No Let Up For The Falling Dollar

Risk-hungry investors pushed stockmarkets higher and the Dollar lower. The exception was the UK where, despite a big day for Sterling, shares baulked at the higher levels.

Sorry, run that by me again. German GDP fell by 3.8% in the first quarter; the economic Fatherland shrunk by around 7% over the past year and unemployment at 3.4 million is on track to increase by another 1 million. So why am I looking at a chart of the Dax that shows a rise of 40% (yes 40%) since mid-March?

At least part of the reason is that the dire numbers mentioned above are all looking backwards; the more forward-looking numbers like the IFO, ZEW and PMIs have beaten market forecasts by some margin. Yesterday the Dax broke through its 200-day moving average; today it soared through the 5000 barrier without even breaking sweat. I reckon the only thing stopping a re-test of January’s 5120 high is the fact I’ve mentioned it now.

For all those lovers of cliches it’s now 2oth May and the markets are set up wonderfully for a 4-month sell bet. Am I doing it? Not yet!
Well the main course on the dinner table is risk and it looks like there’s a hungry crowd out there. It’s been interesting how subdued the FTSE has been, looking like it would rather have a quiet night in, but being dragged out to party by US and European traders.

All this rose-tinted tomfoolery has smashed the Dollar to pieces as the forex boys big-up the riskier currencies. Unfortunately I spent the morning writing so missed out on the big chunks, but I still ended up with some worthwhile gains.

An early trade saw me buy GBPUSD at $1.5485, taking profits at $1.5495 and $1.5515 (yep, I know that looks pathetic now, but at that point Sterling was capped at $1.5520).

Later on this afternoon I bought GBPUSD again, this time at the heady level of $1.5613. The price had briefly broken its 200-day moving average at $1.5616(ish) and it looked in the mood to push further. I used a tight stop at $1.5585 in case the whole thing fell apart, but I needn’t have worried. The price kept right on going and is currently at $1.5655. I part-closed at $1.5647, and have now trailed my stop up to $1.5623 to lock in 10 pips on the balance.

Since I posted the chart Sterling has taken out the 200-day MAV; I’m guessing that if the price closes above the 200-day MAV then it’ll move quickly to test December’s high at around $1.5722.

As usual, I made my sacrifice to the trading gods. Yesterday I sold EURGBP at £0.8793. I part-closed this last night at £0.8783, but left a £2 balance running with a £0.8855 stop loss. Today I closed out at £0.8839 when it looked like the tide had turned, giving me an overall loss on the trade.

My Lloyds short bet started to work today, falling by around 5p more than the ex-rights adjustment. Yesterday, just before the close, I sold a further £8 at 99p, though I’ve closed some of that off today. I’m guessing that there are still sellers ahead of the rights take up, especially if the main market shows signs of getting toppy.

Finally, if you’re new to trading why not check out my latest guide to the main UK Economic Data Releases. The first article is looking at the heavyweight, backward-looking data; Part 2, in the next day or so, will focus on the more predictive forward-looking numbers.

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