Why Friday May Provide Some Direction In FX

  • August 3, 2004
  • Dave Floyd


Overnight markets seemed to discount the terror worry and react to
lower than expected inflation data out of Switzerland, pushing the USD/CHF to
session highs at 1.2835 (200 day ema).  Pull-backs to the 1.2770 area should
provide solid support.  Much of the information that led the authorities to
raise the terror alert at several large financial institutions in the New York
City and Washington areas was three or four years old, intelligence and law
enforcement officials said on Monday. They reported that they had not yet found
concrete evidence that a terrorist plot or preparatory surveillance operations
were still under way.

Oil however has rallied as OPEC
has indicated that supplies remain tight. Concerns about the lack of spare
capacity compound worries about possible supply disruption in the Middle East
and also from Russia, where the nation’s biggest oil company Yukos is battling
bankruptcy. Iraq non-export pipeline attack stirred Brent to break $40. 
Saboteurs bombed an oil pipeline Tuesday in northern Iraq, the U.S. military
said.

This is the backdrop that
traders are operating in at present.  Terrorist threats and still no clear
picture on inflation and growth.  As I had mentioned in yesterday’s report, the
sidelines are a pretty good place to be right now until a clearer risk/reward
picture develops.  Friday’s payroll data is the one piece of data that will
likely be able to provide near-term direction in FX.  Until then, expect range
trading.  If you are inclined to trade off a short-term model, these levels may
offer some good inflection points during the day.

EUR: 
1.2022, 1.2040, 1.2065

GBP: 
1.8307, 1.8260, 1.8120, 1.8110

AUD: 
.6992, .6976, .7020, .7046

JPY:  
110.34, 109.74, 110.90

EUR/JPY: 
133.61, 133.40, 132.60

Please join me for a
free WebCast on Wednesday August 4th at 1:30 PM PDT. 
Click
here to sign up.  I will be discussing the current trading environment,
using technical levels to isolate entry points and proper position sizing. 

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


Dave