Monday, October 29, 2007

The Euro (redux)

Last weeks strong move by the euro, to new highs is continuing in early trading today. At the time I'm writing this one euro is buying 1.4417 dollars and the high for the day so far is 1.4436. The quote, in terms of dollars purchasing euros is well below the 70 cent figure at 0.6934.

What is unusual so far in todays trading is the lack of a big intra-day move in early European trading. Early morning moves of half or cent or more are common as the European exchanges open for business for the day, and we haven't seen that today.

The continuation of last weeks trading comes on speculation that the Fed will reduce benchmark interest at their Wednesday meeting. News from Europe and Germany in particular indicates that inflation may actually be accelerating, raising expectations that the ECB may be forced to raise rates at the November 8 monetary policy meeting.

In terms of the long-term chart, the euro has broken out of the channel that has been almost two years in the making. This weeks continuation could be considered confirmation of the breakout. In related news, Gold and Light Sweet Crude are trading at long terms highs today, as is the Australian dollar.

(disclosure: I am long the euro with FXE march 08 calls.)

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