The Volatile Trading Week Continues as Euro Fails to Hold Support

It seems the jittery equities markets is causing some traders to reconsider their positions. The carnage of last year's global financial meltdown, caused investors to seek safety. They poured billions into safe, low yielding US Treasuries. "The key to making money is not losing what you have" may have been their philosophy. The strength of the equities rally from the deflated levels in March was not anticipated by many. As the market continued higher, traders and fund managers alike, sitting on the sidelines with lots of cash, joined the party. It was simple, equities went up and the dollar went down. The market went too low and they went too high.

So now what? Are markets now too high? The recent volatile stock market action, higher openings and lower closes, big volume on the down, and small volume on the up ticks, sizable insider selling are all yellow warning signs. Most of the manufacturing economic indicators are projecting expanded business activity, but banks on both sides of the Atlantic have their problems. The UBS reported loss for the third quarter was bigger than expected. This had a negative impact on both the Swiss Franc and the Euro this morning.

The old support level at 1.47 failed to hold, and we sold off to 1.4631.

There is no way to figure how long the equities/currency relationship will continue. What we are seeing at the CME futures exchange is liquidation in almost all currencies. Since spec have had the big short dollar positions, we can assume they are probably the sellers. Having taken out the 1.47, the next target is the 1.4450 to 1.45. It is hard to know where to jump in, but selling the 1.4690 level with the appropriate stop is worth a try.