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The Smith Report for May 1, 2007
US Dollar Index
The US Dollar as noted in the last report is not looking good and has drifted down from the 84 cent level to just shy of 81 cents. Prepare for the 80 cent level to get ripped soon.
The Pound holding around the major $2 level is very impressive. We don't see these prices very often on the monthly charts. Initial idea is to place long term shorts up here (mini contracts $50 margin) but maybe to early. We might see a capitulation to the upside maybe to $2.10 or $2.05 level to mark a top. Consolidating around the $2 mark looks to be setting up for a spike higher. On the econmic front in the U.K. they are facing a housing bubble that should begin to burst soon so we can't see the Pound rising forever.
The Yen is are favorite on the long side. The USD is holding up amazingly well against the Yen and holding near the 120 mark. Longterm shorts on the USD/YEN looks to be the place to be. The Yen seems to have everyone pointed on Yen to weaken very similar to awhile back when all the talk was short on the U.S. Dollar. The EUR/YEN and the GBP/YEN look to be nearing longterm shorts as well. But traders that are setting up longterm short plays at these historical high prices should be stepping in very slowly (one toe at a time). And have a game plan if prices capitulate to the upside.
Euro The Eur/Usds looks to have a double top formed at the $1.3651 level. Breaking above there will bring the jaw-boning from the ECB and a possible run to the $1.40 mark. Prices are at levels that shouuld result in some impressive volatility. Long-term the Eur/Yen shoud be posting a major top soon on the monthly charts. The higher she can go the better risk reward in my opinion for new shorts.
The risk of loss in trading foreign exchange and commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage that is often obtainable in foreign exchange and futures trading can work against you as well as for you. Futures and forex trading may not be suitable for everyone. Only Risk Capital should be used.
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