One of the daily emails/blogs I like to follow is The Daily Shot from soberlook.com. This morning 8/21/15 it stated, “The euro jumped, as the risk-off sentiment forced the carry trade unwind.” Can someone explain to this to me in greater detail. I’ve read the basic definition for carry trade. I would like to better understand the rise in the Euro within the context of recent stock and forex market developments.
Look no further:
Carry Trade Definition | Investopedia
The Euro is not a ‘carry trade’ currency, as such, because the interest rate differential between Euro and USD is minimal…
If you bought NZD against the JPY, now that would be carry trading good and proper… However, Yen-crosses are struggling
to continue their bull run, and some (like the NZD/JPY) have already begun showing unwinding…
In the case of EUR/USD, I would just say that the short-interest positioning has been taken off the board, perhaps, and this
has led to a rise, but EUR/USD is coming up (on the daily chart) against the 200-day moving average, which is not
insignificant… I do not believe that the EUR/USD has sufficient strength to go past the 200-day moving average level,
not with the current stagnant mood in currencies (a combination of summer trading conditions and the wait-and-see
attitude before the potential Fed rate-hike on the 10th September).
Good luck.
Well,
we have finally come very close to that Fed rate decision…
16th Deember, here we go…
Will the Euro break below 1.05 and
the Pound below 1.50?