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


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.


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


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


Notice the same pattern on the Euro??


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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