After reviewing my short position i notice a few interesting things that are happening in the markets that i wish to share.
Fundamentals
US CPI high
US retail sales high
FOMC unclear on voracity of rate cuts (if anymore)
I think we have a stalemate in terms of policy and economic reasoning. Can the fed cut rates in the face of inflation? Can they cut rates and have credibilty with those that hold Petro-dollars or have balance of payment issues with the US.
Therefore I think they have boxed themselves in the corner, with nowhere to go. This creates uncertainty. So how can the markets plan for uncertainty? The markets plan by selling off to reduce risk. So investors will take risk off the table, and cull positions such as carry trades, which are normally the 1st to go.
Technically, since the november stock market rebound, the GBP/JPY cross has run into considerable headway at the 230ish level. So, as a proxy for the carry trade if it cant make advancements in a bullish environment, how will it fare with a shift in sentiment?
The pound has been sold recently due to BOE cutting rates, and dollar strength. USD/JPY has risen 600pips from its low point. But equities, JPY, Dollar all have consistent relationships which are a bit misligned at the moment. I favour JPY strengthening.
Next week is also pivotal for the GBP with lots of economic news, the most important being the CPI and Bank minutes. This could serve to weaken the £ further.
Next week in GBP/JPY trading could be like the 2nd week in Nov, where GBP/JPY closed down 700pips in a couple of days, amid further market turmoil.
It looks to me that 213 might arrive in the 1st 2 months of 08. So I will look to sell rallies.
Fundamentals
US CPI high
US retail sales high
FOMC unclear on voracity of rate cuts (if anymore)
I think we have a stalemate in terms of policy and economic reasoning. Can the fed cut rates in the face of inflation? Can they cut rates and have credibilty with those that hold Petro-dollars or have balance of payment issues with the US.
Therefore I think they have boxed themselves in the corner, with nowhere to go. This creates uncertainty. So how can the markets plan for uncertainty? The markets plan by selling off to reduce risk. So investors will take risk off the table, and cull positions such as carry trades, which are normally the 1st to go.
Technically, since the november stock market rebound, the GBP/JPY cross has run into considerable headway at the 230ish level. So, as a proxy for the carry trade if it cant make advancements in a bullish environment, how will it fare with a shift in sentiment?
The pound has been sold recently due to BOE cutting rates, and dollar strength. USD/JPY has risen 600pips from its low point. But equities, JPY, Dollar all have consistent relationships which are a bit misligned at the moment. I favour JPY strengthening.
Next week is also pivotal for the GBP with lots of economic news, the most important being the CPI and Bank minutes. This could serve to weaken the £ further.
Next week in GBP/JPY trading could be like the 2nd week in Nov, where GBP/JPY closed down 700pips in a couple of days, amid further market turmoil.
It looks to me that 213 might arrive in the 1st 2 months of 08. So I will look to sell rallies.