Trade Team Update

As we indicated in yesterday's update, today would be a monster day, and that certainly was the case as Mr. Trichet and Mr. Bernanke took center stage...

On Monday we posted our key downside level of 4638, which was hit right to the pip and the euro has not returned to that level, in fact, any further dollar rally against the euro was stopped dead in its tracks today as Trichet continued his resoundingly hawkish tones against inflation and has left the door even further cracked open to raising rates in the near term to combat the Eurozone's 3.1% inflation rate...

Enter Chairman Ben -- during his speech this afternoon he basically told the audience the Fed would be cutting rates at the end of this month and then babbled on, in his signature shaky voice stlye that growth would suffer, housing and jobs are detiorating, etc. He painted a grim picture and the market immediately hammered the dollar as soon as his words hit the wires.

Bernanke's speech was one of the most pathetic displays of economic and monetary fortitude I've ever seen in my life. The man is a disgrace to economics, monetary policies, and to America. Bernanke is a foolish man to think that cutting rates is going to solve the issues facing America. His twisted monetary policies and weak pandering to Wall St., Paulson, and Bush have caused the dollar to crumble and have caused inflation and energy prices to soar through the roof and the American citizen is paying dearly for it. Bernanke is not qualified to run the unconstitutionally-formed Fed, let alone a 7-11.

Moving on...

As I said above, I believe any dollar rally has been capped for now. You know one of my favorite sayings -- all things interest rate related drive this market... we saw this in action today. I cannot stress to you enough that interest rates, interest rate policies, interest rate fundamentals, and interest rate futures are one of the keys to trading this market profitibly.

Basically we're looking at the possibility of the Fed Funds Rate falling below the ECB's key lending rate and this can only spell more dollar losses to the euro, should it materialize. And it is this possibility that drove the euro up over 1.4800 today, because the market is looking at the same thing we are...

Tomorrow:

We have some key data tomorrow -- U.S. Trade Balance, Import Price Index, and two Fed speeches (Mishkin and Rosengren). I believe the Trade Balance will be USD- tomorrow and should the Import Price Index come in at 0.0% or lower, this would also be USD-.

EUR/USD Trading:

Based on today's developments with the Fed and ECB, I have to stay long euro at this point. I can't see any other way right now. I can't fight against what I know drives the market, but right or wrong, the market will ultimately decide.

The banks needed to hear what Trichet and Bernanke had to say today and I think their message is rather clear, so I feel we'll see more upside for the euro in the near term. How high can we go? I'll have to depend on price action to tell me that, but I see these as some key topside levels:

4828
4854

I think if we can break above the 4854 level, we could easily push up over 4900. And that could certainly happen during tomorrow's trading sessions. While I'm euro long, I'm doing so cautiously and not going in heavy. But, I am not adding an new euro shorts at the present.

Be smart about your trading and leverage headed into tomorrow and next week. Do not overleverage your accounts!