Trade Team Update

We can pat oil on the back for keeping the euro supported against the dollar, as well as gold. Gold's price action isn't quite keeping pace with oil which is one of the main reasons we saw limited euro gains after London's open.

We didn't have any real fundamental data today which also helped keep us in a fairly tight range. Tomorrow is a different story, however. When Frankfurt opens we get an important German PPI release, followed by the even more important ZEW data.

German PPI -- I can't see any reason or basis for a downside surprise here. We likely won't match or exceed last month's print, but I'm not looking at major EUR- surprise on this one.

ZEW -- this is a piece of data that is more difficult to do specific research on and to connect all the dots to. But ZEW is critical because it's more closely correlated to ECB monetary policy. It would not surprise me to see a print at or below market expectations. Any upside surprises would certainly help keep the euro supported as it would give the market more confidence in an ECB rate hold.

PPI/Core PPI -- this is our big U.S. data tomorrow. The market is expecting a significant decline over last month's PPI print. I can't be so dovish on this one. With both oil, gold, and soft commodities remaining well supported to the upside, I don't see much relief for producers and don't see much evidence they would be passing on cheaper production costs to the consumer. The evidence is just not there to support this view. I have to forecast a print that's at or better than market expectations, should the truth be told.

Obviously, a cooler than expected print should easily keep the USD under pressure vs. the EUR.

We do get a speech by the Fed's Kohn tomorrow... Kohn will be speaking out the economic outlook, so we need to keep an eye on that one.

EUR/USD:

My overall bias must remain neutral for now. As I've said many times, as long as we stay supported above the 1.5350 level, I'm keeping my topside targets of the euro pushing the 1.5600-1.5800 levels.

As you know we hit 1.5600 today but could not sustain a break of my first key level at 1.5624. I'm not ruling out further testing of 1.5600 this week, and beyond if the fundamentals and commodities continue to play out in favor of the euro.

My trade plan will also remain intact -- short the euro rises and buy the euro dips. This plan will be executed with precision and discipline, based on current market conditions. I personally do not like to trade in these tight ranges.

I haven't mentioned this much lately, but it is imperative to keep a close eye on commodities this week, espeically oil. The euro has been more tightly correlated to oil than it has gold in recent trade days.

Gold has been on a slow recovery as of late. Should the market speed up gold's recovery and push it above the $930 level the euro should follow accordingly. A sustained break of $950 would be even sweeter.

Oil is a different story... there's no visible signs of oil topping out quite yet. Keep in mind I'm not a commodity trader, but I am of the opinion that we haven't seen oil's top quite yet. If that's the case, the euro and oil should continue to move in tandem.

Further oil gains will also keep the Dow under pressure, in my opinion. Should oil keep the Dow under pressure, this will only serve to give the euro yet another price action boost.

As always, please use proper risk and money management disciplines. We're due for a more extended move I believe. It is imperative you do not overleverage your accounts and work hard to stay on the right side of the market.