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Returns on major FX players are showing choppiness in FX

Submitted by Cornelius on 07/05/2009 22:21 -0400

The returns of some major FX players are serving as a proxied summary of the first 6 months of 2009 as Bloomberg reports both FX Concepts and John W. Henry's currency units are down so far this year. Due to the choppy price action, the trend followers have not been looking too hot (if you don't believe me, look at the track record of a basic 50/200 dma on EUR/USD). The major reason(s) could be the unclear picture on inflation (both in the US and in the majors) but additional factors have come into play including the re-coupling of many markets, the surprising equity rally in Q2 and a suspiciously steady decrease in the price of vol. However, we are likely to see some huge macro factors come into play over the second half of this year so the record is likely to look significantly better by the end of the year.

A few things to keep an eye out for in FX for the next 6 months:

- reconciling with trends in the commodities market (e.g. oil and CAD/USD)

- USD/JPY to finally break out of the 95-100 band - headfake in early April aside, a few more bad Tankans and this thing is over. Official reports aside, we don't see this thing breaking too far.

- Emerging markets to "rationalize" - we've beaten the China drum to death but there are others out there. Our Brazilian real pick back in March has been a huge winner but it would pay to look out for the warning signs (and there are many). The RUB and TRY are also good candidates despite an essentially flat first half.

- Some sustained strength in the USD - this looks to be one of the better risk/reward bets (in any market, not just FX) but the DXY bears are likely to hold strong.

It should be a fun ending to 2009.

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Sun, 07/05/2009 - 23:25 | 4748 RobotTrader

Wonder how those 400:1 leveraged bucket shop traders are faring over at fapfx.com

Mon, 07/06/2009 - 08:18 | 4812 fxquant

can't say what is happening at the 200/400/800(!!!):1 shops but my firm at "only" 1/50:1 max house has seen a signifcant drop in "forum" traffic and the retailoriented websites I scan daily have seen a significant drop in particiaption.

Ergo: the sheep had been shorned last year by ads touting "It's easy to trade the Euro", etc but the more recent chop has now totally neutered the remaining flock.

Mon, 07/06/2009 - 16:49 | 4868 borthds (not verified)