Adam has been pumping dollar strength returning for a few weeks now. I’ve not been so sure and because of my indecision I’m only running a few positions and only one dollar trade.
We’ve spent weeks leading up to this point where we will get a taper decision (or not) and the market is already showing it’s hand on the first two major data releases.
It’s itching to buy dollars and the run up in USD/JPY from 97.00 has shown that the market is getting positioned for good news.
What is surprising is that the commodity currencies may be betting on a US recovery being beneficial to them. AUD/USD is a case in point. It fell initially on the data, as you would expect normally, but then rebounded swiftly.
One swallow doesn’t make a summer but it’s these little clues that we need to pick up on to make sure we can gauge which way the market may go.
Correlations are great but it’s knowing when they may break down that gives you the edge. Stocks are forecast to fall on QE reductions but if the data is good this will underpin them. Should the US embark on a decent sustained recovery (like my beloved UK) then we could be seeing the bottom of stock prices not the top.
I’m still not overly keen to jump into dollar longs, but I’m even less keen to short it right now.
While the FX market is a constant confusing noise, sometimes we need to listen carefully to what it’s saying.
