Someone Give Me Some Caffeine!!!

So tropical storm Ernesto took his sweet time over us and flooded our whole area. But the flood wasn’t what bothered me. The fact that we lost power did! Consequently I couldn’t get into the market on Friday and so I took a nice 4 day weekend with Labor Day on Monday.

So what’s going on with the EUR/USD right now? The same thing that’s been going on for the past 2 weeks…..nothing! And this week looks like it’s going to continue that trend. With no big economic catalysts this week, I think we will see another week of tight range trading. If you notice on my chart below, the daily Bollinger Band is contracting showing just how little this pair has moved over the last few weeks.

Tomorrow we have the Non Manufacturing ISM and Beige Book. I don’t think these will move the market but they are worth getting some airplay.

I actually think the EUR/USD will make one more push up to 1.3000 and maybe even as high as 1.3100 but 4 things concern me once the pair hits that level.

The first is the overwhelming number of existing long positions in the Euro. Once the Euro gets that high I think we will see alot of profit taking.

The second thing that concerns me is that the European officials will not be happy if the Euro gets that high. The reason is that Europe is highly dependent on their exports and when their currency goes up, it will be more expensive for other countries to buy their Mercedes Benz’s, resulting in an economic slowdown. If the Euro gets this high, watch for these officials to start talking down the Euro to push it down.

The third reason is that the Fed does not want the dollar to fall too much. The reason is that if the dollar goes down, other countries won’t want to invest in us as much which will hurt our deficit financing… remember the TIC has to AT LEAST equal our trade deficit because it is what’s covering our trade deficit. If the dollar goes down too much, confidence will shrink and foreign investors will be more hesitant to put their money in our economy.

The fourth reason deals with oil prices. At the moment, oil prices are getting cheaper which is making gas prices cheaper. I think with gas prices dropping, we could see an increase in consumer spending as well as an increase in consumer confidence.

If the EUR/USD gets up to 1.3000 I’d be on the lookout for the dollar to rally!

There were no Alba trades today. As you can tell by my rant, the Euro has been boring and today it pretty much stayed within it’s range (see chart below).

I still don’t see any good looking charts right now, but I am looking at the AUD/USD again (see chart below). It’s made a new 20 day high and it’s moving averages are creating another perfect order. I’d like to go long, but I am going to wait for a dip and then a re-test of this new high which is around 7720. I’ll keep you posted on this.

That’s it for me today. It looks to be another boring week but don’t worry…the Forex never stays dull for long 🙂 Cheers!

-BP

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