In This Market, One Thing’s For Sure
If there is one thing
that is certain in the market, it is that whenever Alan Greenspan
makes a speech, the markets are likely to react. While Tuesday’s reaction to
his adamant statement indicating he will act decisively to contain inflation was
tame relative to other speeches, it was just enough to put the brakes on some
“short Dollar” trades that were developing rather nicely. In this market, any
time there is a slowing of momentum, you wrestle with the idea to trimming
profits or cutting losses.
For me, the news was the final piece that capped
off a good trade in the Canadian Dollar (USD/CAD). Yesterday I had mentioned
that the daily chart was losing downside momentum and the 200 day EMA was
becoming a difficult level to overcome. The result was closing the trade out in
two pieces, one for 100 pips, the other for roughly 130 pips. I still feel the
macro picture favors a weakend USD vs. CAD, but for now, the charts tell me to
book profits and wait for a re-entry.
Meanwhile, given that this is my last column
ahead of my relocation from Southern California, I am not actively pursuing any
other open positions at present. With that in mind, I maintain a long in NZD/USD
and short USD/JPY. The better-than-expected GDP report in Japan last night
should keep a firm bid on the Yen, and a break of 109.15 should accelerate the
move lower towards 105. The only negative in the report was he revised gross
domestic product (GDP) data that showed capital spending for the quarter rose
1.7 percent from October-December, worse than the initial estimate of a 2.4
percent increase.
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So, on that note, goodbye sunny Southern California, and hello scenic Oregon.Â
My next column — Monday — most likely will be influenced more by scenic
mountain beauty and fresh air. Who knows, it may just add one more edge that
allows for us to profit in the FX market.
As always, feel free to send me your comments and
questions.