Another day, and no white smoke seen from the White House, with accusations over who is to blame stoking up in intensity. Meanwhile, take a moment to look back, and recognise just what a decent trending market we have seen in sterling and the euro, and a trend (as we know) is indeed your friend; traders who eased into a long position in sterling, more or less any time since early July, or the euro since the start of September, have had no retracement reason to get out. Smooth upward trends in both currency pairs, and everyone is still long….right? We all wish it was that easy!!
I always found it tricky when my long term views were at odds with short term market sentiment. Experience gets you into the right position, because, short term, price tells you all you need to know, but uncertainty and doubt can get you out too soon, and the fear of a pending deep retracement can cause you take profit – against the evidence of pricing. It is also very difficult after taking profit, to start a new long at higher levels. The message is one that takes a long time to understand and that is. too many traders get themselves into good positions, but very few maximise that winning position.
The nagging doubt now in trader`s minds is, is there any value left by going long cable and euro after the unbroken run we have had. The chips are stacking up on the other side. A truce from the White House would knee jerk the dollar higher, and in an international atmosphere of underlying competitive devaluations, a sense of political unrest about continued dollar weakness is growing. No news from the US sees a continuation of the cautious creep towards 1.63 and 1.37, but the potential for news/comment to cause a gap in pricing on the downside is always there. Risk/reward? I would chance a short in cable towards 1.63, and a short in the euro towards 1.37 should we get there before the weekend. The reason – potential momentum. I am confident that I will be able to get out of my position with tight stops on the upside, less certain that market conditions will ensure that to be the case with new longs at the above levels.
