I’m Looking For Entries On This Pair

  • October 15, 2004
  • Dave Floyd


Yesterday we had mentioned that the fall in copper prices
was tightly correlated with moves in the AUD/USD.  While that
relationship is still clearly intact, we need to consult the charts, which at
present are telling us that perhaps the worst is over, for now.

Persistently, higher oil prices
and a worse that expected trade deficit number have put a great deal of pressure
on the dollar, thereby reducing pressure on AUD.  Furthermore, the AUD may
likely be benefiting from copper producers repatriating AUD$ after being pushed
into increasing their hedge sales for the metals.  Granted, there is a spin on
every move in the markets, and they have their place.  With the charts firming
on AUD/USD, the story simply confirms to some extent the consolidation.  We are
presently seeking long entries on AUD/USD, both on short and medium-term models.

With a raft of data today,
there is always the possibility of some upside and downside surprises which can
offer the nimble FX trader a good way to play the inverse relationships between
the dollar and the EUR with respect to the data.

–         
October Empire State Survey —
consensus 27

–         
October Michigan Sentiment — consensus
is 94

–         
September Retail Sales — consensus is
0.3%

The focus is still away from
dollar-based pairs until a clear path is established.  This has served us well
as our recent trades, while not immune from volatility pockets, have been far
more conducive to the technical and macro backdrops versus the knee jerk
reactions witnessed in the dollar pairs.

Post Data Comments:

The Retail Sales data came in
much stronger than expected, the result is yet another knee-jerk reaction in the
dollar.  Expect the market activity to die off in the next hour or so but the
key question will be whether or not the dollar can add to its’ gains here or
simply consolidate.

Despite the aversion to
dollar-based pairs, we are long NZD/USD from last night due to higher CPI
numbers.  This increases the chances that rates are still heading higher in New
Zealand.

As always, feel free to send me
your comments and questions.


Dave