Fed Day once again.....

Fed announcement today at 2.15pm. Market looking doe 25bp, with little change to the wording. This is all built in. The dollar continues to get crushed.


I will update after the announcement.


Good Luck and Good Forex Trading.

The Wolf of Wall Street.

I am just finishing up "The Wolf of Wall Street". This is a typical book that I read. Non-Fiction (although alot of the "Wolf's" antics I find hard to believe), about Wall Street (although it takes place on Long Island) and someone thinking they can out smart the law. It started out abit slow and you need to get past all the bravado, but it has kept my interest (although I think it could have been 150 pages shorter) since then.

This market never stops amazing me.....

Well this week, stops continued to grind higher and EM continued to strengthen. Will the madness ever end?

Mexico raised rates 25bp, and the U.S. is expected to lower its rates later (Oct31) this week. I think that the U.S. rate move is already built in and I think a potential opportunity is in the Mexican forwards. I will be looking to sell these forwards (slowly...layering into them) over the next week or so. If I am correct and this will be the last rate change in Mexico for 2007 (with the next one being lower??)then there might be some nice carry situations ahead. There has been alot of paying interest in the shorter end forwards and I think most of the market is funded, therefore leading to an abundance of cashflow in the coming weeks.

For the rest of EM, why fight the fight. Better to get on board and Sell dollars anywhere you can. The Euro is on a never ending quest to new heights and Usd/Asia cannot go low enough. Just like in a riptide, don't try to fight the current, at worst trend sidways till you are out of it's pull. At best go along with it and enjoy the ride !

Good Luck and Good Forex Trading.

Mission Accomplished......well almost

Today, as promised I cut my Brazil (at the top) and Mexican interest rate exposure. Singapore is still outstanding as the market was not condusive to exiting this position. Am I correct to do it? Well I can tell you it felt alot better to not be running those positions. I think I can now look at the markets from a more neutral stance. I will keep you updated.

Good Luck and Good Forex Trading.

Can Emerging Markets Survive....Again

EM for the past 2-3 years has been like Hulk Hogan rising from the mat when you thought he was about to lose a match. But has anyone seen Hulk the last few months? It think maybe Hulk Hogan and the EM world have risen from the canvas for the last time.

Well lets start with my last post. I talked about how the trend continues and how I was continuing to ride that trend. Both true. But now I look back on the week and am thankful that I have survived......So Far......

You see as I left the office on Friday my P/L for the week was basically flat. This mainly because EM, for the most part,has been incredibly bullet proof. But this, in my opinion, will not last. Think Sub-Prime. For months we heard about this Sub-Prime problem lurking in the market but didn't see any effects of it and then one day (or at least it seemed that way to me) POOF short date cash started to get tight and the market was in a panic about rates being to high. I think that EM is in for a similar situation. Let's remember I am and have been the leader of the Yield Monkey's for 2 years now. I currently still hold the positions that I wrote about last week. This will change on Monday morning. I will exit these positions by 12 noon New York Time (if I write it I have to do it). All I have heard for weeks/months is that the U.S. is not the engine of the world like it used to be. Their problems will not effect us in the same way. True, but we will have an effect. We have to we are much to big not to. Walking to work everyday I see many store front windows empty. This in mid town New York City. Oil is going through the roof. Layoffs at the big investment houses has started (small now a few hundred here and there, but it has started). Housing is in real trouble and I see no sign of it bottoming anytime soon. Face it the U.S. economy is definitely slowing down, recession slow I do not know, but we are definitely slowing and as such it will effect the other economies. It has to, maybe not as much as in past cycles, but to some degree definitely.

So let's look at a few countries and see where the biggest effect's should come. In Asia, I think India and the Philippines will move the most in the least amount of time. Both of these currencies have benefited from the most stock speculation, and there was talk this week from the Indian finance minister that regulation aimed at slowing forgein speculation was being considered. In Latin America, Colombia, Brazil and Argentina. They all have some real upside potential. Currently I have no spot exposure in this region (really no spot exposure at all) but plenty of interest rate exposure. On Wednesday the Brazilian CB decided for the first time in 2 years not to cut rates. This one trade (lower Brl rates) has been the single biggest trend in the market the last 2 years, now it seems it has come to an end. I have been around these markets for a long time and although I think things have changed I still remember July-August of this year when there was little chance to get out of risk.

So as I wrote above I will get out of my Brazil, Mexico and Singapore (I was paid for some back end rates and haven't taken them back yet) risk on Monday morning. I will not go short dollars against any EM currencies for the short term. I will look for an appropriate way to exit my Argentinian risk. This position will be the trickiest as it has the least liquidity and the highest yields.

As far as opportunities, look toward the UK and Europe (I have posted about this one in the past) to start talking less hawkish. Possible Aud and Nzd also. Canada has been on a tear for a while now and I think that the currency is abit to strong. Wait for a turn before entering those markets, but definitely keep an eye on them.

Let me know what you are thinking.

Good Luck and Good Forex Trading.

And the Trend just keeps on rolling.....

The market's once again this week have been tremendously friendly. Stocks have done well and the economic numbers have been a bit stronger then the market had anticipated. I think that the Fed is on hold based on these numbers, as long as there is no further deterioration in the Sub-Prime situation.

As for Trades, I have recently stepped up my risk in a couple of interest rate plays.

I am positions for the Argentinian yield curve to flatten (2% positive carry 1-12mth at the moment). I have similar (but larger) position on in Mexico and Brazil. The Mexico trade is very short duration as I am playing off the very liquid funding situation. The week was ok, and I think that over the course of time these trades will play out very well.

As for majors and O/R positions, curently I have very little on. I have traded those very poorly (counter trend) and feel it best to stay out of those water's for the time being.

EM has been on fire. Russian rates have collapsed this week. The Dong (vietnam) has strengthened as they are looking to free up the restrictions on that currency. Try broke 1.2000,Isk broke 60.00 and Brazil broke 1.8000. No reason to "buck" this trend as it is way to strong. Just make sure you keep your position small enough to exit if things go poorly....quickly.....which can happen in these markets. This was my problem in July with Argentina. I will try not to re live that one in the case things go poorly all of a sudden.

Good Luck and Good Forex Trading.

It is safe to enter the water....

Wow, what a week. The market is not able to put on enough risk at the moment. Usd/Brl testing 1.8000, Turkey at 1.2000 ! At this rate everything will be a parity by Dec 1! So what next, well it seems that the Fed is now on hold. Even with a bad November job's report they will hold off pending a revision. The Sub-Prime mess is on the back burner. Yes the Investment houses are producing big write-downs (ML with over 5B) but it seems the market was expecting this and has basically shrugged it off. If this continues I think the next big trade could be long Usd/Twd (I do not have this on at the moment). It has come off sharply on the back of higher rates and rick aversion late last month (it is a big carry currency against the Asian basket). With Usd/Jpy higher at the close yesterday, we could see some follow through on the Twd in coming days.

Look for the ECB to begin talking a bit more dovishly. It seems to me that their economy is slowing and their next move in rates will be lower, so it will be important for them to begin preparing the market for this move. Could this mean the Euro could be peaking? HHMMM....well for regular readers of this Blog you know that I have been attempting to be short bothe the Euro and Gbp. In a word WRONG and Costly (OK two words). So going forward I will be looking for a place to re-sell (probably a day or so after making new highs)but cautiously. I will not allow it to run me over like the last trade.

ECB and Rates

Tommorow the ECB makes a rate announcement. The expectation is for no change. The wording is once again key. Currently they are maintaining a hawkish bias. I think that this will have to change and change soon. Although tomorrow may be a bit to early I am looking for a softening of the language over the next two meeting with a view toward's a rate cute in Q1 next year. This will send the Euro lower....MUCH lower.

Please remember I have been attacking the Euro from the short side for quite a while and currently I am sitting short both Euro and Cable.


Good Luck and Good FOREX trading.

So it's Over

Let's Go Met's ! Let's Go Met's ! AWWW Forget it.