AUD,NZD/FXWW News/JPY crosses/Trade Ideas

Market getting very nervous ahead of Wednesday’s FOMC

I’m surprised by the big over-reactions we are seeing to any comments whatsoever regarding the Fed meeting tomorrow. The FT article caused a massive flurry of activity, and this was only one man’s opinion, so obviously the market is not comfortable with its overall positioning. We saw a big macro fund dumping much of its positions last week and as any good trader will tell you, if you don’t quite understand what’s happening then its time to get out.

The FX market is playing a secondary role, reacting to what happens elsewhere, and that’s also how I plan to trade this market, reacting to developments rather than predicting them.

Today’s main event during the Asian session will be the release of the RBA meeting minutes from last month.

  1. Morning Sean! What I don’t get is: if the market thinks Fed is more likely to taper, shouldn’t USD strengthen? Why do we have the opposite?

  2. It’s got more to do with risk pairs really Jasper, the USD might fall heavily against the Yen but make some gains against the AUD? But longer term I think the mkt is realising that only massive QE cud help the US economy and this is a false dawn, once it dries up then the US economy dives south again?

  3. Sean, if the US economy dives again like back in 2007, doesn’t it mean that AUD and other comdolls will rise again since investors will be forced to look into other non-Euro countries?

  4. The way I see it is a sea change move – like commencing the QE wind back – will see a return to deleveraging. So those positions that are currently near record extremes (like a weaker JPY and AUD) get squared up initially.

    But I must admit that without a return to significant private sector credit growth, there is not a high likelihood for an end to QE. Money is debt in our system and lower debt levels destroys money and forces distressed selling.

Leave a Reply

Your email address will not be published. Required fields are marked *