Originally posted by R.Cox. For the full trading briefing click here
The lack of market data next week puts these rallies in a vulnerable position, as it is increasingly likely that investors will look to take some profits at elevated levels and bring a much needed correction to the one-way rally. The major event risks that we will be seeing will come from central banks, with the RBA, ECB, and BoE all scheduled to release interest rate policy decisions. So while none of these meetings is expected to result in a change in rates (outside possibility in the RBA decision), the general tone of the accompanying statements could sway markets depending on how optimistic or pessimistic these statements sound.
The massive rally in the EUR/USD is trading on borrowed time but has not been matched in other currency pairs, such as the GBP/USD. This suggests more potential upside in the GBP relative to the EUR, and this means downside in the EUR/GBP. Based mostly on technicals, I will look for long term monthly PUTS in EUR/GBP at 0.8750
, looking for a run back into the low 0.80s.
I bought Fedex
on the way up and now I will look to bet against the latest strength, as holiday optimism comes to an end. I will enter into monthly PUT options in FDX at 103
, looking for a bear correction back to the daily moving averages.