The euro gained across the board after the European Central Bank left interest rates unchanged at 4.0% as expected. ECB Chairman Trichet said in the post-meeting press conference that the biggest risk for price pressures is that they will increase. His hawkish comments reduced expectations of a rate easing in the coming couple of months. The euro broke 1.46 and tested 1.4650 versus the dollar.
Meanwhile, the Bank of England (BOE) made its first rate cut decision in 2 two years. The bank lowered its benchmark rates by a quarter-percentage point to 5.50%. The sterling dipped to as low as 2.0184 after the rate decision.
The dollar was little changed after a report showed US weekly jobless claims fell from 352k to 338k. Market will focus on the employment report to be released by the Labor Department tomorrow. Non-farm payrolls are expected to fall from 166k to 75k in November. Should the job report surprised the market by showing an above 100k figure as Wednesday's ADP job report did, the greenback is very likely to rebound sharply across the board.
The Canadian dollar gained as oil price rebounded to above 90 dollar per barrel and a run of strong economic data.
Euro Gained On Trichet's Hawkish Comments
ECB Hold Rates
The European Central Bank (ECB) maintained its benchmark interest rate at 4.00% at its meeting this Thurday. The Bank of England is also expected to hold its lending rate in place, at 5.75%. While these two moves should be seen by Dollar bulls as acts of clemency, they are more akin to a stay of execution than to a commutation of its death sentence. The reasoning is that it is inevitable that the US-EU interest rate difference will be bridged over the next few months, as the Fed continues to lower rates while the ECB is in the process of hiking them. The only question is when. Accordingly, analysts will be paying close attention to the language employed by the heads of the various Central Banks at their next meetings to get a sense of timing.
Trading secret revealed! Check it HERE!
7.23 Monday
EUR/CHF 4hr chart
Remembered what I said last July 12?
I said, "If price bounce off the lower channel on 4hr chart, I'll go for a long hedge (depende on indicators), Then from there... I'll open a long hedge positions with TP on the upper channel". Thats what I did, when the Stoch and CCI crossed above their oversold lines (see the 1hr chart below). But I didn't wait for the price to reach the upper channel to close the long hedge positions, I close it too early. Because price start to lose stream. second, the Stoch & CCI starts to curve down. Third, the average daily range of EUR/CHF is only 40-50pips, and price already rallied 65pips from 1.6586 to 1.6651. So I decided to bag the profit of the day.
I hope all of you have applied the lesson about channels I post during the weekend.
I wasn't expecting such a high volatility from EUR/CHF on a monday. Specially when there was only one economic news release today, the ECB Vice President Papademos Speech.
Today's trade is the best single trade ever since we started our PMTFC cycle2. I nearly surpass the whole gain I got last week, and yet we are only on the first day of the week. So I'm expecting a better if not the best week for PMTFC account.
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5pm EST- EUR/CHF reverse after nearly making a new record high at 1.6664, just 7pips short to this year highest high of 1.6671. It is down trending right now. Levels to watch out for are the 1.6632 and 1.6623, these are the 38.2 and 50 fib of the latest swing of 1.6581 LO to 1.6664 HI. On the 38.2 fib, there lays a confluence of lower ATR and a minor trendline.
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I like to take this opportunity to thank Lorie for helping me edit the Limited Power Of Attoney (LPOA) forms. I might add another account to manage starting next month. Wish me luck.
Market Crash Ahead?
Currently, The Asian, US and elsewhere stock market looks healthy. The problem in the US housing market is "contained" in the subprime sector. Everything seems to be robust...
But what others don't know is that the risk of loss is always at its highest on the precise moment that most people judge it of least concern. Eventually, prices would reach its tipping point... a moment of desperate reality... another market crash. Most likely, there will be no crash tomorrow nor the day after. But there are some things you are better off preparing for, even though they may not happen for a while.
Here are some of the concerns that traders should focus on in the coming days.
1. The Chinese stock market is getting hit hard. Its CSI 300 Index is down 17% in the last three weeks. Brokerage account openings have dropped by two-thirds. Could global hot money... and local cold cash…turn bearish on Chinese shares? Could this trigger a worldwide equity sell-off? Yes it might.
2. The dollar is in trouble. The Friday's NFP released data was in favor for the dollar but it didn't help much. On Wednesday, it hit its lowest level against the pound (GBP) in 26-years. It is now near its lowest level ever against the euro. Trillions worth of dollars now sit in foreign vaults. while reserve managers openly talk of diversifying away from greenbacks. Foreigners don't have to abandon the dollar in masse to knock it down, all they have to do is to let up on their purchases of dollar-denominated assets - such as U.S. Treasuries. Could it happen? Could the shock cause a crash in major financial markets? Why.. yes... it might.
3. All paper currencies are dangerous. The dollar is not the only paper currency in the world whose supply is growing rapidly. Practically every central bank is printing up its own money in vast quantities - trying to keep up with the U.S. brand. This is why the world has so much "liquidity." It's why so many assets are rising in price so steeply. But could investors suddenly become fearful of so much monetary inflation? Could consumer prices shoot up as asset prices already have? Could the world's people want to get rid of their paper currencies in favor of other stores of value - notably gold?
4. A Milan-based bank, Italease, has just seen its derivative portfolio blow up. So has Bear Stearns (BSC). Large lenders are getting skittish of complex debt instruments, just as more deals than ever before come to market. So far this year $1 trillion in deals have been done in the North America - a rate of deal-making nearly 50% higher than the year before. What happens if the wheeler-dealers don't find the credit they're looking for? What would investors think if even one of these mega-deals blew up badly?
5. The Bank of England raised its key interest rate on Thursday by 25 basis points to 5.75 percent, another six-year high. This is the fifth time this year. The ECB's Trichet held steady this month but hints that rates will go up in the future. Elsewhere, banks are likely to hike rates too. And watch out if the Chinese decide to do some serious tightening.
Could there be even bigger blow ups waiting to happen? And could they cause a stampede for the exits? Anthony Bolton, Britain's most successful fund manager, worries about it. So does the Bank of International Settlements. And so do central bankers in Madrid, London and who knows where else. And if the pros stop lending so freely, might not it trigger a credit crunch and a crash?
For the last 2 weeks. The majors just did a range bound. If you look at it in a medium term chart, market is indicision phase. The after effect of this would be a breakout, whether a big reversal or a continues steep down... we don't know yet. But we will keep our eyes open.. and keep our ear on the ground.
