Short EURGBP on fundamental divergence
Posted by The Lonely Trader on March 28, 2008
Short established as the Euro looks very overextended against the GBP. The round figure of 0.8000 will, I believe, provide formidable psychological resistance. Depending on what one reads, this pair is headed straight to parity or it is due for a near term correction. I don’t expect the interest rate differential to flip within the time horizon of the trade. Depending on where one measures from, the Euro has gained more than 10% since it broke the December 26 weekly range high, or it has gained more than 17% since it bottomed at the January 21 weekly low. I want to see where this pair goes over the next week or two. If I don’t like the price action or general sentiment, I will close the trade. If I like what I see, I may add on the way down.
Gav said
I see you tag this post as ‘crazy ass idea’. Uhm.. I won’t say your idea is wrong. I agree with you about the extended run of EUR. But, I haven’t seen a weakness, yet. So, I guess, I will just wait for 0.8 and continue observing the development.
The Lonely Trader said
LOL…you actually read my tags! ‘A’ for diligence, my brothah from anothah mothah. you’re much cooler under the bonnet than i. i entered early knowing the risks of further advances but also wanting to position myself ahead of the larger specs that i though may want to fade the move before the figure — but it looks as if the larger specs are actually trading the move instead. (minor oversight on my part, methinks…)
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