Daily Commentary for September 22nd, 2006

Weak Dollar Approaching Familiar Levels & Chavez Probably Won’t Be Buying Bush A Birthday Present

Good Thursday Evening, Friday Morning,

The Dollar has taken a bit of a pounding the past 2 days. Today’s decline was due to poor Leading Indicator data and the Philly Fed Report. The Philly Fed Manufacturing report was negative for the first time since 2003. In spite of the current weakness of the Buck, we don’t think it’s time to load up on Dollar short positions…yet. As we describe in our Indicator section below, an overall consolidation needs to take place, as this current move is most likely unsustainable in the near-term.

In the past 48 hours Venezuelan President Hugo Chavez has referred to US President Bush as “the devil, and alcoholic, a sick man, and he walks like John Wayne.” He also said in so many words that if the US messed with either Venezuela or Iran, oil prices could rise to over $200/barrel. Can’t we all just get along!!! Have a nice weekend everyone and look for our weekly commentary on Sunday evening.

Technical Indicators

Eur/Usd
Luckily for the Euro bulls, the .2640-.2660 consolidation scenario we discussed in the previous commentary didn’t come to fruition. The current print of this pair is a shade below .2800. To be frank, our strategies are believing in the current strength of the Euro, but I will continue to be skeptical until this pair bases up above .2850 for a significant amount of time. This is needed to build up steam to make a run for .3000 again, much like a coiled spring. We’ve used .2800 as the resistance before, and we’re going to use it again.

Usd/Jpy
On Tuesday evening we warned that this pair better stop consolidating below the 117.50 level, if the Dollar had hopes of continuing the upward movement. Well, this pair not only consolidated, but came out of the consolidation pretty violently, before bottoming out around 116.20. While this chart isn’t looking extremely Yen bullish, a break below 116 would be. Given the sharp 45 degree angle of the move, a consolidation around the current level might be in order. Keep 116.80 as near term resistance.

Usd/Chf
.2460 provided about as much support as a training bra on Dolly Parton. Our support levels the past few days haven’t been as accurate as they’ve been in weeks past. Swiss economic data has not been the driver of the Franc’s increase, but rather the poor US economic data. We’re going to go out on a limb and call the .2390-.2400 the next area of major support. A break below this level would send Franc bulls dancing in the streets of Geneva.

What Our Strategies Are Telling Us as of 9/21, 9:00 PM 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 Dollar weakness has caused a net Dollar short bias with the lone exception being our stubborn Yen strategies, which are still long the Dollar. Participation is around 50% as we enter the weekend with a lack of any significant economic data.

Thank you for your continued support, and keep track of our strategy progress at: http://www.fxstreet.com/technical/si...acker/tracker/ along with the equity charts and real-money profit and loss report on our website. If you would like to receive our commentary before it is released to the public for free in PDF format, please send us your e-mail, and we will gladly include you on the subscribers list.

T2
www.tsquaredtrading.com