- It's all been painfully quiet in May thus far
- Event risk ahead could trigger pickup
- Waiting for a nasty repricing of risk
HALFWAY - We are more than halfway through May and it has been a slow grind thus far. There are always periods throughout the year where you get lapses in volatility and it seems we have been experiencing one of them this month. Whenever these things happen, I tend to be welcoming initially and focus my time elsewhere. But after several days, I start to get bored, restless and antsy to see the market start moving again. But there is nothing we can do and the worst thing to do is force a trade.
EVENT RISK - Right now, I am just sitting on my one AUDNZD long position which is out of the money. I am happy to build into this position if we see another dip into the 1.0650 area, but until then, it's just sit back and wait. But I do believe we are nearing the end to this painfully slow moving market, with US CPI due today, followed by the Fed Minutes on Wednesday. The market is probably waiting for more clarity on Fed direction and will be looking to see if it needs to reprice these expectations after these two releases.
REPRICING - Right now, investors want more of the same low interest rates and higher stocks. At the same time, US data has been increasingly supportive of higher rates and lower stocks and if today's CPI comes in hotter and tomorrow's Fed Minutes show a Fed more inclined to move on rates this year, I suspect we will see that repricing trigger some nasty volatility favoring the US Dollar, while weighing on stocks. But having said all of that, we are still profitable in May thus far. :) Excited to see the next great opportunity that comes our way. Stand by.