Tuesday, June 11, 2013

News: Mexico Headline IP Pleases Market, But Bearish Trend Intact

I was foolish to think that I could make money in this market.  A bit harsh, but that's been the reality for the past month.  Mexican headline industrial production came in at 3.3 percent yoy.  I personally was looking for a bit higher number, along the lines of 5 percent, to confirm the seasonality of March's sharp decline.  Nonetheless, this number pleased the market, somewhat.  USD/MXN had spiked to 13.11 overnight, but retreated back down to 12.87 on the news.  Alas, the sharp rise in this pair during the Asian and European sessions assured that my short positions were already deep in the red, meaning that the post report bounce was more about recovering losses than making money.  Furthermore, its unclear whether the market was responding to the report or if the dip was caused by broader USD weakness.  Indeed, in the hours following the release, GPB/USD rallied, and USD/CAD fell from off its 1.0250 session peak to 1.0193.  

In general, the market remains chaotic.  USD/ZAR whipsawed up to 10.38 before plunging all the way back down to 10.03.  EUR/CHF was also unusually volatile, bouncing around between 1.2350 and 1.2230.  Earlier in the day, an SNB official called the 1.20 floor on maintained by the central bank "indispensable."  I can all but agree.  The specter of deflation still hangs over the small European nation as Swiss inflation struggles to register above 0. 

Given these facts, and keeping mind the market tone and fundamentals, I have decided to refocus my efforts toward getting long EUR/CHF at the most favorable spot.  I am also slowly building up a long USD/ZAR position.  The uptrend remains intact, largely in line with fundamentals.  Given the awesome volatility, much care is required.  I therefore plan to buy cautiously on dips.      

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