-58 pips: Euro Tumbles. ECB raises 25 bps in interest rates with dovish speech from Trichet.

The day I've been waiting for weeks came and left with so less action of which I've anticipated for weeks. Today is definately the USD bull day with market still favoring them despite the hike of rates from the ECB. Normally this doesn't happen and what happened is the abnormality. Normally when a certain Central Bank raises the nation's interest rates, it would spur the currency up high.... but for yesterday I was a long red candle. The consensus of 50 bps killed the currency. Accompanied the rate hike was a speech given by the ECB President Jean-Claude ' Van Damn " Trichet which was later interpreted as dovish as market was expecting hawkish remarks by him due to the overall excellent Euro-zone data reports. Adding wood to fire, the euro currency burnt faster than ever.

It was really amazing when the timing is just right for everything to come in place to support the currency. The news of the leader of Iraqi insurgency and one of the top men in the al-Queda hierarchy - Abu Musab al-Zarqawi - has been killed in a joint US and Iraqi military raid north of Baghdad has overshadowed the ECB rate hike decision. The news immediately sent the oil futures below the $70 dollar handle as traders celebrated the possibility of an increase in the flow of crude from Iraq which has been severely compromised by insurgent sabotage. Whether Mr. al-Zarqawi’s death marks a turning point in the Iraq conflict remains to be seen, but it certainly buoys the near term prospects for the dollar for several reasons. It curtails, if only for a short time, the geo-political tensions that have roiled the region and it will likely eliminate some of the “terror” risk embedded into the oil market leading to lower crude prices. Lower energy costs, of course, would be beneficial to the US economy in a variety of ways. First by compressing the US Trade deficit which will be released tomorrow, a progressively large part of which has been due to higher import costs of crude and secondly by serving as a “de facto” tax cut for the US consumer and thus offsetting the depressive effects of higher interest rate hikes planned by the Fed.

Another leading factor that just happens is the initial jobless claims fell 35'000 this month making the lowest jobless claim for the past 8 months. This sparks off the rally of USD against the major crosses in the currencies and commodities even before our ECB president action superstar 'Van Damn'.

How could this NOT be a perfect day for the USD to bull. There's no reason why it should go down... Unless the ECB rate hike was 50 bps then this blog would have a different thing to say. I've now hooked up with USD/CHF expecting it to reach at least 1.2440 next week. I took profit on a trade in USD/CHF and I took another loss in EUR/USD but I'm glad that I took the loss because with the current situation going on, I'm not expecting EUR/USD to come back anytime soon, at least for next week. Naturally, with US economic slowing and poor economic data released but with a hawkish Bernanke, the dollar would mostly rally but with an excellent Euro-zone but a dovish ECB president... Euro will reign again as the market again will prove Trichet wrong. As what happened previously for the Euro hike without any speculation in the interest hike.

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Closed/Completed Trades
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Long USD/CHF @ 1.2280, TP @ 1.2330 ( +50 pips )

Long EUR/USD @ 1.2785, Closed @ 1.2676 ( -109 pips )

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Existing Trades
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Long EUR/USD @ 1.2820

Long EUR/USD @ 1.2960

Long USD/CHF @ 1.2220

Long USD/CHF @ 1.2270

Long USD/CHF @ 1.2320

Long USD/CHF @ 1.2380

Short USD/ZAR @ 6.7000

Short USD/ZAR @ 6.5800

Short USD/ZAR @ 6.0500

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Trades I'm Waiting For
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Long USD/CHF @ 1.2370

I loss some money today but I felt it was a wise move and safe as well. With some small losses, I could manage my margin better with one less negative to handle.