Euro Take Center Stage On Friday Sell Off. 1.30 Primary Target for EUR/USD.

It's been really amazing on how the Fed influences the world market prices. In the matter of 24 hours after the Fed raised interest rates from 5% to 5.25%, it's totally changed the market sentiment and direction in a total opposite way. The dovish statement made by Ben Bernanke has caused major sell off in the greenback immediately after the rate hike announcement and the sell off has been extended today today. Just in a day's time, the dollar gave back 240 pips to the Euro and 221 pips to the Swiss Franc which was gained prior before the Fed Meeting. I would say these 2 pairs of currency are one of the top winners for the day. For the stock market, majority of the markets from ALL over the world ended higher on closing today. However, markets from China are not doing very well, it might be due to the calling from the new US Treasurer Secretary Henry Paulson for stronger yuan against the dollar to cover the ever-negative US trade deficit. Another supporting reason is that China may raise interest rates to cool down the over-heated economy in the country.

Today's report for the Eurozone came out supportive for the currency as European executives and consumers confidence jumped to the highest in more than five years in June and inflation was stronger than expected, evidence of an expansion that is gathering momentum and may prompt the region's central bank to accelerate its interest-rate increases. The European Commission's index of economic sentiment in the dozen euro nations rose to 107.2, up from 106.7 in May and the highest since March 2001. Consumer prices in the area gained 2.5 percent, the same as the previous month.Confidence and price pressures are increasing as growing exports support corporate investment, which in turn is generating jobs. That gives the European Central Bank reason to add to three interest-rate increases since early December to at least 3.25% by the end of the year. For the USD data, Consumer spending in the U.S. rose 0.4 percent in May, the smallest increase in three months, and inflation held above the Federal Reserve's preferred range noting a considerably unwillingness to make personal spending due to the mainly higher consumer prices and energy prices. BUT core PCE remains 0.2% in May unchaged from the previous month. This is what the Fed usually watches for inflation signals whether to persue higher interest rates in future. For the Chicago PMI which was reported surprisingly strong last month dropped significantly lower this month after manufacturing and the economy are becoming more dependent on exports and business investment as sources of strength because higher fuel costs and interest rates are taking a bite out of consumer spending and probably some correction from the high figures last month. The business barometer declined to 56.5 this month from 61.5 in May. A reading greater than 50 signals growth. As I've expected, Americans were more confident in June for the first time in three months as a decline in gasoline prices left them more to spend on other goods, accoding to the Michigan's Consumer Confidence Index survey in the month of June. The University of Michigan's final index of consumer sentiment increased to 84.9 from 79.1 in May. The gain in confidence may help temper a decline in consumer spending that's forecast to curb the nation's economic expansion. The Federal Reserve raised interest rates for a 17th straight time yesterday, saying an apparent moderation in economic growth hasn't ended the risk of inflation. The higher confidence still failed to boost USD in anyway.

I'm expecting the EUR/USD to retest 1.2980 which was reached in April after the Fed raises interest rates suggesting that the committee might pause at one or more upcoming FOMC meeting. The time frame would be within 2 weeks time, if 1.2980 is retested, I would expect the major resistance at 1.30 to break down after 2 failed attempts previously. For my trades, I'm acting more aggresively on the EUR/USD to make as much profit as possible to bring back my margin due to the heavy losses a few days ago. I'm currently holding 7 EUR/USD trades and 3 negative USD/CHF to handle. I will make a change this time and let the profit run till the end of the EUR/USD rally. I would step protective stop loss to secure the profits in case the unexpected happens. Who would know what's gonna happen anyway?

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Existing Trades
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Long EUR/USD @ 1.2590

Long EUR/USD @ 1.2620

Long EUR/USD @ 1.2670

Long EUR/USD @ 1.2720

Long EUR/USD @ 1.2770

Long EUR/USD @ 1.2820

Long EUR/USD @ 1.2960

Long USD/CHF @ 1.2480

Long USD/CHF @ 1.2501

Long USD/CHF @ 1.2520

I'll continue my aggresive trades placing in this rally and if the prices reached 1.3100 for EUR/USD, I would be able to recoup at least 80% of what I've lost before. Bringing me back to where I've started. After these losses, I've learnt some valuable experiences in trading making me feeling more confident in the currency trading. As it's always been one of my discipline in trading, never be afriad to make mistakes and always learn from it and always cut losses to live to trade another day.

Federal Reserve Raise rates to 5.25% from 5%. A Pause? Now It's Possible.

The day finally came, 25 bps hike with a slightly dovish state from Ben Bernanke. It's good news~! The Federal Reserve raised its overnight lending rate between banks by a quarter-point to 5.25 percent and said prospects for a further move depend on data. Some says the Fed is done raising rates, some says they'll go for 5.5% in early August. Where would you place your money in?

My analysis has proven to be right and you know it if you're my loyal reader of my posts. It's finally come to their attention for the inflation-fighting-warrior Chairman Ben S. Bernanke to realise that his job is TOO to control the economy balance and not trying to kill it. Ben Bernanke is trying to contain a jump in prices and inflation expectations without choking economic growth. The housing market has been reported softening with applications for mortgages dropping to the lowest in more than two years and economists predict economic growth will slow from the first quarter's annual pace of 5.6 percent.

``The Fed will leave its door open for further actions, but I think they are probably done,'' former Fed governor Robert Heller said in an interview after the decision.

The committee said ``recent indicator suggest that economic growth is moderating from its quite strong pace earlier this year,'' the statement said. ``Readings on core inflation have been elevated in recent months.''

I'm not ruling out the possibility of another quater-point hike in early August but as the Fed would like to leave options open for them but the chances has definately dropped lower in my view, so would I to leave some room for myself in upcoming more supportive data for the Fed to pause rates. For stock traders across the world, Friday opening for the market would be a wonderful day for them as I'm expecting stock markets to soar on Friday Morning. The fully priced in greenback with a minor expectations of 50 hike has caused the dollar to jump from a cliff without any ropes. It'll be in a matter of time before the dollar hit the ground hard on.

Also, before the the FOMC rate decision, the U.S. economic growth leapt ahead at an upwardly revised 5.6 percent annual rate in the first quarter, helped by lower imports than first thought and generating strong corporate profits, the Commerce Department. However, personally I would consider this a laggish indicator and I'll be expecting mdoerating growth in the next coming quater partly because of some softening in the housing sector that analysts say will potentially have an impact on consumer spending, the key driver of U.S. economic performance. Also out today is the US Jobless Claim which rises again to 311k last week. This is not going to be beneficial to the dollar. Coming along side with the data, Personal consumption rose at a 5.1 percent clip in the year's first three months, slower than the 5.2 percent previously estimated. The report's price index was revised to 3.1 percent from 3.3 percent previously. So what remains on hope for greenback bulls is the FOMC rate decision and their superhero Chairman Ben Bernanke, the 'BIG B'.

On the other hand however, Eurozone data was reported positive for the 12-nation currency as Europe Money-Supple Growht Quickens and German Unemployment Rate Fell. Germany's seasonally-adjusted jobless rate fell to 10.9 percent in June, the lowest since 2004, from 11 percent in May. For the M3, the ECB's preferred measure of money supply, rose 8.9 percent in May from a year earlier, after gaining 8.7 percent in April. The Frankfurt- based bank says more than 4.5 percent risks stoking inflation.
These quicken growth and employment rate in the Eurozone will leave companies with more room to pass on higher energy costs and labor unions to seek wage increases. Another opportunity and reason for the ECB to raise interest rates to curb inflation.
I'm expecting the ECB to raise interest to at least 3.25% before 2006 ends.

``M3 remains very high and now we have an increasing number of good economic data, which really justifies further rate hikes,'' said Stephane Deo, chief European economist at UBS AG in London.

For Friday tomorrow, we'll have German Retail Sales, French Consumer Confidence and Producer Prices, Italian CPI, Eurozone Business Confidence and Eurozone CPI estimate across the board for the Eurozone. USD data we'll see Personal Income, Personal Spending, PCE, core PCE these are all for the month of May and leaving only Chicago PMI and Michigan Sentiment for the month of June. Across the Eurozone, I'll be expecting higher German Retail Sales BUT a slightly lower French Consumer Confidence. Eurozone Business Confidence and CPI should soar with the current 'hot' economic in the zone. For USD, I'm expecting Personal Income to increase a little and personal spending will increase more than expected due to the higher energy prices for the month of May. PCE and core PCE is still expected to be higher for the month as previous reports has given me a full reason to believe it's coming so. For Chicago PMI and Michigan sentiment, I'm putting my money on lower than expected, partially with lower gold prices and interest rates affecting the daily life of the consumers.

After the rate announcement, I decide to took profit on 1 of my USD/CHF with only a minor profit, probably a few pips. Leaving 3 USD/CHF trades on my trading platform. Well, they do provide me daily interest rates to reduce my daily EUR/USD charges on interest. I've taken another EUR/USD trade at 1.2620 after seeing the huge EUR/USD rally as the market reaction. This really reminds of the situation when the market has fully priced in the hike of 25 bps for the ECB and high expectations of 50 bps then. It didn't happen for 50 bps and 25 bps is still announced. But traders still short the Euro. I'm judging from my own experience to make trades this time.

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Closed/Completed Trades
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Long USD/CHF @ 1.2415, Closed @ 1.2430

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Existing Trades
============

Long EUR/USD @ 1.2590

Long EUR/USD @ 1.2620

Long EUR/USD @ 1.2820

Long EUR/USD @ 1.2960

Long USD/CHF @ 1.2480

Long USD/CHF @ 1.2501

Long USD/CHF @ 1.2520

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Trades I'm Expecting
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I'm expecting to continually take EUR/USD trades if the sentiments remains the way it is right now. But IF somehow something came out (I hope Bernanke don't talk silly again this time to the public saying another misunderstood in his statement), I'll be taking profit on every positive EUR/USD trade and take on USD/CHF trade at a lower level. Hedging in anyway possible way for my negative trades.

Conclusion for the day is Euro bulls win and Dollar bulls gets shattered. I'm really glad that my analysis didn't go wrong as I'm seeing the Fed will consider the economic growth issue this time as traders and economists from the whole world are questioning his credibility. I hope to provide myself and whoever's reading my posts with my accurate analysis and hopefully I'm right. GO EURO!

German GFK Consumer Confidence Highest In 5 Years.

I'd personally wouldn't expect much today from the market as the big day is only 1 day away. The whole world is basically waiting for the Ben 'Beast' Bernanke for his 25 bps hike and a possible of 50 bps hike. I've read researches and analysis from several banks and most of them would advise buying the greenbank. For me, I would be a contrarian for this time, as I expect the Fed to be dovish, 25 bps hike this month, and he might be neutral in his speak after the hike. History repeats itself like the previous week with a fake hike in EUR/USD and end the week with lower value. No doubt that the FOMC hike will be a support and demand for for the greenback. However, I am seeing a rapid recovery from the EUR/USD IF the Fed is concern about the economic growth as well.

Tomorrow will be plenty of data reports due tomorrow, so it'll definately be a very busy day with lots of data to analyse and so little time. Highlights for the day would be Swiss CPI, German ILO Unemployment Change and Unemployment Rate, French GDP, French Unemployment Rate and Unemployment Change, Eurozone M3, GDP Annualized and Price Index, Personal Consumption, Core PCE and FINALLY FOMC Rate Decision. Sounds like alot to do isn't it? Sure does...

So I'll start with the main dish, FOMC Rate Decision... a 25 bps hike with a neutral comment from Bernanke, something like being data dependant on the coming months to determine the future hike or pause. Swiss CPI is expected to be higher than the previous month, I would say it would most probably matching consensus as the Swiss will do another rate hike next month. German Unemplyoment Rate and Change however is expecting a slightly lower than expect consensus than the previous month. BUT, I would say that it would be higher than consensus, partially due to the world event held in the country for the month. French GDP will be higher than consensus or matching consensus signalling higher cost for domestic consumer products calling for interest rate hike in the Eurozone. Since the core PCE price index is a measure of average consumer prices, excluding the food and energy components, which tend to fluctuate quite a lot. There's no proper consensus for the Personal Consumption and the core PCE but according to my analysis I'll be expecting a stronger number in supporting the Fed for further rate hike. I'm personally not favoring this kind of indicator but these fundamental indicators are lagging indicators, what happened the previous month of slower is only reported. So, I'm still seeing negative dollar for medium term and long term basis.

I closed a trade today for EUR/USD when a bearish candle was formed during the NY session, speculated by traders in New York. The current push in the market is the interest rate issue and economic growth. The result will be released tomorrow and I'll be hoping for the best to happen.

Euro Consolidates Against Dollar As Traders Fear Slower Economic Growth.

Traders continue to sell the greenback today as traders fear slower economic growth in the world's largest market. Dollar continue to be sold until it reaches a support at 1.2562 for EUR/USD during the Asian Session and it's pretty much range trading from then but sign were still showing that traders are favoring Euro for the day as FOMC meeting is just 2 days away.

The day started with Eurozone data, stating German Import Price Index match consensus of 0.2% for the month of May. Meanwhile German IFO Business Climate reported higher than expected, 106.8 in June vs. 105.6 in May marking 15 year high for the business climate. Italy Business Confidence reported higher as well for the month of June signalling the Eurozone is capable to adapt higher interest rates. These reports does do a little help for the 12-nation currency but fails to bring it higher as well. But it's definately enough to dumb-found the dollar bull traders. US Confidence in June raised higher than expected as Americans' outlook for the job market improved. Rising confidence may temper the slowdown in consumer spending that's forecast to reduce the pace of economic growth this year. Confident the economy will keep expanding, Federal Reserve policy makers are forecast to raise interest rates later this week to combat higher inflation. However, Existing Home Sales reported dropped as much as 1.2 percent drop in May to the slowest pace in four months as higher interest rates damped buying activity. This has been added to another factor to the US economy showing the interest rates is hurting the real estate industry in the country. Adding salt to injury is the Deputy governor of China's central bank advocates diversifying away from dollar for trade, reserve assets and gradually rely less on the dollar for trade and their foreign exchange reserves. My analysis was proven correct as these reports were coming out inline with my expectations. Feels real good when you're right~

I've not make much difference in my trades today as it's much of range trading for me today. I'n hoping much bigger movements for tomorrow as FOMC meetings starts tomorrow.

Eurozone failed to provide supportive data, US Real Estate sets new record for the year.

The week finally kicks off with the much anticipated FOMC meeting which will start this Wednesday where the 2-Day Meeting begins. Euro has begin the day with a rally upwards reaching as much as 80 pips after European Central Bank officials indicated the bank may step up the pace of interest-rate increases to keep inflation in check. The rally kicks off during the late Asian Session and continued to remain strong at 1.2560 zone. A fundamental channel was formed after the prices stabilized as the market awaits the highlight of the day which is the May New Home Sales.

The only data to support the Euro was reported disappointing as the French Business Confidence Indicator unexpected drop to 107 from 108 in the previous month. The drop in the French Business Confidence halt the rally of the EUR/USD from reaching 1.26. The indicator reflects the level of positive business leader opinion on the overall output outlook, their own output outlook, past production, inventories and order books. So, that's not really good for the Euro isn't it?

For the Real Estate Biz in the US, the sales set a record to the highest this year as buyers found greats deals offered in the market as it's filled with unsold homes. Sales increased 4.6 percent to an annual rate of 1.234 million from a pace of 1.180 million in April that was lower than previously reported, the Commerce Department said today in Washington. There were 556,000 homes for sale at the end of May, compared with a record 560,000 units the prior month. Another attraction is that builders are offering lots of 'priviledges' to these new home buyers such as free country club memberships and luxury car leases to lure buyers put off by rising mortgage rates. However The gain in sales confirms the Federal Reserve's forecast that the slowdown in housing won't be abrupt and may prompt policy makers to continue their string of interest- rate increases beyond this month. So, what the heck? Doesn't really moves the price much anyway.

There'll be plenty more of data to be release tomorrow and the highlights for the day would be German IFO Business Activity, US Consumer Confidence and US Existing Home Sales. German IFO's consensus is slightly lower than the previous month but I'll be expecting a number higher than consensus as a support to the 12-nation currency which means a number higher than 105. For the US Consumer Confidence, as much as I hate it to be dollar supportive but my analysis would match consensus or higher than expected as well. Existing Home Sales would deteriorate as with the New Home Sales setting up with new record and being offered with so many good incentives coming with it. Higher interest rates is one of the factor that's affecting the real estate industry in the country and that would be a turn off to buy a 'used' home and high mortage price. Well, at least that's what I think.

I took profit on the a EUR/USD after new home sales report were higher than expected and I didn't know how would the result would move the market. I took it with a slight profit without risking to lose all the profit. My bias still stand for Euro bullish and am ready to continually trade trades in EUR/USD. For USD/CHF, I might make intraday trades to scalp some profits to cover my losses in ZAR previously. One problems comes after another, and I hope to my ZAR trades would be the last mistake, AT LEAST for the time being.

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Completed/Closed Trades
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Long EUR/USD @ 1.2523, Closed @ 1.2546

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Existing Trades
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Long EUR/USD @ 1.2545

Long EUR/USD @ 1.2860

Long EUR/USD @ 1.2960

Long USD/CHF @ 1.2480

Long USD/CHF @ 1.2501

Long USD/CHF @ 1.2520

The Euro seems to continue the rally now after the New Home Sales report. This proves that the support for EUR/USD is strong enough to withstand these hits from US. Hopefully it'll maintain. Things just ain't right for the EUR/USD without hitting 1.3. I'd really hope to see that soon. But not gonna expect this to happen until Ben Bernanke decides to pause the rate...