Trade Team Update

As we indicted in yesterday's update, the likely scenario with today's fundamentals would put the market in stand-still mode as the data would be mixed USD+ and USD-. That's exactly how it played out today.

Oil was weak to the downside, gold had a so-so day but once again the fundamentals of the market were the key...

German ZEW printed weak but this just gave us a great shorting opportunity and then a buying opportunity -- many reported playing both sides of this move and that's a job well done...

As I expected, PPI printed strong to the upside while the Current Account printed below expectations along with Industrial Production. Now, the fundamentals of the past two days are playing directly into the main factor that cost the euro 500 points last week -- Fed rate policy.

Apparently some traders didn't think I was clear enough in my last 5-7 posts, so let me be clear now: if you think the Fed is hiking rates in September you are an idiot. Bottomline. End of story. I hope I've made my point.

Yes, the Fed needs to be hiking rates. In fact, Fed Funds should be sitting around 7% right now to fight off this inflation. But it's not going to happen. Today's fundamentals prove it's not going to happen... growth, housing, and the consumer is still way to the downside.

Hiking rates now would crumble any gains growth might see through the rest of the year. It will debilitate the equities market, it would crush the housing market, and it would send the U.S. into political turmoil.

Between the Fed and ECB the only one of the two that carries the highest probability of raising rates is the ECB, not the Fed. Fed Funds Futures finally started to get the clue this week.

So has the bond market. The past two weeks the bond market was screaming for rate hikes ASAP and now they are re-thinking things a bit. And all of this is going to be great for the euro in the short-term once these idiots realize they are idiots for even thinking rate hikes were on the way.

OK, now that we got this issue cleared up, lets take a look at tomorrow...

Tomorrow:

No news tomorrow except for crude inventories. Don't let the lack of news lul you into thinking the market can't and won't move...

EUR/USD:

The pair was quiet today and I really don't have anything monumental to say about it at this point. I am very much remaining euro long right now at least in the short-term...

At this stage I absolutely, positively refuse to close any open euro longs that are sitting in drawdown.

I told you last week that I wasn't going to allow the market to shake me out after that 500 point drop and I'm not changing my stance on this at all until the price action shows me otherwise.

That being said, I see that it is imperative we stay above the 1.5400 level in order to continue our move back up. And if we can stay above 1.5450 a few hours into London there's a very good probability we hit my first upside target of 1.5600-1.5640 this week.

Even though I'm remaining bullish on the euro in the short-term I'm certainly not going crazy with fat euro longs and I will continue to short the rises.

I do have some key levels to offer:

Key upside levels:

1.5524
1.5552
1.5567
1.5584
1.5599

Key downside levels:

1.5501
1.5489
1.5462
1.5441
1.5428

As always, please be smart with your entries and with your leverage.