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Well, today was one of those days that we would rather forget. All of our trades backfired as choppiness in the market triggered our stops before conditions turned in our favor.
The day started with optimism towards a positive resolution at Friday’s EU Summit. This was followed by mid-day skeptism. In any event what we were reminded of today is that trading in news driven markets can be hazardous to your trading account.
Beyond our grumpiness, here are a few things we took out of today’s action, or lack of action, or too much action. AGH!!!!
1) Gold Prices rallied
2) GBPUSD rallied
Prices of Gold are back above 1740 after trading around 1700 24 hours ago. The move isn’t surprising as precious metal has almost always been an outperformer during periods of general uncertainty in the market. Basically, you are 75% hedged with Gold. If the overall market rallies, commodity prices will rally and carry Gold higher. On the other hand, if we see a flight to quality, Gold has a 50/50 chance of rising. It could gain on the safe haven buying or drop along with commodities. So, 75% chance of price appreciation is pretty darn good. Too bad we didn’t think about it with prices at 1700.
Beyond the easy rationale of Gold, the rally in the GBPUSD totally took us by surprise. The pair looked dead as it was in a week long downtrend and support looked vulnerable. Also, Manufacturing Production figures from the UK were worse than expected. In any event, prices unexpectedly rallied in mid-day to a high of 1.5722 from the 1.5600 figure. There wasn’t much news other than the usual “EU worries sends the GBP higher.” Not really sure what one has to do with the other, as we have seen “EU worries sends the GBP lower” headline used quite often as well. Our thoughts are that a big EU firm is in the process of unwinding a large Euro trade and rotating funds to Pounds ahead of tomorrow’s interest rate meetings from both the ECB and BoE. It will be important to watch if today’s trade reverses following the meeting.
Just to end on a positive, our long term EURGBP was our big winner today as it went back into the black, on the GBP’s strength.