The Dollars resurgence can be attributed to a variety of factors European stagnation, oils collapse, or better yet Michael Phelps. The most important factor is that the USD is considered the lesser of two evils in regards to economic health. Governor King came out and expressed that the down side risks of recession outweighed the future risks of inflation. Hence the massive sell off of the Cable this morning across the board. The pound yen moved nearly 400 pips over night while the GBPUSD fell off a cliff because expectations were being priced in the market. However the Euro and the pound did not fluctuate against each other. Why? Both economies are expected to head into recession soon. Even if the US economy is in no way considered expansionary its future is much less bleak than the EZ. Tomorrows report could smash the euro bulls if EZ GDP disappoints and comes in worse than expected.In reality the report will most likely be a contraction that is greater than expected around 4. This information juxtaposed with the fact that USD CPI will most likely be high leads to one conclusion. The range trading days of summer are over. The dollar has broken all support levels and the ride has just begun. Any trader can see that the 200 day simple moving average is around 1.35 which means we have a long way to go until we break meaningful support. Will it happen? Perhaps if the EZ data severely disappoints we will be headed in that direction and it will happen sooner rather than later. The important underlining fact is that the range bound market is over. I am excited because the summer doldrums are finished and we will start to see some significant movement. Tomorrow will be a big day and if the U.S. CPI is high and the EZ GDP disappoints look for the dollar to touch 1.47.
No comments:
Post a Comment