The British currency remained under pressure across the whole spectrum of the market, while paired with yen this helps the overall strengthening of the latter against the backdrop of rising tensions in the equity markets, and now the pound / yen traded around Y154.39. Bulls managed to find support around Y154.20, but currency strategi Nordea sees risks preserving the dynamics of a pair of negative and point out that growth is now trying to use to find opportunities for sales. The bank previously opened a short position of the foot, at Y155.63 from Y160.50, and the original intent of the area Y148.00.
While reading a recent CNBC article about current events something clicked for me.Here is the passage:
The dollar rose broadly on Thursday as yields on 10-year U.S. government bonds jumped more than 50 basis points in the last two weeks, drawing Japanese investors into overseas assets like global semi-conductor stocks, banks and U.S. junk bonds, according to Reuters.Do you remember the massive unwinds that occurred during the past year? Do you remember all the talk about money heading towards Japan due to risk aversion?Pay attention, this is significant. It's also backs up my much touted long term notion that carry trade currency pairs are in for a recovery.Given the quote above what do you think will happen once the jobs numbers start to turn around in the US economy? I'll tell you what I think. I think interest rates and yields will start to rise. What do you think all that money sitting in Japan will do if there is a hot US economy paying good yields? I suspect that it will leave Japan in order to earn good returns.Guess what that will do to the Yen? That's right, it will drop like a stone. When that happens you'll see carry trading pairs rise massively.Okay, I realize this may be a year to two away, but as long as we do eventually get a worldwide economic stabilization this is what is in store for us. Anyway, if you are a rookie, be careful, as you can't simply make long term bets willy-nilly. The market can always move against future expectations long enough to blow up your account and it often does so as soon as you throw caution to the wind.What this means for me is that I may be more willing to accumulate carry trade positions at moments of opportunity. Keep an eye out for fundamentals and watch leading economic indicators such as the Baltic Dry Index or the price of copper.As you can see these indexes are rising. However, they are still at historically low levels. Are we just in a bounce with respect to worldwide economic activity or are we simply coming up from a recent bottom? You decide.
The dollar rose broadly on Thursday as yields on 10-year U.S. government bonds jumped more than 50 basis points in the last two weeks, drawing Japanese investors into overseas assets like global semi-conductor stocks, banks and U.S. junk bonds, according to Reuters.Do you remember the massive unwinds that occurred during the past year? Do you remember all the talk about money heading towards Japan due to risk aversion?Pay attention, this is significant. It's also backs up my much touted long term notion that carry trade currency pairs are in for a recovery.Given the quote above what do you think will happen once the jobs numbers start to turn around in the US economy? I'll tell you what I think. I think interest rates and yields will start to rise. What do you think all that money sitting in Japan will do if there is a hot US economy paying good yields? I suspect that it will leave Japan in order to earn good returns.Guess what that will do to the Yen? That's right, it will drop like a stone. When that happens you'll see carry trading pairs rise massively.Okay, I realize this may be a year to two away, but as long as we do eventually get a worldwide economic stabilization this is what is in store for us. Anyway, if you are a rookie, be careful, as you can't simply make long term bets willy-nilly. The market can always move against future expectations long enough to blow up your account and it often does so as soon as you throw caution to the wind.What this means for me is that I may be more willing to accumulate carry trade positions at moments of opportunity. Keep an eye out for fundamentals and watch leading economic indicators such as the Baltic Dry Index or the price of copper.As you can see these indexes are rising. However, they are still at historically low levels. Are we just in a bounce with respect to worldwide economic activity or are we simply coming up from a recent bottom? You decide.
QMan at Tickerville reminds you to trade the traders, not the macro fundamentals...
Here's the weekend Tape Talk.Some of the sectors he thinks attractive happen to coincide with mine. Specifically, he seems to be looking at sectors which have been dismissed or neglected by traders: commercial real estate (people just want to short), financials, commodities (industrial metals, oil, but NOT ag). He likes retail, too. NOT because of fundamental reasons but market psychology (i.e. other traders).If you haven't noticed, in this 2-week rally, commercial real estate and financials didn't materially participate. Check the charts of ETFs - IYR for commercial real estate, and XLF for financials. They basically went sideways.I have NRO (commercial real estate) and FAS (financial 3x long), and I've been sitting on MTL (iron ore) and DXO (oil). I hope Qman's right.In the video, he said one interesting thing. He said the bearish patterns like head and shoulders ended up breaking to the upside, instead of down. Maybe that's a sign of a bull rally. Or maybe it's because of High Frequency Trading feeding frenzy...If this rally has more legs, "everything will go up, at least initially", according to Quint. I agree. Just know when to quit. (If that's easy....) Whatever will be, will be
Here's the weekend Tape Talk.Some of the sectors he thinks attractive happen to coincide with mine. Specifically, he seems to be looking at sectors which have been dismissed or neglected by traders: commercial real estate (people just want to short), financials, commodities (industrial metals, oil, but NOT ag). He likes retail, too. NOT because of fundamental reasons but market psychology (i.e. other traders).If you haven't noticed, in this 2-week rally, commercial real estate and financials didn't materially participate. Check the charts of ETFs - IYR for commercial real estate, and XLF for financials. They basically went sideways.I have NRO (commercial real estate) and FAS (financial 3x long), and I've been sitting on MTL (iron ore) and DXO (oil). I hope Qman's right.In the video, he said one interesting thing. He said the bearish patterns like head and shoulders ended up breaking to the upside, instead of down. Maybe that's a sign of a bull rally. Or maybe it's because of High Frequency Trading feeding frenzy...If this rally has more legs, "everything will go up, at least initially", according to Quint. I agree. Just know when to quit. (If that's easy....) Whatever will be, will be
