FX explosion!

Ranges have finally broken in FX, with EUR/USD surging above 1.30. Macro Man was filled at 1.3005 on his 10 million stop loss. He will now bid 1.3070 for another 10 million.

More updates as time permits....
Next Post »


Click here for comments
November 24, 2006 at 2:36 PM ×

How do you foresee this FX stuff playing out ?

Do you think USD will get clobbered big time ?

Macro Man
November 24, 2006 at 4:39 PM ×

Well, that is what I am wrestling with. While the dollar's price has changed, that is a necessary but not sufficient condition for the market environment to change. After all, it was less than two months ago that the dollar had evidently broken HIGHER and many commentators and traders were calling for a big dollar up move.

That having been said, volumes have been quite large today, and central banks do seem to have changed their behaviour (chasing EUR/USD higher above 1.30 rather than trading the range.)

I am still trying to figure out what is driving this, because you need to know the driver/theme before you can project the price action. I don't think it's a carry unwind, else EUR/JPY wouldn't have made new highs today.

Is it a diversification story? A current account story? A relative growth story? I/we/the market needs more data points to be convinced.

For the time being, one has to favour EUR/USD higher from a purely technical perspective, hence the cheeky attempt to buy the dip. That having been said, EUR/USD is already overbought on the dailies....so we need something more compelling than 'technicals' to drive us higher. At this point, the balance of risk favours that central bank and private sector actors will continue to sell USD over the next few days...but whether it is a 5% move or a 0.5% move will depends on whether or not a tangible theme emerges that justifies a de-rating of the dollar.

For now, the jury is still out....so I am happy to buy the dip, but reticient to pay the offer until I have more and better information. If, however, this is a 5% move, it will demand a high risk allocation.