Rockin' in the FX and Futures Markets

All Aboard the Gravy Train

2012-02-01T18:38:00.001+00:00

From Bloomberg online:
Global Strategists Abandoning Bearish Views
(By Michael Patterson and Inyoung Hwang - Feb 2, 2012 12:00 AM GMT+0800)

excerpt:
Just two weeks after saying that investors should “remain cautious,” Larry Hatheway, the chief economist at UBS AG (UBSN), raised his recommendations on global shares and high-yield bonds in a Jan. 23 note to customers entitled, “Wrong, but not too late.”

Amazing....setting ourselves up for the big fall? who cares, get it while it's hot!

FOMC Projections 25 Jan 2012

2012-01-26T05:32:00.000+00:00

Should have gone to school. The FOMC projections don't make much sense to me.

Rates are expected to stay low 'til end 2014, and inflation is expected to remain stable 'til then.
Huh? cheap money ==> low inflation?! what gives?

Notes on EUR action

2012-01-25T16:17:00.001+00:00

Late 2011, real money sellers weighed on EUR.
Early 2012, real money buyers offer support.

EUR Bounce, Some tgts hit

2012-01-13T02:28:00.002+00:00

Interesting news:
- Chosun reports that South Korea's sovereign-wealth fund obtains license to invest in mainland Chinese stock and bond markets

- Lawmakers from Chancellor Angela Merkel’s party are stepping up pressure on Greece as it struggles to meet the terms of its second bailout, saying that a Greek exit from the euro region would be manageable. (Bloomberg)

- ...the exchange rate that would equalise the price of a Swiss Big Mac with an American one is 1.55 francs to the dollar; the actual exchange rate is only 0.96. (Economist)

One more time :)
- The market can stay irrational longer than you can stay solvent - John Maynard Keynes

* EURCHF stopped out as pair dips below 1.2100, no sign of SNB. Stay away from manipulated currencies.
* XAU tgt reached, turned short small. AUD small tgt reached, square.
*EUR long in play, GBPJPY long small, close stop.

NZD Earthquake Insurance Payouts

2012-01-12T03:33:00.001+00:00

-Said to be behind GBPNZD's amazing slide so far this week from 1.99-1.92.
(perhaps, but i doubt its that simple)

-EUR breached recent lows by a pip or so on wednesday; small long tight stop.

-AUD pattern within pattern, long.

News Items of Note

2012-01-11T07:41:00.001+00:00

-wsj online:
Spanish Banks Try to Build Their Way Out of Home Glut
http://on.wsj.com/yiZCfJ

-reuters - hedge funds lock horns with IMF
funds accumulate greek debt and cds, refuse any haircut deal in order to force payment. if greece defaults, cds payout to cover losses. risk / reward.

Tuesday's Recap

2012-01-11T07:29:00.000+00:00

-nzd stopped out
-aud, xau, in play, eurchf barely hanging on

+mkts generally optimistic
+european problems remain, hope prevails; hope for:
- more rescue measures for europe
- chinese stimulus measures
- moderate growth in US

New Monday

2012-01-09T14:15:00.000+00:00

- SNB Prez Hildebrand quits. EURCHF low 1.2106.
- Germany gets paid to have money parked with them: "Unlike the vast majority of longer-dated bonds, bills don’t pay coupons but are usually issued at a discount and then redeemed at par. Germany’s auction saw investors pay €100.00616 now to receive €100 in six months’ time, giving a yield of minus 0.0122%. "

- Long xau, aud, eurchf
- Short nzd

First Friday of the Year

2012-01-06T05:24:00.003+00:00

- GBPNZD, XAU, EURCHF in play

- Took NZDUSD short, undersized, pattern stop

- non-farm day
- NKorea nuclear 'incident'?

- GBPNZD out on another failure ard 1.9900
- Full-sized NZDUSD short.

Long Day

2012-01-05T15:27:00.000+00:00

-Gold in play, losing momentum
-EUR watching formation
-GBPNZD choppy, losing momentum
-EURCHF holding amidst Hildebrand scandal

-US claims lower, ISM non-mfg slightly below expectations but above 50

2012 - First Day of Trading

2012-01-04T08:46:00.001+00:00

From 3rd Jan 2012, Tuesday

-Higher mfg numbers from major countries, equities rally, S&P futures gaps higher
* Aussie PMI 50.2 (hi since Jun'11), back above 50
* China PMI 50.3, back above 50
* India PMI 54, Swiss PMI 50.7, UK 49.6 (from 47.7)
* US ISM 53.9, all higher.

. USDJPY <77, no strength
. XAU pattern long
. GBPNZD turned long
. NZD pattern failed
. EURCHF in play

+ watch EURUSD possible formation, 4h
+ watch ES futures possible formation, 4h

Hello Goodbye

2011-09-13T08:43:00.002+01:00

It's been only a little over 2 months and the world's gone to hell in a handbasket...well, almost.

World's so full of nonsense I don't see a need to add to it, but I'm back to note down a few points of interest 'cos i'm too lazy to go into the next room for my notebook and pencil.

> 12 Sep - Commentary in the Telegraph 'The Swiss Franc is the new deutschemark', by the chief economist of Ignis Asset Management.

The least ugly of the lot you mean. So everyone and their uncle piled into the franc until the SNB came out on 6 Sep to announce a 1.20 EUR/CHF peg. Sweet. You just know the whole world is waiting for that level to be tested 'cos everyone would love to see SNB fail; pegs do not feature in a free market economy, or so economists claim. Well, we'll see. Me, i'll stand on their side, 'cos they've told me where to place my stops.

And what else is new? Let's see, the latest G7 meeting again highlighted the fact that we're in such a horrible place now there's not much that can be done on a coordinated basis, we're still waiting on a Greek default as the 1yr bonds yield over 100% (would you buy some even if you could?), the Japanese have a new PM (who was the -arguably- ineffective Finance Minister), DSK is back home (too big to fail i guess), and markets are all over the place again.

What a wonderful world.

FX Trading - Fragile

2011-06-27T11:00:00.002+01:00

It's been almost a month since the last post, and guess what, nothing seems to have changed.

Greece still dominates the headlines, threatening to throw the financial world into turmoil even as European officials struggle to save the day. The Greek parliament meets this week to vote on austerity measures, and nobody really expects the vote to fail, but implementation is a totally different matter. So while a slight sense of optimism creeps into the market, it feels more like players getting tired after the recent sell-off. In case anyone has a short memory (that's all of us traders), Greece has a glorious history of defaulting on its debt to save its behind, and the only thing keeping them from doing so now is the somewhat illogical tie to the EUR.

EURUSD - Still some life left?

But why worry? China comes to the rescue! Chinese Premier Wen Jiabao and company are on a European tour offering the west a chance to sell their troubled souls to save their tainted faces. Who's your daddy?!?! The one with the fattest wallet, of course. And he attempts to save the world, calming fears of endless tightening in China and even, according to some, signaling a move towards easier monetary policy. So we're all safe now, no worries, go invest all your cash.

Unless you're in the UK. Officials have finally come clean and admitted the possibility that further easing might be needed, as the current bout of inflation is expected to be transitory, of course. Witness the crude sell-off last week (thank you for the oil, IEA!). And growth remains elusive.

GBPUSD - we've seen happier days

So let's end this little update with a look at the S&P, as good as any a barometer of the health of the Global Economy.

S&P - teetering on the edge

The chart says it all. We're just about going over the edge but not quite. There's still some optimism left but like it says in the song...'sometimes I feel so fragile'....

Will we fall into the abyss, or will China save the world? Stay tuned, but don't hold your breath....

Peace

FX Trading - Play The Game

2011-06-06T11:18:00.003+01:00

With all the weak numbers coming out recently, you'd think it's the beginning of the end. After all, we're just 2 quarters away from 2012. The threat of slower growth in the global economy is certainly hanging over our heads, as evidenced by the slide in the equity markets. Oh well, the show must go on.

This week sees RBA, RBNZ, BOE and ECB meetings, not together of course, and the one expected to hike rates? China! No, they don't tell you when they meet and make these earth shattering decisions. But it's all expected, and if it comes to pass will certainly keep markets on a downward path. Other than that, the ECB is expected to be the next one to raise rates, and the focus on this is probably what's keeping the EUR well bid, after European debt-crisis fears abated slightly with the IMF agreeing to dole out funds when the market feared it wouldn't.

Everyone's pushing back expectations of a hike from England and the US after recent data, although you still have officials pushing for a tightening soon. There's even talk of a QE3; well, who knows, if pigs could fly...

So what is one to do? The one 'sure thing' out there seems to be a bet on more USDJPY weakness. The pair has been dragged down with falling US yields (witness last week's sudden drops after US data releases), and a certain online broker showing >80% of traders long the pair. Well, they're just asking to be slaughtered. An assault on 80.00 is currently underway as we write, and an 'orderly' move lower is unlikely to attract intervention, so little stands in the way of further weakness.

EURGBP may yet be fulfilling the breakout move we talked about all those posts back, and we still support patient longs.

Patience - key word of the day.

Peace

Note: Just to get this down - saw it somewhere, can't remember the huge numbers but here it is, Greece's 4 largest creditors in descending order - France, US, Germany, UK. The states is in 2nd place...hmmm....

FX Trading - Hey Joe

2011-05-27T09:38:00.001+01:00

Been busy on several fronts and have been neglecting this blog. So here's a catch up with updates to remind myself of these interesting times in years to come.

Since the last post, the world looked like it was going to end again (apparently the 21 May 2011 date was a little off), as European concerns weighed and dollar buying picked up speed. Then we hit bottom and markets started to correct back, with most currencies and commodities, and the equity markets slowly and tentatively clawing higher after the recent huge sell-off. Whether this is just a pause before another leg down, or a reversal in the works, we'll have to see; 'cos most all fundamentals remain weak.

USDJPY

USDJPY - JPY still a safe haven currency ?!

Since our last post and the last peak circa 82.20, USDJPY still managed to spend some time above 82.00 before the bottom gave out on Thursday. Possible reasons? Well, US yields slid quite fast after weakish numbers out of the US, which led to USD sales across the board. Of course, don't forget the earlier statements from the BOJ Governor (see previous post). EUR, on the other hand, had other things on it's mind...

EURUSD

EURUSD - Nice chart to draw lines on

EURUSD was happily near the top of its channel on the recent correction when Junker's comments about possibly holding back aid to Greece took the market down over 100pips. Bot near the lows when heavy volume appeared to stop the sell-off, but never expected the strong move up in Asia on Friday morning. Excuses for Friday's move include a thin, stop-driven market, with China setting it's Yuan rate at another record high forcing Asian countries, notably Korea, to buy dollars to stem their currencies' appreciation. All these dollars were of course recycled into EUR's and such, according to anecdotal evidence.

GBPUSD

GBPUSD - X marks the spot

No prizes for naming the pattern. Got in late and nervously held to target; the move was counter-intuitive in most ways but if the chart says jump you jump. A big move lower in EURGBP kept GBP strong in recent days, and then dollar weakness on Thursday cemented the rally. UK fundamentals aren't exactly stellar, although one bright spot may have been an MPC member seemingly ready to support a rate increase, just as ultra-hawk Sentance is finishing his term.

So What's Up?

S&P - the representative chart

The S&P chart is rather representative of what's been going on so far. Worries abound of a global slowdown led by China and an anemic western world, and so you see the chart looking ready to roll over; although looking at the big picture this is nothing more than a correction in a crazy bull market. The line defining the up-trend may be broken yet, but even then we still have a long way to go before we see a meaningful correction of this last rally from around mid 2010 (I'm talking about those amazing numbers traders like to see from Mr Fibonnaci).

So whatever happens folks, it's not the end of the world, yet. Species extinctions take place over long periods of time, and for you to actually witness the end of the human race in your puny little lifetime is more unlikely than winning the Powerball.

Peace.

FX Trading - Strange Days

2011-05-20T11:25:00.002+01:00

Here's the story thus far.

- In March, you had a rare G7 co-ordinated intervention to weaken the JPY after The Disaster; what they were ostensibly after was market stability.

- Earlier this week BOJ Governor Shirakawa gave everyone a heads up when he warned "we are now expecting production and gross domestic product will decline in the first quarter and the second quarter."

- Of course GDP figures then came out indicating a technical recession, and this helped to take USDJPY above 82.00, where it has stayed below since late last month.

- Then the BOJ today surprised some by voting not to take any measures to stimulate the ecnomy, although they are still likely to do so later in the year.

- But what took the cake was the BOJ Governor today saying that while a strong JPY would put pressure on the economy in the short-term, it would be positive in the long-term, such as helping companies buy overseas firms. Well, forget long-term, we've already seen the biggest international acqusition this year, and it's a $13.7b takeover of a Swiss pharma by Japan's Takeda Pharmaceutical.

So perhaps it's clear now. They do want a strong JPY. I hope all the crazy USDJPY longs out there are listening. On the other hand, China has just been in the market buying USDJPY, and Nomura has a buy recommendation out, so the longs are probably safe for a while. Either that or something got lost in translation.

As I write this EURUSD is selling off almost 100pips after a strong run towards 1.4350 earlier today. Quite expected given weekend risks with Spain's local elections on Sunday. Apparently we may even see some hidden debt coming to light if there's a change in office-holders, so keep a look out.

Peace

FX Trading - Slip Sliding Away

2011-05-19T09:12:00.001+01:00

It has been a good few days of consolidation, as dollar strength is sold into and vice versa with no real commitment either way. Classic range trading, trend remains down and all we need is a catalyst.

Nothing seems to have changed much; EUR is still weighed down by debt concerns, GBP is heavy as the MPC seems more and more reluctant to hike rates with fears of stagflation floating around, and the bozos in the US play chicken as the country's finances head towards a steep cliff. At least we have official figures showing Japan in a technical recession (you mean it's not a 'real' recession?), and we finally see more commitment from JPY sellers; although nobody's really surprised by the news.

Speakers and data galore again today, with UK retail sales expected out stronger in a bit, just surprised there's no rumour or leak yet.

Will be looking to buy dollars when an opportunity presents itself, although the thought itself is midly disgusting; buying the currency of a country so blase about debt. Oh well, beggars can't be choosers.

Oh wait. There is a rumour re: UK retail sales; much weaker, hence the GBP sell-off. Recently these rumours seem to be propagated by those with interests on the opposite side, as opposed to last month when they seemed more like leaks. We shall see.

Peace.

FX Trading - Wild Thing

2011-05-16T09:32:00.000+01:00

Deja Vu. Once again we ask, does the fate of the world depend on 1 man (this time round it's not that 'wild thang' hiding in Pakistan, but the one in charge of a certain monetary fund); because according to the media it may very well be so. Well if that's the case (we don't believe it for a moment) then sorry, Greece, but it's not the first time a woman caused you great grief. Remember Helen of Troy?

We have another interesting week in store as the EU Finance Ministers meet today, while the market is still reeling from last week's big moves. Lots of data starting with EU CPI, UK Consumer Confidence sometime during the day and US Empire Manufacturing. BOE mintues later in the week and a bunch of EU and US officials on the cards.

It's hard to see this bout of dollar buying ending as suddenly as it started, so while it's still quiet out, and consolidation takes place, nothing has changed to turn markets around. Uncertainty rules and markets will stay volatile before any longer-term clarity develops. We're always up for some dangerous fun.

By the way, looks like the missing post came back on again. Curious.

Peace.

FX Trading - Lost

2011-05-13T19:54:00.002+01:00

What happened to my post on Thursday?! I tweeted it as usual, then checking in today I see it's disappeared! Amazing, this technology thing...

Oh well, it's been too exciting these past couple of days, but just to leave a note here for myself:

Re: The BOE inflation report and ECB monthly report - these things have been losing their influence on the markets in the short-term; what with more recent developments and the climate of uncertainty hanging over the market, so feel free to read then put aside for future reference.

Peace

FX Trading - The Fast & The Furious: Tokyo Drift

2011-05-12T08:10:00.000+01:00

The title explains it all; everything was falling like so many bricks in a pool while USDJPY drifted higher. Yep, it was a resumption of USD strength as we had suspected, with analysts pointing to risk aversion; though we like to think of it as a return to sanity. If it was true risk aversion Gold would have been bid and USDJPY would have sunk too. USDJPY moved out of it's downward channel, so a case may be made for further strength, though we would not buy here.

One thing to remember: GBPUSD's spectacular reaction to the BOE's inflation report; how the pair gained over 150 pips on the day only to close slightly negative. Whatever the reason, it pays to ignore the inflation report.

Time for a summary: ECB officials continue to flood the wires with hawkish comments, BOE is uncommitted, the US is rather happy with its idea of a strong dollar, AUD's fate is tied to that of the precious metals for now, and Japanese exporters are fretting over the strong JPY. Markets are nervous as hell, having created a nice little bubble, but we think Wednesday's move has cleared out most of the weak hands and we'll more likely see a correction now than a continuation, especially since everyone is looking in the latter direction.

'And they will dance if they wanna dance
Please brother take a chance
You know they're gonna go
Which way they wanna go
All we know is that we don't know'
- Oasis, 'The Masterplan'

Peace.

FX Trading - Dancing In The Dark

2011-05-11T07:45:00.000+01:00

The market has regained some of its sanity since the last post, as precious (very, very precious at these prices) metals correct aggressively and EUR fell off a cliff. AUD is pulling back from it's huge sell-off, being the big benefactor of yield differentials, and GBP falls victim to dwindling expectations of a rate hike.

UK releases it inflation report later today, and in our view whatever it says should not be taken too seriously when trying to judge the possibility of rate changes. Fact is upcoming figures may change the scene drastically, even as officials seem reluctant to act on the rate front, quite convinced of inflation returning to target next year. Didn't Bernanke just say that recent inflationary pressures are only transitory?

Not much clarity at these levels, we may be seeing dollar correct its recent strength but a continuation is the preferred scenario, even as the US tries to convince China its holdings of US Treasuries are safe while at the same time trying to teach them how to run a country. Would you listen to someone on the verge of bankruptcy?

We're looking at USDJPY on a downward channel, rebounding after threatening a move to historical lows. Perhaps this is what an 'orderly' move looks like, which means the Japanese authorities may not be too alarmed; meaning a green light to sell the pair, barring a close above 81.00. Let the brave take the lead.

USDJPY - Is this orderly enough, Noda-san?

Peace.

FX Trading - Mysterious Ways

2011-05-03T08:40:00.000+01:00

Sometimes methinks I'm real thick. How Osama's death served to be a catalyst for stock market gains and USD strength was rather beyond me. Perhaps it was the after-effects of the Royal Wedding, the death of Indian guru Sathya Sai Baba, or the fact that I had a drink too many the night before? Or maybe Osama's brokers were busy liquidating all his USD shorts on news of his passing; now that sounds a lot more logical.

Regardless, a look at the charts seem to suggest that the greenback found a bottom on Monday; for now, of course - we can see into the future as well as said Indian guru. AUDUSD reached a nice round target of 1.10 and change while EURUSD momentarily popped above 1.49. USDJPY is hanging around 81.00 but this pair lives in its own world so nothing significant there. Margins for Silver futures have been increased twice since Friday, and this helped to put the brakes on a market going crazy selling dollars for everything, after Bernanke's blessings to do so. AUDUSD's negative reaction to a seemingly hawkish statement from the RBA after it left rates unchanged certainly said something about the willingness of a market to extend recent rallies.

So all in all it seems like time to look for opportunities to sell stuff against USD, although we know that markets are always the most volatile around tops and bottoms. So caution rules and we're not too bothered about not taking part in this madness for now.

Peace

FX Trading - Benny & The Jets

2011-04-28T08:13:00.002+01:00

Well, The Man has said his peace and you can see what markets make of it. No point adding to the noise on the wires, but this being my blog, i'll just note down my take on it; which is this:

Basically, Benny told the whole world to carry on and have their fun, not to worry, he'll let us know in good time when the party's ending.

It is really quite brilliant that they (or is it him alone) have decided to communicate their intentions in a more regular and structured manner; and while he still makes non-statements and presents a nice buffet from which you can take away whatever you want, at least we get some hints along the way.

And it must be real cool to have your book plugged by none other than the Reigning Fed Chief; you can't have missed the bit where his old buddy mentioned the book he wrote. And what was that thing about Japan? Must be a nice chap, this chairman.

Party on, Plebeians!

One last thing. It seems clearer to me now. Yes, the US wants a strong USD; all those Tsy Secretaries, Fed Chiefs and other such important officials over there haven't been lying through their teeth. I just failed to understand that what they meant was a strong USD for US citizens living and spending on US soil. They haven't been talking about the FX market or anything like that, what they mean is as long as you earn and spend dollars in the US, and inflation is maintained around the 2% level such that you don't feel your bank notes losing their worth (in the short time spans which mark human memory), then all is well and the USD is 'strong'. Localised spending power - Simple. It's just that rising commodity prices tend to muck things up a bit but hey, like Benny said, it's all China and the emerging markets' fault. To think that I thought they gave a hoot about EURUSD or other such nonsense....

Trading-wise, our GBPUSD position was taken out before the show began, and apart from a little scalping, we basically missed the chance to go shopping for a yacht this weekend; in the States, of course. We shall remain vigilant and partake in the party the Fed is hosting; 3 cheers for Benny!

Peace

FX Trading - Do It Again

2011-04-26T10:00:00.000+01:00

We're coming out of the long weekend to a historic week; for traders, punters and all us plebians!

First up, Mr Bernanke and friends begin a new tradition at the Fed, holding 4 press briefings a year after FOMC meetings, starting with this week's meet. Releasing the statement earlier than usual, the prez will present all his committee's economic projections after they're done; we're just wondering if he'll entertain questions. Come to think of it, if each of the members backed up their predictions with money, this will be just like a soccer pool in the office.

Then on Friday, the UK is closed for business for the Royal Wedding! Here's a note on the financial aspects from Bloomberg:

The Federation of Small Businesses calculates the extra public holiday to mark the nuptials in London’s Westminster Abbey on April 29 may cost the economy as much as 6 billion pounds ($9.8 billion). That’s 10 times the 620 million pounds Verdict Research, a unit of Datamonitor Plc, estimates that sales of wedding memorabilia might add to the economy. (emphasis mine)

Well, if there's a tradable UK Happiness Index Derivative at least we'll see a pop, which I'll definitely fade.

Trading

Our GBPJPY long was stopped out on a quiet Monday for a small profit. Looking at the action these few days, we'd say the market's consolidating for another round of USD selling; so will probably look for pullbacks to buy GBP or EUR, especially after the strong rejection of lows seen earlier today. May consider GBPJPY again but wary of volatility, and the deathly look of USDJPY after failing to stay above 82.00.

On Wednesday we have UK GDP and the FOMC taking centre-stage, followed by US GDP the next day and Eurozone CPI while the royals get married.

So all in all, it'll be an interesting week we trade in.

Peace

FX Trading - Changes

2011-04-24T10:22:00.002+01:00

Since everyone's so focused on rates, here's a look at GBPUSD with rate actions marked-out. Make of it what you will.

GBPUSD Weekly; rate changes

Notes:
- amounts in basis points
- last hike 05 Jul 07, 25bps to 5.75%
- last cut 05 Mar 09, 50bps to 0.50%; Start Asset Purchase Prog. (AP)
- last increase in AP 05 Nov 09 to GBP 200b

Peace