Trade Team Update

Quite an interesting day... we started things off by making a new all-time high at 1.5911 and then proceeded to drop almost 200 pips after Trichet's press conference...

First, lets dissect Trichet...

Overall, Trichet told the market's what the market's expected to hear... but, I have to say that he conducted today's interest rate press conference in a way and manner I've not observed him do before...

I study Bernanke and Trichet's body language, I study the way they say things, the way they respond to questions, they way their eyes and hands move when they speak, and the way they deliver their messages to the markets....

Trichet was very benign today. He just seemed to gloss over all they key points... like he was reading from a script void of any personal inputs, feelings, or emotions...

He wasn't over-the-top hawkish on inflation and wasn't over-the-top dovish on growth. Very middle of the road, so to speak... He did mention price stability concerns and growth concerns and credit risks, but it was all done in a very melancholy style.

I don't believe he gave the markets any real signs or signals and didn't tell the markets anything they didn't already know before the meeting... upside risks to price stability, but will moderate later in the year... credit tightening causing market turmoil... downside risks to growth... thinks Fed and Treasury believe in a strong USD policy... excess FX volatility undesireable... blah blah blah.

Overall, his sentiments can be viewed as EUR+.

All-time high:

Despite our special vistor in the chat last night who assured us, based on EMA's and pivot points, that the euro would not make an all-time high today, somehow we managed to make one... amazing... must have been a pure fluke...

Anyway, what's critical to note is the almost instaneous failure to sustain a break above the 1.5904 level. The euro has now made a pattern of failing at the 1.5900 level, and this is to be considered...

I believe there are big-money stops sitting at the 1.5920 level and big money pushed us back down. I believe the banks will want to run those stops at 1.5920+.

But I am taking strong note of the repeated failures at this level and with it grow more cautious taking new euro longs. Am I still biased euro long? Yes, I have to be. I still believe we have room at the top and cannot count the euro out yet.

Our correction today was largely fueled by: profit-taking, some stops getting triggered, and commodities getting hammered. But, I do not believe we've yet started our bigger, more sustained correction that is way, way, way overdue...

EUR/USD:

As of the writing of this post, we're sitting close to one of my key levels -- 1.5734... the market is totally thin and the price action is not giving any indicator either way... best thing we can do is keep an eye on the spreads to determine when we'll start moving again and in what direction.

As I said, I am biased to be euro long still. Same bias as I've had the past 2 months. But my caution is growing stronger and I am tightening things up on the longside and will not be making any euro long trades up at these levels unless I see a clear sign within the price action.

I will hold all of my best euro swing longs from 1.4595 on up at this point. I will also continue to short the euro on the rises. I took a euro short this morning at 1.5808 before we dropped and will hold it with a +1.

Tomorrow we have the Import Price Index which I believe should print USD+ as China has done well to import inflation to the U.S. the past few months. The Michigan Sentiment should print at or below market expectations.

The G7, starting tomorrow, will take center stage this weekend and the first part of next week. I may post on Saturday when I get more news and data from tomorrow's afternoon meetings, but please don't go into this weekend with any dumb trades, overleveraged accounts, or knee-jerk, last-minute trades taken on a Friday afternoon... you could be regretting it when the market opens on Sunday. Just a word of caution...