Today, It’s About The Trade Number

  • September 10, 2004
  • Dave Floyd

It is only about one thing today, trade numbers.  In about 15 minutes the
trade data will be released.  Given the emphasis by Greenspan earlier this week, the FX markets are now squarely focused on two drivers:

1.  the price of oil

2.  deficits

The consensus estimate for today’s trade number is -51.5 bln, versus thectual reading last month of -55 bln.  Either way the number is disturbing
ong-term, but the actual value this morning will be key.

Any number greater than -55 bln will immediately offer the dollar lower and put a sizable bid in EUR.  This will be tradable if you are nimble.

 

Other reasons that may continue to put pressure on the dollar include comments from San Francisco Fed Governor Yellen yesterday.  A stable dollar
means larger deficits:

 “It seems to me over the very long term … that with the dollar remaining
roughly where it is relative to other currencies, this trend is likely to
continue to exacerbate, to go from five percent (of gross domestic product)
current account deficits to higher levels,”

 

Certainly not what dollar bulls wanted to hear.

 

And so it continues, sound-bite after sound-bite whipping the market in different directions, we can only remain patient and strike when the odds
are clearly in our favor.

 

Technical Notes:  (post Trade Deficit number)

Despite a seemingly favorable number, -50 bln, most major’s appear to be poised higher for a run versus the dollar. 

EUR: 1.2180-1.2200 solid wave support with 1.2260 being the “magic” resistance level

GBP:  similar pattern to EUR, 1.7870 seen a near-term support with 1.7934 as upside price target.

CAD:  despite making a nice run in recent sessions, the pattern here is sideways without much clear direction, stay clear until 1.2860-1.2960 is breached

CHF:  1.2559 looks to be tested here as dollar is selling off despite “decent” trade data.  This would extend CHF towards 1.2375

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