[DannyBly]

Fib retracements can work particularly well in periods of increased volatility - such as we saw this morning with the Employment Report. The following is a classic example - GBP/USD retraces to 50% of the initial upmove after the numbers came out - entering long at the 50% level something of a 'gimme trade' IMO

[cowpip]

Nicely done, DannyBly. The 14-ema on the 15-min charts also coincided with the 50% fib, which was nice confluence. Price action on the shorter time-frames also helped signal the bounce off of that level. It pads the 'ol account nicely, doesn't it?

[ztrader]

Yes, it was a nice "gimme trade" after the news. I took mine off of a bounce on previous resistance/now support which may possibly coincide with a fibonacci level. Nonetheless, I am glad to have caught it right around market opening of US exchanges while I went short on YM and ES.

ENJOY

ztrader

[torero]

Yep, I took that dip as well and stayed until before the close of the NY session (no weekend holds for me for now).

[cowpip]

Originally Posted by torero »

Yep, I took that dip as well and stayed until before the close of the NY session (no weekend holds for me for now).

Cool, you guys. You did very well on cable. I personally focused on $/yen and rode it down. If oil stays up on Monday, any retracement might be on the shallow side. There is usually a retracement the following Monday or Tuesday after NFP (sometimes a full reversal). But I think this time the main trend will be reinforced and the downward movement will resume. Uncertainty regarding financials, oil, politics, and Bernanke's failure to keep the dollar suspended will probably keep the yen on the side of strength.

Cable, on the other hand, is a different story. I can still see cable whipping around rather violently since the UK is not that different (in terms of their immunity from the credit crunch) than the US. Their economy is also likely to suffer fairly badly as the stress continues. I can see other pairs having greater predictability than cable. But that's just my 2 cents.

Here's a scenario worth watching. It isn't likely to play out yet, but the first hints are starting to form now. If the Euro zone concentrates solely on inflation and if they are heartless towards employment (after all, price stability is their sole responsibility, unlike the FOMC), member countries who are really starting to feel the pain may be decimated to the point that they start arguing about bringing back their own currency and replacing the Euro with it. I can see several countries (Greece, Spain, Italy and France) who might start publically debating the worth of staying a member of the Union. All it would take to seriously destabilize the euro is an effort from a few of these countries (preferably simultaneously) to start talking about resurrecting their own currencies. Yes, it would be expensive for them to do this, and the short-term pain may be high, but let's not forget that the Euro Union still does not have a ratified constitution and none of the countries are obligated to stay in the Union permanently (as I understand it). If any one of these countries threatened to jump-ship, the Euro could become significantly devalued against the other currencies. I would imagine in this scenario, the yen and the U.S. dollar would win.

I can see where it wouldn't take too much more pain at the gas pumps combined with rate increases by the ECB to really start this type of snowball from rolling down the hill. And once it starts, it may be hard to stop. Euro/Yen could fall hard in these events. Of course, these are long-term outlooks, but must nonetheless be considered in the backs of our minds if we are going to take advantage of these things.

At the very least, this is an interesting possibility that could seriously erode the strength of the euro and boost the strength of the dollar. What would that do for inflation, I wonder?

[torero]

I don´t think anyone in Spain is even debating about going back to their own currency. The last time the housing market crisis back in 1994-1995 happened because of the 15% inflation but since with the Euro, the inflation has been in check so I don´t think the housing market is as bad as the last time. Way too many advantages to unglue now.

Of course, oil wasn´t part of the equation. I think there´s still room to maneuver for the gov´t. The prices at the pump is 30% or so more is due to taxes so there is still room to reduce it to lessen the worries. There has been talk of consumer cutting down consumption by not traveling far on their holidays this summer or outright not going on vacation.

For the moment, I don´t correlate oil to the currency fluctuations but of course it could be ignorance and naivety on my part.

[cowpip]

You're definitely closer to that situation than I am, Torero. My thoughts were just thoughts, and although I still think it's remotely possible, it may be far more remote than I am thinking.

As for oil and currencies - you only have to look as far as Friday to see possible correlations between oil and currencies (and other markets). I believe it really was oil (with some contribution from unemployment results) that caused much of the dollar fall. Of course, there's no way to prove it, but when the entire market is fixated on one item, effects of that item will move the market. I'm not saying it was the sole reason for the dollar fall on Friday. That would be ridiculous as there are a myriad of other things that move currencies. But oil had to be a part of the equation, imo.

[torero]

What struck me on Friday was GBPUSD went up while GBPCHF went down. Seems the market is diverging giving signs in money moving unilaterally (I think?). Any idea on this movement?