Your Currency Trading Profits

The Bank of England left  rates unchanged at 5.0% today in a widely expected move.  There was some thought that they might cut 25 basis points to 4.75% but they held steady. I believe that “The Old Lady” will cut rates in June.

In spite of weaker European data, the Euro traded higher throughout the European morning. After reaching a low of 1.5286, the Euro shrugged off weaker German export and European industrial production releases. It’s now trading back above 15400. The ECB remained on hold in May and we got the same rhetoric from ECB president Trichet i.e. hawkish.

There was an article in this morning’s Financial Times stating US and Eurozone sources as welcoming the dollar’s recent rise and argues that both sides believe that the fundamentals are shifting in the dollar’s favor given that the Fed may have paused and the ECB should start to ease later in the year. The problem I have with this sort of story is this.

We don’t know who these ‘sources’ are and besides, if US officials do think that the dollar has fallen too far why don’t they say so ? The fact that they have not suggests that US officials – especially Treasury Secretary Paulson– are still happy to let the market decide where currencies should be and if this means a lower dollar so be it. 

I was stopped out of my long Euro position overnight at 1.5360. I still the believe the US dollar should be traded from the short side and I will look for technical levels to reestablish my position.

Good luck and good trading.

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