Written by Derek Frey
Monday, November 30th, 2009
Dubai shocked the world when it froze payments on it 60+B in Debt late last week. We expect this to have far reaching effects but will play out slowly over the next few weeks before we recognize the full impact. Bottom line is clear, global risk are rising NOT falling as major media may have you believing. 9 of the Worlds largest banks are on the other side of that call so you better believe it is going to have an affect on the balance sheets of those banks. Just imagine if you are a business and one of you major customers called you and said “I cannot pay for 6 months”, would that affect your business? So do not be lulled into a false sense security because the market has yet to recognize the real risk this exposes…
EUR/USD:
This pair continues to present medium term entry opportunities as it trades north of 1.50. We are looking for spikes early this week to sell into. We continue to look for major rallies to sell into more than anything else.
GBP/USD:
We have seen some nice moves on the shorts we mentioned in the last issue. We have now covered those shorts and are again looking for major rallies to sell into this week.
USD/CHF:
Parity has been tested and broken, we of course he rumors about intervention but would urge caution against taking a trade that depends on it. That being said we are happy buyers of breaks to or through parity.
USD/JPY:
As I warned in the last issue this pair in particular would and has seen wild movement as global risk continue to rebalance. We are now buyers of dips this week but still approach this pair with caution as risk aversion is anything but over…
AUD/USD:
We continue to fade the current commodity bubble by shorting this pair on spikes and will continue to do so into next year.
USD/CAD:
This pair has seen some wild moves but remains able to hold above parity, so far. We expect to see that retested near term and will likely be buyers of that test.
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