5 Reasons for “Risk On”
So today was a Risk On day. Amazing. Today reinforces my view that we are in for a weak recovery and are in the midst of range bound trading with a bias toward Emerging Market strength. Here are my 5 reasons why:
1. The Administration will do everything necessary to keep the recovery, no matter how anemic it is. Lets face it there is a lot invested in getting the economy moving. Mostly getting reelected.
2. For the last few months traders seem to me to be looking for the breakout trade. It has not come. Either on the topside or the bottom. I have be seeing less evidence of traders looking for the breakout. Rather it seems the market is trading the trend and not fighting it.
3. Flows, They have mostly been Dollar sellers. Rate rises in India, Korea, Malaysia, Brazil, Chile…… have all been well received. Increased rates means higher Yield (see #5) and it shows that the Central Banks are not afraid to move when the time is deemed right.
4. Euro, Very Very Very bid. It seems that no one cares about stress tests and Greece debt and a Portuguese credit downgrade. Everything now is Euro positive. Probable because it was just over sold, but for now the market views all news (well at least most) in a positive manner for the Euro. I think there are still a lot of Euro shorts out there (and a few more attempted everyday) so a further squeeze is in the cards.
5. POSITIVE CARRY ! There is no thing like it and during quiet times ( vacations? ) it is an easy trade.
Good Luck and Good Forex Trading
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