ForexSpirit

Last week saw a large number of data releases, the majority of which were dollar bearish. So why then did the euro end up weaker on Friday’s close then it had on Sunday’s opening?

I don’t think there’s any easy answer to that question. What can be deduced is the dollar is far more resilient than most people think. This isn’t too surprising really: it is still the main reserve currency, and banks, hedge funds and others often return their capital to dollars at any sign of weakness in their foreign investments.

Trading for the whole week was even more rangebound than usual, within just a 120 pip range, between 1.276 and 1.288. Given such a narrow band I feel quite happy with the two trades that I initiated.

My first entry last week was on Tuesday morning, after the release of the US PPI and retail sales numbers. Both came in dollar bearish, and there was a 50 pip move north when the data first came out. The dollar then showed its teeth and retraced that move fully, plus an additional 30 pips more, entering Q3 briefly. I had a resting order in at the top of Q3 which got hit.

I kept this position open until Wednesday lunchtime. The FOMC meeting minutes were going to be released after lunch and were expected to be rather dollar hawkish. My analysis agreed with this assessment, and so I closed out my long position and went short instead. The minutes were indeed hawkish but had a muted effect on the market for the remainder of the day.

Thursday saw US CPI and TICS data releases. CPI came in weak, while the TICS showed foreign buying of US treasuries to be still well supported. The dollar creeped higher throughout the day, slowly inching towards the 1.2775 level which I had previously identified as a profit target for my trade. I saw it as a prime location for stop hunting, given the low at that level from Wednesday morning. That level was indeed hit.

Friday saw the release of US housing data. The US housing data came out rather bad but had a limited effect at first. It wasn’t until an hour later when the US equity markets opened that we saw any real reaction with a move up into Q4.

I was hoping to go long on weak housing data but was rather too preoccupied that day in organising a weekend trip away with my wife to take advantage of it. We had a very nice time relaxing in Pennsylvania’s Amish country, and I’ve recharged my batteries enough to take me through to the extended weekend ahead with Thanksgiving taking place this Thursday.