Trade Team Update

These are the types of day I live for as a trader... tons of money making opportunities, tons of volatility, tons of liquidity, tons of banks triggering stoplosses which helps our entries, and lots of general mayhem in the markets...

There are two very exact and specific reasons why the euro jumped up to make a new all-time high at 1.5497 and then why we dropped from 1.5497 to 1.5281... both reasons are fundamental in nature and stemmed from the ECB and the Fed.

Early this morning our good friend Axel Weber from the ECB basically told the markets that the ECB is not cutting rates, bottomline. That's all the market needed to hear to send the euro to the moon -- remember, interest rates, interest rate policy, and interest rate futures are the #1 key drivers of this market...

OK, so a few hours later, Ben Bernanke comes out with this great plan to offer $200 billion to banks in exchange for just about any type of security that they could throw at the Fed... the Fed said they'd even take worthless and risky mortgage backed securities as collateral... this was the Fed's way of easing the credit crisis and liquidity crisis that has plagued the markets for months and months, despite steep rate cuts...

To break it down as simple as possible, you give the Fed securities, private or institutional, and they give you money... not money to lend to the general consumer, but money to lend to other banks... plus, the Fed said the banks could take 28-days to cover instead of the normal 24-hours, and they went as far as saying they would be willing to extend this program as need be...

This news immediately sent the market down for one very key and specific reason... you guessed it... INTEREST RATES! It's very simple, when the market saw this move they immediately got the idea that the Fed may not cut rates next week or may cut them by just 25bps...

Just yesterday Fed Funds Futures showed a 100% chance of a 75bps cut. As soon as this news hit the wires, there was no more 100% chance of a 75bps cut, it was gone, and the banks responded to those interest rate futures by taking the market down...

EUR/USD:

So, we got some really big news from the Fed. And I have to be honest and say that this type of plan is much better and much smarter than slashing and hacking up interest rates, it might, just might do something worthwhile and positive...

Overall it's not going to help our inflation issue, but it could turn out to be one of the more "dollar positive" moves the Fed has made in months.

First, let's talk about tomorrow's fundamentals... the two biggest pieces of data is French CPI and Crude Inventories... I believe we see very EUR+ CPI data out of France, there's no clear signs inflation is slowin in France.

The Crude data is key as oil continues to be on an unstoppable run the past few weeks... the legendary commodities trader Boone Pickens was all gung-ho about his big oil short a few weeks ago, but word is that his trade, which is reportedly massive, is down almost 15% and if oil goes any higher, he's going to have to do some serious short-covering... I don't think Mr. Pickens wants to see $110 oil but he just might soon...