Tuesday, August 16, 2011

Easy Money Banked, Now the Skill

After the wild gyrations last week, where 7% range days were the norm, we now have some semblance of normality. The week that past and some key levels: http://macromon.wordpress.com/2011/08/14/week-in-review-can-the-european-center-hold/

Are we now back in the range bound markets?

Looking at some key charts, the AUD has retraced half it's selloff from 1.1 to the low 1.00 - sitting squarely 1.05 today. We may see some resistence here before floating slowly higher.

Mean reversion trades: http://www.robertsinn.com/2011/08/14/when-mean-reversion-goes-horribly-awry/

The jury is out whether or not this is a dead cat bounce as a healthy bounce should have stronger volumes in its rally - http://goldstocksforex.com/2011/08/15/what-a-real-bounce-looks-like/
If we think the market is going to trend lower -then we'd be looking at setups that resemble bear flags to short: http://www.upsidetrader.com/2011/08/14/so-many-bear-flags-so-little-time/

If the markets continue to stabilise and scramble positions in the liquidity trade, then we'd stick to the probability that we're still in range bound mode, i.e mean reversion mode, so we'd be staying long until we closer to the top end of the trading ranges of the majors.

Wayne Swann's comments of the AUD likely to remain higher sounds good for the carry trade - and whilst we still have the risk of a possible rate cut next month, we still have a good 2 weeks to ride the current rally before a possible re-rate lower.