T Squared's Market Commentary

[T Squared Trading]

Japan Calls For North Korea To Chill Out, Why Didn't Zidane Chill?

Daily Commentary for July 12th, 2006

Good Tuesday Evening/Wednesday Morning,

Japan Calls For North Korea To Chill Out, Why Didn’t Zidane Chill?
The tension in Asia is growing thicker by the minute. In somewhat of a contradictory move, in my opinion, China’s president urged North Korea to stop “stirring the pot” in terms of the nukes they’ve been developing and testing. What makes it contradictory is that in the same breath, China’s Foreign Ministry stated that Japan is overreacting in its demand for North Korea to stop making these missiles. I feel you really can’t overact enough when someone is standing in your backyard with a nuclear missile aimed right at your bedroom!

Gold and Oil reacted bullishly to the news that a number of blasts hit a commuter rail in Mumbai, India, killing over 100 people. Another result of the bombing was the Dollar took a breather from its latest increase.

The World Cup may be over but the controversy surrounding the Zidane head-butt is still present. Apparently an expert lip reader was able to ascertain that the head-buttee, Marco Materazzi, called the bald bull a “son of a terrorist whore.” Materazzi has denied these claims. Although I feel the head-butt was a bit extreme, if someone called my mother a prostitute I might have done the same thing.

Technical Indicators
Eur/Usd
Upcoming EuroZone GDP data will more than likely give more support to the need for a rate hike sooner than later. Still look for .2680-.2700 as near-term support, and the .2600-.2800 trading range remains consistent.
Usd/Jpy
The Yen fell across the board as Finance Minister Tanigaki hinted that the widely expected rate hike on Thursday is not a sure thing. We’ll comment tomorrow on the impact of a rate hike would have on the Yen.
It looks like this pair is still comfortable in the 114 area. It snapped back like a rubber band after reaching 114.70 today. This increasingly volatile pair continues to be a money maker for scalpers on the right side
Usd/Chf
The resistance we pointed out last night, stood solid around .2350, and we raised the support level to around .2200.

What Our Strategies Are Telling Us as of 7/11, 7:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Long Bias
Usd/Chf
$ Short Bias

Our strategies maintain their now week long Euro long bias. The Yen and Swiss strategies have flip flopped biases in the past 24 hours. Our strategies as a whole flat-lined today with a mix of winners and losers. This is indicative of our strategies during a small drawdown-consolidation period. Our strategies are designed to make winning trades in bunches and stay steady during market stagnation.


T2

 

[T Squared Trading]

Yen Traders Wait For Decision

Daily Commentary for July 13th, 2006

Good Wednesday Evening/Thursday Morning,

Yen Traders Wait For Decision, Our Clients Wait For Cash
The Bank of Japan is scheduled to announce monetary policy decisions on Thursday evening. The general consensus is that the decision will basically be a result of an accord between the Bank of Japan and Japanese government. The BOJ has been itching to raise rates for months now, while the governing leaders have been giving reason after reason why this is not a good idea. There will most likely be a 25 basis point hike accompanied with words essentially saying this is a one and done deal. Any comments stronger than this should help the Yen, but in all probability look for further Yen weakness if the initial scenario plays out.

Zidane spoke out today, and apparently our report on this story last night was incorrect. According to Zidane, Materazzi not only insulted his mother, but his sister, as well!!! In a related story, after producing additional losing trades this week, a client called me and insulted my mother and sister also!!! The part about the insults is of course a joke, but unfortunately the other part is true. As our readers have seen, we report how are strategies are doing on a daily basis, positive or negative. Obviously a successful trading system needs to be evaluated over time, and a few days of winning or losing really don’t mean much. What does mean much is if the losing trades are greater in frequency than the winning trades and if they’re not managed correctly on a risk management and position sizing basis.

Technical Indicators
Eur/Usd
Look for some of the first World Cub influenced data to be displayed in some Eurozone reports on Thursday. The 2680-.2700 near-term support was able to hold true along with the .2600-.2800 overall trading range. Today’s activity didn’t really do much on a technical basis, other than making some money for the Euro shorts.
Usd/Jpy
114 acted as the support over night and the Yen showed some similar weakness to the Euro. The 114.70 top from yesterday’s trading session was cut through like a knife through hot butter, reaching highs in the mid 115’s. Thursday’s comments on the ZIRP will definitely be a market mover. Key on 116, if this pair breaks through this area, look for further follow through. 114 is still the support
Usd/Chf
The .2350 area we targeted last night was briefly pierced before dropping and settling below. It’s going to take some work to go higher, possibly consolidating prior to doing so. A nice consistent 150 pip trading range has developed in the past few sessions.

What Our Strategies Are Telling Us as of 7/12, 7:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Neutral Bias
Usd/Jpy
$ Neutral
Usd/Chf
$ Long Bias

Our Euro strategies seem to be departing a bit from there Dollar bearish attitude that has been present the last week or so. I guess the near 100 pip drop beginning in the European session was enough to either take profits or get “stopped out,” depending on the strategy. The Yen strategies have also switched to a neutral bias…apparently the volatility in this pair is causing their lil’ computer chip brains some pause before fully committing. The Swiss strategies are now a believer in the Dollar as well. Today was another sub-par day for our largely followed Strategy Suite 1. Our individual strategies fared better.

T2

 

[T Squared Trading]

If the Price of Oil Goes Higher I Think I’m Going to Buy a Bike

Daily Commentary for July 14th, 2006

Good Thursday Evening/Friday Morning,

If the Price of Oil Goes Higher I Think I’m Going to Buy a Bike

Oil reached almost $77 a barrel due to the rising tensions between Israel and Lebanon. In addition, the possibility that our good friends in the Middle East might cut supply if the UN continues to threaten to use economic sanction, doesn’t help things. The big money boys are also noted as a reason for the increasing price of oil. Apparently hedge funds and institutions have been buying the heck out of oil recently in an attempt to capitalize on the global uncertainty. This is done to counteract the investments that have performing like a limp noodle as of late.

As noted last night, the Bank of Japan is expected to render a decision on interest rates this evening. If they fail to raise rates, or raise rates a ¼ and accompany it with comments that this will be a one time raise, the Yen will most likely fall. If the comments accompanying the rate hike point to further hikes, look for a Yen rally.

We have the number this evening, and the US Retail Sales tomorrow. It’s natural tendency to let the fact that we have news affect your trading decisions. Many traders think it’s opportunities like these that will allow them to pay off their car, or pay for gas for there G5. As a result they start risking more of their capital per trade, widen their stop losses, etc. This is very dangerous. If you have a profitable trading strategy, stick with it regardless of upcoming news or not. Our strategies and risk management rules stay consistent no matter what is occurring, or is expected to occur, and we advise our clients constantly to do the same. BE SMART!!!

Technical Indicators
Eur/Usd
The data from today was somewhat a disappointment as it appeared the level of inflation wasn’t as high as expected, causing the Euro to drop slightly. The slower rate of inflation may cause the ECB to make the possible rate hike next month, the last one. The .2680-.2700 support is holding nicely, as apparent consolidation is taking place.
Usd/Jpy
The trading range in this pair is as tight as a Joan River’s face. Without a doubt the concern about the end of the ZIRP is the cause of this consolidation. 114-116 is the range, and pay close attention if this pair trades out of this range after the decision is release.
Usd/Chf
This pair didn’t come close to threatening the .2350 level we have been noting the last few nights. A pretty active 50 pip range has developed in between the larger overall 150 pip trading range from .2200-.2250

What Our Strategies Are Telling Us as of 7/13, 7:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Long Bias
Usd/Chf
$ Long Bias

Our strategies appear to be a bit more decisive in their biases as some key economic numbers approach. We’re starting to see stronger participation as well. It’s interesting to see our Euro strategies shift back to a Dollar short bias, as we expected the switch to neutral yesterday to represent a turning point in their long-term bias. Again, please use proper risk management if you decide to trade the numbers actively.


T2

 

[T Squared Trading]

Can We Please Stop The Sad News!!!

Daily Commentary for July 17th, 2006

Good Sunday Evening/Monday Morning,

Can We Please Stop The Sad News!!!

We hope everyone had a nice weekend, and are anxious to start a good week of trading. If you’ve watched the news lately, you probably need to visit a therapist to make you feel happy again. There is certainly no shortage of depressing news stories, you can’t help but feel a bit unhappy. The continued conflict between Israel and Pakistan, the tensions between North Korea and everyone, the bombing in India, Iraq, the price of oil…….Enough is Enough!!! It’s time like these that we realize how lucky we really are, and how much we take simple pleasures for granted.

When there is conflict like this throughout the world, the Dollar is usually the place where banks find “safe haven.” As we will describe later in the commentary, our strategies are starting to develop a Dollar bias as well. For the most part, our strategies had a poor showing last week, as our trending strategies were stopped out a few times by the choppiness within the market. Our shorter term strategies fared a bit better. Regardless of news, stick to your trading plan, and always observe your risk management parameters.

Technical Indicators
Eur/Usd
Weak German and French CPI data have some traders assuming the need for future rate hikes is perhaps lessening. The .2680-.2700 support level we have been noting broke down Thursday evening into Friday. This pair has given back nearly 50% of its gain from the last few days of June. .2600 should be the next level of support to watch.

Usd/Jpy
As noted as a possibility in our Friday commentary, the Bank of Japan opted to go the ¼ point hike plus no future rate hike route. This of course caused the Yen to sell off and allowed this pair to break above the 116 level. Watch to see the amount of time this pair stays above 116 as a possible sign of consolidation.
Usd/Chf
The flight to quality resulting from tension between Israel and Palestine combined with some important economic data this week could cause some choppy movement in this pair. The .2350 level was pierced again, with a temporary high of .2370. Unlike when it reached this level last week, it did not reverse direction violently. Look for this as a potential sign of strength for the Dollar.

What Our Strategies Are Telling Us as of 7/16, 7:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Long Bias
Usd/Chf
$ Long Bias

Not much change from Thursday evening’s bias. It’s interesting to see that our strategies are still net Dollar long after all of the disappointing data last week, and the horrible performance from the Dow Jones Industrial Average. As we stated earlier, for the most part, our strategies did not have a good last week. It’s all part of the process. Have a nice week everyone.



T2

 

[T Squared Trading]

What A Difference A Day Makes

Daily Commentary for July 18th, 2006

What A Difference A Day Makes

Good Monday Evening/Tuesday Morning,

If you read our commentary yesterday, I’m sure you could tell that we were a bit depressed by the current state of the world. Although all of the “bad” things still exist today, there were some positives: There were talks of a possible truce between Israel and Lebanon being organized by the world leaders. It was also noted as a positive that the violence had not spread to other parts of the region.

Iran also said they are ready to talk about the possibility of putting a halt to their nuclear program. Personally I will believe this when I see it. These events along with a few others caused the price of Oil to drop about 2% to close the trading session around $75. Is the good news today a reversal of fortune for the world? Of course, time will tell, all we can do is hope and pray.

The other bit of good news, which is obviously minor compared to what’s been happening in the world today, was we were finally able to make our clients some money. After a week of frustrating stop outs and choppy activity, we had some nice defined Dollar strength, and our strategies were in the correct position to capitalize. You’ll see from our 3rd pary verification updating later this evening, we made back about 80% of the losses from last week. As always, proper risk management and position sizing make it possible to survive certain drawdowns.

Technical Indicators
Eur/Usd
So much for .2600 being the next level of support. The Euro behaved like a scared little school girl as the Dollar cut through this level like a hot knife through butter. Similar to our comment about the Swiss later, it will be interesting to see if tomorrow’s World Cup affected EuroZone ZEW survey will be enough to put a temporary bottom to the Euro decline. Look for .2480 to be a possible bottom, anything below that would be like catching falling knives.
Usd/Jpy
This pair not only stayed above the 116 level, but got anxious enough to move up 100+ pips and is resting comfortably at the 117 level. Logic would say after a 250 pip increase in the past few sessions, look for consolidation or even a minor pullback. But be careful as there appears to be absolutely no catalyst for a higher Yen. This pair will most likely be dictated by the Dollar action as opposed to the Yen’s (If you’re confused what I mean by this, please ask me)
Usd/Chf
As we noted last night, the fact that this pair did not reverse direction after hitting the .2370 level was indeed a sign of Dollar strength. It’s going to be interesting to see if a potential strong Swiss retail sales number this evening will be enough for the Franc to regain some value. .2525 was the high point in mid-June, so key on this level as the next major area of resistance.

What Our Strategies Are Telling Us as of 7/17, 7:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Long Bias
Usd/Jpy
$ Long Bias
Usd/Chf
$ Long Bias

The only change today was the switch from a slight Euro long bias exhibited Sunday evening to all 3 pairs turning into Dollar lovers by Monday morning. Although participation isn’t as heavy as it should be considering the big move from the Dollar today, all the right strategies were involved to give our clients much needed relief from last weeks decline in equity. As we noted earlier, we essentially made back close to 80% of the equity that was lost last week.

T2

 

[T Squared Trading]

Oil Continues Drop and Expensive Eggs

Daily Commentary for July 19th, 2006

Oil Continues Drop and Expensive Eggs

Good Tuesday Evening/Wednesday Morning,

Oil fell a second consecutive day today, closing the day around $73.50. The Dollar added to yesterday’s gains as a result of this, along with decreasing Mideast tensions and a relatively strong PPI report. The PPI report stated that the increasing price of food and raw materials could cause producers to raise their prices, in kind. This raises the idea that the rate of inflation could still be a problem. Look for the CPI report tomorrow to give further direction on the rate of inflation

If you follow the data on a daily basis in regards to its possible impact on inflation, etc. you might go crazy. It seems like everyday the data is saying something totally different. While it’s important to follow market data from around the world on a daily basis, it makes it almost impossible to keep an opened position while all of this conflicting data is being reported. Our opinion is if you have a successful time-tested strategy, always stay true to it and its rules regardless of news.

In a quick funny news story, a man was fined $20,000 and faces a maximum jail sentence of 10 years for trying to smuggle 6 rare eggs from Australia to Bangkok. The humorous part of the story was the fact that the poor man tried to hide the eggs in his underwear. He claims that he was smuggling these rare and expensive eggs not for financial gain, but to surprise his girlfriend. I think my girlfriend would not be surprised, but disgusted if she found 6 eggs in my boxer shorts.


Technical Indicators
Eur/Usd
We interpreted the EuroZone ZEW report today to be a good news/bad news situation. The good news was the strong report displayed what the analysts were thinking; that the World Cup fans brought an influx of money to Germany. The bad news was; how can this level be sustained with the soccer tournament being finished, and all of the geo-political factors existing in the world today? Our noted .2480 level actually withstood some additional Euro weakness. Keep an eye on that level, as this pair is not looking as weak as the Yen and Chf.
Usd/Jpy
A relatively minor department stores sales number was disappointing, but it’s tough to say if this was the reason for further Yen weakness. Realistically, 119 appears to be the next level of major resistance. In order to reach that point, this pair would have had to have gone up 450 straight pips. While anything is possible, look for possible consolidation before the next leg up or down.
Usd/Chf
The retail number was not nearly as strong as expected causing the Franc to continue its slide. Last evening we mentioned the .2525 as a major level of resistance. Well, this price was easily surpassed by about 25 pips as the Dollar reached .2550, before settling back in the aforementioned resistance area. Similar to our comment about the EurUsd last evening, we feel it would be a bit dangerous trying to pick a top here, as there is no major upcoming resistance.

What Our Strategies Are Telling Us as of 7/18, 7:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
Slight $ Long Bias
Usd/Jpy
$ Long Bias
Usd/Chf
$ Long Bias

Not much activity today in our strategies other than one of our shorter term Euro strategies getting tricked a few times, for a few losses. The small pullback in the Dollar was not enough to convince a majority of our strategies that the recent Dollar increase is over.


T2

 

[T Squared Trading]

Fed Chairman Bernanke Plays the Role of the Skunk at the Party

Daily Commentary for July 20th, 2006

Fed Chairman Bernanke Plays the Role of the Skunk at the Party

Good Wednesday Evening/Thursday Morning,

After a positive PPI report the Dollar backers were busy dancing in the streets, popping the champagne corks, and buying those first class tickets to Aruba. About an hour and a half later, their feet hurt, they were drunk, and they had to change their seats from first class to coach. US Fed Chairman Bernanke was roasted by members of the Senate, who basically insulted everything about him but his family. They questioned his competency and decision making. This caused the Dollar to not only give back its post PPI gains but his comments also brought into question the possibility of the end of future rate hikes.

The trading dynamic of today’s Dollar movement was interesting to watch and analyze. There was some real nice money to be made in the past few days with both scalping strategies and longer term models. It’s days like these that really enable our strategies to capitalize and make profits for our clients. Unlike last week, there have been defined moves in the markets with significant follow through.

Technical Indicators
Eur/Usd
The .2480 level of support we have been noting wasn’t breached by much today….so we’re kind of proud of ourselves, I guess. The mixed EuroZone data was not so much the catalyst as the fact that the Euro has been declining the past week and was prime for some retracement. .2700 could prove to be resistance as no EuroZone data is expected the rest of the week.
Usd/Jpy
This pair didn’t quite make it to 119 we noted as the next major level of resistance last evening. At around 117.90 the Dollar ran out of gas and began its reversal. Since the move from 114 earlier this month, today’s decrease was the largest in size, possibly signifying a longer term retracement. Not much upcoming news for the Yen, so watch for possible consolidation in the 116.50-117 area depending on what Bernanke says tomorrow.
Usd/Chf
The Tuesday high of .2550 was surpassed just enough to get a bunch of Dollar longs on board before the rug was pulled out from under them. With the absence of any Swiss news in the next few days, this pair will be controlled by the Dollar action. There was consolidation in the .2450 area a few days ago, so that level might provide some support.

What Our Strategies Are Telling Us as of 7/19, 8:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Neutral Bias
Usd/Chf
$ Short Bias

As mentioned in our previous commentary, our strategies were net long the Dollar entering the Asian session last night. Our shorter term strategies were able to cash in on the brief Dollar rally and subsequent reversal at around10am ET. Our longer term strategies, however, were finally convinced that enough was enough and it was time to take profits. They then switched to a Dollar short bias and were able to squeak out a small profit and are currently net short the Dollar.

T2

 

[T Squared Trading]

Daily Commentary for July 21st, 2006

Bernanke-Master of the Obvious

Good Thursday Evening/Friday Morning,

US Fed Chairman Bernanke made the following comments Thursday morning, “The increase in energy prices is clearly making the economy worse off both in terms of real activity and in terms of inflation. There is no question about it.” This statement made me want to jump through the TV screen and prompted a state representative to ask a question basically saying after 17 straight rate hikes wasn’t something like this inevitable. Of course Bernanke didn’t have an answer.

His lack of an answer and increased fighting between Israel and Lebanon brought the Dollar lower across the board. There is no real reason to take a pro or negative Dollar stance based on the last 2 days, so it seems that the underlying currencies are running the show for the first time in a while. Not much real data on the US side tomorrow, so it might make for a rather uneventful day barring any strong data coming outside the US or geopolitical events. Have a nice weekend everyone.

Just wanted to inform those interested that in a response to feedback we have received, we have substantially decreased both the minimum account sizes and monthly lease fees. This should allow our automated strategies to be more accessible to everyone. While we feel we have a superior product, this change was called for, and we needed to oblige

Technical Indicators
Eur/Usd
The strength today in the Euro wasn’t as extreme as yesterday, but there was still enough movement for Euro fans to cheer. Consolidation is beginning, but look for top side resistance in the .2700 area. French consumer spending data coming out near the European market open could prove to be a key for defining Friday’s direction.
Usd/Jpy
There indeed was consolidation in the 116.50-117 area as pointed out last evening. Obviously there is plenty of room on the downside still, but the fact that consolidation is taking place just about 75 pips from the high is not exactly a positive sign for the Yen. The talk today dealt with speculation that the BOJ isn’t really in any rush to raise rates further. This is a bearish sign for Yen backers.
Usd/Chf
The only data that came out of Switzerland over night essentially stated that while the economy is still performing well, it has been hurt somewhat by the increase in oil prices. This has many traders speculating that the Swiss National Bank might need to take action and increase interest rates sooner rather than later. The .2450 we noted as support last evening is being breached somewhat, but still holding strong around .2425. This is still in that general vicinity, but beware that a drop under .2400 most likely would take the Dollar all the way down to .2325 or so.

What Our Strategies Are Telling Us as of 7/20, 9:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Long Bias
Usd/Chf
$ Short Bias

The only change in our strategy bias from last night was Usd/Jpy turning Dollar Long Bias. All of our strategies performed very well the past 24 hours. There is heavy participation in our strategies right now, so it makes it very exciting for us to see how they perform in this environment.


T2

 

[T Squared Trading]

How Do Tiger Woods and Sergio Garcia Relate to Trading?

Daily Commentary for July 24th, 2006

How Do Tiger Woods and Sergio Garcia Relate to Trading?

Good Sunday Evening/Monday Morning,

We hope everyone had a safe weekend. To sum up last week in a nutshell: It was a good time to be a disciplined currency trader. Due to the many geopolitical factors, there was a tremendous amount of volatility. The volatility led to some well defined moves both long and short the Dollar. It was one of the rare weeks where both a long term strategy and scalping strategy was able to make some nice profits.

I wanted to touch briefly on some observations I had on Sunday while watching the British Open Golf Tournament. I want to preface my comments by saying I have tremendous respect for anyone who can play golf on a professional level. With that said, I couldn’t help but notice the glaring disparity between the mental makeup of Tiger Woods and Sergio Garcia. When the day started, they were basically dead even in terms of their overall scores. They most likely had the same game plan going into the day, be conservative and seize the opportunities as they presented themselves. As the day went on, each mistake that Garcia made, it was obvious he would get frustrated and let his frustration affect his game. Tiger was extremely focused through the good shots along with the bad shots. Of course this led to Tiger winning the tournament, and Garcia, again missed out on an opportunity to win a major golf tournament.

The parallels that can be drawn are quite simple. If you enter each trading day with a game plan that is a proven winner, stick with it. Don’t let a losing streak affect your risk management or your focus.

Technical Indicators
Eur/Usd
As noted in our commentary on Friday, the French Consumer Spending data was a catalyst for the Euro on Friday. The data was some of the first containing the impact of the World Cup. Actually the data from the next month or so will contain World Cup influenced data, so look for continued strength. Our .2700 resistance point was rock solid on Friday, so keep keying on that level. Look for EuroZone Industrial New Orders on Monday to have a minor influence on the current price.
Usd/Jpy
So much for consolidation, as the Dollar gave up about 100 additional pips on Friday. Word out of the People’s Bank of China is that they are requiring the banks to increase their reserve requirement. Speculation is that this might fuel the notion that the BOJ might need to increase rates sooner rather than later. This of course is bullish for the Yen. Look for a 116-117.50 trading range. No major news upcoming.
Usd/Chf
This pair did breach the .2400 level we noted on Thursday evening’s commentary, but the decline stopped in the .2350 area. According to analysts, they are still bullish on the Swiss economy and the data supports this. We would now look at that .2350 as a major level of support, and possible consolidation could present itself over the next few days.

What Our Strategies Are Telling Us as of 7/23, 8:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Neutral Bias
Usd/Chf
$ Short Bias

Our strategies had another good day on Friday, as we were able to capitalize on the Dollar weakness most of the week. Not much changed from Friday in terms of bias. Our Yen strategies turned neutral, meaning some strategies are short, and some are long the Dollar. Our strategies were net short the Dollar during Friday, and maintain the “Dollar-Hater” mentality. It will be interesting to see if the possible consolidation before the next defined move will have an impact on the overall bias. Participation is currently about ¾.

T2

 

[T Squared Trading]

Mideast Conflict Continues and Oil Starts Creeping

Daily Commentary for July 25th, 2006

Mideast Conflict Continues and Oil Starts Creeping

Good Monday Evening/Tuesday Morning,

We hope everyone had a nice day today. The Dollar regained some of the Mojo it lost in the latter half of last week. This was most likely due to increased tension between Israel and Lebanon, as traders found safety in the Buck. Our benevolent Secretary of State, Condoleezza Rices called for a cease fire. Well, this was greeted with about as much disdain as a truce between Wiley Coyote and the Road Runner….no chance. Oil continued its rise, settling right around $75/barrel.

There are major concerns in the US and across the world over the heat of this summer. There are rolling black-outs in parts of California and Missouri. Actually, I can’t remember a summer as hot as this one. We have offices in both Florida and Pennsylvania, and Florida seems to be the cooler choice…amazing! If you’re looking to cool down, go to the movies and watch An Inconvenient Truth narrated by Al Gore. Although I nearly fell asleep during some parts, the overall message was awfully powerful. Basically we need to wise up soon in terms of protecting the environment or we might end up a bunch of crispy critters. Have a nice night everyone.

Technical Indicators
Eur/Usd
A strong New Orders report did nothing to help the Euro, indicating that a pullback was inevitable. Continue to key on .2700 for a major level of resistance, and the .2580 area as near-term support. The German IFO report on Wednesday could carry some weight, as traders think that should be a sneak peak at the possibility of an ECB rate hike next week.
Usd/Jpy
The 116-117.50 trading range remained intact, as the Yen lost some of its Mojo overnight. No major Japanese data until the middle of this week, so that leaves this pair to be dominated by Mr. Dollar. It’s interesting that there has been no major news related to the Fukui incident as of late. Perhaps the situation is being swept under the carpet?
Usd/Chf
The .2350 support level we noted last night was only slightly approached before the start of the Asian session. The Swissie was hit with a double dose of dovish comments by members of the Swiss National Bank. One member basically said traders no longer flee to the Franc as safe haven during war times, and another member stated he is comfortable with the current level of the currency…..talk about killing any momentum the Franc might have! Look for a topside in the .2500 level.

What Our Strategies Are Telling Us as of 7/24, 8:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Long Bias
Usd/Jpy
$ Neutral Bias
Usd/Chf
$ Long Bias

The slight Dollar strength across the board was enough to convince some of our strategies to take profits, and some to reverse direction. While the 50-75 pip Dollar move in some of the majors didn’t seem like much on the surface, our strategies apparently saw something. Participation is only ½, so it appears that there is some indecisiveness in the air.

T2

 

[T Squared Trading]

Dollar Maintains Mojo and Australian Sewage=H20?

Daily Commentary for July 26th, 2006

Dollar Maintains Mojo and Australian Sewage=H20?

Good Tuesday Evening/Wednesday Morning,

Good day to everyone. The Dollar continued its steady rise, tacking on another 75 pips across the board. Some possible reasons for this was a stronger than expected US Consumer Confidence report and the fact that State Secretary Condaleezza Rice is still in the Middle East trying to restore peace. Actually Rice’s continued attempts for a truce, caused oil to give back about a $1.30, finishing the day around $73.75.

The Dollar strength was even more surprising, as news out of China was they would be lowering their Dollar denominated reserves. They are currently ranked 2nd in the world in Dollar holdings. Logic says this would be an extremely bearish sign for the Dollar, but as usual in the Currency market, logic is apparently insignificant.

Finally, to prove that our commentary spans all areas of the globe, we are reporting a bit of news out of Queensland, Australia. Apparently the drought stricken town of Toowoomba is so concerned about the prospect of the water reserves running out, they have come up with a solution. They will pump purified waste water back into the main reservoir. Scientists insist it’s safe and effective. I wonder if the scientists are going to be first in line to try a cup of the murky liquid?

Technical Indicators
Eur/Usd
Our .2580 level of support is holding up quite nicely as of 6PM ET. Since our Eur/Usd strategies are net short the Euro, it will be interesting to see if the support is right, or our strategies. Expectations that the German IFO Report tomorrow will be weak, is pointed as the reason for the Dollar weakness today. If the support level is broken, look for a next level of support in the .2475 area.
Usd/Jpy
The lack of Japanese data allowed the Yen to be dictated by the Dollar today. This Yen gave back another 75 pips, but is still within the 116-117.50 range we have been pointing to lately. Comments from a Bank of Japan’s policy member and Japanese Trade Balance data in the next few hours, should give us a glimpse on the possibility of another rate hike. Depending on the data, look for a halt to the current Yen weakness, or a catalyst for this pair to jump out of the range to the upside. Watch 117.50!
Usd/Chf
The Swiss economic data is showing positive signs, but members of the Swiss National Bank are still tempering the overall optimism on a strong economy…kind of a weird dynamic. Similar to recent data, consumption data from last night topped analyst’s consensus. Unfortunately, for Swiss backers the Franc still dropped in value against the Dollar. Our resistance noted last night of .2500 is currently being breached by about 30 pips. Keep a watchful eye to make sure the level doesn’t stray to far above this level.

What Our Strategies Are Telling Us as of 7/25, 9:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Long Bias
Usd/Jpy
$ Neutral Bias
Usd/Chf
$ Long Bias

As noted in last night’s commentary, our strategies switched to a net Dollar long bias, and this turned out be correct….at least for now. Most of the Dollar long trades are still open, as the strategies are apparently looking for further strength. The only slight dissenter is a few Usd/Yen strategies, they need to be convinced further, I guess. Participation is high, around 90%.

T2

 

[T Squared Trading]

Beige Book Blues & What in the World are “Freeze Rates"

Daily Commentary for July 27th, 2006

Beige Book Blues & What in the World are “Freeze Rates”

Good Wednesday Evening/Thursday Morning,

Hello loyal viewers, we hope everyone had a nice day. It was a pretty quiet morning until 10am ET rolled around. This was the time the report known for giving the current state of the economy and the possible pitfalls it faces know as the Beige Book was released to the public. Apparently people aren’t buying enough McMansions or pants, as both the housing numbers and retail sales numbers were down significantly. The lousy data caused a 120 pip Dollar loss in some pairs, and caused our clients to wince a bit. A majority of our strategies were net long the Dollar prior to the Beige Book.

Finally I wanted to discuss a relatively new product I saw while surfing some financial sites today. I read that a Forex brokerage firm is offering “Freeze Rates.” Apparently the way it works is when you request a quote to execute a trade, it ‘freezes” the quote and gives you a few seconds to decide whether you want to do it or not. I smiled when I read this because it’s just another example of what a disadvantage the retail investor is at in the Forex market. Imagine running a race and getting a 5 second head start, and you still lose almost every time….same thing here!

Technical Indicators
Eur/Usd
Surprise, surprise. The German IFO report was weak as expected, and guess what the end result was? The Euro going higher of course! The .2580 proved again to be good support as the Euro sky rocketed off that level to around .2700. Watch the behavior around the .2700 area carefully after the French jobs and German confidence report. It will be fun to see if this pair reacts more favorably towards these numbers or the US housing numbers later in the morning….my guess is the US data.


Usd/Jpy
The Bank of Japan’s policy member’s comments pointed towards a possible rate hike most likely in the fourth quarter of this year. This was enough to move the Yen prior to the larger move later in the day. What does it need to take to get this pair out of the 116-117.50 range? The more energy it builds during this large range of consolidation, odds are the preceding move should be a doozy!
Usd/Chf
The .2500 level of resistance we noted the previous two nights was breached by about 40 pips, but apparently it was just a head-fake as the Franc was on the positive end of the poor Beige Book numbers today. We will now key again on that .2380 level as a support we have referred to a few times now. No economic news in the next 24 hours, so watch the Dollar dictate the movement here.

What Our Strategies Are Telling Us as of 7/26, 7:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Long Bias
Usd/Chf
$ Long Bias

Most of our Eur/Usd strategies which were long the Dollar as reported last evening either took profits or were stopped out depending on the time frame. The Dollar weakness caused a net Euro long bias. It’s interesting to see that the Swiss and Yen strategies still maintain a Dollar long bias. Our Suite gave back some of its open position profit, but the majority of the strategies contained in this portfolio are still opened so we’ll have to wait and see the outcome

T2

 

[T Squared Trading]

This Time Mr. Magoo Saw It Coming Before We Did

Daily Commentary for July 28th, 2006

This Time Mr. Magoo Saw It Coming Before We Did

Good Thursday Evening/Friday Morning,

We hope everyone had a nice day and are excited for the weekend. All good things come to an end, and our performance today was indicative of that. After a string of consecutive winning days, our clients would have been better off having Mr. Magoo making market direction calls than us today. In all seriousness, though, the choppy movement of the market caused a few stop outs to occur, before quickly reversing with our client’s hard earned money in the enemies pockets. As we allude to later in the “see how our strategies are performing section,” our clients are able to handle drawdowns when they occur due to the extreme risk management and position sizing we utilize in our strategy design.

Look for US GDP to drive the action in tomorrows trading. Aside from that, please have a safe and enjoyable weekend and look for our commentary on Sunday evening.

Technical Indicators
Eur/Usd
The .2700 level was taken care of shortly after the strong EuroZone data early in the morning. Unfortunately for the Euro backers, these gains were erased shortly after the US data came out. Look for French CPI data to be greeted with a tepid response compared to the US GDP later in the morning. The market movement will probably be similar in timing as today. Still key on the .2700 level for the next major move.
Usd/Jpy
The Yen gained in value against the Dollar today, as the 116 bottom was breached similar to what we will describe in the Usd/Chf analysis. Look for an ample supply of Japanese CPI data to possibly further the Yen’s move. Again, similar to the Swiss behavior, note the amount of time spent below the 116 level, before deciding on the next direction this volatile pair will take.
Usd/Chf
The .2380 support level we have been referring to over the past week was breached by about 70 pips, before rebounding back to the same stubborn resistance. The violent move was enough to confuse one of our Swiss strategies, so chalk one up for the bad guys, I guess. The KOF Leading Indicator is the last piece of data for the week and should be a non-event. Note how long this pair is below the .2380 level, before deciding on the next move.

What Our Strategies Are Telling Us as of 7/27, 9:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Long Bias
Usd/Chf
$ Short Bias

Our strategies had a rough day today, as the choppy action of the market created some confusion in their computer chip brains. Our longer term positions which still have a Dollar long bias are hurtin’ for certain, but we shall see if they wind up getting stopped out or not. Participation is about 90% still. As always, the proper position sizing and rigid risk management we stress to our clients will let them endure drawdowns regardless of how small or large they might be.
.
T2

 

[T Squared Trading]

Traders Licking Their Chops As Data Filled Week Approaches

Daily Commentary for July 31st, 2006

Traders Licking Their Chops As Data Filled Week Approaches

Good Sunday Evening/Monday Morning,

We hope everyone had a safe weekend with family and friends. Many traders approach an upcoming week such as the one ahead as an opportunity to make some serious money. We have a ton of Euro data including the ECB meeting on Thursday, and the all important US Non-Farm Payrolls on Friday. Some traders will most likely stay on the sidelines early in the week, and patiently wait for “dessert.”

Oil dropped on Friday and Israel has put a 48 hour halt on air strikes over Lebanon. Hopefully this will lead to a cease fire in the near future. Some of the images coming out of both countries are too painful to watch. Our thoughts and prayers go out. We hope everyone has a profitable week, and as always, please use proper risk management and position sizing. Look for our comments tomorrow on Gas and the difference between correlated and non-correlated trading pairs.

Technical Indicators
Eur/Usd
As expected, French CPI data was essentially a non-event. This pair was dominated by the US GDP figures, and the Euro gained as a result. The .2700 level is about as useless as an appendix, as the .2790 level should prove to be temporary resistance. The ECB meeting on Thursday will be highly anticipated as a rate hike as widely expected.
Usd/Jpy
The Japanese CPI data showed the economy is still white-hot and another rate hike is becoming more and more likely later this year. We’re finally comfortably out of the 116-117.50 trading range. We’re moving at about 70 degrees, so a consolidation isn’t out of the question. Housing data is due later this evening. Not much is expected from this number, so the 114.50 area might provide temporary support.
Usd/Chf
The KOF Leading Indicator data proved to be a non-event as noted on Friday. The .2380 support level appears to be rendered useless for the time being as this pair spent most of Friday below this level. Logic would show .2300 to be the next level of support as this is basically where the last move north occurred in early July. No data tomorrow, so the Dollar will dictate the movement.

What Our Strategies Are Telling Us as of 7/31, 7:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Long Bias
Usd/Chf
$ Short Bias

A majority of our longer term strategies simply held onto their positions on Friday. Our shorter term strategies were able to book some profits, but all in all, a pretty uneventful day. Participation has dropped to about 75-80%, but a net Dollar short bias still exists.

T2

 

[T Squared Trading]

Good Day To Take A Walk, Exercise, Or Clean Out Your Sock Drawer

Daily Commentary for August 1st, 2006

Good Day To Take A Walk, Exercise, Or Clean Out Your Sock Drawer

Good Monday Evening/Tuesday Morning,

To quote the great cult classic Office Space, I think the market had “a case of the Mondays.” With the market waiting for the end of the week’s data, today’s price action was about as exciting as watching a sleeping contest. Oil was the only major mover, increasing a little over a Dollar per barrel before settling around $74.40. The heat wave in the US and renewed tension in the Middle East was pointed as the cause for the rise.

The summer months are notoriously slow in the currency market. This summer has been somewhat of an exception due to the many geopolitical events. We were supposed to include some comments on the difference between correlated and non-correlated pairs this evening, but our contributor was not able to make it to our offices this evening. He assured us that he will stop by, so we will share his comments with you at length.

Have a nice day everyone, and please don’t “force trade.” Take what the market gives you, and sit on the sidelines if need be.

Technical Indicators
Eur/Usd
.2790 is still the major level of resistance. Much data last night provided little in terms of movement. This pair will likely march in place over the next couple of days leading into the ECB meeting on Thursday
Usd/Jpy
Housing data showed that the end of the ZIRP wasn’t able to decrease new construction as much as expected. Even so, this did nothing to propel the Yen higher against the Dollar. Similar to last night, key on the 114.50 level
Usd/Chf
.2300 is the current major level to watch here. Similar to yesterday, no news is expected for tomorrow. Barring any major news tomorrow, this pair will likely sleep walk through another day.


What Our Strategies Are Telling Us as of 8/1, 9:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Long Bias
Usd/Chf
$ Short Bias

We had one execution day, in a short term Usd/Jpy strategy. That was about all the excitement our strategies could muster. Participation is still around 70-75%, and Dollar bias remains the same. Our strategies are most likely sizing up the situation in anticipation of the inevitable volatility later in the week.

T2

 

[T Squared Trading]

The Dangers of Correlated Pairs

Daily Commentary for August 2nd, 2006

The Dangers of Correlated Pairs

Good Tuesday Evening/Wednesday Morning,

We hope everyone had a cool day today. This heat is starting to get a bit ridiculous. In terms of the market, the Dollar was as cool as a cucumber, losing about 70 pips to most majors. Traders noted the reason for this being the same old song: oil and war. In addition, a tropical storm is forming in the Gulf of Mexico, and there are worries that this could affect some oil refineries.

In our Strategy Suite 1, we use 5 non-correlated strategies. What this means is that a majority of the time, the individual strategies contained in this portfolio, are pointing towards different directions in terms of Dollar bias. This is key in risk management, as the strategies are basically hedging themselves. Of course, there are times when all 5 strategies are pointing towards the same direction in terms of bias. This is usually an exciting time for us, as it’s showing that they all are seeing basically the same thing.

Some strategy providers use correlated strategies. This is basically a portfolio of strategies that are always pointing the same direction in terms of bias. Essentially it’s one big position! To increase risk, these positions are usually entered in steps, meaning one lot would be bought at one level, the next at another, so on and so forth. With correlated strategies traded in this way, it’s very easy to make a few hundred to a thousand pips in a few days. On the flip side, the potential losses and the commissions that are generated by the clients, would stand to be much greater than the gains. We point this out not to criticize our competitors, but to simply give you the facts. Please send us questions or comments if you don’t understand this point. We would be happy to further assist you.

Technical Indicators

Eur/Usd
It’s interesting to note that our .2790 level of resistance in last night’s commentary could now prove to be a key level of support according to the charts. This pair is eyeing the .3000 level like Tom eyes Jerry. Hawkish comments and a rate hike by Trichet on Thursday coupled with a weak US NFP on Friday could be a catalyst for this to occur.
Usd/Jpy
The 114.50 held up surprisingly well today. Troubled BOJ Governor Fukui made additional comments today that a rate hike later this year is a strong possibility. On a chart basis, the next major level of support is the 113 area. Anything below that is a black hole. No major news in the next 24 hours, so look for possible consolidation.
Usd/Chf
Our Swiss strategies have been tricked a few times in the past 2 weeks with the choppy behavior of this pair. We pointed to .2300 as the next support level last night, and we were wrong again. As we’re net short the Dollar, our strategies most likely have this pair going through the important .2200 level. You’ll see this level is the 2 month low, and there isn’t much support below this area. Look for PMI data later today.

What Our Strategies Are Telling Us as of 8/1, 9:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Short Bias
Usd/Chf
$ Short Bias

Today was actually a busier than usual day for our strategies. We were right in last night’s assumption that our strategies were just picking their places to enter the market. They didn’t just tiptoe in, they entered the market with full force, as participation is near 100% and decidedly Dollar short. It will be interesting to see if the bias stays that way leading up to the ECB meeting, so stay tuned.

T2

 

[T Squared Trading]

The Misconception of a Drawdown

Daily Commentary for August 3rd, 2006

The Misconception of a Drawdown

Good Wednesday Evening/Thursday Morning,

Good day to all. Currency pairs across the board remained relatively steady, as traders are anxiously awaiting the ECB monetary policy meeting tomorrow. We briefly analyze this meeting in our technical section. Oil rose again on fears that Tropical Storm Chris might develop into a hurricane, and wreck havoc on the Gulf Coast similar to last year. This is most likely the first of a few hurricanes, as we’re entering the busy season.

We wanted to touch on the topic of drawdowns, and how the risk management and position sizing we constantly stress allow our clients to withstand them. Let’s assume we are trading the Strategy Suite 1 with a $10,000 account. There is a collective 100 pip loss over the course of 5 days. The maximum drawdown on the Suite is 25%. Our data says you should be able to trade roughly 3 mini contracts in each of the 4 individual strategies within the Suite. So simple math shows us we will have a $300 drawdown on this account, or only 3%. Of course it always stinks to have a drawdown, but unfortunately it’s part of trading. As you can plainly see though, if this drawdown wasn’t managed correctly with proper position sizing, it could easily make your % loss much greater. In tomorrow’s commentary we will explain why increasing your position sizing as your account increases, and decreasing position sizing when your account goes down in value is so important.

Please be smart in trading the upcoming ECB announcement, and always stick to your trading plan.

Technical Indicators

Eur/Usd
All eyes are on this pair as the ECB reports in about 8 hours. A ¼ point rate hike is expected, but the mystery is always what ECB President Trichet will say. Traders maintain that his words are predicated on the current level of the Euro. If this pair were closer to 1.3000, the overall tone might be of more urgency to tighten rates. Our strategies are pointing to a positive move by the Euro, so we’ll have to wait and see. The .2790 support we mentioned last evening has been proved correct thus far.
Usd/Jpy
The possible consolidation we noted last evening, did indeed occur, as this pair barely moved out of the 114.50 region. BOJ official Mizuno, took the baton from Fukui last night to make additional positive statements about the Japanese economy. It’s interesting to see that these officials are going out of there way to make these comments, as they have been somewhat muted in the past few months.
Usd/Chf
Swiss PMI data was stronger than expected, but still, the Swiss gave back around 50 pips to the Dollar. It was interesting to see that this small move was enough to convince one of our Swiss strategies to jump ship and switch to a Dollar long. Ahead of the ECB report, it will be interesting to see if the bias is maintained. We’re still looking at the .2200 level to provide the next level of support.

What Our Strategies Are Telling Us as of 8/2, 5:45PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Neutral Bias
Usd/Chf
$ Long Bias

Our strategies did some last minute positioning prior to the ECB report Thursday morning. Similar to last evening’s report, not much occurred in terms of execution. One of our Swiss strategies was stopped out as the Usd/Chf continues its choppy movement. Our Yen strategies have switched to neutral, and overall participation remains high; around 100.

T2

 

[T Squared Trading]

It’s That Time…….Again

Daily Commentary for August 4th, 2006

It’s That Time…….Again

Good Thursday Evening/Friday Morning,

The ECB meeting was a dud, as Trichet rained on the parade of Euro bulls with dovish comments about the economy. It will be interesting to see if these comments mean anything if the US Non-Farm Payroll numbers are a disappointment tomorrow morning. The key numbers are 175K and 100K. If the number is below 100K, look for a Dollar sell-off as a rate hike next week would shrink faster than a slug in salt. If the number is above 175K, look for Dollar fireworks. Anything in between could produce a collective yawn, traders closing their laptops, and taking a 3 day weekend.

As always, don’t go crazy trading this number. Preserve your capital, so you’ll have an opportunity to do this all over again next month. Have a safe weekend.

Technical Indicators

Eur/Usd
The .2790 support level was breached by about 40 pips after the ECB came out with the expected ¼ rate hike, but accompanied it with less than bullish comments on the economy. According to Trichet, don’t plan on another rate hike for at least another few months. German factory orders are due in the morning, but will be overshadowed by the US data 5 hours later. We wouldn’t be surprised to see a strong move by the Euro based on what our strategies are telling us.
Usd/Jpy
The 114.50 level was strong like a bull today providing enough support to bring this pair up to the 115 region. The weakness was due to Japan’s Finance Minister commenting on the possibility of not increasing interest rates later this year. This of course is contradictory to the positive comments made by BOJ members earlier this week. It’s a mystery who to believe, but one thing is for sure….this pair should be extremely volatile tomorrow.
Usd/Chf
One of our Swiss strategies was able to squeak out a small profit, which broke somewhat of a bad run as of late. Our Swiss strategies are currently net $ short. In case of a weak number tomorrow, keep an eye on the .2200 number as support.

What Our Strategies Are Telling Us as of 8/3, 9:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Short Bias
Usd/Chf
$ Short Bias

Barring any last minute movement, our strategies are $ Short heading into the Payroll number tomorrow. We had some trades in some Euro and Swiss strategies resulting in a net loss for the day. Participation is around 90% as a Yen and Euro strategy flattened out.

T2

 

[T Squared Trading]

Two Major Numbers Down, One To Go

Daily Commentary for August 7th, 2006

Two Major Numbers Down, One To Go

Good Sunday Evening/Monday Morning,

We hope everyone had a safe and happy weekend. Fortunately the temperatures cooled off a bit in the northeast, as we were finally able to venture outside without drowning in a pool of our own perspiration.

Unlike the non-event of the ECB meeting on Thursday, the US Non-Farm Payrolls the following day provided more than enough money making opportunities for traders. With the number coming in weaker than expected, the Dollar was hurt across the board. This not only made Dollar bears happy, but our clients happy, as well. After a pretty miserable week “pip wise,” we were able to make some profits back as we came into Friday net Dollar short. As we discussed last Tuesday, our strategies are non-correlated for the most part. When they do line up in the same direction, though, the results are usually good.

Look for the Fed meeting on Tuesday to provide the last bit of direction for the Dollar. While the majority believe we’ve seen the last of the rate hikes, stay on your toes as a trader, as anything can and usually does happen. Have a profitable week, and we’ll talk to you tomorrow.

Technical Indicators

Eur/Usd
On Friday we wrote, “we wouldn’t be surprised to see a strong move by the Euro based on what our strategies are telling us.” This occurred as this pair temporarily rose above the .2900 level. Most likely we will see a true test of levels we haven’t seen since early 2005, as our hunch is that this pair will test the .3000 range sooner rather than later. Look for the Bloomberg data to basically be a non-event later this morning.
Usd/Jpy
The 114.50 level broke down somewhat on Friday. Based on a daily chart, the Yen has a real good chance of doing some major damage to the Dollar. The next level of any real support is in the 112 range. It will be interesting to see if no rate hike on Tuesday will send Dollar backers heading for the hills in this pair.
Usd/Chf
On Friday we wrote “in case of a weak number tomorrow, keep an eye on the .2200 number as support.” It appears that this was the case as this pair couldn’t seem to go any lower. The Swiss unemployment data is due tomorrow morning, so let’s see if a strong number is enough to strengthen the Franc even further. Obviously still key on the .2200, and note the amount of time it spends below if it does break through.

What Our Strategies Are Telling Us as of 8/6, 9:00PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Short Bias
Usd/Chf
$ Short Bias

Our strategies went into Friday’s NFP net Dollar short. The only last minute change was our Swiss strategy turned into a Dollar bull, but quickly recognized its flawed thinking, and reverted back to the right direction shortly after the number came out. As you can see, our strategies still maintain their negative Dollar outlook. Participation is still around 90-95%.

T2

 

[T Squared Trading]

The Eve of a Pause

Daily Commentary for August 8th, 2006

The Eve of a Pause?

Good Monday Evening/Tuesday Morning,

A corroded oil pipeline in Alaska not only caused the Dollar to rally today, but will also be a contributing factor as to why I’ll need to start searching under my sofa cushions in order to pay for gas in September. British Petroleum announced Monday they will need to temporarily shut down the largest oil fields in US due to dirty pipes. The magnitude of this will become clearer as the duration of the outage becomes known.

The big day is upon us, as the FOMC is due to report on interest rates tomorrow around 2:15 PM. The odds are in the favor of no rate hike. This will most likely signify the end of 19 straight rate hikes. The wild card is supposedly the comments accompanying the decision. Hawkish comments might or might not move the Dollar higher, whereas dovish comments will almost assuredly put a dagger in the Buck.

Final Thought: The movement of the market today was obviously based on the news out of Alaska…..or was it? I was thinking during the market movement in the afternoon; who is establishing any new Dollar long positions? On the surface, this looks like a trap by those “in the know.” We’ll find out tomorrow!

Technical Indicators

Eur/Usd
The belief on many trading floors is that if the Fed decides not to tighten rates tomorrow, it will give the ECB carte blanche’ to continue their own tightening in the months to come. As we noted last night, the possibility of this pair reaching the .3000 level, is very much a reality. The Euro got stuck in the .2900 level yesterday, before quickly reversing course, so pay close attention to how this pair reacts amid any Dollar weakness tomorrow. German and Italian data early tomorrow morning should have little impact.
Usd/Jpy
The Yen was weakened after the news of the Alaskan oil pipeline was reported. As a result the Dollar gained about 100+ pips. After the Fed decision tomorrow, the primary driver in this pair will be the BOJ’s comments and future decisions later in the fall. 114-115.50 is the current trading range. Watch any movement near 114 after the announcement tomorrow.
Usd/Chf
If you traded the .2200 level we’ve been noting the past few sessions, you would have been able to close out your short position, open a long and be laughing all the way to the bank. Also, if my Aunt had a mustache she would be my Uncle. In all seriousness, though, this pair jumped off the .2200 level rather violently, leaving some doubt the next time this level will be tested. As expected the strong unemployment number wasn’t enough to give this pair any major movement. Look for topside resistance around .2300.

What Our Strategies Are Telling Us as of 8/7, 6:30PM ET:
We have 10 strategies that we will report to our clients on a daily basis in regards to their respective dollar bias. Our intent is not to provide investment advice to those who read this following section. We are merely reporting the biases that our strategies are exhibiting.

Eur/Usd
$ Short Bias
Usd/Jpy
$ Short Bias
Usd/Chf
$ Long Bias

As evident in our biases above, our Swiss strategies have turned Dollar longs, after booking a tidy profit on the short side early this morning. For the most part, our strategies still have open positions, as the Dollar strength today hasn’t been enough to change their minds. It remains to be seen whether they will change bias prior to tomorrow afternoon’s Fed decision. Feel free to write to us leading up to it, and we’ll do our best to keep you informed.

T2