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Euro, Pound Racing Lower?

Posted on Wednesday, July 23rd, 2008 | In Current Market News, Europe, Market Commentary
Contributed by: Jack Crooks (http://blogs.moneyandmarkets.com/blog/currency-corner) -

The story so far this week was fired up yesterday via dollar-positive comments from Treasury Secretary Hank Paulson (same old stuff) and monetary policy comments from Philadelphia Fed President Charles Plosser.

Bottom line: the US dollar zipped higher and is continuing its rocket-ride today.

As is usually the case with price action that goes against the trend, dollar strength is shaking up other assets – crude oil, gold and the euro are showing the most noticeable reaction.

This wholesale move in favor of the dollar is impacting other currencies too, just not necessarily as much as it’s impacting the euro. Somewhat surprisingly, the British pound is holding up far better than the euro.

A quick look at a chart comparing the two (EURGBP) shows a key break below a narrowing trend that may presage further near-term euro weakness relative to the pound. This would make sense, because even while the pound is fundamentally vulnerable the euro could give up quite a bit more ground in the near-term …

But since this breakout goes against the grain (the longer-term trend between the two), it may not last too long. It may make sense to play for a downside test of the 7800+/- level in the very short-term, but wait for confirmation before committing too much.

That said, without a convincing break below new support levels, it makes sense to bet on this pair moving back into its sideways range, despite what the dollar does. That means euro firms back up or the pound plays catch-up to the euro’s weakness.

Regards,

Jack & JR

Last 5 posts by Jack Crooks





About Jack Crooks (http://blogs.moneyandmarkets.com/blog/currency-corner)

John (Jack) Crooks is the founder and president of Black Swan Capital, an independent advisory firm specializing in foreign exchange and currency markets investing for retail and institutional clients. A seasoned financial advisory with nearly 20 years of investment experience, Mr. Crooks uses both quantitative and qualitative approaches to determine the fundamental driving force(s) behind the movement of the currency, capital, and commodities markets. He is the editor of Weiss Research’s latest investment offerings, World Currency Alert and World Currency Options, which were launched in August 2007.

Mr. Crooks also founded Ross International Asset Management, a discretionary money management firm specializing in global stock, bond, and currency asset management for retail clients. Previously, he was general manager of Plexus Trading, where he specialized in currency futures and commodities trading. During his successful career, Mr. Crooks served as chief currency and futures strategist of M2 Futures Inc., an investment boutique headquartered in Chicago, as well as vice president of Global Strategic Research for an international investment boutique, where he was responsible for providing daily advice and global strategy analysis.

Prior to entering the investment arena, Mr. Crooks held various corporate finance positions. He has written extensively on the subject of global currencies and international economics and has been published in Asian Times, Futures Magazine, Barron’s, Bloomberg, Dow Jones Newswire, and across many financial websites. He has also appeared on Bloomberg TV and CNBC.

Mr. Crooks holds a bachelor’s degree in finance from Florida State University and a master’s in business administration from the University of North Texas.

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