Carry Trades, Thanksgiving and the EURUSD

November 19, 2007

News that China will be forcing banks to curb their lending activities has hit equity markets globally. Higher levels of volatility in the financial markets has been particularly damaging for carry trades. Moody’s also warned that the commercial property market will be the next sector to begin reporting major losses. I continue to expect further losses in Carry Trades.

Meanwhile everyone is saying that it should be a quiet trading week because of the holiday, but that may not be the case. Do not rule out a big move around Thanksgiving because that was exactly what happened last year. Here is a chart of the EURUSD in November 2006. There was no action on Thanksgiving, but the day before and the day after, there was a major upside breakout in the EURUSD:

Posted in Carry Trades, Dow, Forex News, US Dollar, euro