“I love it when a plan comes together!”
- Colonel John “Hannibal” Smith

So far, so good with my amazing powers of precognition. Twenty four hours after my attempt to read the sentiment tea leaves EUR/USD finds itself just under 1.4850, where I predicted it might fall to. Luck, skill, experience, intuition; it matters not. What matters now is what I do now that price has fallen back from 1.500.

Is there further to go in this retracement? Or it is just a quick breather before a push up to 1.51 and beyond. Or is this a retracement at all? Could it be the start of another major dollar bull run?

I don’t see anything on the immediate horizon leading to the start of a new dollar bull run. Not this week at least. I think there’s a good chance we’ll get one eventually, within the next year maybe.

U.S. Treasury Secretary Geithner has been spouting the usual mantra of a strong dollar policy. Couple that with news reported by the WSJ that Asian central banks have been buying dollars hand over fist to keep their own currencies from appreciated too quickly. Finally, mix in the latest press release from China’s central bank, which, when read between the lines seems to indicate they are going to allow the renminbi to slowly appreciate again against the dollar. Stir it all up and you have some dollar positive news which has been reflected in today’s EUR/USD fall.

It doesn’t point to any change in general risk conditions, so I’m happy to keep to the view that this is just a retracement. I don’t think it is quite over yet and may last into early next week.

My thinking at the moment is to look to go long again if we get into the 1.47 handle somewhere.