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I closed my EURUSD short trade at 1.0602 this morning at 8:50am CET to take a 2% profit. I'd opened the trade at 1.0795 on 1st February. As I wrote on Thursday, a few things started to bug me about my position, including a failure to break through the 1.0520 support and a sudden jump in the implied probability of a Fed rate hike in March. Friday's USD selling didn't exactly alleviate my worries. Flat now and on the lookout for new trading opportunities.
Open positions as of 06/03/2017 8:50am CET: Flat
Realized YTD return: +6.34% from 4 trades
Total YTD return: +6.34% from 4 trades
It's Sunday, and Sunday is blues day! This week with a country spin, as I'd like to remember the great Johnny Cash. February 26 would have been his 85th birthday. The song Home Of The Blues off his 1958 album Sings The Songs That Made Him Famous (released by the Sun Record Company) is about his unhappy childhood. Cash's older brother Jack, to whom Johnny was very close, died at the age of 15 after he'd been pulled into a head saw in the mill he worked at in 1944. He was almost cut in two and suffered for over a week before he finally died. Many decades later Johnny Cash still spoke of this horrible accident and said he looked forward to meeting his brother again in heaven.
I walk and cry while my heartbeat
Keeps time with the drag of my shoes
The sun never shines through this window of mine
It's dark at the Home of the Blues
Oh, but the place is filled with the sweetest mem'ries
Memories so sweet that I cry
Dreams that I've had left me feeling so bad
I just want to give up and lay down and die
Two things have begun to worry me about the strong USD story:
First of all, the implied probability of a March 15 Fed rate hike jumped from roughly 30% to almost 90% within a few days on no important news whatsoever. The biggest jump occured after Trump's address to Congress and comments by New York Fed President Dudley that the case for Fed tightening had become a lot more compelling. But come on, we've seen comments like that many times before. They haven't exactly been a reliable predictor of future Fed actions. I'm afraid the market is overreacting to comments by central bankers and politicians. An almost 90% probability of a rate hike amounts to a near-certainty expectation that we will see a hike in two weeks. The risk of disappointing that expectation is enormous.
Secondly, EURUSD has repeatedly failed to break through the important support level around 1.0520. While we would probably see an extended downmove to at least 1.0341 if that support were finally taken out, I must assert that a failure to do so would likely result in a similarly large move higher. This, too, suggests an increased risk for my EURUSD short position. I'm keeping the position on for now, but I'll probably close it out if the expected move lower doesn't materialize soon.
Open positions as of 02/03/2017 8:49am CET:
EURUSD short from 1.0795, unrealized return: +2.62%
Realized YTD return: +4.34% from 3 trades
Total YTD return: +6.96% from 4 trades
Donald Trump's first address to Congress turned out to be uneventful. His "America first" motto shone through, but he managed not to say anything negative or too dopey. Everybody is still waiting for him to present details on how he is planning to implement the promised tax cuts or provide stimulus to the US economy. I stick with my credo that listening to Trump is a bad strategy; I prefer to watch out for actual implementations of what he promised. I've said this before: Ignore Trump noise. As such I also maintain my EURUSD short position as the overriding narrative of Fed rate hikes combined with economic stimulus and European election risk is still active. Support levels 1.0524, 1.0454 and 1.0341.
USDCAD looks constructive for a long trade targeting 1.3575. Technical analysis, continued USD strength & Canada NAFTA risk supportive. On my watch list.
Open positions as of 01/03/2017 8:50am CET:
EURUSD short from 1.0795, unrealized return: +2.56%
Realized YTD return: +4.34% from 3 trades
Total YTD return: +6.9% from 4 trades
It's Sunday, and Sunday is blues day! This week with (Everybody's Got) Sweet Soul Vibe by Jimmie Vaughan off his 1994 album Strange Pleasure. Most blues songs I've posted so far have been a bit gloomy, so today's pick is a tad more uplifting for a change. Jimmie Vaughan was born in Dallas County, Texas in 1951. Based in Austin, Vaughan plays Texas blues, which is usually characterised as more jazzy and swingy than other blues styles, such as the Delta blues and Chicago blues. He formed The Fabulous Thunderbirds in the mid-1970s and stayed with them until 1989, when he left the band to play with his younger brother, blues rock guitar legend Stevie Ray Vaughan. Tragically, Stevie Ray died in a helicopter crash in 1990. Strange Pleasure was Jimmie's first solo release. It also features the acoustic song "Six Strings Down" about the death of his brother.