Portfolio Composition
Short USD/MXN 16.667 Percent
Long TRY/JPY 8.333 Percent
Cash 75 Percent
I booked profits on my big short USD/MXN position on the New York close yesterday, not so much on the anticipation of Plan B going down to defeat, but more rising rhetoric from both sides on Thursday. Furthermore, what appeared to be the low point looked like a harbinger to a Friday afternoon selloff, especially in riskier assets like emerging market currencies. Indeed, USD/MXN has surged up to 12.95, a one day topside move of nearly 1800 pips.
Last night's Asian session was a bit less dramatic. USD/MXN popped but then consolidated around 12.85, and I was probably a bit trigger happy when I got back in at that level. However, it was a small position and I still have lots of firepower to take advantage of any overdone moves to the topside. Many technical analysts think USD is already overbought, however, there remains substantial risk for further short term dollar strength on any sort of overzealous comments from Washington players or further entrenchment from either side. I am looking add slightly to my USD/MXN short position at 13. JPY was also quite volatile, and I was able to book a modest profit on an intra-session USD/JPY deal.
With the House gone until the 27th, all eyes are on any action the White House or the Senate might take to calm markets. I plan to sell USD/MXN in small steps as the greenback gains strength on cliff fears. I maintain my 12.5-6 mid 2013 target, for now.
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