Markets shrugged off bad economic data out of China and Australia and risk was rampantly bought leading up to tomorrow's FOMC statement and Ben Bernanke's press conference. The markets seem to be pricing in a resolution of the fiscal cliff as is evidenced by the broad gains in equity markets and US Dollar weakness.
My opinion on the resolution of the fiscal cliff remains the same: I think we'll get a last minute resolution and markets will drop rapidly leading up to it. That said, after today's run-up and the way the markets shrugged off highly negative comments from political leaders in Washington, I believe it's dangerous to sell into strength. I would much rather wait for concerns over the fiscal cliff to spark a downward movement and sell into the weakness so I'm able to put a stop loss in front of my entry then to try and pick the top. I have to assume this rampant buying could continue all the way to the end of the year into a resolution of the fiscal cliff - because that's a possibility
I was recently stopped out of my AUD/USD short at 1.0515 at a small loss. I'll look to sell either AUD/USD or NZD/USD again, but I'll wait until I see substantial signs of weakness in equity markets due to fiscal cliff concerns. I'll be keeping an eye on USD/JPY as a bellwether for fiscal cliff concerns.
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