With Japan now out of the way….we can clearly see that markets don’t dig it. The Yen is powering higher which is the absolute last thing Japan would like to see.
A strong Yen is terrible for Japan ( as a strong currency is for any nation these days ) and suggests that money is actually flowing “out” of markets – back to the place where it was originally borrowed at 0%.
Think about it.
Let’s say you went nuts and borrowed thousands of dollars when the interest rate was 0%, then invested it in U.S Equities hoping you could make a buck. Months later your U.S Equities trades are flat at best, but even more likely sitting at a loss. Then you figure out……hey wait a minute – if we get an interest rate hike here in The States…this market is gonna tank! You sit there thinking…..man I better get the hell out of here, or I am gonna get killed.
Imagine if they actually DO raise rates in the U.S today? You are hooooooped!
How will I pay back all that Yen I borrowed??
So you unwind your trade. You sell your U.S Equities likely at a loss…..then you have to convert the U.S Dollars “back” to Yen ( at a new rate that also hurts ) and finally pay back your loan. This is the fundamental driver behind movement in the currency pair USD/JPY. This is why it’s been tanking since markets “actually topped” back in late 2015. Everything else has been pure distribution as the big boys and heavy hitters unwind their Yen Carry trade, and it’s taken more than a year to quietly do so.
You can see it on the charts so clearly, and now that USD/JPY is at parity……things could get pretty ugly.
Clear signs that markets have more or less topped out – and have been distributing to retail “hopefuls” for the past full year.
Little mining stocks on fire….just getting started in the larger macro trend people so……go grab a couple!
Blah, blah blah……as once again The U.S Fed and Bank Of Japan keep markets on their toes.
Tomorrow we “should” hear from both, which sets up a pretty tricky scenario if you are thinking about placing any trades prior to the announcements. That’s not how I roll, although…….I am still holding every single trade entered like – 10 days ago.
Conviction is great, as I am 100% certain that The U.S Fed will not be raising interest rates this close to the election but we can never EVER count on The Bank Of Japan to do what we expect. In fact…there have been several times in the past where The BOJ has surprised markets – big time.
You are aware that the BOJ and The U.S Fed have been working together on this “propped up market” for years now right? Taking turns cranking up the printing presses as to keep these fake dollars / yen rolling into markets?
BOJ takes the next kick at the can
This coordinated effort is widely known….yet poorly understood.
It would not shock me in the slightest to hear Japan “beefing up” its easing and money printing efforts in order to keep the balls in the air a while longer as…..Japan is deep DEEP in The Fed’s pocket.
If Japan pulls the trigger ( allowing The U.S off the hook ) expect markets to rally…..otherwise…we continue flat across the top. Flat across the top until the elections are out of the way…then down.
Further currency trading prior to tomorrow’s announcements is plain stupid.
Sit tight….wait and see what shakes out.
Posted without comment.
There will be no rate hike. Impossible.
USD to continue lower.
So the number of people who filed for unemployment assistance in the U.S. last week rose less than expected, remaining in territory associated with a healthy labor market, official data showed on Thursday.
In a report, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending September 10 increased by 1,000 to a seasonally adjusted from the previous week’s total of 259,000. Analysts expected jobless claims to rise by 6,000 to 265,000 last week.
I love the media spin, framing this as good news….that the number of people without work is rising “less than expected”. Why is it rising at all? Only another quarter million U.S citizens filing for unemployment benefits last week…………..last week!
Talk about waiting for the other show to drop. That´s what I call a recovery.
I´m so deep in profit on long EUR/AUD ( 400 pips ) I will consider taking profits before the weekend. Unfortunately a number of other trades still remain flat…but stops have been moved to break even so….risk has been eliminated.
I´m holding all trades…just bored as hell.
Professional traders don’t care if they get stopped out, because their money management rules allow for it. Trades are trades…nothing more. The key is to have more winners than losers at the end of a given month / year.
Amateur traders freak out when a trade moves “even the slightest bit” against them because 9 times out of 10 they’ve traded far to large ( or on margin ) and very quickly realize – if a single trade goes against them…..they’ve blown up their account and are left with nothing.
Professional traders plan the trade “first”, while amateurs chase news events and headlines, more often than not finding themselves on the wrong side of the trade – cuz they are chasing and idea…and are likely far to late.
Pros look at the “macro “ while amateurs still believe they can `day trade it`with nothing but a stock chart in front of their faces.
Pro Traders vs Amateur Traders
Professional traders inevitably find themselves trading far less often ( picking their shots more effectively ) while amateurs tend to over trade…exposing themselves to far greater risk ( in volume of trades alone ) and in the end….far greater losses.
Pros have no emotional attachments to a trade. Amateurs are fully invested “emotionally“ which clouds good judgement, and again leads to over trading and panic.
The list goes on but in a general sense, the largest difference between the two ( go figure eh? ) is really no secret.
So…..if you want to log hours and hours / months and months / years and years of successful trading….what’s the biggest tip I could offer?
Trade smaller. Live longer. Make more money.
Volatility obviously on the rise here these past days……..short USD trades and long Gold / Silver miners good. Just flat as a pancake these last few days. Slug it out….or freak out. You a pro or an amateur?
The EUR ( EUR ) has gained just over 100 pips vs The Australian Dollar ( AUD ) since this morning – as suggested.
When risk comes off ( markets cool or turn lower ) commodity related currencies such as AUD, NZD and CAD generally fall. This you can file away in your tool drawer, for the lifetime of your forex trading career.
Risk on = AUD, NZD and CAD UP! Risk off = DOWN.
When risk comes off…..”funding currencies” such as the Japanese Yen rise…as the money that was borrowed at near 0% interest, comes flooding back to Japan when stocks are sold. This too you can include in your “basket of trade secrets” for the forseeable future ( or at least until Japan totally implodes ).
We’ve got USD falling, EUR rising…..and in turn can formulate a tonne of trade ideas knowing as well that JPY rises when risk comes off….and the commodity related currencies fall.
EUR Looking To Fly Hgher
There it is! You’ve got this!
Now…..things get a little tricky when you then consider trading pairs such as USD vs AUD where ( in theory ) BOTH should be falling! The trick here is two-fold. One – don’t trade a pair that you can’t work out where each of the individual currencies “fit” in the grand scheme of things ( based on the above breakdown ). Two – keep these ambiguous pairs “on watch” until you can clearly discern which way they’re going.
Always look for the largest moves to come in currency pairs that pit a funding currency ( cheaply printed JPY ) against a commodity related currency ( AUD ) when risk appetite/aversion shifts.
Getting a “macro view” of how each currency “behaves” during times of “risk on vs risk off” can be very valuable, and will help you simplify your trading. If you can’t reference each of the currencies you are trading, within this general framework – don’t trade’em!
It´s simple. Very simple.
The EUR and The U.S Dollar are simply the two most widely held currencies on the planet. This being said….you can usually generalize that weakness in one suggests strength in the other ¨regardless¨ of the news. Seriously…….all news aside you can generally just look at EUR and USD as ïnterchangeable¨ – trading nearly 100% correlated. Tit for tat.
So……..with further consideration that USD has now reached a major inflection point ( and is headed decidedly lower ) we can also assume that EUR is set to bottom. Fair assumption?
Now you start looking at EUR pairs specifically and ask yourself……which currencies will I see the largest moves in against EUR?? Well…….we can also assume that commodity related currencies take a hit when risk appetite subsides right? Currencies like AUD and NZD ( Australian and New Zealand ) generally fall when risk appetite wains so……long EUR and short AUD?
I’m watching exotic pairs such as EUR/AUD ( which also falls into my ¨faceripper¨ category, being that this thing is extremely volatile, and ready to blow up in your face at any moment ). You can’t trade this thing…..but you can sit on the sidelines and observe.
I´m watching this pair as of today…..not trading it – YET!
Facerippers are nuts. These currency pairs will clean out your account without a moments notice so please – do not try this at home! Watch this pair……watch for the coorelation to ¨risk on vs risk off¨.
There’s little more to be said here this morning – as The U.S Dollar plummets nearly a full 1%, down a full 100 points from 96.00.
Absolute Dollar devastation as both GBP as well EUR make 100 point gains, USD/JPY hit’s resistance and dumps….and our little gaggle of gold and silver miners now up 7-9% since entry.
I’m obviously short as “sh&%t”…and very well positioned ahead of the move. So what could you have done better perhaps?
- You “could” have plotted areas of support and resistance on your charts “long before this move was made”, and have been fully prepared with your orders
- You “could” have created 3 small orders and “legged in” over the previous 3-5 days, ensuring and average price and not betting the farm on a single entry.
- You “could” have shut of your T.V, eliminated the noise, and gotten back to your charting…where you would have clearly seen the set up coming.
- You “could” have opened your mind to the “other side of the trade” ( vs the general main stream media ) and taken advantage of some pretty early indications ( here at the blog ) that things where about to turn.
There it is…..likely the best possible entry / trade tip / suggestion that you’ve seen laid out for you over the last several days…no stress….no pressure. No chasing markets in panic…no text marathon’s with your broker…just proper planning and execution. A very well placed trade, looking to become a very VERY profitable trade.
So what are you gonna do now? Seriously………..what are you gonna do now?
As I’m sure you’ve been following the “bold call” earlier this week..our dear friend U.S Dollar “has indeed reached the 96.00 level”, and as suggested – has clearly been rejected.
On has to appreciate not only the timing and levels, but the “patience required” in planning your trades, then executing properly.
This trade “short USD” was outlined back on Monday.
This is the key difference in “planning a trade” as opposed to waking up early one morning, and “impulsively taking a trade” cuz of something you’ve heard / seen on the T.V. This generally has you “chasing markets” and usually ends in a loss.
Broadstroke……this has USD headed lower as expected. and will also likely mark a “daily cycle low” for both Gold and Silver ( have you bought your few small mining companies yet? ) providing these with several days upside to follow.
Perhaps consider a shot at EXK and / or GPL for some silver plays ( fun ones…….very cheap ).
Have at it people. If this hasn’t put you in a decent spot to make a buck er two shit……..what else do you need?
Call it 96.50 or 97.00 – I mean seriously. We are talking about 1/100th of a cent difference in the value of the currency so…..take your decimal points and go blow it. Its far bigger than that.
Forex is highly leveraged, and great deals of money can be made on even the smallest of moves but…..thats not the reason I trade forex.
I trade forex because it’s the ¨window to our world¨. Economically. Geo politically. Nothing goes on in any other market, any other asset class that isn’t first reflected in the currency market.
The trick is only to understand it.
Forex trades 24 hours a day…no pre market bullshit….no after market earnings announcements ( ever wonder why they do that? ). You don´t wake up in the morning to find out your stock has traded down 23 bucks during the hours that you´ve been sleeping….laying there – powerless.
You can stay in the game – out on the field 24 hours a day!
I like that as…….I like to play…and I´m very good at it.
USD in the 96.00 area suggests a serious inflection point. I won´t get into the fine details….just sticking to the plan.
You lining up any trades?