New Forex Position Added After FOMC Announcement

• August 11, 2004
• Dave Floyd

The Fed threw a curve ball yesterday, or
maybe you could call it a “change-up”.  While the widely expected 25 BP’s was
given, there was no change in the accompanying statement.  This has given US and
dollar investors a reason to be buyers again as the Fed seems adamant about
future growth.  It is easy to see both sides of the argument.  The jobs data is
disappointing, however, it is one piece in the puzzle.  The broad range of data
including jobless claims, consumer and small business surveys and the household
employment survey are not consistent with an abrupt stalling in hiring.  You
guessed it, we will need more data going forward to make necessary adjustments. 
Retail sales tomorrow will be one such piece.

After the
announcement, we established a long USD/JPY position on the premise that flows
will now favor the US over Japan in the near-term.  Additionally, persistently
high oil prices and evidence that China continues to slow should favor higher
levels.

Today will
likely be quiet as traders await tomorrow retails sales report to see if it
coincides with the Fed’s outlook.  Light positions and flexibility continues to
be the best approach.

Today’s
Levels:

USD/JPY:  
111.03, 111.60, 110.58, 110.35

NZD/USD:  
.6525, .6480, .6565

GBP/USD: 
1.8308-14, 1.8218

Dave Floyd