To paraphrase senator Dirksen a trillion here, a trillion there and pretty soon you are talking real money. This week's expansion of the Fed's balance sheet by another $800 Billion was good example of that well worn maxim. Certainly the currency markets did not look kindly on the news, as the EUR /USD soared more than 300 points post announcement.
As we noted that day,”The trade in the dollar therefore has shifted from seeing the greenback as the safe haven asset and the ultimate reserve currency in a credit crunch world, to one where concern over the inflationary implications of so much debt being backstopped by the Fed and the US Treasury could make the buck vulnerable as we approach the end of the calendar year.”
But the rally EUR/USD did not last. The pair ran into massive supply at the 1.30's as month end fixes overwhelmed any immediate fears about dollar's inflationary collapse. For the time being range continues to be the dominant theme as every breakout turns into a fake-out crushing the hopes of both bulls and bears.
Next week the focus will turn to the US Non-Farm payroll report as trader steel themselves for a possible -300K number. Given the 500K+ weekly jobless claims this month a large loss of jobs is almost assured but unless the print is woefully worse than the -285K expected it is unlikely to trigger much of a move in EUR/USD.
With Obama Administration still two months away from taking office, technical factors such as end of year fixes are more likely to dominate flows. As dollar repatriation picks up pace in December, the greenback may see one more round of buying, but on a longer term time frame the salad days of the dollar rally appear to be over and consolidation continues to be the dominant play inn FX
Bad Selection
The 8:00 AM Thanksgiving train from New York to Boston was full of self satisfied New Yorkers including myself, smug in their knowledge that they they were able to circumvent the maddening crowds at the airports and the bumper to bumper traffic on the highways during the busiest travel day of the year in US. Indeed, as the train sailed smoothly towards Boston's Route 128 station, the majority of the passengers began to gather by the exit smiling at the fact that the whole journey took a scant three hours to complete. Suddenly, however, the train lurched to screeching halt and a sickening smell of burnt rubber enveloped the car.
We were no more than four minutes away from the train station but now found ourselves dead still in the middle of suburban Massachusetts wilderness surrounded only ominous looking trees and and a track full of twigs. A grim faced conductor rushed by and said, “Go back to your seats. We are not going anywhere for a while.”
What happened? After a few minutes of frantic cell phone calling to friends and relatives at the train station we pieced together the basic facts of the story. A man had apparently wandered on to the track and was unfortunately struck by our train. Although injured, he was not dead and by now the whole rescue apparatus of the state of Massachusetts was involved in the incident.
The moment the outline of the story became known, a hundred Iphones and as many Blackberries lit up in frantic attempt to find out how soon the whole mess would be resolved. As i watched my fellow passengers armed with the latest gadgets of the information age struggle vainly with getting an answer I smiled ruefully knowing how pointless it was.
By now, the accident triggered a long and complicated bureaucratic protocol and no matter how many times my fellow travelers refreshed the tiny screens of their web-enabled cellphones they weren't going to expedite the process. So as ten minutes turned into a half an hour and half hour turned into an hour and an hour turned into two, we watched the Amtrak local train which left New York an hour after us and was supposed to arrive two hours later pass us by as we remained trapped less than a mile away from our final destination.
Sitting in a cafe car nursing a cold cup of coffee, I realized how this little unexpected and unfortunate adventure was similar to trading. I saw clearly how even the best laid plans, accompanied by the latest information technology can still fall victim to fate. All of our clever travel planning, all of gadgets could not help us on this Thanksgiving day. We were simply subject to forces outside our control.
As traders of course we see this phenomena all the time. No matter the trade plan, no matter the analytics, no matter the money management, sometimes we simply make a Bad Selection. The good news for the passengers is that we finally arrived to Boston safe and sound and enjoyed a great Thanksgiving with our families . A point to keep in mind next time a trade blows up in your face. Bad Selection is part of life as it is part of trading we should take it all in stride.
Happy Thanksgiving to all our American subscribers. No video this week due to holiday shortened trading,
No comments:
Post a Comment