We’ll continue to short the US dollar in the short term.
That seems to be very unlikely, but in the short term that is the latest narrative that has everybody excited. With this, we continue to short the US dollar in the short term. However, this is a market that will continue to run on a motion, and of course a lot of people are starting to think that the United Kingdom is suddenly going to come out of its issues now that we have a new prime minister in that country. That’s obviously nonsense, but the market is extraordinarily emotional these days, and it is probably worth noting that the situation is probably only going to get worse.
That being said, if and when we do break to the downside, I think a move below the 1.15 level could open up the floodgates. Yes, it’s been a very nice move to the upside, but it is still but a blip on the radar for the bigger time frames. A break above the 1.17 level could open up a move to the 1.20 level, and at this point it’s also worth noting that we are probably in the midst of a bear market rally in general, so that should not be a huge surprise. Remember, bear markets can be extraordinarily noisy, and it is a feature bear markets that you see massive rallies in risk appetite. More likely than not, we will eventually see exhaustion that we can sell, but in the short term it certainly looks as if we’ve got a lot of work ahead of us. Ultimately, this is a market that I think is in the midst of trying to make a bigger decision, so the one thing that you can do is be very cautious with your position sizing.