Short Sterling – June 2010

Nicole Elliott from Mizuho Corporate Bank at 01/20/10

Comment: Demand for index-linked and long-dated Gilts remains steady, regardless of what the media says. Almost record volume in this June10 contract yesterday, and record volume across all contract months, shows just how nervous traders are at these lofty levels. Nevertheless the cash market is ‘firmly anchored’ with prices going nowhere and nothing changing hands. Small signs of instability with last Wednesday’s ‘doji’ followed by yesterday’s sudden sell-off, which has corrected the overbought situation. Our view remains unchanged, seeing this latest blip as just one of the many to which these markets are subject to on their interminable grind higher.

Strategy: Buy at 99.140, adding to 99.090; stop below 99.000. First target 99.200, then 99.300/99.350.