EUR/USD view for week OCT/29/2007

I. Important news from the week:

1. Gold stands high - 785 USD, crude oil is 90+ USD

2. HUI is still 400+.

3. USD continue down to sinkhole, but lose momentum. Yet, EUR/USD open~1.44.10

4. FED will have meeting next week on 31th OCT. Market already calculated a 0.25% rate cut - more for this later

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II. As I wrote before:

FED blew it!!! They totally destroyed the dollar in long term. I think they will inflate now, and stock market will go higher and higher, but only in nominal terms.

GOT GOLD :-)

For first-time readers, and those who do not know, the wedges are reversal patterns. This wedge is bullish for USD index, no matter what people say for US economy, debt bubble etc. I am sure that at the end of the year, the USD will be lower, but wedge suggest we will have one bounce before that.

Unfortunately, we had proof that our beloved wedge, is wedge no more.
It was transformed in parallel bearish channel.
Now, even if we see USD up, it will be not an uptrend, but just a correction.

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III. The parallel uptrend (old wedge):

USD index weekly chart:
The wedge is transformed into a parallel channel. Not much change since last week. Still believe it must move up now (USD up, EUR down) We may expect now a rally in USD up to 79+. If the resistance is broken, rally will continue to ~81.

EUR/USD 4 days chart:

Same situation as week ago. It must go down, but we will see.

EUR/USD 4 hours chart:
Here is "speculative" chart. We are on the top of the channel now we will go down.

EUR/USD 5 min chart:
Chart is not shown, but as I predicted we have open the week with a gap. The gap is between 1.43.90 (close) and 1.44.10 (open). Price for sure will go down and will fill the gap. We are take this short EUR/USD trade already.

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IV. Summary:

Generally USD will rise now, EUR to fall, but play carefully.

It is very important what Helicopter Ben and friends (FED) will decide:

o If they kept the rate unchanged, USD will raise a lot - 50-100 pips or more.
o If they cut just 0.25%, USD may raise, or may fall, but in any case will be small move.
o Some believe FED will cut another half percent. In such case USD will totaly fall with 50 pips or more.
o Some, even suggest FED will cut half percen + half percent on discount rate. This will be total disaster for USD.

We will write about this soon, when we do a research and see what others think about it.

Happy week and trade!!!

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V. Carry trade with AUD/JPY:(As usual) Will not be updated this time, probably tomorrow.