Euro Versus Dollar

The Dollar has eased back a little over the past days, giving rise to various pundits declaring the the rally as having played out. Well, frankly I’m not so sure and the justifications on both the bullish and bearish side, as always, are contradictory at best. What I do know however is that both the Dollar and the Euro are sitting near important inflection points, so let’s play!

Here’s are long term panels (weekly and monthly) of the DX futures which both show us medium and long term resistance near the 93.5 mark. A fall from here probably brings the Dollar back to the 90 mark whereas a push > the previous weekly spike high at 93.3 almost guarantees a visit to the 100-week SMA near 94.5.

Both perspectives have merits so I decided to out a hedge in both directions. My first play is a long campaign on the EUR/USD, which looks too juicy to pass up.

As you know I wanted a piece of that action yesterday and was already belaboring the possibility of having missed the bus. So I’m long here with a stop < 1.182.

The AUD/USD however looks a lot more fragile on the daily panel and it was also one of the fastest movers on the way down. Which is why I picked it as a short play with a stop > 0.7566.

My preferred direction of course would be a stronger Dollar but I rarely get what I want and looking at those two charts side by side tells me that either we are getting a massive squeeze higher or an equally if not more rapid decline lower. Either way I want to be positioned, and I now am.

A quick reminder that it’s that time of the month again as we are being graced with ECB President Draghi’s speech tomorrow around noon EST. He’s recently been pushing hard for a Single Resolution Fund which pretty much boils down to being a Europe wide deposit insurance scheme.

Not so coincidentally I saw the German Welt float a fairly controversial article this morning in favor of demands by the IMF for Germans to retire even later and to remain in the workforce. In that context it’s important to remember that the retirement of Germans recently had already been raised from 65 to 67, and now there is talk to pushing it toward 70.

Suffice to say that the vast majority of the reader’s comments weren’t exactly in favor of such a scheme. Germany is already the second highest taxed nation in the OECD, and if I was still living there (fortunately I do not) I would seriously begin to wonder why and for what exactly I should be busting my butt for half a century whilst paying record tax rates all the way into my grave.