Eruo Looking Like Yen Before Monster 2012 Move? – ValueWalk Premium
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Eruo Looking Like Yen Before Monster 2012 Move?

Back in January, I wrote that I was short the US Dollar against a basket of currencies. The basic logic was that we were witnessing all sorts of bullish US Dollar events, yet the dollar was acting tired. I know, it’s not the most intellectually pure reason to take a position, but I’ve often found that when good news doesn’t lead to the expected outcome, negative news often leads to an opposite outcome. Besides, having traveled a lot internationally lately, the US Dollar sure seems overvalued.

Q1 hedge fund letters, conference, scoops etc

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Currencies trade funny. They mostly move slowly—until they go REALLY fast. I don’t talk much about charts because I think drawing lines on a screen is mostly witchcraft. That said, over the years, I have noticed one chart pattern that currencies seem to make right before a big move. I call it the 2nd triangle. Basically, you have a reversal of the existing price trend coming out of a descending triangle, followed by a substantial move that consolidates over many months or even years into a second descending triangle. When you get to the apex of this 2nd triangle, look out!!

I’m not going to say that I have a strong bullish thesis for why the Euro should strengthen here. The best that I can muster is that it’s pretty cheap to go and get a good bottle of wine and some excellent food in Europe—which incidentally is often a good enough reason for currencies to re-balance over time. What I will tell you is that the Euro is experiencing a 2nd triangle pattern. I’m not a great artist and my skills with the Bloomberg chart drawing function are embarrassing, but I’m going to draw for you anyway.

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This is what it looked like at the apex of the 2nd triangle in Japanese Yen back in 2012 right before a monster move

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This is what it looked like at the apex of the 2nd triangle in Chinese Renminbi back in 2014 right before a monster move

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Notice the same pattern on the Euro??

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I just zoomed in a bit.

I’m not saying this is going to work as planned; who wants to be long Euro with all its problems? Then again, I respect my 2nd triangles and I just added a hell of a lot of Euros to my already sizable short US Dollar basket.

Funds that I control are long EUR and EUR futures along with a basket of other currencies.

Article by Adventures In Capitalism


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