Friday, April 15, 2011

FX Trading - Manic Depression

'Bipolar disorder involves periods of elevated or irritable mood (mania), alternating with periods of depression. The "mood swings" between mania and depression can be very abrupt.' 
(from the PubMedHealth site)

Wait a minute, are we talking about EURUSD here? If you saw the slide and recovery on Thursday you'll know what I mean. So on the one hand we've got rate differentials and expectations holding the single currency up, on the other we've got debt woes weighing. Traders are thus advised to meditate and hold off the coffee.   

Finance ministers and other very important folk who travel with a large entourage have started gathering to decide all our fates, beginning with the G7 (or is it 8 or 9 now?), then G20, followed by the IMF and World Bank meetings this weekend. On the cards is a probable inclusion of the Chinese Yuan and possibly Russian Ruble  in the SDR basket. If you're not familiar with the IMF's Special Drawing Rights, it doesn't really matter (unless you're in charge of your country's finances). This has been used as an excuse for USD weakness but in the whole scheme of things, the impact is debatable; the move seems more symbolic then anything else, a kowtow to the Chinese and all us USD haters if you may.  

As USDJPY threatens to head lower again, Japan is resorting to their (in the past) oft-used method of verbal intervention, but having spoiled the markets with a coordinated intervention, maybe what we need is coordinated verbal intervention. They're all in the same place for the meetings anyway.  

GBPUSD is holding its own, keeping a low profile amidst all the news coming out. We're out of our longs and have decided to stand aside for now as we're not fans of wild mood swings. But all said, GBPUSD longs still seem to be the way to go for now. 

It's Friday, US CPI's due later, and if there's one prediction to be made it's this: expect volatility. Maybe we should all trade options instead.

Peace.

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