I'll just like to touch up on a quick post regarding sentiment in the currency markets, as there seems to be so much interest there with constant bearish news coming from both Eurozone and China. I have been reading a lot of blogs as of late to track what the markets view currently stands at. I like doing that from time to time because blogger-sphere seems to be a good barometer of consensus thinking. So it turns out some of these very poplar and quite well followed blogs are currently surprised with the current risk-on rally. Funny, these same bloggers were recommending continuation of downtrend and further selling just couple of weeks ago.
Common sense stated we were overdue for a huge short squeeze or a technical rally or whatever you want to call it. I have actually been warning of a US Dollar pullback for weeks. However, majority of these "blogger experts" disagreed, saying "No, no, no... Europe is in huge trouble... run back home and short some Euros quickly before its too late!" Now, I look at the Euro just reaching $1.38 and above today - after trading at $1.31 just recently. That is 7 handles in a week... ouch! Even the British Pound is gaining, despite so many "pundits" recommending shorting it after further QE was re-started by BoE.
Commodity currency complex is pretty much similar. As of last two weeks, speculators were net short commodity currencies for the first time since March 2009. I'll quote this for you...
"So you better be quick and short the Aussie Dollar, before Chinese property blows up! Price will never reach parity again." said one blogger, who I won't mention here, while referring to a Jim Chanos' video.
Haha. Speaking of parity, Aussie Dollar is stronger than its US counterpart again - as a matter a fact it is now close to $1.02 after trading at 93 cent handle just a week or so ago. That is almost 10 handles in a week or so - ouch! Kiwi Dollar is also back towards 80 cents, while the Loonie now trading below $1.02 and moving toward parity again. Even other less popular commodity currencies like the NOK are also gaining very rapidly, now trading back to $5.60 from $6.00 just couple of weeks ago.
I can here a lot of squealing and pain coming from the Johnny-Come-Lately's who insisted that shorting the Euro or Commodity Currencies was the priority only few weeks ago. It is not just currencies either, S&P 500 has now rallied 12% from the bear trap, while Crude Oil is edging towards $90 a barrel again. The whole thing is a bit hilarious really and the funniest thing of all is these gentleman speak at conferences for finance and investing, charging money on us citizens.
So what is my view on the currency complex?
Well, I remain optimistic on the US Dollar, so you could claim I belong in the same boat. Well maybe I hold the same view as the professional bloggers slash conference speakers, but in this business, timing is almost everything and I prefer not to get squeeze by 10 handles on the Aussie Dollar within 10 trading days. You are either a contrarian or a victim. Don't get me wrong, even being contrarian gets you into trouble from time to time, but you are still better of being wrong some of the time, then all of the time.
So understanding execution is the main part of making money, we should soon enough be looking at adding some US Dollar longs or some puts (depending on your strategy), while a lot of weak hands get squeezed. We still might have some squeezing to go first, judging by the remaining bearish talk. The whole purpose of this blog is to follow a contrarian analysis from both the short, medium as well as long term perspectives. The goal for a contrarian investor is to always try to buy low and sell high!