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Dollar weakness among the trends to watch for next year – Morgan Stanley

  
Analysis, Forex
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Strategists at Morgan Stanley view that betting on a weaker dollar will be among the top trades for 2020

Dollar

In a client note detailing the trends to keep an eye out for next year, strategists at the firm view that the dollar is to be hit by stronger global growth outside of the US and dwindling portfolio inflows.

They argue that the greenback will fall against the pound, euro and kiwi dollar while also recommending to short the dollar against the Indian rupee in the EM space.
GBP/USD
Cable should “rally sharply by Q1 2020 as an orderly Brexit path becomes clearer, prompting foreigners to lift their GBP hedges and invest in undervalued GBP assets”. Target 1.40 in Q1 2020 before ending 2020 at 1.35.
EUR/USD
“Narrowing US-Europe growth differentials” and improving political factors should see the euro rally against the dollar. Target Q1 2020 and end of the year at 1.16.
NZD/USD
Recommends taking up a long position in the pair as they see Chinese and global growth improving. Target of 0.69 by mid-2020.

Difference between trading and gambling?

  
  Education
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Gambling is, usually, an event with:

  • Limited duration
  • Finite upside
  • Finite downside
  • Binary outcome

When you gamble you either win or lose. That event usually takes only a small amount of time.

For example, you can bet on a horserace 10 minutes before it starts and 5 minutes later you have a result. For anyone who plays poker, you know it may take a little bit more time as the stakes are raised. So poker is a little bit closer to trading.

In gambling your risk on any event is usually what you outlay. And your potential return is what the house is offering at the time you agree to the bet.

I love to play blackjack (and for some reason, while I don’t play often, I have been profitable almost every time I’ve played in the last 3 years) like one of my trading mentors who was an original Turtle Trader.

A bet on a Blackjack table can take a minute or two until it’s over. Whereas in trading, a trade has the following characteristics: (more…)

Life’s a Bet

  
  Education
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One of my favorite bits of wisdom from trading legend Larry Hite:

Life is nothing more than a series of bets and bets are really nothing more than questions and their answers. There is no real difference between, “Should I take another hit on this Blackjack hand?” and “Should I get out of the way of that speeding and wildly careening bus?” Each shares two universal truths: a set of probabilities of potential outcomes and the singular outcome that takes place. Everyday we place hundreds if not thousands of bets–large and small, some seemingly well considered and others made without a second thought. The vast majority of the latter, life’s little gambles made without any thought, might certainly be trivial. “Should I tie my shoes?” Seems to offer no big risk, nor any big reward. While others, such as the aforementioned “speeding and wildly careening bus” would seem to have greater impact on our lives. However, if deciding not to tie your shoes that morning causes you to trip and fall down in the middle of the road when you finally decide to fold your hand and give that careening bus plenty of leeway, well then, in hindsight, the trivial has suddenly become paramount.

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