ForexSpirit

I had hoped to meet up with Dirk du Toit, my forex mentor, this past Wednesday. Dirk had flown from his home in South Africa to Florida last Thursday (February 8th). He was then going to spend a few days in the Washington, D.C. area this week, from Tuesday to Thursday.

I had planned to meet with Dirk for lunch on Wednesday. Unfortunately, the weather conspired against me. We had a pretty large snow storm pass over most of Maryland on Tuesday night. My road was not plowed until Wednesday afternoon. This meant that when I was trying to leave my house on Wednesday morning I was thwarted by the ice and snow that lay about five inches deep in my neighbourhood. The road conditions were pretty bad everywhere, as the snow was followed by freezing rain. It didn’t seem sensible to try and brave the elements that day.

As a nice compensation I got to spend the whole of Valentine’s Day at home with my wife.

The euro had a pretty good week. EUR-USD finally saw the long awaited breakout above the 1.3040 area. The 200 pip move up form 1.2960 to 1.3160 took place from Monday to Wednesday. European economic data releases were strong all week long. Tuesday saw some strong preliminary GDP data from France, Germany and Italy along with European industrial production.

In contrast, most of the US economic data was average to poor for the week. Bernanke’s talk with the Senate Banking Committee on Wednesday prompted the euro bulls to come out in force as Bernanke put forward a rather dovish stance.

US data on Thursday and Friday was especially poor, with a huge shortfall in the TICS report, weak industrial production and a large fall of 14% in housing starts on Friday. The euro bulls seemed to have gone back into hibernation by this late stage of the week, and no further real gains were seen. The euro hovered between 1.3100 and 1.3160 over the last two days of the week.

I closed out one position this week at 1.3090 on Wednesday morning. This position had originally been opened on January 8th at 1.3022. This position was closed out as the expectation was for either average or good US data that day. I also opened a new position at 1.3150 on Thursday after the poor TICS and US industrial production numbers were released.

Next week will start off quietly with the US markets closed on Monday due to the President’s Day holiday. The main action will most likely be Tuesday night/Wednesday morning with the BOJ’s next interest rate decision.

The yen seems to have done alright for itself over the last week, with the USD-JPY dropping 300 pips. The fact that there was no explicit comment made by the G7 last weekend doesn’t seem to have worked out as most people would have expected. The general option was that if the G7 did not come out and ask the BOJ to raise rates that the yen would continue being taken to the woodshed. Instead the G7 statement just said that the market decides what’s right. The market seems to have listened and simultaneously realised that the yen is looking seriously undervalued right now. This might well be the start of some sustained yen appreciation.

Wednesday next week also sees the release of the US CPI data and the last FOMC meeting minutes. Thursday and Friday are mainly focused on European data releases.