When we get very directional like we have in the past two sessions there are lots of deer caught in the headlights.
Who are the deer? Asset managers and corporate Treasurers. They’ve known for weeks they should probably be hedging but they were lulled to sleep by the relatively tame price action.
The key to me was the fact that were were unable to rally in a sustained way a week ago when the Fed cut the cost of dollar swaps to the ECB and other central banks. With the speculative market well-short, we should have squeezed dramatically higher. We did not.
All complacency is now gone and time is short before the end of the year. Look for sellers on rallies now as real money continues to flee from Europe and corporate Treasurers hedge.
1.3145 is the first logical spot for those trapped long to try and offload some inventory…1.3057 was the intraday low.
