Mini macro trade
One of the themes I tend to reinforce is that you must think outside the box and look where the majority isn’t looking to make money. I see a trade opportunity today on the Euro using this idea. Before I begin, please realize that this one trade has no guarantee of making money, but over time these kind of trades will have a profitable edge.
The Euro at the time of writing is 1.3274 dollars. The 1.30 figure seems to be an anchor in recent times. An anchor is a level that tends to magnetically attract price just because people think it is important. It is not support or resistance (for the technical analysis people in the audience) per se, but rather a reference level. In Gestalt psychology there is a tendency for the human brain to make sense of the unknown by using other things as a reference. Anyway, despite the emergence of risk-taking mentality that has been driving currencies up, nothing has changed fundamentally to support the idea that the world has recovered yet. Sure, stocks are up due to some positive earnings, but is this enough proof ? Let’s look at some other indicators: Eurodollars (futures contracts that represent the price of US dollar deposits overseas) have not decreased in price–this indicates that risk sentiment is still there. German factory orders are dismal at -3.5% m/m, and Euro Zone retail sales are stagnant at -0.5%. The market will range until there is a fundamental stimulus that will shift traders’ perceptions. Look for Euro to possibly target 1.3000 if it continues to range.
