Monday, February 26, 2007

Boy was I wrong.....

What started out (at least to me) as a calm day changed pretty quickly. Certain currencies at least. Specifically Mexico. It seems that a certain local bank BBVA put out a report today basically saying that the Mexican Central Bank is on course to hike rates to 7.25% in March and to 7.5% in May. Hhhhhmmmmm.....Not what the doctor ordered. They feel that if the CB waits any longer it will become increasingly difficult to contain inflation. The curve steepened out at a higher level on the back of this report. So where does this leave me and my positions. I have squared most of my spot positions and have cut down on the longer end of my Mexican interest rate play. I repeat CUT DOWN, not totally cut. I also added alot to my shorter end play. Selling 1mth Mexico (Forwards) against buying 1 week. I think the curve provides an opportunity even if you think the CB hikes next month.

These markets are typical of an environment of uncertainty (and possible change in direction). I rarely trade well under these conditions and will keep my positions on the smaller side until (if ever!) a clearer direction can be seen. I do not hold out hope that this will occur in the near term. I am however still long Euro's. Although I was very disappointed that the market retraced some of it's o/n gains, I am confident that when I walk in tomorrow the Euro will be above 1.3200.

Brazil, I still see little reason for a change in the rate environment but the spot is anyones guess. I went long a few Usd/Cop, only because I was short everything and needed some sort of a hedge. Bad idea, Usd/Cop continued to come lower. I will reasses this in the morning. Note to self ...Do not enter positions just to hedge other's without having a clear plan before hand.

Good Luck and Good Forex Trading.

These are the FX Trading Ideas for Tonight.


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