So Much for That Orderly Consolidation

Here we see the Euro Trust ETF (Amex: FXE) gapping down 1.1% on massive volume relative to its short trading history. Volume totaled 1.9 million shares, or 13 times the average volume over the past 50 days and 3.2 times the previous record volume, which was set on its first day of trading, back in December 2005. On a “dollar volume” basis the $225 million in FXE shares traded today is a drop in the bucket compared to the $2 trillion size the daily foreign exchange market. To be exact, today’s 13x normal dollar volume was still only 1/100 of 1% of the total daily foreign exchange dollar volume.

While the foreign exchange is not the focus of this blog, it is of interest due to the factors outlined in my previous posts. Therefore, we’ll be keeping tabs on the dollar as the year progresses and the Fed completes its tightening cycle. Note: The recent almost 1/4 point rise in long-term U.S. treasury rates is one factor currently lending support to the dollar (i.e. if all other factors are held constant, higher U.S. rates are dollar positive). Cheers!