I have been thinking about my new process, and as the balance between fundamentals and technicals tilts towards the former, it occurs to me that I should make some record of what is going on day-to-day so that I can go back over it and see whether my understanding and expectations were later borne out. To that end I am going to try to resurrect the diary (I say “try”, because it has to be written at the end of the day — I have always been most comfortable with a day that starts off structured and becomes ever less so).

The EUR dropped further on ongoing debt concerns as Spanish bond spreads widened to new highs. There is talk of the Commission trying to get the Germans to increase the size of the EFSF and of the ECB having to delay further its exit from extraordinary liquidity support. The USD rallied on European debt problems and also tensions on the Korean peninsular. Fears of Chinese interest rate hikes are again drifting around (they tend to hike rates at the end of the week). The AUD and GBP have dropped against the USD — the former after the RBA governor indicated that a strong AUD will restrain inflation and interest-rate hikes should therefore be off the cards for now; I don’t know why the GBP should suffer particularly, but the USD is driving the move.
I am still disinclined to add to my long USD position (short EUR/USD). It is tempting to think it is rallying because of improving US economic data but the mood is risk-off and the USD is benefiting, which suggests the usual relationships are in play. The market could move on from Chinese tightening and Korean tension at any moment; either has the potential to become something bigger, but it is too early to say that they have and therefore that there is a trend in place. There is a trend in the EUR, driven by the debt crisis, and the USD seems the logical thing to be short against at present.
Advertisements