ECB & The Next Minsky Moment

CentralBanks, Eur/Usd & Low Volatility

The ultra-low volatility recently gripping FX markets. In the absence of sweeping trends, investors look to short-term moves for inspiration.
As long as volatility remains low, cash markets are telling us it pays to fade to bet on a reversal. To a certain extent this makes behavioral sense. If you’ve made money, you take profit, if you are losing money, you quickly cut the position. In decision making processing we call it: Win stay, lose shift.
In that sense, the trend is self-reinforcing (the reflexive dimension of reflection), as it encourages traders to avoid betting on longer-term price moves.