The dollar stall continues.
Any recent news about the world's currencies still is dominated by concerns for the european economies. It is keeping the major dollar gains in place. There may be some simple reasons for this, universal perception finally coming to the fore.
Have you ever heard about the “Big Mac Index”?
I ran across this interesting article from The Global Guru about it. You've probably heard about it in the past due to the invention of the term and published index by the Economist since 1986.
The index is actually pretty cool. It puts in perspective how much money it takes to purchase a common item (the ubiquitous McDonald's Big Mac) in 120 countries. It is a quick and easy, perhaps not perfect-- indicator of where prices around the earth may be seriously out of whack.
Such as the “Euro Area” as it is termed, where the Big Mac is priced at an average of $5.34.
On the site mentioned above, the Global Guru-- the question posed is--- if you were running money in a currency hedge fund, where would the Big Mac index suggest that you position your money?
Based on the current numbers, there are 6 currencies that are most out of position vs. each other.
This is what the site had to say. “Looking purely at the Big Mac Index, you'd buy the Japanese yen (FXY), (28% undervalued), the Australian dollar (FXA) (17% undervalued), the Mexican peso (FXM) (17% undervalued). You'd sell the Swiss franc (FXF), the Swedish krone (FXS), the euro (FXE) and the pound (FXB), (57%, 43%, 19% and 21% overvalued, respectively.) “
Pretty interesting, and not far off from my point of view.
You might want to keep an eye on the index in the future. Just check out the Economist website.
Our 3 remaining FirstStrike positions are still alive, two of which are doing well. The short Gbp/Jpy is working well and so is the short Usd/Jpy.
See you tomorrow.
Current equity is $839.20.
Joel Rensink
PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me to which address you would like it sent. Please do not use AOL, Hotmail or Yahoo addresses. They've been known to filter out more good mail than actual spam. Try a Gmail address. It's free, simple and perfect for traders!
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