Last Week’s Trade
Last Sunday, I wrote about how the GBP/SEK currency cross was likely to rise over the coming week. It did, by 0.78%. It was up by a lot more than 0.78% on Friday morning, but it fell quite sharply when British GDP data was released showing that the U.K. economy had barely grown at all over the previous quarter. In any case, there was some profit to be made. These “buy the dip” weeks set up when there is a strong multi-month trend and then a week closes with a movement of more than 2% in value against the trend direction. Here are some statistics on how these have played out on the 3 major Forex currency pairs (EUR/USD, GBP/USD, USD/JPY) from July 2001 to date:
Currency Pair | No. of Trades | Win % | Average Result | Median Result |
EUR/USD | 28 | 57.14% | +0.17% | +0.14% |
GBP/USD | 22 | 63.64% | +0.53% | +0.87% |
USD/JPY | 40 | 52.20% | +0.19% | +0.11% |
All | 110 | 56.67% | +0.27% | +0.19% |
It is an impressive strategy – it produces good results, with a relatively high win percentage, which is rare in Forex.
Korean News
Last week we saw the surprising spectacle and the leaders of North and South Korea having friendly talks, with the North committing to closing down its nuclear test site within days, cease all nuclear tests or otherwise warlike acts, and commit to working towards a peace treaty including the complete and irreversible denuclearization of the Korean peninsula. It is unclear just what the North sees as the end result here, but if a real peace treaty and denuclearization is arrived at, a major source of tension and political risk in Asia could be removed. Markets didn’t really react to the news, but it may be that if more concrete progress is made, it could provide a boost for equities and other risk assets, especially those located in Asia.