There seems no end to the current risk rally, with the market seeming to take everything as good news. There is already revision being done with the Chinese data, reporting that GDP actually came in 0.2% lower than forecast, but that's OK. Even though the world is looking for China's organic growth to pull the rest of the world out of this current slump, the spin is that this failing to miss expectations is good because China was trying to cool their economy. Really? And if that isn't bad enough, we read further spin on the Spanish bond auction this morning. The Auction was "successful" in that they floated enough loans for the month, and therefore, are getting the "approval" of the market that they are fiscally sound. The truth is, first of all that Spain is not fiscally sound, and in order to get their debt sold was required to pay higher rates than last month. Secondly, while the auction may allow them another month of financing, it's just that...financing. Continuing to give debt to a country that cannot pay what it already has, is like giving alcohol to a man suffering from the DT's just to relieve his pain.
I will still contend that the current rally in the Euro and Pound are corrective in nature, and are only part of a longer downtrend. That being said, the run, although very much overdone, may not be quite done yet. We could easily see a rise to 1. 5400 by the time today is over, and if the steam is rising, this could easily carry over the next resistance at 1.5450. Our current stop is at 1.5400, as I honestly estimated that the last rise would be the conclusion of this run. But when markets take bad news and make it good, they have reached a level where nothing is easily predictable.
So although I have a gut feeling we are nearing a top, we can always re-enter when the opportunity presents itself. We have risked 6% on this trade, and made a half percent on a position earlier this week, so it cuts our loss to 5.5%. If I am convincd that a trade is pretty sound, I don't mind risking up to 8%, but at this level, and with the current response to news items, I'm willing to cut this one loose.
If we get signs of weakness before the 1.5400 level, we'll see about entering a third position at this level. But I'll let you know by way of alert.
Stay tuned!
Bill
www.thfxtradingmasters.com
bill@thefxtradingmasters.com
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