As we sit on the cusp of the 1.50 level, market pundits are speculating if and when the pair will venture to the hollow ground above that number. The market has remained in an expanded trading range this morning, first taking out some stops under 1.4850, and then returning to 1.4950. With both equities and commodity firm this morning, you would expected the market to assault the 1.50 area. It is curious to note that the futures open interest was down Friday, following the pattern in previous trading days. This implies that despite the proximity to the season high, the bulls are not eager to extend their positions. Once the magic 1.50 level is achieved, how much time are we going to spend above it prior to the bankers and finance ministers talking about the difficulties caused by the strong Euro. This fear may be why open interest is being liquidated.
This seems to be the week for bankers meetings. Today the ECU bankers are meeting in Luxembourg, and it is doubtful they will be encouraging a stronger Euro. US Fed Chairman Bernanke give a speech in San Francisco today, and people are interested if he will respond to suggestions that US short rates should be close to 2%, to preserve the value of the sacred dollar. So far the only news reports from this conference were some lame comments about reducing the budget deficit. With unemployment approaching 10% in the US, it must be remembered that the unemployed and not the foreign bond holders will be the voters in the next election. Tomorrow we get comments from the Bank of England Governor King, and the Bank of Canada's comments on rates.
Currently the Euro is stalled close to the season high.
While a longer term chart might suggest that there has been little volatility in this market, it would hide the churning that has been taking place. The hourly chart illustrates this activity. If you had identified that this pair was stuck in a trading range, there were numerous opportunities to buy in the 1.4850 area and sell around 1.4950. Often is easier to trade if you do not have a longer term conviction but take what the market offers. It seems we are taking too much time to take out the 1.50, so lets again try to sell the pair at 1.4940 or better with a 100 point stop from entry. Maybe some more of the bulls will throw in the towel and take the pair back to the 1.4650 area.