Heinz, a trigger, that's exactly what we're all on the lookout for. I find it very remarkable that one can observe this phenomenon time and time again in the markets. Almost regardless which asset you're talking about, stocks, bonds (today) or currencies...When they're on a tear, be it down or up, at some point all market parties are convinced the trend will make a U-turn. But they just can't figure out when exaclty. Then, whooosh, all of a sudden it's there. Fascinating. This works for market crashes too of course...Right now we have this wonderful bullish sentiment returning to the market again. People just get sick of too much pessimism until the facts are so far piled up against them that they can't deny the obvious anymore. Till then, happy racing...
Anyway, re: the euro. I wonder whether we've seen its lows for the year or whether will go down one more time (from $1). In any case, what you're saying about short-covering and hedging is definitely true. I just wonder whether - once these effects have worn off - fundamental factors and markets psychology will catch up fast enough to really keep the euro considerably above $1 in the short term. Even though the European economy is strengthening, it might still not be enough and we'll have the occasional disappointments too, cf. for example Japan - a somewhat different situation, but look at the hopes which are slashed time and time again by yet another disappointment. |
