Thursday, January 3, 2013

Doing the Rounds: Euro Way Down as Debt Ceiling Looms

The Euro is fast approaching 1.30 per USD, and not retesting 1.33 after spiking up to 1.3275 after the US House passed the tax compromise.  I cut my losses at 1.3104 after getting long at 1.3200.  Tough to take a hit after ending 2012 so strong, but as it turns out I was fortunate to get out well before the bottom.  The  greenback was broadly stronger today, up nearly 0.25% against its other major peers according to the WSJ dollar index.  AUD/USD was off its post deal highs of 1.0515, and continued its slide during the Asian session trading at 1.0439 at 2:33 AM GMT. Mexico's Peso and South Africa's rand were down, closing  though neither has given back all of its  gains from the 0 deal.  USD/JPY continues to test new highs, which has lent considerable support to AUD/JPY and CAD/JPY crosses.  In general, we are witnessing a classic case of buy the rumor, sell the news.  Traders have been quick to take profits after the the tax deal, especially since Republican leaders are openly expressing there intentions to have another debt ceiling fight.  I intend to lay low, slowing rebuilding my positions in the Peso and perhaps a JPY cross.  The Washington dysfunction is far from over, and USD/MXN may well return to the 13. 0-1 range in the short term, so great care is required. 

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