Originally posted by R.Cox. For the full trading briefing click here
Risk sentiment showed improvements last week with several different asset indicators reaching long term highs. In stocks, the Dow Jones Industrials and the S&P 500 are seen at 5-year highs, and this is being matched in carry trade activity with the Japanese Yen showing is longest period of weekly losses in more than 30 months. The USD/JPY is now trading at levels not seen since June of 2010 and this is a broader suggestion that market sentiment is bullish despite the relatively sluggish results that we have seen in recent macroeconomic releases.
Last week’s call on the EUR/CHF
was based on the previous central bank price floor enacted at 1.20 and the recent surges to the upside help to validate the market’s position in this area as well. This CHF weakness will translate into the USD/CHF as well, and if we see a drop back into 0.9290 I will enter into 1-week CALL options
as the longer term trajectory should remain in positive territory.
I will look to avoid long term stock plays with the large number of earnings releases scheduled next week but if the positive numbers continue, carry trades like the AUD/JPY
are well-positioned for another run higher. This will be a longer term trade, with monthly CALL options taken at 94.20.