Trade Team Update

We did get a speech by Trichet today, but in my opinion, he didn't offer anything new to the markets and pretty much stuck to the same tune. He said -- While monetary policy has limited power in the short term to stem external price shocks such as the sudden increase in the relative prices of food and commodities, medium-term price stability can be delivered by preserving the firm anchoring of inflation expectations and by ensuring the absence of second round effects.

Basically he's saying rates will remain at 4.00% and I'm sure this gave the euro a bit of a boost in late NY trading. I still believe there's much Trichet or the ECB can say at this point to push the euro up and over the 1.5850 level and especially not back to 1.6000. I'm just not seeing it happen right now.

I still believe the ECB will have to lower rates in the second half of this year and the more that other market players begin thinking the same, the better it will be for the USD.

Tomorrow:

Today was easy... tomorrow could get hectic as we've got retail sales data, imported inflation data, plus we get Bernanke first thing in the morning followed by the Fed goon squad comprised of Warsh, Plosser, and Fisher.

Core Retail Sales -- based on my research, the retail sales data should be bad and should print below expected, USD-. That being said, as we're now firmly in a season of shifting USD and EUR fundamentals, shifting to fall in line with monetary policy, it would not shock me to get an upside surprise on the retail data. Nevertheless, I have to forecast what my reseach shows and it shows me that the retail sector is weak and still floundering.

Import Price Index -- this is a very key inflationary report. I must forecast the index to print USD+. China's PPI is off the charts. In fact, most nations that we import consumer goods from is experiencing rampant inflation acrossed the board. Inflation is China's biggest export to the U.S. right now and I see zero evidence that it's scaling back at this point. I'm hoping the truth is told on this because a hot headline number should prove to be very USD+... maybe not immediately but as things unfold with the overall underlying fundamentals of the market.

Also, there's a meeting with leaders from the EMU that we need to keep an eye out for... it's highly probable they will discuss economic conditions and monetary policies and then release a statement...

I hate to keep repeating myself, especially for those of you who pay close attention, but I want to be clear that I firmly believe we're well underway in a fundamental shift between the U.S. and Eurozone. Basically. this means we should continue to see stronger USD fundamentals and some rays of hope while we should see weaker EUR fundamentals and some shades of darkness.

Once we get to the point where the ECB dials back on their over-the-top hawkish inflation rhetoric things should really get moving for the EUR/USD... all of you that have been patiently holding shorts in the high 1.4000's might be smiling in the next few weeks and months.

EUR/USD:

I really don't have much new to report here... I'm not giving much consideration to the moves we made the past 24-hours... we have too many big key fundamentals this week to even dwell on what we've already done, my focus is now on what it could do...

My overall bias remains neutral.

My short-term bias is to continue shorting the euro rises and taking new longs when the opportunity is ripe, using low margin and making sure all of my reward vs. risk ratios fall in line to do so. I urge caution with adding new longs and urge careful managment of new longs, especially above the 1.5550 level, if you have any there.

The market is very thin and quiet now, but I do have a few key levels based on current market conditions:

Downside key levels:

1.5518
1.5504
1.5489
1.5468
1.5441

I'm seeing decent euro support at the 1.5520-30 level in general.

Upside key levels:

1.5552
1.5578
1.5598
1.5611
1.5628

That's it... be smart heading into tomorrow... there's a lot of big data on the books and we could certainly see some heightened volatility... practice strict risk and money management this week please.