Tuesday, August 28, 2007

Some of the best trade's are the one's never made...

So earlier this week I wrote that upon returning to work this week I would be re-emtering the EM market's. Well I am happy to say that I luckily did not do so. Why, well I think it had alot to do with the over riding feeling of nervousness that was previlent in my office and in conversations with other trader's.

It seems to me that the best way to approach these markets is with extreme caution. Do not look for "home run's" and to trade from a (I cannot believe I am going to say this) negative carry prospective. Until the Fed cut's the Fed Funds rate (and I think it will happen sooner rather then later) you should be long dollars. After the cut then short the dollar. These markets are difficult but there is plenty of opportunity. I am currently pretty sq in my interest rate positions and looking to "scalp" a few points here and there in spot. Not my usual style but these type of markets are not usually very friendly to me.

Market talk....

Local South African's seen in buying Usd/Zar.
Large Funds selling Aud and Aud crosses.


Mexican central bank desperatly wants to raise rates to combate inflation but will not (cannot) until this sub-prime mess dies down.

Watch inflation (especially in the food component of EM countries) this is the first place it hit's. It starts here and moves on from there. This will be the death spiral for the markets.

Good Luck and Good Forex trading...



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