the market wrap 10-29
THE MARKET
The market was nothing short of thrilling today as dollar bears reemerged on the back of a strong GDP number. While that may sound a little confusing, it is the same old equation. Good US data means higher risk appetite, thereby driving money into high-yielding currencies. With interest rates at zero, the dollar is a great funding currency for these carry trades and therefore falls as the stock market rallies. The advanced 3Q GDP report showed an annualized growth rate of 3.5%, which topped expectations. Furthermore, upon dissecting the number we saw that it wasn't all government spending. This fueled a near 200-point run in the Dow as well as currencies like the Aussie. The pound-sterling also gained more than 200 points on the dollar today, which really is the only mystery in the whole equation. Did everyone forget that the UK economy is still shrinking??? We can't help but think the GBP/USD rally might unravel in coming sessions when people come to their senses.
In the meantime, we have only one day left in the week and it is still up for grabs. The dollar bulls were in charge for the first three days, but bears stepped up in a big way this morning. If stocks stay strong through the close and foreign stocks pick up where they leave off, it could be lights out for the dollar. As short-term traders in this market, we are open to whatever the next 24 hours holds. If the signals are clear for a rebound in the greenback, we'll be bulls. If the selling keeps up, we're bears. The most important things is timing our entries and exits. If the market has no decisive direction we can still make money as long as we are patient in pulling the trigger and disciplined in taking our profits off the table.
The market was nothing short of thrilling today as dollar bears reemerged on the back of a strong GDP number. While that may sound a little confusing, it is the same old equation. Good US data means higher risk appetite, thereby driving money into high-yielding currencies. With interest rates at zero, the dollar is a great funding currency for these carry trades and therefore falls as the stock market rallies. The advanced 3Q GDP report showed an annualized growth rate of 3.5%, which topped expectations. Furthermore, upon dissecting the number we saw that it wasn't all government spending. This fueled a near 200-point run in the Dow as well as currencies like the Aussie. The pound-sterling also gained more than 200 points on the dollar today, which really is the only mystery in the whole equation. Did everyone forget that the UK economy is still shrinking??? We can't help but think the GBP/USD rally might unravel in coming sessions when people come to their senses.
In the meantime, we have only one day left in the week and it is still up for grabs. The dollar bulls were in charge for the first three days, but bears stepped up in a big way this morning. If stocks stay strong through the close and foreign stocks pick up where they leave off, it could be lights out for the dollar. As short-term traders in this market, we are open to whatever the next 24 hours holds. If the signals are clear for a rebound in the greenback, we'll be bulls. If the selling keeps up, we're bears. The most important things is timing our entries and exits. If the market has no decisive direction we can still make money as long as we are patient in pulling the trigger and disciplined in taking our profits off the table.
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