Waiting For Answers


SUMMER DOLDRUMS - Clearly, we have entered that razor thin August trade where the market doesn't really want to do any moving at all in either direction. There is a lot the market has on its mind right now, but there might not be any answers until September rolls around. The most important question is what the Fed will do next month. Will the Fed go ahead and raise rates, or will it leave policy on hold? Until we get an answer to that question, I don't think we should expect any major moves in the markets. There is the argument the US Dollar will sell off once the Fed starts tightening as this will have all been priced in. But I wonder if this time is a little different given the state of global interest rates. With global interest rates so low and the Fed about to set out on a path of tightening, I'm wondering if yield differentials will continue benefit the Dollar even throughout the tightening process, or at least in the early stages.

THESE 4 FX MARKETS - As far as strategy is concerned, the big irony for this FX trader is that 2/3 of my open positions are non-FX positions. I am still short SPX500 from 2122 and I am now long WTI OIL from just under $42. Both trades are in the money at the time of this update and both show good room for significant follow through in the days ahead. Otherwise, I have my eye on 4 FX markets. I still think EURUSD can rally quite a bit and will be looking to sell at 1.1325 (78.6% of the May-July move). I also believe with risk sentiment looking shaky, USDJPY could see a more pronounced reversal than many anticipate. Meanwhile, USDCAD has been very well bid, but looks like it could be poised for a decent correction lower in the days ahead. Finally, perhaps the most compelling market right now is one that also might sound the scariest. I have just sold a very overbought USDTRY market at record highs. This market is violently extended and in desperate need for a pullback. The CBRT is out with a rate decision ater today and I will be looking for the Turkish central bank to help the Lira a bit, wither by way of rate hike or some other measures. 

Watching $EURUSD, $USDJPY, $USDCAD and $USDTRY Via @joelkruger

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