My EURUSD Call

I guess I under-estimated the market's willingness to take on risk.

In my previous forecasts on the EURUSD and USDJPY on the Sunday before last, I called for the two currency pairs to fall on persistent uncertainties within the banking sector and EZ economy.

Yes my orders to sell were hit at 1.3425 and 99.40 for the EURUSD and USDJPY respectively, the two obviously did not move down to my target zones at 1.31 plus and 97. USDJPY did trade near the 97 handle though, but not near enough to my desired level.

I did take some profits off the table in the EURUSD on Wed when it got stuck at low 1.33 because price action tells me there is some strong buying that keeps coming back into the market.

I just closed out the remaining position at a small loss near the opening price because this trade seems to be a lost cause. Sometimes we have to live with a poor call. Not allowing a trade to run deep into the red should be priority. Ego is second.

My USDJPY position is still open though, but I'll be closing it soon if cross yen buying persists. I sold at 99.25. The only thing that is keeping the USDJPY contained is broad dollar weakness it seems.

On Thur, the ECB announced a refi rate cut of 0.25% to a record low of 1% as well as a plan to buy up to Eur 60 bn worth of covered bonds to ease credit conditions in the EZ.

Well, Eur 60 bn is just a small percentage of the total outstanding issuance in the EZ market and is not expected to make much of a splash but the fact that the EURUSD jumped after the announcement says a lot about the market.

There is pent up demand for risk.

And look at the sterling pound - after announcing further Quant Easing (bringing the total to GBP 130 bn from GBP 80bn), the pound recovered from its post news sell-off to end the week at 1.5237, from under 1.50 on Monday.

Maybe next week we might see some profit taking, but I wouldn't bet against another surge higher.

Will try to write a post on my forecasts for the next couple of weeks before the weekend is over.

Hope your weekend has been good.