The Long Term Play

I wanted to share with you today a long term fundamentally and technically based trade that may play out during 2010. As we all know the end of 2009 we started to see a return to USD strength, and so far in 2010 this trend has remained in tact, interestingly during this same period a corresponding drop in the Euro has occurred.

The data coming from the US has increasingly began to look healthier as the recession subsides somehwat and the Federal Reserve looks to drop measures like buying Mortage backed securities and eventually increasing interest rates. Alternatively the Euro Zone data has been a lot worse, Greece on the verge of collapse, spain with a set of problems not too disimilar and the UK still deeply in recession.

I would like to show you a couple of charts which show some interesting patterns and correlations starting to form

The first chart is the USDCHF notice how price comes down and finally finds support around 99 during november and december 2009 we see a nice rally up to 1.05 where support turns resistance and it starts to fall again. I expect in the coming weeks we will see a retest of the low to maybe as far as 1.0050 if this is rejected then expect a big upswing from here in line with the federal reserve withdrawing extraordinary measures, and raising interest rates at sometime in 2010.





The second chart I would like to show you correlates nicely with the USDCHF that I have just been through. The EURUSD similarily has a familiar pattern to it after making a new high in 2009 of 1.5140. The euro got the wobbles in December and fell to a low of 1.4215. I dont see this fall continuing until some or all of this move has been retraced. The left shoulder comes in a 1.5025 and a pullback to here could see this pair line up for a once a year short opportunity. As the Euro Zone has structurally a lot of issues left over from the Gloabl Financial Crisis and the US seems to be recovering faster. The USD could gain in strength throughout 2010.




Enjoy Good Luck out there