$/Yen Overshooting On The Way Up...
Why exactly is it trading at 118.50? Probably because people are still expecting higher U.S. yields (essentially the carry trade), stronger U.S. economy and stellar non-farm payroll (NFP) numbers tomorrow (Friday). These may all materialize, but if everyone is on the same side of this trade, it's difficult to justify a higher dollar this year with all its inherent structural problems. I was long the bounce, but now I am out. For choice, would be short here (118.50) again, but let's see how these NFP numbers pan out.
posted by Ivan at 2/02/2006 12:01:00 PM
2 Comments:
So are you ready to start betting against the long bond market and short it? I have. I thought it was a masterful prop job in TOL after they hit a new 52 week low- *value* buying. Now we are going to see some black swans in the next two months....
bigalphx
Still don't have a definite view on the bond market. I think the 10-year note range of 4.30%-4.65% is still holding for now. Yes, for choice, would be short bonds and have a few curve steepeners after these latest economic numbers. However, the Fed's decisions are going to be data-dependent not on the data we have already seen but on the data we are going to see, which might be completely off the charts for all we know. Black swans? Possibly, i am buying equity vol at these levels. Has been a graveyard trade for the past 3 years, but I just have a feeling the world is not going to be a stable place for long...
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