Stocks, US Dollar React To Tim Gethner’s Joke

Equities are hanging in there, thanks in part to better than expected economic data. Sterling tumbled after the UK government struggled to sell bonds, and the Dollar crashed on Geithner comments before he confessed that he was only joking.

Yesterday I said that today it would be ‘back to basics’, choosing only a couple of markets to trade. Well, I did, sort of; I chose Europe and the US!

I traded in and out of gold profitably a good few times today. I traded FTSE (^FTSE) in both directions for profits, though one outstanding short bet is currently underwater. And in forex land I sold Sterling on several occasions, against the Dollar and Euro, and traded EUR/USD for a full 5-pip profit.

Gold’s had an OK day today, bouncing well off its 50-day moving average, though it wasn’t able to hold above the 21-day MAV. Most of today’s trades were to the downside, but when the price failed to re-test the 50-day MAV at $919 I switched to a long bias. One of these, a buy bet at $923, coincided with Tim Geithner’s “Sure China, we’re fine if you want to drop the Dollar,” comments. The gold price took off as the Dollar crashed from $1.4566 to $1.4688 in seconds. I took my profit, selling at $939 and went short at $935. Cheers Tim.

My squawk gave me a great opportunity to short GBP/USD; the shout came over the squawk that today’s UK government bond auction had gone horribly, to the extent that it wasn’t covered. What that meant was that there wasn’t enough demand for today’s issue, leaving the Debt Management Office with a rump of bonds that they can’t re-issue for at least two months. This is surely a bad sign as by my reckoning we’ve got a shed-load of bonds to be sold and the Bank of England can’t buy all of them.

So, either the yield has to become more attractive (bond prices need to fall) or the currency has to fall to make the overall package more attractive to overseas investors. Anyway, so I sold GBP/USD at $1.4633, riding it down to $1.4555 until a nasty spike took out my stop loss at $1.4593.

A bit earlier I’d bought EURGBP on a confirmed break above £0.92. I’ve found before that this is a good trending market, so bought the Euro in a tenner at £0.9220. The failed auction gave this trade an added boost, allowing me to sell £5 at £0.9244 and £3 at 0.9250. I trailed the balance up to £0.9270, but was stopped out at £0.9240 this afternoon for an overall profit of £250.

Yesterday I went back to flat on FTSE; I wanted to play in either direction unhindered by an underlying position. Today I bought £2 at 3895 on an intraday signal and took my profits at 3939 (I chose that level as I found resistance at the same level last night).

At the moment I’m short of £2 on FTSE (and 20 points in the red) and a slightly nervous £1 short on gold (a couple of Dollars offside and not looking to be brave).

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