EUR/USD Weekly Outlook 7/27 thru 8/1 2008

This week's fundamental calendar will prove to further complicate things for the EUR/USD as we'll be trading in very ill-liquid conditions with the addition of monumental economic data for both the euro and dollar.

In my view I see the USD at risk this week as there's more overall growth, manufacturing, inflation, employment, and consumer data coming out of the U.S. compared to Europe.

Last week's market conditions and real-time price action showed the first real effects of what it's like to trade during the summer session. I expect the same exact summer session conditions to persist this week.

Money flows are not at the volume that creates orderly market conditions and liquidity is extremely low which adds a level of uncertainty to overall price direction. The underlying fundamentals of the market will rule the day.

Last week we saw a dramatic sell-off in commodities. Oil has come down from high's at the $147 level to test lows at the $120 level. Gold is off significantly from highs at the $975 level all the way down to the $920 level. I believe oil and gold are due for some upside retracement, but this will largely depend upon how the market's decide to react and respond to this week's fundamentals.

Despite the massive sell-off in oil, U.S. equities struggled last week and the euro was unable to sustain a break of the 1.5650 level and showed no signs of even being able to test the key 1.5600 level. This is to be noted.

In my view the market is telling us they are not ready to move into an extended dollar long bias and they are ready to keep buying the euro as long as the dollar fundamentals remain to the downside.

Should the USD fundamentals shock to the upside this will certainly serve to ease the market's mind and give them greater comfort to buy dollars and sell euros.

The continued turmoil in the U.S. financial sector is going to weigh heavy on the dollar. Over the weekend the FDIC had to take over two more institutions that went bankrupt. First National of Nevada and First Heritage N.A. were shut down and taken over by the federal government in a move that was mostly to prevent another scene of angry customers standing in line waiting to pull out every penny they have.

Those are not the kind of images the government wants to be broadcast on the evening news. There will be more bank failures, this you can be assured of. And just wait until the banks in Europe start to fail... when those lines of angry customers form outside of European banks you better be short the EUR/USD...

NFP:

So, we have low liquidty, sporadic money flows, choppy price action, and our favorite fundamental event: Non Farm Payrolls. NFP weeks are always different than the other weeks and you can expect the advent of Friday's NFP to only make things even wackier.

Economists are forecasting anywhere from a net job loss of -45K to as much as -82K. All of the banks do their own independent NFP forecasting which can make it difficult to gauge how the market will respond.

The risk during an NFP week, especially when liquidity is low, is when the banks decide to position themselves for Friday's NFP and Unemployment data. The moves you see on the run-up to NFP are almost meaningless to how Friday will playout.

The point is, expect the unexpected this week because of the NFP factor and as we draw closer to Friday minimize your risk exposure, and please, do not try to trade NFP.

EUR/USD:

I still have some euro longs open that I took last Thursday and I intend on keeping those open for now. Obviously the market's not even opened yet but in my view I believe we need to make another run at the 1.5800-1.5850 level again.

This week's fundamentals certainly can provide all the fire power the market needs to push the euro back up to test the top of the range. As far as trading goes, I will continue to short the euro rises and I will continue to buy the dips. This gameplan has worked beautifully all summer long and I see no reason to change things up at this point, but I will be more cautious and likely on the more conservative side this week because of the liquidity situation and NFP.

To be honest, I really have nothing groundbreaking or brilliant to say about the euro right now. For me, I'm mostly going to depend on what the real-time price action is telling me, what the market corrrelated variables are telling me, and what the outcome of each day's fundamentals are telling me.

The market will tell me what it wants to do, so I will be patiently waiting for the message. If I don't like what I see or the price action is not behaving properly, I'll sit on the sidelines and wait until I see my price. I can go days without taking a trade if I have to.

Trading:

I'm involved on another trading site where people can watch one of my live trade stations 24/6. They can see every trade that's opened and every trade that's closed on that particular account. That account's usable marging has never fallen below 96% and the average weekly ROI is over 2%. Since June the account has gone from $57K to $70K while maintaining a usable margin of 96% or better.

That account has euro shorts in the 1.5300's and euro longs from above the level we're at now. That account banks daily profits, it can easily withstand anything the market throws my way, it can safely hold trades in drawdown while waiting for the market to come back, and at the rate it's going, the annualized ROI will be over 100% which is seven times better ROI than anything Wall St. can produce.

Why am I telling you all this? That particular account is a live, viewable lesson in patience, timing, and strict risk and money management disciplines. 2% weekly ROI is modest but the key is that it's consistent and that account is unexposed to the risks of the FX market and is not at any risk of a margin call and never will be. The market can't beat me, the broker can't chase me, and there's no negative emotional connection to that account, to the market, and to trading it.

I'm not doing anything special with that account and none of that makes me a great trader but the point is I firmly believe traders can achieve those kinds of modest results and keep themselves from a margin call situation if they would only learn to be patient, learn to be strict risk managers, and learn to time the market to their advantage.

So, let me close by saying to practice strict risk and money management disciplines this week and to be smart.

Trade Team Update

Today's market action can be summed up in one word: weird... all markets were off kilter as we got nasty data out of both Europe and the U.S.

The euro was kept under pressure by the abysmal growth data and the dollar was kept under pressure by weak fundamentals and by commodities finding support and making a move back up.

The Dow was used and abused today as the housing data showed it's worst readings in 10 years. Gold and oil stopped their downward slide and managed to claw their way back up.

The key downside price levels were between 1.5650 and 1.5620. We stopped seven pips short of breaking the 1.5620 level, so the only way to go was back up... funny how that works, huh?

Basically, the EUR/USD was rather out of sync with the market correlated variables and the market correlated variables were out of sync with each other and that just makes for a some weird price action... but, the range trading today was fantastic.

Tomorrow:

Tomororw is a make or break day for the USD. If the USD fundamentals print at or below expected I see no reason the EUR can't win the day. I've been so busy this week I haven't had any time to do my normal research for tomorrow's fundamental events but lets just say I'm not bullish on the data.

EUR/USD:

I'll call myself a euro bull for tomorrow's trading. I was buying the euro at the 1.5660 level and all price points lower. I'm also holding euro longs from above these levels

We made attempt after attempt after attempt to sustain a break of the 1.5650 level and failed each time. The closer we got to the 1.5620 level, the faster we bounced and moved back up. Those price patterns should be noted headed into tomorrow's trading session.

I'm not ruling out another test of the 1.5650 - 1.5620 level after London opens, but should we bounced up again I see no reason we can't move on to 1.5700+.

Of course tomorrow's fundamentals and the market correlated variables will be key in the EUR/USD's direction. Should we get weak USD data this will likely set the market correlated variables in motion to work hand-in-hand to give the euro a boost.

No matter what I'm shorting the rises. I will keep shorting all the way up to 1.6000 if I have to. I don't care. No drawdown on any euro shorts will even make me blink an eye. I'm strongly bearish on the euro. It can go as high as it wants to and I will keep adding shorts.

Once the market masses all get on the same page and realize there's an economic armageddon within the Eurozone and once the Fed and ECB physically begin their respective shifts in monetary policy the euro will take a whipping unlike the markets have seen in recent memory.

The ECB is not raising rates. I don't care what kind of crap comes out of Trichet's mouth, his hands are tied on future rate hikes. Of course, the Fed can't raise either but the Fed has the much high probability of rate hikes and the ECB has the much higher probability of rate cuts in the near-term. Do the math on that one...

Look at today's euro Current Account data: ugly as sin. Look at today's Manufacturing PMI data: beat up from the feet up...

I'm patiently waiting for the wheels to be put into motion to push the euro over the side of the cliff. Until then I'll remain strongly bearish on the euro and almost nothing will cause me to flip flop on this overall view.

I will depend strongly on the EUR/USD real time price action once London opens to get a clear picture of how to trade today's market action. Be smart and do not take any knee-jerk trades you'll get stuck in over the weekend. Do not overleverage and pay close attention to what the market is telling you between now and closing.

Trade Team Update

I'm sorry for the delay with today's update and for what will be a very light and brief update...

Just a quick re-cap on today's events... the euro was again pushed lowered thanks to gold and oil... gold lost another $30+ today and oil lost another $3+. This week gold has dropped from $975 down to a low of $918. In the past few weeks oil has dropped from a high of almost $150 to under $125. There's no way the euro can make any gains with commodities so weak to the downside.

But what is to be noted is the fact that the euro is presently sitting above the 1.5700 level even though commodities have taken their worst beating to date. To me this shows the euro still has some fire power to make another run towards 1.5850+.

The fundamental situation for Thursday is insane and the EUR is at heavy risk. Most if not all EUR data should print at or below expected with the USD data printing USD+.

All eyes will be on Fed Geithner who is a known hawk. I fully expect to hear hawkish rhetoric and I fully expect to hear Geithner call for rate hikes in the near-term.

Fundamentally the EUR is going to need positive news to gain any upward momentum because right now there's very little by way of upward momentum. As far as the price action goes, my downside targets have all been hit and we've backed away from testing the key 1.5650 level.

As I indicated all week a break of the 1.5750 level would take us to 1.5680 and points lower. Now, we need to work our way back up and over 1.5750 in order to get anywhere on the topside. Should we fail to even sustain a break of the 1.5720 level I see more downside and I see an easy break of 1.5650 and then a test of 1.5620-1.5600.

Price action is weak to the upside right now but we'll know more once London enters the market. You will want to be alert when all the EUR data hits the markets as it could get ugly between 0300 EST and 0730 EST. That time holds good potential for heightened volatility.

Yes, I'm still bearish on the euro, will short any rise I can get my hands on, and will hold my best euro shorts at this point.

Be smart as things should get even crazier the rest of the week...

Key Levels

Key upside levels:

1.5823
1.5834
1.5862
1.5881
1.5904

Key downside levels:

1.5754
1.5739
1.5718
1.5703
1.5683

Beware of today's euro data which is forecasted weak to the downside... keep a watch on oil and gold

I will be looking to short any rises I can get my hands on. In order for the euro to gain any upward traction we'll at least have to sustain a break above the 1.5810 level.

On the downside, a clean break of the 1.5750 level opens the door to run down to test 1.5700 and then points lower.

Be smart. I expect we see some more shaninigans over the next 14 or so hours.

Trade Team Update

As physically and mentally demanding as the Forex market can be, and as stressful as it can be, sometimes you just have to step back and laugh at the interesting cast of characters that make up the retail side of FX...

Approximately 1 minute and 36 seconds after Philly Fed Plosser uttered a few choice words I posted his comments in the chat knowing they would move the market...

Let me cut to the chase because what happened today is completely inexcusable for anybody trading live money in this market -- the inexcusable part is not knowing a powerful central banker is speaking and what this powerful central banker is telling the markets.

I know it was mostly tech traders who were lost in the dark and wondering why the euro was tanking, but being a clueless tech trader is still no excuse because we gave 12-hours advanced warning of what could happen today:

In my view the key event we need to watch is Plosser's speech. He'll be speaking about the U.S. economic situation and I surely expect Plosser to talk about inflation.

If you read yesterday's update you saw what some of the Fed's have been recently saying on inflation. Now, what the market needs to see and needs to hear is all of the Fed's key players singing the same song and reading from the same script, which is hawkish rhetoric on inflation, talk of raising rates, and general optimism for the U.S.'s economic future.

That's an excerpt from yesterday's Team update... can we possibly spell it out any clearer? The other point is, even though we give advanced warning on these events and the possibilities it's still up to each trader to do their homework and to stay at the top of their game at all times.

If you want to gamble with techs, fantastic, more power to you, but please at least know when a central banker is speaking. Trust me when I say this... it's highly unlikely that the Fed and ECB are looking at candlecharts and all the fancy colored lines before they get in front of the mic to make either hawkish or dovish comments...

Do yourself a favor and learn what really moves markets. If you do, I promise you'll get out of the herd that loses 95% of their trades and you can join our little group here that wins 95% of the time.

EUR/USD:

A quick re-cap of today:

Plosser said he wants to hike rates no matter how bad the employment and financial markets are and he wants to hike them sooner rather than later. That's all he really said and that's all he really had to say.

Those few comments dropped the euro 200 points, dropped gold $35+, and dropped oil $4+. This isn't rocket science, it's pretty simple stuff.

Is the end of the euro as we know it? No, I don't think so. Plosser is a well-known hawk and his rhetoric's effect has already worn off.

Now, what could further beat up the euro is tomorrow's fundamental data. All signs are pointing to the downside for tomorrow's data. The market is expecting the worst and will probably get the worst if the truth is to be told because economic conditions in Europe are abysmal.

Should the key data surprise to the upside, obviously this would be EUR supportive and will help breathe some life back into gold and oil. I'm expecting and forecasting the worst.

That being said, I did buy the euro on this drop and will hold those positions for a potential move up and over 1.5800 between now and 0200 EST. And then if we get a good rise, I'll add a new short or two or three... price action will dictate my next moves.

The fact that the euro didn't sustain a break of the key 1.5750 level keeps the EUR poised to move back up. Now, should we have another break down and we sustain a break of the 1.5750 level we should be clear to make a move to the 1.5680-1.5650 level. If bad EUR data is the catalyst for another leg down you can expect to see the high to mid 1.5600's.

I'm still overall bearish on the euro, just as I've been for months and I will continue to be bearish, nothing will change this bias at all.

That's all I've really got to say at this point... I'll post my key levels later this evening when things become more clear

Key Levels

Key upside levels:

1.5934
1.5958
1.5974
1.5999
1.6024

Key downside levels:

1.5902
1.5883
1.5862
1.5847
1.5823

Trade Team Update

With a total lack of fundamental data, lack of central bank speeches, and severly ill-liquid conditions acrossed the board we had a rather quiet day...

The markets were looking for anything and everything they could react to... today's flavor was tropical storm Dolly churning in the gulf and headed for Texas... this news stopped oil's slide around the $128 level and we saw crude push back up dragging the euro with it.

While the euro was trading around the 1.5850 level we saw the 10-year yield trading at very USD supportive levels, but did an about face after the euro broke above the 1.5880 key resistance level.

In addition, gold has been strong since Sunday's market open and this has served to keep the euro propped up against the dollar...

Tomorrow:

Once again we have a very light day as far as the fundamentals are concerned, which keeps the doors open for more USD weakness. It also doesn't help the Chief Liar Hank Paulson speaks first thing in the morning.

In my view the key event we need to watch is Plosser's speech. He'll be speaking about the U.S. economic situation and I surely expect Plosser to talk about inflation.

If you read yesterday's update you saw what some of the Fed's have been recently saying on inflation. Now, what the market needs to see and needs to hear is all of the Fed's key players singing the same song and reading from the same script, which is hawkish rhetoric on inflation, talk of raising rates, and general optimism for the U.S.'s economic future.

Should Plosser fail to deliver any USD supportive commentary, there's really nothing else that could hold the EUR back unless we get some surprise geo-political event.

EUR/USD:

As I mentioned in yesterday's update, I see no reason we can't and won't test the all-time high and then some. I still hold to this view as price action has been clear to the upside basically since the market opened yesterday.

In order to cool the euro down, the fundamental data we get between Wednesday and Friday must print EUR-, the Fed must support the USD, equities must stop sliding, all hurricanes or potential hurricanes must stay away from the central and north coast of Texas and Louisiana of course, and it wouldn't hurt to see gold sell-off.

Tall order, isn't it? I see the market correlated variables working in favor of the EUR right now and don't see anyway the USD can make substantial gains unless the wheels get put into motion to weaken the EUR.

That being said, yes, I'm still a euro bear because the Eurozone is on the brink of economic collapse just like the U.S. has suffered through for the past two years. Germany won't offer enough economic fire power to save Spain, Portugal, Italy, France, Greece, Ireland, etc.

I'm not ruling out a test of the 1.5900 level over the next few hours and will hold my shorts from 1.5930, 1.5927, and 1.5925 for this move. Should the 1.5900 level sustain a break, it will move on to test that key 1.5880 level.

On the upside, stops at the 1.5930 level were already knocked out earlier which means there will be more stops sitting between 1.5950-1.5980.

I may be looking to add some new euro longs should we correct down off these highs, but price action and the market correlated variables will dictate my next moves.

At this point I can't change my bias that we can see more upside over the next 24-hours of trading. The first test will be when London enters the market.

Later this evening I will post my key levels. So far we've stopped one pip shy of my 1.5934 key level and it's holding for now. Be smart with your trades... if you can't get a clear view on the market, wait it out. Do not overleverage and wait for the trade to come to you...

EUR/USD Weekly Outlook 7/20 thru 7/25 2008

We have an interesting week ahead as the European economic situation will come under closer scrutiny and analysis on the back of Eurozone manufacturing, production, growth, and economic sentiment data.

On Friday the euro closed down 200 points off the all-time high which has renewed some of the sentiment and talk that the euro’s ready to fall off the cliff. I don’t exactly hold those views at this point because this week’s data could provide the euro enough fuel to make another run at the all-time high and then some.

Last Thursday we did make one attempt at sustaining a break of the 1.5800 level and that was resoundingly rejected as stops were triggered and long contracts were picked up sub 1.5800.

As far as this week’s Eurozone data is concerned, the market is forecasting mostly downside weakness with exception to some of the German data. I do think some of the German data should hold up well for the most part. The real risk to the euro comes with the IFO data and the PMI data.

It’s imperative you understand that there are other factors at play this week that have tremendous market moving potentials. Lets take a look at some of these issues and how they will potentially effect the EUR/USD between now and Friday…

Fed:

I’m not sure why this hasn’t received much attention but at the end of last week we had a few Feds running their mouth about rates and monetary policy. I suppose the dismal news out of Wall St. rained on the Fed’s parade, but listen to this…

Minneapolis Fed Stern: The Federal Reserve shouldn't wait for housing and financial markets to stabilize before it begins raising interest rates. We're pretty well-positioned for the downside risks we might encounter from here, I worry a little bit more about the prospects for inflation. We're going to want to, in my opinion, reverse some of those interest-rate reductions. I don't think there's any question about that. But exactly when depends on how things evolve from here.

Kansas City Fed Hoenig: I'm on record as being concerned about inflation.

Obviously only Bernanke can really get the markets worked up over inflation and rates but we can clearly see a shift in rhetoric in regards to interest rates and the future of Fed monetary policy. This week we get speeches by Plosser and Geithner and I’m expecting to hear both to take a more hawkish stance on inflation and we could potentially hear more talk of rate hikes in the near-term.

The Fed’s stepped up inflation rhetoric is now translating into the futures markets showing higher probabilities of Fed rate hikes in the near-term. Fed Funds Futures is showing a 76% chance of at least a 25bps rate hike before 2008 is over. I’ve been watching Fed Funds probabilities rise over the past few days and this has helped translate(among other reasons) into euro weakness after the all-time high.

Keep a close on eye on the Fed this week as the markets are watching and waiting for any signs or signals they can jump on and react to.

Europe:

In January we told you the second half of 2008 would be a rough one for the Eurozone. Back in January I was certainly not expecting a June rate hike like we got. I would have laughed if anybody had told me the ECB was going to hike this year.

But I’m glad they did hike because that only gives me more reason to stay overall bearish on the euro. Not only is the ECB going to have to take that hike back, they are likely going to have to take back last year’s hike.

Oh wait, that last hike was supposed to already be priced in yet somehow we managed to move up a couple hundred points and somehow we managed to make a new all-time high two weeks after the rate hike… hmm… I guess somebody forget to tell the market about the myth of “priced in”.

Regardless, I’m a euro bear and I will keep shorting the euro rises because I still see weakness and downsides on the horizon for the Eurozone. Economic sentiment in Europe is running at historical lows. There is recession talk in Europe now, especially in countries like Spain, Portugal, Ireland, and it’s starting to creep into Italy and France.

Germany is resilient and should remain mostly immune to the coming downsides, but should Germany succumb to the type of weakness being seen in Spain and some of the other Eurozone nations, this will do substantial damage to the euro.

The rate hike did throw a wrench in the works, but as I said, I’m thrilled they hiked and I’ll be even more thrilled if they hike again because this will only serve to make the economic downturn in Europe more pronounced and more exaggerated, and you know how our market likes to respond to these types of things… the FX market is the perfect oasis for exaggeration and over-extension…

This week’s economic data out of Europe should give us all some great clues as to how things are progressing in Europe. Last week’s ZEW data was abysmal and I believe it gives an honest echo of what I’m thinking and what I’ve been saying for the past seven months.

It’s very difficult placing an exact data and time on when things happen, especially in this beast of a market, but I believe my views will be realized soon enough and I’m happy to keep positioning myself for the turn.

Market Correlated Variables:

As I mentioned earlier, there’s many more factors at play than just the underlying fundamentals of the market. Last week oil took the biggest hit ever in one single week of trading. Oil’s massive sell-off gave Wall St. a boost, it gave the dollar a boost, and it’s kept the markets guessing and probably even more confused.

I’m not an oil trader and I’m not about to give any analysis on oil. But, the formula is simple, should oil find support and continue its bullish trend this will only serve to put downward pressure on Wall St. and the USD. Thinking logically it would seem that after last week’s tremendous sell-off crude would find some support and buyers and would make an attempt to get up and over the $132 level. Should the sell-off continue look for Wall St. and the USD to find support and make some bullish gains.

Same is true with gold. Gold closed down off its highs but I see no reason to take an overall bearish view on gold. We have some major U.S. fundamental data this week and more earnings data out of Wall St. Should the news continue to be bad this will be very supportive of gold.

The USD Index is also another piece of the component. The same support and resistance levels I’ve given you the past few weeks are the ones you still want to watch. On the downside, 70 is a major key level. A break of 70 could send it to 68 and we’d be well into “heads will roll” territory. There’s quite a bit of resistance above the 73 level but should we be able to make a clean break, the next areas of resistance will be around 74.50/75.

So far any time we’ve approached that major key level of 70 the EUR has reversed against the USD and we’ve dropped several hundred points. Keep an eye on the Index this week…

EUR/USD:

Again, I’m not ruling out another run to the 1.6000 level but in order to get there, we’re going to have to sustain a break of some key resistance levels. The first of which is the 1.5880 level.as long as we trade below the 1.5880 level, we’re not moving up, it’s really that simple.

The 1.5780 is the first that has some decent support. There will be some big stops sitting below the 1.5750 level, all the way down to the 1.5700 level. I have no idea what the “trader sentiment” is in the retail market, I have no idea what the other forums, blogs, and traders are saying.

I could careless what are saying. I need to see certain price levels get hit, tested, and see if they break or bounce and this is how I will decide to trade in addition to following the underlying fundamentals of the market and whatever the market correlated variables are doing.

I’m still short at 1.6019 and 1.5925 and will hold for now. Price action will dictate how I trade and where I decide to get in and get out. I am on alert for any bank failure news that may hit the markets. I know I must sound like a broken record but I find it hard to believe we’ve still yet to hear about any significant bank failures in Europe. Surely this news must come out at some point…

Don’t make any dumb trades before London because the whole ball game can change once London enters the market. Be smart with your risk and money management.

Key Levels

Key upside levels:

1.5854
1.5872
1.5897
1.5908
1.5926

Key downside levels:

1.5802
1.5780
1.5763
1.5751
1.5739

Trade Team Update - - 7/17/08

Today's low liquidity and shocking news events in the other markets made for a wacky day for the EUR/USD.

USD fundamentals were all to the upside which kept the EUR under pressure. Oil took another beating as more banks and hedge funds liquidated net positive oil contracts in order to provide liquidity. In addition, there were crude options expiries today which only added to the mix.

Most of the wackiness was due to moves in the equities markets... the Dow was all over the place with earnings reports. Most of the news was not good on Wall St. Merrill Lynch suffered more billion dollar loses and the whole U.S. financial sector in general remains in serious trouble.

And really, it is those issues with U.S. banks that are keeping the EUR propped up against the USD. Wall St. is totally to blame for the EUR/USD continuing to hover around the 1.5900 level in my opinion.

We did see some great price action today... as I noted last night, a break below the 1.5800 level would take the euro to the 1.5780 level to knock out stops and then to pick up buyers. This is exactly what happened and exactly how it played out today.

The ECB certainly did a good job of complicating things today... Trichet told the markets flat-out that the ECB would achieve taking inflation at or below their 2.00% target rate in the medium-term. Then, ECB Wellink told the markets that the slowing Eurozone economy wouldn't ease the price instability and he pointed to the possibility of another rate hike.

Those price-fixers at the ECB can run their mouths all they want about rate hikes. In fact, let them hike rates again and I'll keep shorting the euro down because the more they hike rates the harder the Eurozone economy is going to crash and the further the euro will tank. Bring it on the rate hikes! Hike it up to 5.00% and watch what happens in the next 6 months... we will be laughing all the way to the bank at FXI.

Tomorrow:

The only semi important piece of data we get is German PPI which should continue to show inflationary pressures.

EUR/USD:

I'm not expecting any major monumental moves tomorrow but we'll likely see some more wacky price action and price swings as the market remains ill-liquid and as players in all markets are trying to figure what in the world they are doing.

Personally I don't like trading under the type of conditions we saw today. I LOVE trading when markets are extremely volatile but are moving in an orderly fashion. Today's price action gave the volatility I love but there was no order to it and this just doesn't work for me. I watched it all go down poolside today. I've learned my lessons trying to trade disorderly price moves and it's not worth it for me.

Now if you're trying to make sense of it all, just follow the euro's price action and the market correlated variables... the formulas are simple... if oil continues to take a beat down tomorrow you may see the Dow gain which would mean the EUR stays pressured against the USD.

The key is to watch how the markets respond to today's dismal news and dismal earnings reports from the U.S. financial sector. In case you don't realize this, when there's bad news and data for U.S. banks this is terribly USD-. Same thing would go for Europe. When we finally get the truth about European bank losses this will translate into the euro getting sold off. That's just how the correlations work.

As far as trading goes, I'm basically done for the week unless I see some surefire money trades. It would not surprise me to see the EUR finish strong tomorrow but I'll reserve anymore speculation on that until at least London opens.

You know the drill -- be smart with your trades and your money management. Do not overleverage and do not make any knee-jerk trades before the weekend. And please don't give any profits back to the market.

Key Level

Key upside levels:

1.5884
1.5899
1.5921
1.5942
1.5958

Key downside levels:

1.5832
1.5804
1.5791
1.5772
1.5753

Liquidity is extremely low. Overall price action is to the upside right now but could easily change after 0300 EST.

If we can break through the 5850 level, the next struggle will come at the 5880 level. If we can sustain a break there, the market will likely move on to take out stops above the 5910 level.

On the upside, there should be a struggle in the 5920. Real time price action and momentum will show whether or not we can move beyond.

On the downside, 5800 should provide stronger resistance. Below the 5780-5750 levels will be many stops that may need to get taken out, but I would suspect there to be buyers down there as well.

Trade Team Update - - 7/16/08

After forging a new high all-time high, the euro came under some intesified pressure as most of the market correlated variables worked in favor of the USD in today's trading.

Early this morning during the London session the market made quite a few attempts to find momentum and traction to make a move back towards the 1.6000 level. What I saw within the price action was a market void of buyers and a market filled with anxious sellers waiting for the signal to make a move agaisnt the euro.

Today's slide down was purely fundamental in nature... the CPI data out of Europe printed as expected, so no big surprises there. The U.S. CPI printed a touch to the upside and this was the point where it became clear the only smart trade today was short as the sellers got the ammo they needed to make their move.

Not only was the CPI data hot as we forecasted but the Industrial Production number printed to the upside. The next move against the euro came during Bernanke's speech.

Bernanke's tone and rhetoric today was clearly different than yesterday's. During his testimony on Tuesday he was aloof in regards to the U.S. inflation issue. He didn't use any strong rhetoric and really just made it sound like no big deal.

But today was a totally different story. He used strong rhetoric and was very clear that the U.S. is indeed facing a problem with inflation and that it was the Fed's job to use monetary policy to combat this inflation.

The market picked up on his hawkish rhetoric and pushed the euro down to the 1.5800 level. For my own personal liking I don't think Bernanke went nearly far enough and wasn't strong enough but it was better than the BS we normally get from him.

I know why Bernanke was hawkish today. It was because he knew what the FOMC Meeting Minutes had to say and he couldn't conflict with that. If he painted a different picture than what the FOMC has painted it would be too contradictory and right now the Fed needs to do everything they can to build back credibility and restore market confidence.

FOMC:

Overall I have to give today's FOMC Minutes a B-grade on their views on inflation. It wasn't dovish, the rhetoric was a touch more hawkish, and I believe in the very near future inflation will be the Fed's flavor of the week.

It almost has to be because inflation talk is now on the evening news, the politicians are stirring up the inflation debate, and consumers are freaking out about it. We've got election season coming up and surely the two bonehead candidates will be addressing it.

The FOMC Minutes also said that some voting members were ready to hike rates soon. Now the key is to wait and see how the market responds to this. The FOMC came out too late in the day to get any response out of NY and London, so it will be interesting to see if the market players care to make their feelings known...

Overall, I call these FOMC Minutes more on the USD+ positive side and I believe they gave the markets a better notion that the Fed's next move (after the elections) may be a rate hike.

Tomorrow:

Tomorrow's big events are Housing Starts, Building Permits, and a speech by Fed Kroszner. I'm not looking at a USD+ print on the housing or building data. Kroszner will be the one to watch. There's a decent probability he will be more on the hawkish side.

It will be interesting to dissect what he says now that Bernanke's testimonies are over and the FOMC Meeting Minutes are out. Will he show a pattern of consistency or will we get a surprise? Stay tuned.

EUR/USD:

As we mentioned, the market correlated variables were mostly working for the USD today. Oil took another beating. The Dow was up. U.S. bond yields made a move up. Pretty simple stuff to follow...

For those of you that took our call to short the euro above the 1.6010 level I would strongly encourage you to hang on to that one. After what I heard form the Fed today I reduced my probabilities of seeing the euro go back to sustain a break of the 1.6000 level.

As far as trading goes, it's the same old story... I'm bearish on the euro. It can go to 1.6000, 1.6100, I'm shorting it. Bring it, whatever the rise is, I'm shorting it back down.

The fundamental and economic situation in Europe is abysmal. Many economic sectors in Europe are crumbling. The problem has been that the U.S. gets more attention and more focus. But I believe a time is soon coming that the issues in Europe will be revealed and will be under a more intense focus by the market.

There are two things that need to happen to send the EUR/USD on a real downtrend/correction. The first will have to be the market turning it's attention and focus on the terrible economic conditions in Europe and take them off the terrible U.S. economic conditions.

The other thing is that the Fed will have to truly go into a hawkish monetary cycle and the ECB will have to truly come out of their hawkish monetary cycle.

Once those two things happen, it's game on. I was told that after the euro broke 1.6000 the tech traders were calling for 1.7000. Don't listen to those idiots... these are the same idiots that went long at the top of an all-time high. As I said, I'm bearish, I'm shorting all rises, and I don't care what anybody tells me otherwise.

I'm not ruling out another attempt to move back up before the week is out. For now I'll wait to see what happens when London enters the market. London gave great clarity this morning and could do the same again.

You know the drill -- be smart with your trades and with your money management. If you're not feeling the market, sit on the sidelines until things become clear to your view.

Trade Team Update - - 7/15/08

The last time the euro made a new high against the dollar was April 22nd.

Fundamentally there was no reason for the euro to go to 1.6037. German ZEW was absolutely abysmal and is only confirming our forecasts of economic doom and gloom in Europe. Today's oil sell-off was the second worst in history and the largest since 1991. Securities held their ground and the Dow was even in the green for a good part of the day.

It's safe to say that the majority of the EUR/USD's market correlated variables were all working for the dollar and working against the euro, so what is the explanation for this new all-time high?

Very simple -- the market sent a message that they no longer have faith in the Fed, that Bernanke has lost most if not all of his credibility, and that the Fed and Treasury do not have control of the spiriling U.S. economy.

I am certain this was the market's way of sending a message to the Fed and to the rest of the market players, our commrades...

What makes me certain is what I saw gold do today in addition to what Bernanke told the markets in his testimony.

Before we go any further, I want to explain the situation with oil. At one point oil was down almost $10 and I believe it settled being down over $6. Normally, this kind of massive oil sell-off would have hammered the euro and have skyrocketed the dollar. But, the sell-off had zero to do with anything USD+.

Banks (those people that actually move markets) went on a rampage to close net positive oil positions in order to add solvency to their cash liquid holdings. The U.S. banking system is on the edge of the cliff... investors have lost faith, customers have lost faith, politicians have lost faith, and market players have lost faith in the U.S. banking system.

Banks need to show solvency, they need to show cash reserves, and they had to liquidate net positive oil contracts and this is exactly why oil sold-off but did not give the USD any boost at all. The other reason for the sell-off was the simple fact that investors have no hope in the U.S. economy and believe the slowdowns will diminish demand for oil. There could be more oil selling this week, but I don't see any reason it won't also find buyers that will drive it back up.

OK, getting back to gold... gold gained today. Gold has been gaining and the reason why is because investors are scared of the U.S. economic situation, which is faced with staggering inflation and flat growth. The Fed is basically telling the market players to buy gold again.

With geo-political tensions rising, with inflation rising, and with growth slowing to an even greater degree gold has to gain and the USD will have to fall with it.

In my opinion gold is back on pace to test the $1K level. If this market sentiment that we saw today sustains throughout the rest of this week and into next week it's quite possible we see $1K gold or better, and this we know would not be very USD+.

I could be totally wrong, but I believe if this USD- sentiment persists it will only drive gold back up.

Bernanke:

I don't even know where to begin with Bernanke. These updates are family-friendly so I'll refrain from saying what I'd really like to say...

I'm going to quickly sum up the best of the worst from Bernanke today. Basically, Bernanke gave the greenlight for the market's to keep selling the dollar in my opinion.

Bernanke had the perfect opportunity today to hit the markets with rhetoric to show the Fed was seriously considering the use of hawkish monetary policy to fight the rising inflation situation. He was on stage, the whole world was watching, and he didn't do it.

Instead, Bernanke told the markets the Fed's hands were tied and they couldn't raise rates in the near-term. Bernanke said the Fed's number one main concern was the proper functioning of the financial markets. Not inflation, but Wall St.

Not the dying consumer, not the crumbling housing market, not the worthless dollar, not the trade deficit, not the employment meltdown, but his friends on Wall St.

Every time Bernanke speaks he paints a darker picture of the U.S. economic situation and doesn't use the opportunity to send a strong monetary policy message to the markets.

I could be the only trader on earth that has this opinion, but I believe Bernanke gave the markets the OK to keep buying commodities and keep selling dollars. The market will decide as it always does...

EUR/USD:

Today's euro data was terrible, absolutely awful. No surprise to the traders here because we know Europe's economic situation is terrible and it's just a matter of time before the ECB can't keep things swept under the rug.

Today's dollar data was very positive, especially in the inflation area. Tomorrow we have a monumental day as we get inflation data out of Europe and the U.S. Both should be hot and print to the upside.

There is more risk on the euro inflation data to print to the downside as opposed to the dollar inflation data, but if the truth is to be told tomorrow both sets of data should print positive for their respective currencies.

With bond yields dropping in recent weeks this is a signal that there's been heavy buying of bonds and I believe this will lead to a USD+ print on the TIC data.

But the two biggest events tomorrow are Bernanke and the FOMC meeting minutes. There's no telling what Bernanke will say tomorrow. Obviously he's well aware the euro made a new all-time high today and that the USD Index is fighting for dear life. So, there is risk that Bernanke may get a little more vigilent tomorrow to keep the market's calm.

I do expect the FOMC meeting minutes to address the inflation issue, but to what degree and to how hawkishly I have no idea and won't even try to speculate on that. But you know how it works... dovish inflation/rate rhetoric = USD-. Hawkish inflation/rate rhetoric = USD+.

Costly Techs:

I personally grabbed euro shorts at 1.6010, 1.6014, and 1.6019.

I took 101 pips on the 1.6014 short and 88 pips on the 1.6010 short while my 1.6019 is still open.

While we were shorting we heard reports of tech traders going long in the exact spot we were shorting. One trader took a big hit using some MACD thing that signaled a break-out above the 1.6000 level. Apparently another trader got caught long using some strength indicator.

This is exaclty why I say techs are worthless and why I can't stand them. By the time those lagging indicators caught up with the price action, the market had already made its move and was ready to go the opposite direction. And this is why we use leading indicators here, not lagging and historical indicators which prove to be failures.

And yes, I'm bragging. I don't care either because once again price action was right and the techs were wrong. If today's example isn't enough to motivate traders to learn how to read the most reliable leading indicator - price action - I don't know what else is.

Have you ever been to a good ole fashioned Southern Baptist tent meeting? I've been to plenty... one of the favorite lines of the revival speakers is, "I hate the sin, not the sinner..."

EUR/USD Trading:

Can we test the all-time high again? Yes, absolutely I believe we can and it may happen before the week's over. But, tonight's price action will be absolutely critical, especially after London opens.

It's imperative we see how the market responds and where the market wants to take the euro. Last time we made a high we tanked the proceeding days. I'm not getting the sense this will be the case again but it's way too early to speculate on those things.

For me, I'm sticking to the same exact game plan as always: buy the dips, short the rises. The euro has no business being up at these levels, but the dollar has no reason to get bought.

Bernanke already told the markets he's not raising rates this year. If euro CPI prints hotter than expected and Bernanke bends over and grabs his ankles tomorrow, this will just give the markets more fuel to buy euros and sell dollars.

For now I'll hold my best short and sit patient to see what the market brings us later on. Again, I'm not going to speculate on anything because we need to see how Asia, Frankfurt, and London respond to the EUR/USD.

I suggest you also patiently wait before making any moves that could put you in an uncomfortable situation. Later on I will post my key levels. If I see anything happening in the markets to be aware of I'll post this as well.

Be smart, do not overleverage, and wait for the trade to come to you...

Trade Team Update

Yet another odd day in the markets, but one that saw the EUR show continued upside strength...

Apparently the euro's move caught several traders off-guard today... allow me to cut and paste and excerpt from yesterday's update:

Once the news about the Iranian missle test hit the market last night the risk shifted off the EUR and back on the USD.

We didn't make a major move today but based on what the price action is telling me there's a higher probability that we see more euro gains tomorrow, but we'll get into this later in the update.

The spotlight was on Trichet and Bernanke today. Trichet had nothing new or nothing shocking to reveal to the markets. Bernanke was a different story. He was on Capitol Hill answering questions from politicians about the credit markets, housing, economic conditions, equities, etc.

The highlight of the event was when our favorite freedom-fighter, Texas congressman Ron Paul took the floor to hammer both Bernanke and Paulson on their brain-dead monetary policies and their destruction of the dollar. It was a beautiful thing...

Bernanke was speechless while Paulson repeated his "I believe in a strong dollar" mantra which he followed up with a lot of mindless drivel that made zero sense. Finally, the committee chair had to step in and end Paulson's reply to Paul as it was just making Paulson look like the idiot he is.

I have to say that I thoroughly enjoy these events when Ron Paul gets a shot at making the Fed and Treasury look like fools... Paul hands them the rope and they slip it around their necks and hang themselves... it's almost too perfect. We have nothing but love and respect for Ron Paul here in the FXI community.

Needless to say, neither Bernanke nor Paulson said anything to help the dollar and we pushed up to the 1.5800 level, knocked out stops, and then pulled back.

Tomorrow:

We have two key fundamental events tomorrow: Trade Balance and Michigan Sentiment.

The abysmal Trade Balance is one of the main causes of the years-long USD weakness and why the USD Index has dropped so dramatically. Even with the devalued dollar the Trade Balance has not made any USD+ gains and is falling further to the downside.

I haven't done my normal amount of research on this report because I believe it will remain in USD- negative territory even if prints slightly USD+ tomorrow. Same thing with the Michigan Sentiment. I'm forecasting a USD- print on this piece of data and I really only see nothing but sour times for the consumer.

EUR/USD:

Oil made a strong resurrgence as it gained over $5 today. Gold was also strong to the upside and this certainly gave the euro a boost. For most of the day the Dow was under the gun but made a late day rally and this pretty much capped any further EUR/USD upside gains.

Geo-political events are very much the flavor of the week. I would like to mention this aspect of the market... many traders ask me why I'm so against using candle charts and using technical analysis...

I have a laundry list of reasons why I can't trade with those things. I won't go through them all here but I do want to talk about the geo-political aspect to the FX market.

We trade in a complex market as you very well know. As complex as the market is it still comes down to a bunch of humans pulling the trigger, pushing the buttons, calling the shots, and whoever has the most liquidity at any given moment are the ones that hold the power to push the market one way or the other.

And those humans that decide to flood the market with liquidity or decide to drain the market of liquidity are driven by two distinct sets of human emotions:

1. Greed
2. Fear

Both of those sets of human emotions dictate how the vast majority of market participants decide when to get in and when to get out. Greed and fear are more on a subconcious level for the average trader but those two emotions keep most traders in their grips.

What does this have to do with geo-political events and candle charts? Everything...

There's no chart on earth and no candle pattern on earth that can forecast a geo-political event nor can they forecast how the market will respond to a geo-political event. At any given second a geo-political event can hit the markets.

Not all events are responded to the same because not all traders will have the same emotional reaction to a geo-political event. A few weeks ago I warned to be on the lookout for a rise in geo-political events and for the market to respond to them.

What have we seen the past few weeks? Oil pipelines have been attacked, tensions between the U.S., Israel, and Iran have escalated, etc. Most of these events have not benefited the USD even when a candle pattern or technical set-up may have been pointing to USD strength at that given moment in time the event hit the markets.

So for me and my trading style, I shun the charts, I shun the techs and I keep my eyes and ears focused on catching those geo-political events as they hit the market and trade them accordingly.

This is also another reason why proper risk and money management is imperative. A geo-political event that catches the market off guard can easily move the euro 200+ pips, it can widen spreads to a vast degree, and cause intense up and down volatility. Having an account over exposed during a voltile geo-political event driven move will only further toy with your emotions as a trader and cause you to do really stupid things. Is it worth it?

Now as far as trading goes, I will be looking to buy dips and head into tomorrow with some fresh euro longs. This is purely my opinion and my own analysis but I see a higher potential and probability for upside gains tomorrow as opposed to downside losses for the euro.

On most accounts I've got tons of free margin to buy the euro and this is my plan. I do believe we'll see a pullback from these levels and this will just present me with a buying opportunity.

If price action causes me to change my plan I will post but for now I think we do more upside testing tomorrow. If I'm wrong, so be it. I have to trade according to what I see in the market and according to my own gameplan. I don't care what anybody has to say.

That being said, the euro will face a battle beyond the 1.5820 level. 1.5800 was quickly rejected but with enough liquidity and momentum we should be able to breach 1.5800 and move on to test the 1.5820 level.

There will be a bull vs. bear battle between 1.5820 and 1.5850. A break of 1.5850 should take us up to the 1.5890 level to knock out more stops. With all the techies talking about the dollar recovery, the euro weakness, blah blah blah you can be assured there's heavy stops sitting at 1.5805 and above.

Liquidity has been severly lacking so I can't forecast a mega market move tomorrow but I do believe the euro will win the day overall. Again, just my opinion... there's a lot of time between now and then. Later on this evening I'll get a better read on the market.

The first two hours of London will be critical as this can give an even better view of the market. After midnight I will post my key levels.

As always, be smart, trade smart, and do not overleverage.

Trade Team Update

Today could be classified as another odd one in the markets... I think some of it might have to do with the fact that trade desks are likely under staffed with the summer session being here.

There's a severe lack of liquidity in our market and this is probably the case in the other markets. The lack of liquidity and the renewed risk aversion really makes trading a little more complicated because the fundamentals of the market continue to play out minute by minute but the typical amount of liquidity is not available to make the market moves more orderly.

We did see the euro make nice gains on the dollar in spite of terrible EUR fundamentals early this morning. Oil was also weak to the downside and gold's gains were limited. My opinion is that the dollar lost ground in light of the renewed risk in the equities market on the back of serious risk issues with U.S. financial institutions.

It's also important to note that the 2-year and 10-year yields got hammered today. This means that money flows are coming out of the equities markets and flooding into securities. The reason is clear: traders and investors are spooked and do not have much faith in Wall St. right now and have almost no faith in U.S. financial institutions.

This could spell some big trouble for the USD in the short-term if Wall St. goes into a Great Depression era mindset and starts making dumb knee-jerk moves. Keep an eye on this the rest of the week and see how it all plays out. Today the Dow lost over 230 points and has been officially called a bear market. None of this is good for the USD.

Tomorrow:

Tomorrow is a big fundamental day as we get some key EUR data and a Bernanke vs. Trichet showdown. That's the only two events I even care about. All markets acrossed the globe are focused on the Fed and ECB and they only have one thing in mind: future monetary policy.

That's all I'm concerned about. Early this morning Trichet delivered a speech but it was basically a repeat performance of last Thursday. Trichet was hawkish on inflation and dovish on growth, but repeated the phrase about how the last ECB rate hike should accomplish the ECB's objective on price stability.

Trichet didn't give the market's anything new today but tomorrow is a new day and it brings a new opportunity for both Bernanke and Trichet to manipulate the market's.

Bernanke will speak first at a testimony before the House of Representatives Committee on Financial Services. I'm almost certain he will be questioned on monetary policy, rate policy, and overall economic conditions. I am expecting the markets to react to what Bernanke says, so be on alert for this event.

Trichet will speak later in the day at some Eurozone party in Munich. I would expect Trichet to say nothing but positive and uplifting things about the Eurozone and would also expect him to point out the ECB's independence and how their hawkish monetary policy is helping the Eurozone economy. I do not expect to hear any EUR- rhetoric from Trichet.

We also get Initial Claims tomorrow and I'm looking at a USD- print on this data as well.

EUR/USD:

Once the news about the Iranian missle test hit the market last night the risk shifted off the EUR and back on the USD. The EUR was weak the entire week until that news hit the wires and then things quickly turned around.

We made two attempts at breaking the 1.5750 level but failed quickly and have not had any momentum to even make a third attempt at breaking that level.

If the market does build up the momentum to sustain a break of 1.5704, it will then need to break the 1.5692 level which could open the doors to go to 1.5670 level.

At this point I'm not looking at the market being able to break 1.5750. Price action is weak to the upside and we ran out of steam to keep pushing north.

I'm still overall bearish on the euro and I will keep shorting the rises and I will keep buying the dips until the market shows me to do otherwise. I believe more risk has shifted back ontot he dollar but I'm certainly not ruling out a test of the 1.5640 level again.

Be smart with your trades and do not overleverage.

Trade Team Update

We certainly had an interesting start to the week... for the most part the euro slid easily to the downside just as we suspected it would... this lasted until early afternoon in the NY session when the markets got hit with some heavy money flows and the market correlated variables went a little nutty...

The Dow took a nosedive and that got the ball rolling... at the same time oil and gold did an about face and scaled back their losses, the 10-year yield lost about 10 points, and the euro pushed up to the 1.5750 level after making a session low three pips from my key downside level of 1.5607.

The EUR fundamentals were abysmal today and this helped keep the EUR under pressure in early morning trading. Once the USD- money flows hit the markets it was relatively easy for the euro to push above the 1.5700 level and it's now sitting comfortable around the 1.5720 level.

Tomorrow:

Tomorrow is our first big fundamental day of the week as we get Pending Home Sales, and two Fed speeches: Bernanke and Lacker. Bernanke is not specifically scheduled to speak on monetary policy but Lacker is.

You can be assured the market's will dissect anything and everything the Fed says. Today, San Fran Fed Yellen gave a very dovish tone to the credit market and to the U.S. economy as a whole.

This week will be a good test to see how serious the Fed is about a strong dollar... the central bankers and their rhetoric are going to reacted to by the markets, this you can be assured of...

Pending Home Sales should print at or slightly above market expectations, but regardless, we will not see the major upside we got last go around and overall this data should remain USD-. An upside surprise on this data will likely give the USD a boost, but don't forget we have Bernanke speaking two hours before the home data is released...

Although not a market mover, it's important we take a look at the Consumer Credit data released later in the afternoon. This piece of data is key because the U.S. economy is so heavily dependent upon the consumer to have access to lines of credit, to take out home equity loans, to take out second mortgages, and to keep adding debt to credit cards, retail credit cards, etc.

The sharp decline in lines of consumer credit has directly correlated into the sagging retail sales, sagging car sales, and the overall pullback of the consumer.

EUR/USD:

The moves we saw with the euro today were really nothing to take any note of and probably won't mean much going forward the rest of the week...

The market remains very ill-liquid and this makes the overall trading environment a little tricky.

As far as trading goes I'm treading lightly until the market gives more clarity within the price action... I absolutely beleive we can easily make another run at the 1.5850-1.5900 level but the euro will need some positive money flows and we'll need to break some key levels on the way up in order to gain the momentum required to at least sustain a break of the 1.5800 level.

Commodities were very weak today but we didn't see a tremendous amount of euro weakness in relationship to the commodities weakness and this is something worth noting. The correlation between the EUR and the Dow seems to be back in stronger effect... should equities continue to sell off and stay to the downside this will only keep the EUR supported vs. the USD.

My tradeplan for the most part will remain the same -- buy the dips, short the rises, and remaining overall bearish on the euro... on all accounts I freed up between 1% and 4% usable margin by taking profits on entries and this will give me even more freedom to operate under these shaky market conditions. Right now I do not have a single account with anything less than 95% usable margin, so there are no worries in that regard.

Right now price action is a touch to the upside but of course it's early and conditions are terribly thin... later on this evening when we get more liquidity I'll post my key levels.

Be smart with your trades and be smart with your margin usage...

EUR/USD Weekly Outlook 7/6 thru 7/11 2008

This will be our first "back to normal" week following the ECB's rate decision and the incredibly thin conditions due to the U.S. markets being closed for holiday.

In my view, higher risk is on the EUR this week and there's a slight advantage on the USD and a greater probability we see further downside on the EUR. What happens between market open today and Tuesday could very well set the tone for the remainder of the week and the short-term trend of the EUR/USD.

In case you missed it Trichet delivered a speech early this morning and was more on the hawkish side... Trichet was defending his decision to raise rates 25bps and was taking the position of protector against Europe's poorer citizens. I'm not so sure the markets will quite follow that logic...

Sarkozy did give a much more even response saying that he supports the ECB's independence and policies but feels that rates should be lower because the U.S. has lowered their rates.

I believe this comment from Trichet at the post-rate press conference will still be fresh in the mind of traders:

"Today's decision will contribute to achieving our objective."

It is this comment that sent the euro on a 200+ pip dive against the dollar and it is this comment that could potentially keep the euro pressured against the dollar.

Fundamentally we have a light week. The biggest fundamental data this week will be German Industrial Production, ECB economic bulletin, Pending Home Sales, Trade Balance, Crude Inventories, and the Michigan Sentiment.

With only a few big reports on the books, the Fed and ECB will take center stage this week. Bernanke speaks twice with one of them being a testimony on market regulation. You can be assured he'll be questioned on more than this and will be questioned on current monetary policy while the opportunity is there to do so. Trichet will speak three times this week and is widely expected to defend his position and to remain hawkish on price stability.

All eyes will be on the two central banks this week as the markets will be looking for any and all signals that point to future monetary and rate policy moves in the near-term.

EUR/USD:

Last Thursday's sharp correction and Friday's continued euro weakness is worth noting even though market conditions were thin and the move was fueled by profit-taking and stoploss triggering.

We've seen the euro make repeated attempts at a sustained break above 1.5800, 1.5850, and then 1.5900. All were resoundingly rejected. As I mentioned in the last update it would be important to see the euro close above 1.5724 on Friday. This didn't happen.

The euro made one final attempt at that level on Friday and within minutes had dropped about 50 pips to the downside. Should thin market conditions persist at the start of the week it's highly likely the bears will remain in control and will seek further downside testing.

Fundamentally there is no reason at all for the dollar to make any substantial gains against the euro. There's been zero fundamental change in the market the past two weeks with exception of the ECB raising rates 25bps.

If you take a logical approach to the market, with an ECB rate hike, and with the euro trading under 1.5700 these should be excellent levels to buy at for the potential of 100, 200, or 300 points worth of profits.

Our market rarely operates on logic, though. It's runs on pure emotions... it buys the rumor, it sells the fact...

In general, price action patterns of the EUR/USD will almost always move to the downside at a much faster and more exagerrated degree. All you need to do is pull up a chart and calculate the time it takes the euro to move up 200 points vs. the time it takes to move down 200 points and you'll clearly discover prices slide faster and more forcefully to the downside as opposed to the upside.

There are very specific reasons why this happens. I won't take the time to explain that here, maybe in a future price action post, but I want you to be aware of this price action pattern and to keep a watchful eye on the euro's real-time price action this week, especially at the start of the trade week.

We're still several hours away from market open, but I do have some overall key levels you'll want to be aware of...

Upside: 1.5724, 1.5748, 1.5767, 1.5788
Downside: 1.5662, 1.5641, 1.5628, 1.5607

At this poin I'm more biased to see additional downside testing. A sustained break of the 1.5580-1.5560 level could easily open the doors for the market push down another 120-220 points... of course the market correlated variables will come into play addition to what the market is showing us with the real-time price action.

It's imperative we watch the USD Index this week. In terms of support, 72 and 70 are key levels. In terms of resistance 73 and 75 are key levels. As always, gold and oil will be back in play. Is this the week oil runs out of steam and corrects below the $132 level? Will gold run out of steam and fall dramatically below $910? We have to watch close...

And as far as rates are concerned, we have to watch the 2-year and 10-year yields... when the euro pushed up last week U.S. bond yields fell and German bund yields rose which only further fueled the euro's rise.

With the market remaining at a heightened level of uncertainty at the start of the week I caution you to use strict risk and money management disciplines until there is more clarity and more sense is made.

It's quite possible we can remain stuck between 1.5300 and 1.5800 for the next few weeks, but lets allow the market to get back in the groove on Monday and Tuesday and see what the price action is telling us.

As always, be smart with your trades and don't overleverage.

Priced in? Is data really priced in?

The term "priced in" is used quite often in the Forex market. The term is used to describe how a big fundamental event or piece of fundamental data is already factored in the price moves before it's actually released and realized by the market.

I absolutely, positively, do not, at all, whatsoever believe in this concept of "priced in". I never look at any event like a rate decision or an NFP being priced into the market or into the price action.

I do believe that market expectations can and will drive price action to certain levels but this idea that a rate hike or a rate cut, for example, is priced into the market is pure lunacy in my opinion.

I have a really good memory and I distinctly remember back in early September of last year that the market gurus and talking heads were saying that three Fed rate cuts were already priced into the EUR/USD.

I ripped up the idea "priced in" and said it was idiotic for anybody to even dare think that three Fed rate cuts were being priced into the EUR/USD.

So, I went back and did some basic research on what the Fed did with rates between September of 2007 and April of 2008 and correlated back to what the EUR/USD prices did between that time period.

And if this doesn't disprove and discredit the idea of "priced in," I don't know what will...

Fed Funds Rate before the first cut: 5.25%

First cut: September 18, 2007
Amount: -50bps
EUR/USD September low: 1.3548
EUR/USD September high: 1.4276
Gain: 728 pips in favor of the EUR

Second cut: October 31, 2007
Amount -25bps
EUR/USD October low: 1.4013
EUR/USD October high: 1.4503
October opening price: 1.4275
Gain: 228 pips in favor of the EUR (opening price vs. high price)

Third cut: December 11, 2007
Amount -25bps
EUR/USD December low: 1.4309
EUR/USD December high: 1.4769
December opening price: 1.4641
Gain: 128 pips in favor of the EUR (opening price vs. high price)

Fourth cut: January 22, 2008
Amount -75bps
EUR/USD January low: 1.4365
EUR/USD January high: 1.4921
January opening price: 1.4591
Gain: 330 pips in favor of the EUR (opening price vs. high price)

Fifth cut: January 30, 2008
Amount -50bps
EUR/USD January low: 1.4365
EUR/USD January high: 1.4921
January opening price: 1.4591
Gain: 330 pips in favor of the EUR (opening price vs. high price)

Sixth cut: March 18, 2008
Amount -75bps
EUR/USD March low: 1.5146
EUR/USD March high: 1.5902
March opening price: 1.5195
Gain: 707 pips in favor of the EUR (opening price vs. high price)

Seventh cut: April 30, 2008
Amount -25bps
EUR/USD April low: 1.5508
EUR/USD April high: 1.6018
April opening price: 1.5762
Gain: 256 pips in favor of the EUR (opening price vs. high price)

Total rate cuts: 7
Total amount of basis points cut: 325
Total euro gain between first cut and last cut: 2,470 pips

When the market gurus we're talking about the Fed rate cuts already being priced in the EUR/USD was trading around the 1.3500-1.3600 level. By the time the rate cut cycle was over the EUR/USD made a high at the 1.6000 level.

Still believe in the "priced in" concept?

Trade Team Update

Today was probably the most widely anticipated trade days of the year and it certainly delivered the volatility, theatrics, and insanity we were all expecting.

I've got a lot on my mind, I've got a lot to cover, and we as traders have much to consider going forward. Basically I want to cover today's events, the implications, and the possibiliies for the future.

As always, the proceeding are my own personal thoughts, ideas, and opinions. It's up to you to do your own research and come to your own conclusions.

Trichet:

As expected, the ECB hiked rates by 25bps bringing the ECB's key lending rate to 4.25%. This was no shock to the market and had no immediate effect on the EUR/USD price action because the market's were then waiting to hear what Trichet had to say at the press conference.

Although the ECB's rate policy move was no shock to the markets, the shock came when Trichet said eight simple words... and it was those eight words that sent the euro down 230 points top to bottom against the dollar...

This is an exact quote of what Trichet said:

"Today's decision will contribute to achieving our objective."

That comment halted the euro in its tracks and sent it on a nosedive against the dollar. Through that comment Trichet told the market this rate hike was a one-and-done deal, that the ECB was not moving into a rate hike cycle, and that this hike has the potential of being taken back in the near-term. In addition, he said there were downside risks to growth and warned of a coming economic downturn within the Eurozone.

That's all the market needed to hear to bring out the profit-takers and the bears to help push the market down... they got help with some pretty heavy stoploss triggering which only added more fuel to the fire.

We did not get a hawkish Trichet and the market's got the sure-fire signal that there would be no more rate hikes and that this hike would likely be revoked due to the worsening economic conditions that Trichet clearly stated exists.

It's really that simple -- the explanation for today's move is that simple... and it's those eight little words that the market will remember going forward...

I did gain a new appreciation for Trichet today for something he said. Towards the end of his speech he took the opportunity to throw some hate at the Fed and call them out for their lack of credibility. And he did it knowing the entire world was watching and knowing the Fed was watching. I thought that was pretty cool... it's nice to see a central banker get subversive on the crooks and criminals at the Federal Reserve.

USD Fundamentals:

Obviously the biggest event today was the ECB but we absolutely must talk about today's USD fundamentals and their implications on future Fed monetary policy...

NFP -- with NFP showing another net loss of 62K jobs, the data did come in at general market expectations but this is absolutely abysmal for the U.S. economy. Today's NFP is terribly USD-. So far this year the U.S. economy has lost a total of 438K jobs.

Some of the talking heads in the market were saying how great it was that NFP didn't print a triple digit loss... as if losing 62K jobs is a good thing...

This NFP will only serve to diminish the market's expectations of a Fed rate hike in the near-term. An economy that's bleeding jobs is not an economy that can handle a rate hike cycle without further crimpling growth and credit expansion.

In addition, the unemployment rate was expected to tick down but it stayed at an elevated level of 5.5%. Bernanke has repeatedly warned that the unemployment rate will likely increase in the coming months and I certainly have to agree with that forecast. The elevated unemployment rate is another reason why the Fed won't be able to hike.

Initial Claims -- we got a shocking number this morning... an increase of 16K new jobless claims from the prior week bringing the total to 404K. This is terrible news and extremely USD-. Today's data took the 4-week moving average on Initial Claims to 390K which are the worst levels seen since October of 2005. Another very bad sign for the labor market and another reason why the Fed can't jack up rates...

ISM -- we got awful ISM services data this morning with a 48.1 print. With ISM services printing well below the key 50 level, this too will weigh heavy against any market expectations of a Fed rate hike. The U.S. economy is very dependant upon the service sector and this weakness will only serve to put downside pressure on growth and the consumer. The service sector has cleary become a victim of the freightened consumer and the recessionary conditions that are prevelent in the economy.

When the market returns from the holiday next Monday it will be interesting to see how they digest this data and it will critical to see how Fed Funds Futures responds to this data...

EUR/USD:

The big question is: where does the EUR/USD go from here... if you want an easy answer, you're not getting one from me... if you're one of those mindless traders that just wants to be told to "go short" or "go long" I have zero to offer you...

What I can offer are my opinions and analysis of what I think will happen in the short-term... first of all it's imperative to keep in mind that we have an even wider interest rate differential between the EUR and the USD... we have a full 225bps differential that favors the EUR even more now.

Is this rate hike going to send the euro up and above 1.6000? At this point I have to say no, I don't think so. Of course there's a probability we could see this happen but based on current market conditions and the coming downside on the euro's fundamentals I see an extrememly low probability we sustain a break of 1.6000.

Today's 230 point drop doesn't faze me in the least. It's was very obvious why we dropped and it had zero to do with a "dollar rally". There was no dollar strength today... this was not the case at all.

And I'm not gauging anything on what the market did today or what it will do tomorrow as tomorrow will be extremely thin with all U.S. markets closed for the holiday.

Tomorrow's thin market conditions can open the door to sending the euro to 1.5400 just as easily as it could send the euro to 1.5800. There will be a severe lack of liquidity and this will just give the banks and brokers ample opportunity to trigger stops and cause choppy price action that makes no logical sense.

As far as trading goes I took some profits on euro shorts and added some longs on this move down. I believe we need to make another run to test the 1.5800-1.5900 level. But, this test will have to happen soon or else the euro is at severe risk of dropping back to 1.5400-1.5300.

Next week will be very critical for the euro... normal trading will resume and the market will be dissecting and digesting today's data and likely acting upon it. I think more risk is on the euro at this point and there will be more pressure on the euro.

As far as tonight and tomorrow go, the euro will first have to sustain a break above 1.5724 if it wants to pick up any traction and momentum to move back up.

It's made repeated failures to even move above 1.5700 and this is certainly a sign of more downside. There should be decent support between 1.5650 and 1.5640, but there will also be stops sitting down there and conditions will be perfect for the banks and brokers to run those stops.

Overall I'm still bearish on the euro and will be shorting all rises... same gameplan I've had for the past two months. We may be in a season of general ranging until the market gets more clarity on what it thinks the Fed and ECB will do this fall.

Next week when things return to normal I will get a much better read on the market and feel for what the price action is telling me. My best advice is to sit on the sidelines tomorrow and not expose your money to any unneeded risk. It's really not worth it.

If you do decide to trade tomorrow be smart, don't overleverage, and don't make any knee-jerk trades.

Trade Team Update

Once again the euro put in another strong performance today, not surprising though... throughout the night and early morning in all of my updates I indicated price action was clear to the upside so hopefuly you either bought or stayed long today...

The results of the events between 0745 and 0830 tomorrow will likely set the general near-term trend and direction for the EUR/USD. The future of the pair largely rests in the hands of Jean-Claude Trichet. He's got the power and authority to either make or break the euro.

The entire world will be watching... all global markets will be watching and waiting and ready to act upon the ECB rate decision and upon what Trichet has to say at the proceeding press conference.

Tomorrow's ECB/NFP combo is shaping up to be an event of Biblical proportions... this will be the currency market's equivilent of David vs. Goliath... David being the USD and Goliath being the EUR. The only difference is David might not win the day against Goliath like he does in the Bible passage.

Each event has the power and potential to both positively or negatively effect each other which makes things doubly complicated for us traders. I'm going to give you the possible scenarios for how things could potentially play out tomorrow and what I think the probabilities are.

I cannot find words to strongly caution you not to trade tomorrow. The potential that exists for absolutely chaotic and wild price swings is off-the-charts. I know some of you got burnt trying to trade last month's NFP. Do you really want to put yourself through that stress again? Is it worth it?

ECB:

It's been about a year or so since the ECB last hiked interest rates. In the meantime the Fed has cut interest rates 325bps starting last September through April of this year. During this period the euro has gained almost 2,800 points on the dollar mostly on the back of the EUR+ interest rate differential.

Basically all traders, all economists, all politicians, all "gurus", all finance ministers, and all markets are fully expecting no less than a 25bps hike tomorrow. The market's probability of a hike is about 100%, especially after this morning's comments from Trichet.

European finance ministers and politicians spent all day today begging Trichet not to raise rates tomorrow... they are whining, moaning, pleading, and demanding Trichet to keep rates at 4.00%. Trichet has promised the markets a hike tomorrow. His credibility is on the line. The future credibility of the ECB is on the line.

So, lets first look at what I think the possible scenarios are for the actual rate decision...

The biggest sham in the history of speculative markets: it is entirely possible that Trichet is about to pull one of the biggest shams ever in the history of the markets... it's no secret that the Fed and ECB work hand-in-hand to manipulate the markets and to price-fix the markets. Bernanke and Trichet are in constant contact and we know that the Fed and ECB have a see-saw type relationship going.

If the situation is that Trichet and Bernanke have brokered a deal to "intervene" on behalf of the USD and to knock the wind out of surging commodities there's no better way to do this than to tell the markets you're going to raise rates and then not raise them.

The U.S. and Eurozone both have inflation issues that are totally out of control and need to be reigned in. In addition to stifling inflation the majority of the Eurozone is suffering from a coming economic downturn that will be hastened with a rate hike.

The only way to combat the inflation issue without sending the dollar to its grave is to trick the markets into thinking the ECB will raise rates and then shock them by holding rates.

Now, I don't give this scenario a very high probability but it's certainly something I'm prepared for and will act upon should this play out tomorrow. It Trichet doesn't raise and his more dovish in his press conference you can expect the EUR to eventually work its way back down to the 1.5300-1.5100 levels in the near-term.

25bps hike: this is the mostly widely expected scenario that the markets are thinking. I'm not going to expound on all the reasons why Trichet would hike 25bps as they are obvious.

They key is what would a 25bps hike do to the euro? Well, initially it should send the pair up towards a test of the all-time high at the 1.6000 level. Even though the market is expecting this action from the ECB it's not fully "priced in" as many have said. The euro will gain on the dollar on the back of a rate hike, guaranteed.

A 25bps hike would send commodities higher, it would send German bund yields higher, it would send U.S. bond yields lower, it would send the equities markets into a tailspin, and most of Europe will be brought to their knees begging for mercy.

A combo rate hike and hawkish Trichet will just about assure a move back to test the all-time high at 1.6018 and would likely send the euro even high than that in the short-term. But, this will also renew fears about physical intervention from the Fed and ECB, especially if the USD Index dips below the key 70 level. A dip below 70 on the USD Index would put things in "heads-will-roll" territory which ups the odds of intervention.

My probability of a 25bps hike: 74%

A less than 25bps rate hike: the ECB has never hiked or cut an odd number but I think there's a good probability we could see an odd rate hike number of like 15bps or 12bps or 20bps, etc.

That could be the ECB's way of fulling their promise to hike rates but also to shock the markets into not hammering the USD too bad. I can't speculate on exactly what would happen if the ECB did an odd numbered rate hike but I think the immediate reaction would be EUR+.

This type of move would certainly cause an enormous amount of confusion and conjecture within the markets, so it's really anybody's guess on how it would all play out.

My probability of a less than 25bps hike: 82%

Overall, I'm more biased that we'll see some sort of a rate hike tomorrow. I've spent a lot of time studying Trichet and his behavorial patterns and I do not feel he would put his credibility at stake by shocking the markets with a no hike.

My overall probability of some kind of rate hike tomorrow is 78%. What else can be said? Those are the only scenarios I can see possibly playing out tomorrow.

NFP:

Tomorrow's NFP is not getting quite as much attention as Trichet but this event should not be considered playing second fiddle to the rate decision. Expectations for an absolutely abysmal NFP are running hot.

At the start of the week economists were forecasting job losses between -50K and -80K roughly... now they are forecasting job losses in the triple digits with some going as high as -111K. They are also forecasting an uptick in the unemployment rate.

To be honest with you I've been totally focused on the ECB and have not done my normal NFP research. I do expect the unemployment rate to tick up. I'm not convinced we'll see triple digit job losses though.

Now, should NFP come in worse than expected and should the unemployment rate go up coupled with an ECB rate hike I don't think I need to tell you what's going to happen to the USD...

I am forecasting a USD- NFP and unemployment rate. I do not have any probabilities on this as I've not done much research on how the data might print.

EUR/USD:

It's obvious what's at stake tomorrow... a rate hike, a hawkish Trichet, and a USD- negative NFP will crush the dollar and likely send the EUR/USD to a rise of 150-240 pips Thursday/Friday... and by the beginning of next week we could be comfortably over the 1.6000 level.

A non rate hike, a dovish Trichet and a USD- NFP will likely do little or no damage to the USD and the end result should be strong USD gains after the dust settles and the market sets the trend.

And should all events and factors turn out to be USD+ tomorrow we'll be on the train back towards the 1.5300 level or better in the short-term. If all factors are to play out USD+ positive this will send utter shocks to all markets and commodities especially would likely have a meltdown.

We'd see heavy profit-taking and heavy stoploss triggering as the euro, gold, and oil all have a meltdown.

As for me and my trading I'm really not going to do anything to prepare for tomorrow. On all accounts my lowest usable margin percentage is 96%. This means the market can literally do whatever it wants and I'm in no jeapordy at all whatsoever.

If I do trade tomorrow's events it will likely be a game-time decision based on what the ECB and NFP results are. On all accounts I have plenty of usable margin and plenty of free usable margin to make trades. It can run to 1.6000 or run to 1.5600 for all I care, either way I'll be making money...

It's quite possible I do some euro buying tonight... it really all depends on what I see with the price action. I haven't made up my mind yet if I want to position myself ahead of time or not. I really don't want to go long up at these levels but I have plenty of margin to do so and plenty of open entries that are well into profit to cover any losses I may have to take.

That's about all I have to say at this point... those are my thoughts and opinions. Don't listen to me though... you come to your own conclusions and your own opinions.

I urge you not to expose your account to the tremendously high risks that tomorrow holds. Play on a demo if you must. If your usable margin is below 85% I would suggest you take steps to get your account in better shape and at a safer place.

Be smart the rest of this week please...

Trade Team Update

We had a rather interesting day in the market... the market was very ill-liquid which gave us the choppy up and down price action we saw with the EUR/USD.

The price action we've seen the past 48-hours is very symptomatic of an ill-liquid market... in other words, the big players have mostly been on the sidelines this week, and you know exactly what they're waiting for...

In today's price moves we saw the EUR/USD fail at the 1.5724 key level on the downside and then fail at the important 1.5820 level on the upside. Throughout the day we made several attempts at sustaining a break above 1.5800, then we saw the market take a very fast 50-60 pip nosedive, then it bounced and went back up over 1.5800, then dipped, etc.

The price moves were extrememly choppy and moved at a very heightened speed and degree during the times of broader activity. The reason I know the market was ill-liquid and that we'd not breakout in either direction was for two reasons:

1. The big bank players and hedge funds typically will be inactive in the market prior to a major ground-breaking fundamental event. In this case, it's Thursday's ECB/NFP tag team.

2. Knowing the big players aren't utilizing their billions in liquid to move the market, it takes far less liquid cash to cause the market to move in either direction.

When the market is fully liquid it takes a greater sum of cash and stronger money flows to push the market a certain direction and to cause the market to build momentum behind that move.

In an ill-liquid market it takes far less cash and fewer money flows to move the market, and those movements are very erratic, but will almost never breakout to the top or bottom, but will bounced between key levels.

For example, in an ill-liquid market a news event that might only normally cause a 20-30 pip move can cause a 50-60 pip move, and then it would take smaller liquid money flows for traders to act on that move to push it the other direction.

Smart traders know when a market is severly lacking liquid and it's important that we too are able to spot those price action patterns because it can be a relatively safer way to make very good profits and ROI under those market conditions.

Tomorrow:

At 0315 EST we get a speech from Trichet. This is the last time we'll hear from him before Thursday's ECB event. Will he give us any last minute clues and signals as to what the rate decision will be? It's possible. All global markets will be listening and dissecting everything he says.

After today's strong euro data basically the entire world is convinced the ECB is raising rates by 25bps on Thursday. I'm not nearly convinced as everyone else may be...

First thing after NY opens we get the dumbest, most worthless piece of data ever -- ADP Non Farm Payrolls. ADP is calling for a net loss of -20K jobs. Many economists have upped their forecasts to NFP printing losses of -90K to -110K. As far as ADP goes, I don't care what that garbage says, it means nothing to me.

We also get Factory Orders which should remain USD-. After lunch we get speeches by Chief Liar Hank Paulson and Fed Mishkin. It will be interesting to hear what Mishkin has to say... he's pretty much an idiot so I doubt he'll say anything to help the USD.

EUR/USD:

Tomorrow is really the last chance the market will get to square up and position before the ECB/NFP. As I mentioned, all markets are fully convinced Trichet is raising 25bps.

I don't count myself as convinced. My probabilities of a rate hike are still under 75%. Germany is the only nation in the Eurozone that is thriving. The other three top nations, France, Italy, and Spain are suffering economic hardships and a serious economic downturn that will only get worse, especially if rates are hiked.

The past two weeks the European bourses have taken a beating as expectations of an ECB rate hike continue to rise. German bunds yields have risen which has been very EUR supportive.

France just assumed the EU presidency and Sarkozy wasted no time at all condemning the ECB for even considering a rate hike. You can be sure there is tremendous political pressure on Trichet not to hike. Will Trichet fall to his knees under the weight of political pressures like Bernanke does? We will soon find out...

As far as trading goes and the euro goes I'm not expecting any topside or bottomside breakouts before Thursday. I think we may see pockets of volatility between now and then at certain times, but overall I'm not looking at a downside break of 1.5680 and not looking at an upside break of 1.5850. That's the range we'll likely trade in until 0745 EST on Thursday.

Tomorrow will be the day you'll want to get your account squared up if you have a low risk tolerance and want to minimize your market exposure for Thursday and Friday.

There should be some good scalping opportunities over the next 14-18 hours, but certainly don't get into a trade you can't get out of in time for Thursday.

I really don't have much else to say about the euro and trading right now. Later this evening I'll have some key levels to offer when things pick up a bit.