A friend of mine has a poster in his office depicting two hikers looking over their shoulder at a Black Bear with the following statement printed above; “You don’t have to outrun the bear, just the other guy”.
Similar to the fate of the two hikers, success in the Global FOREX market is solely dependent on an investor’s ability to identify the better currency within a pairing. Below we lay out the factors to help handicap the field in 2013.
In 2013 investors can expect the US Dollar & Japanese Yen to under-perform most major currencies – again. The USD in particular is weighed down by a Zero rate policy, unchecked leverage and poor management (legislation) imperiling the benefits of reserve status. These factors fuel USD under-performance against higher rate and lesser indebted currency regimes. The Euro is our only exception as its potential to under performance to the USD is as large as it is unpredictable.
Given the potential for quick & severe “risk-off” moves which benefit USD longs, entry point is a meaningful determinant of FOREX success and therefore suggest investors reference the risk dimensions Heat Map (pg. 4) when entering and exiting trades. The full report “U.S. Debt Load & FED Poilicy drive relative value trades in Foreign Exchange (FOREX)” is available to Risk Dimension clients. This weekly report includes Asset Class Overview, Weekly Highlight, Risk Heat Map, DataBank, Risk Methodology and more. Contact us if you are interested in receiving access to these reports.