Eric Kelly's  Instablog

Eric Kelly
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Trader and money manager, graduate of the University of Michigan with dual degrees in Finance and Accounting. I have with interest in all global markets, assets, and trading styles. The analysis and opinions conveyed in my articles are my own, not that of my employer.
  • EUR/USD Analysis - Bernanke Effect on Equities 0 comments
    Apr 27, 2011 9:11 AM | about stocks: FXE, FXC, OIL, UUP, VIXY -- The highly anticipated speech from the FOMC, namely Ben Bernanke, has caused analysts to really evaluate the recent EUR/USD run. The pair is currently near $1.4650 and has been on a huge run up for months. The speech on Wednesday is expected to give more insight on the exit plan of QE2 and possibly introduce future monetary strategy.

    Currency trading has become the most liquid market worldwide, and the US Dollar is the main tool. The US Dollar has been on a decline, reaching it's lowest levels in years. The weakness is due to a growing budget deficit and a low interest rate, among other factors. However, at some point, the decline has to end. I believe Bernanke's speech tomorrow will be read as bullish for the USD. This should cause the EUR/USD to decline. Members of are currently positioned in the EUR/USD at 80% short, 20% long. This should give a hint that currency traders are preparing for a sharp decline in the pair, it does not typically trade with one side being so heavily favored.

    EUR/USD, analysis, technical, fundamental, bernanke, equities, hedgefundlive, FOMC, QE2, monetary,, gold, silver, oil, dollar, volatility, mayDaily chart of EUR/USD, last 6 months

    Hopefully, if the USD is able to strengthen over the next few months, the burden of high commodity prices will lessen for consumers. This may end up being a tipping for the markets worldwide. Gold, Silver, Equities, and Oil are all due for a pullback, while the Dollar and Volatility are oversold. Watch for the Dollar to determine market direction during near-term trading. The markets are in perfect condition for a month long draw down during May.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Stocks: FXE, FXC, OIL, UUP, VIXY
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