Well that’s the way I see it after the last few days of excellent and mainly unexplainable volatility.
- Sovereign names, led by China, still are looking to buy EUR/USD on dips. Whatever their reasons, and until the market sentiment has universally changed, it’s probably useless fighting them so join with them and buy dips.
- The Japanese election on August 30th is encouraging many corporates to fully hedge earlier than they normally would. Every rally in USD/JPY we hear of exporters selling. Once again, for the next week or so, sell rallies in USD/JPY.
- Sterling is the odd man out. The economic news out of the UK is still bad and we have seen some big players selling sterling, particularly against the EUR, in the past few weeks. The EUR/GBP market couldn’t get through solid bids around .8525 yesterday and it looks to be basing in my opinion. Wait for short-stops to get triggered in the cable and sell into rallies.
- Perhaps I should add that from a slightly longer term perspective I am a total non-believer in the China story and I think the markets’ expectations that China will lead another global recovery are just another bubble. Therefore I’m a seller of AUD/USD on rallies waiting for a top to form.
That’s how I see the world at the moment and good luck today.
