Intermediate time scale wave analysis is difficult due to global political interruptions, or rather perhaps supercycle wave inflection points. Fibonacci points the EUR/USD to just south of parity, but we believe speculators will use the psychological boundary as a point for short term support. Look for upward spikes as we close in on 1.00 as traders go long in advance of this imaginary support. We will not be shorting these, as we look to square this trade entirely between 1.02 and 1.00. We will short all spikes above 1.05, as these will be nothing more than short covering. Speculators and international trade related players are still pushing this pair downward, however long term players may be reading into the fundamentals, as parts of the Eurozone have responded well to QE, according to the ECB. If these bulls push into an upward movement as bears cover their shorts, we could end up in a short squeeze that reverses the trend entirely.
On the other hand, the USD Index points to continued strength through the rest of the decade, if it can par some gains in the 2nd quarter of next year.
Fundamentally speaking, the private debt markets are a likely driver for a majority of non-speculative financial players strengthening the USD. Private debt has been a major alpha driver for fund managers over the trend over the last 18 months, and fund commitments are at an all-time high, especially for those debt funds based in the US and Eurozone. Look for small and middle market business growth with younger entrepreneurs as a factor in growing deal flow, and thus capital raising, for these funds. (Older business owners are more likely to look for equity partners to assist in their exit.) As of yesterday, the Fed is still concerned about the lack of business investment.
For these reasons, we will be looking to play these currencies independently with one another (insomuch as possible) with funding currencies of weakening economies, especially after this trade is squared. Our outlook will adjust if DXY becomes range bound (tops before 105) and the EUR/USD retreats into the 1.10 region without any indications from the central banks that downward motion may resume.
Current Positions -
EUR/USD Short from 1.09.30, Average 1.06983
USD/JPY Long from 113.20, Average 114.69
GBP/JPY Long from 135.996, Average 143.369
NZD/JPY Long from 80.73, Average 81.51
USD/ZAR Long from 14.3854, Average 14.2138
Carry Trade strategy - EUR/JPY Long and EUR/ZAR Short exited yesterday. Would maintain small position if our broker carried ZAR/JPY, but maintaining two pairs with no option hedges proved to be too volatile and margin heavy. Still profitable.
On the other hand, the USD Index points to continued strength through the rest of the decade, if it can par some gains in the 2nd quarter of next year.
Fundamentally speaking, the private debt markets are a likely driver for a majority of non-speculative financial players strengthening the USD. Private debt has been a major alpha driver for fund managers over the trend over the last 18 months, and fund commitments are at an all-time high, especially for those debt funds based in the US and Eurozone. Look for small and middle market business growth with younger entrepreneurs as a factor in growing deal flow, and thus capital raising, for these funds. (Older business owners are more likely to look for equity partners to assist in their exit.) As of yesterday, the Fed is still concerned about the lack of business investment.
For these reasons, we will be looking to play these currencies independently with one another (insomuch as possible) with funding currencies of weakening economies, especially after this trade is squared. Our outlook will adjust if DXY becomes range bound (tops before 105) and the EUR/USD retreats into the 1.10 region without any indications from the central banks that downward motion may resume.
Current Positions -
EUR/USD Short from 1.09.30, Average 1.06983
USD/JPY Long from 113.20, Average 114.69
GBP/JPY Long from 135.996, Average 143.369
NZD/JPY Long from 80.73, Average 81.51
USD/ZAR Long from 14.3854, Average 14.2138
Carry Trade strategy - EUR/JPY Long and EUR/ZAR Short exited yesterday. Would maintain small position if our broker carried ZAR/JPY, but maintaining two pairs with no option hedges proved to be too volatile and margin heavy. Still profitable.