Breakout In This Pair

• September 22, 2004
• Dave Floyd

The market’s reaction to the Fed’s comments indicates that the
following comment was focused upon:

“Despite the rise in energy
prices, inflation and inflation expectations have eased in recent months.”

And with that, the
landscape changed, yet again.  While there is nothing dramatically different in
the statement is giving traders something to sink their teeth into, something
sorely needed after recent range trading.  It appears that the bond market was
dead on in recent weeks with yields a full 20 bp’s lower since the last hike.

Technical
levels were broken in several pairs and the result has been the establishment of
some new trades as a result.  We can only hope that there is enough in text of
the speech to allow for some follow through.

USD/CHF: 
A key bull trend-line from early July (1.2570) and this should allow for a test
of the 1.2400 level.

 

EUR/GBP: Tthis
pair made a nice break-out yesterday.  We are long from .6832.  A nice wave 4
completion and a breach  of the March ’04 highs is encouraging.

 

Dollar
Index: Ttechnically
speaking a decent break-down.  Similar to the pattern in USD/CHF, our near-term
targets are 87.70 and 87
 

 

AUD/NZD: 
Still building a base for a possible long entry.  Keep an eye on economic data
out of New Zealand which indicates some slowing momentum in growth.  There is
125 bp’s of rate hikes that are still filtering down through the system.  Any
‘poor’ reports will be the catalyst for this long trade.

Morning
Update:  Looks like the FX market has succumb to another knew-jerk reaction
overnight, follow-through is rather elusive at present as the dollar retraced
some of its’ losses from yesterday’s session.  At present it has made a move
back above the 50% retracement of yesterday’s move (88.49) and is hovering at
88.60 (.375 retracement).

There is
no key economic data out today, so price action will dominate. 

Dave Floyd