ForexInfoCenter

07/01/2007 - Fireworks are likely in carry trades and USD weakness

Posted by FOREX.com's Weekly Strategy in June 29th 2007  
* Fireworks are likely in carry trades and USD weakness
* More uncertainty over mortgage-backed market expected
* BOJ Tankan on Monday in Tokyo
* BOE expected to raise rates, RBA hold steady
* US NFP on Friday

The US dollar is closing lower across the board after an extremely choppy week of trading. The week opened up with a sharp sell-off in USD/JPY and the JPY-crosses, collectively representing the carry trade, as concerns mounted over the extent of losses in the mortgage-backed securities market, fallout from the sub-prime mortgage meltdown. I had cautioned in last week's report that there was a disconnect between the resilience of the carry trade (Strong JPY-crosses) and the mortgage market problems, and that something had to give. The sell-off early in the week validated my concern, but the carry trade proved resilient and came storming back by the end of the week, with the JPY-crosses returning to re-test the highs made last week. So I'm left in much the same position as last week and continue to anticipate a larger shake-out in the JPY crosses.  Full text »

digg this! | del.icio.us | Technorati | Stumble It! Read More...

Filed under: Weekly Strategy