You know me. I’m a currency guy.
As each of us “eventually” find our specific area of interest, be it options or futures, equities or bonds, currency or commodities, you’d like to think that – over time…..we get better at it.
After countless hours and many, many sleepless nights – finally……finally things start to come together. If you stick with it long enough “eventually” trade ideas and entry signals “literally” – come “leaping out of the computer screen”.
I suggested the other day that I was seeing weakness in the commodity related currencies. Those being the AUD, NZD as well the CAD. I also initiated a trade “short tech” last week – that is now about a “millimeter” from being picked up. The weakness in commodity related currencies cannot be ignored as…these currencies represent risk. Would it just be coincidence if we where to see the “short tech trade” get picked up , and see equities pullback as well?
I think not.
The currency market is like ” a gazillion times larger” than a single countries equities market, and it’s always been my firm belief that “currencies lead”.
You don’t get a “sell off in AUD” for example – because equities markets are looking weak. Equities markets “become weak” as “risk appetite” wanes. Appetite for risk is seen via currency markets “long before” it’s reflected in a silly bunch of stocks.
Take it for what it’s worth as everyone has their own views but…..to ignore movements in the currency markets, in exchange for headlines on the T.V, or perhaps an analysts opinion sounds like a great way to lose a lot of money.
I’ve entered “several new positions” short the commods against a variety of other currencies as my original “feelers” are looking quite good. GBP has been a monster, and CAD and AUD in particular have been taking some decent hits.
I’ve stepped into the market with a handful of trades, keeping positions very small – with relatively tight “mental stops”.
Seeing the commodity currencies stall early yesterday, I’ve got to keep pushing in order to continually pull money out of this “labyrinth” we currently call a market.
Not having the “larger time frame stars aligned ” in situations like these, often what I will do is jump down to the smaller time frame charts “regardless” and apply the same technical know how / skill – only with far smaller expectations, far smaller position size ( if that’s even possible these days ) and with a set % of risk, all-knowing I’m not in the “absolutely best place to place a trade”.
Often these “feelers” turn into fantastic starter positions as I generally “buy around the horn” but….one has to keep an open mind – considering the current market conditions.
That being – nothing is for certain.
USD continues lower, but fairly “unconvincingly” as JPY has shown the “tiniest bit of strength” although again – with little conviction. The commodity currencies are weak, but still hanging in there, creating an overall trading environment fraught with indecision.
I’ve entered long GBP/AUD as well GBP/USD , as well a couple “shots” at commods vs yen.
Well – what can be said?
It looks as though I’ll have no trouble “celebtrating in style” here today and through the “Day of the Dead” celebrations set to kick off here in Playa over the coming days – as we nailed the upside turn on USD literally to the minute. That, coupled with the incredible moves in AUD overnight ( I sent out the tweet, and even put a post together as fast as I could!) has me up an additional 3% and “holding” here as of this morning.
As well the “offical” 1 year anniversary at Forex Kong!
Day of the Dead (Spanish: Día de Muertos) is a Mexican holiday celebrated throughout Mexico and around the world in other cultures. The holiday focuses on gatherings of family and friends to pray for and remember friends and family members who have died. It is particularly celebrated in Mexico.
It’s Halloween on an entirely different level, lasting nearly 3 full days (and even gets an official bank holiday). The costumes, art work and cultural festivities are second to none. I encourage all of you to Google it / have a look online.
So, that’s about it for this morning short of keeping our eyes on reaction across other asset classes as the USD digs in here, and looks to wipe out a serious number of players “still” sitting on the other side.
The following a direct quote from Glenn Robert Stevens – an Australian economist and the current Governor of the Reserve Bank of Australia.
“The foreign exchange market is perhaps another area in which investors should take care.
While the direction of the exchange rate’s response to some recent events might be understandable, that was from levels that were already unusually high.
These levels of the exchange rate are not supported by Australia’s relative levels of costs and productivity. Moreover, the terms of trade are likely to fall, not rise, from here. So it seems quite likely that at some point in the future the Australian dollar will be materially lower than it is today. “
You’ve got to love it when a central banker:
- Tells the absolute truth.
- Tells the absolute truth.
- Tells the absolute truth.
Short AUD has been ” and will continue to be” an absolutely fantastic trade moving forward, as perhaps “finally” we get the correlation to “global appetite for risk” back in vouge.
I don’t care what anyone else says ( obviously no? ) as we’ve all got our own opinions.
You can listen to the constant stream of bull%&it coming across CNBC justifying company after company’s earnings misses – then the ridiculous “short-term reasons” they suggest.
Fact of the matter is, the majority of companies that indeed “have met earnings expectations” have largely done so via cost-cutting and margin expansion. Don’t be fooled – this is not revenue growth. Your company might “appear” to be doing better as well – with 60 fewer employees etc…
As “the “global supplier to construction and mining industries, Caterpillar (NYSE: CAT ) sees the very foundation of economic expansion, and is often considered an economic bellwether, particularly in emerging economies like China. More machines sold means more holes dug, more roads built etc.
If in the absolutely “simplest sense” one can’t see / comprehend CAT’s massive earnings miss as indication of global growth “slowing” and forward guidance as “further slowing” – I’d be extremely concerned that you may need to have your head examined.
CAT is no “one hit wonder” or some “.com fly by night”.
As CAT goes………global growth goes.
I’ve booked ( and I do mean booked….ie sold positions and placed the money on the “plus” side of the account ) an additional 4% here this a.m – as per the trades outlined just yesterday.
If there is one thing I really can’t stand – it’s watching these “real profits” disappear during the NY session as the usual “POMO ( permanent open market operations ) pump job” continues to mask the true fundamentals….lurking underneath.
More often than not, an entire “weeks” worth of planning/strategy and profits can be completely “wiped clean” during the NY session as “counter trend rallies in reality” ( as I like to call them ) play out daily.
You’ll note that Asia and the commodity currencies got absolutely hammered last night with the Japanese Nikkei down a whopping 445 points, yet today “during the con job” I don’t imagine you’ll hear a thing about it.
Do think it just might be possible that our dear friends in Asia woke up to see the NFP / employment numbers out of the U.S and said: “Holy shit – that’s crazy!! What the hell is going on over there? Are these guys seriously talking about “recovery”? Bleeep! – sell.
Left to their “own devices” U.S markets should be crumbling like a moldy ol tortilla – left to sit out on the counter too long.
I’ll tuck my pennies in my pocket and continue on “after” the gong show rolls through.
I’ve got my eye on the “Kiwi” regardless of which pair, for the pure reason that it looks severely overbought.
Overbought – A situation in which the demand for a certain asset unjustifiably pushes the price of an underlying asset to levels that do not support the fundamentals.
Now, The Bank of New Zealand has recently made mention of a possible “hike” in interest rates (which has most certainly been the tail wind behind the latest advance) but the Kiwi still represents a “risk related currency” and is subject to large moves when appetite for risk wanes.
Have a look at the daily chart and see how “84.00” looks like a solid area of resistance.
Now, “86.00” doesn’t look completely out of the question, but with the usual “staggered mutli-order” approach, I’m seeing the risk vs reward looking pretty good for a short up here.
Another full day’s downward movement will likely trip the Kongdicator ( as I am free wheeling here on this one so far ) so we’ll keep our eyes peeled for that.
In case you’ve forgotten about it. The “insanity trade” is still very much alive. So much so in fact, that I want to (not only bring you up to speed) – but also introduce……..Insanity Trade 2!
Not much different from the original “insanity trade” we’re talking about EUR/NZD this time.
Ok. Wrapping your head around the “reasoning” or the “fundamentals” behind these trades is a stretch for even the most experienced of traders. Pitting the Euro against AUD and now NZD? What the hell? Why? How? What could you possibly be thinking about “fundamentally” to consider such a bizarre trade / pairing? Now?
I’m not going to tell you.
These are the Insanity Trades remember! You need to be insane to take them, and possibly insane to understand them!
I am placing an order long EUR/NZD a full 100 pips above the current price action – my order to buy is at : 1.6260
The current insanity trade is currently sitting EXACTLY BREAK EVEN at 1.43 ( what? you think I sold / freaked on the Fed? Hell no! ) – It’s an insanity trade.
That’s it. Do not try this at home.
In case you haven’t noticed – commodity currencies are strong across the board this morning. The Kiwi , Loonie as well the Aussie all making reasonable moves upward against nearly everything under the sun.
Generally associated with “risk” I do find it interesting that these currencies are exhibiting relative strength a short 24 hours ahead of the Fed’s Announcement. Further “blurring” the markets expectations of a “modest taper”, a “super taper” ( highly unlikely ) or no taper at all , seeing these currencies on the move could be perceived a couple of ways.
- Ramp job into tomorrow’s announcement ( with consideration/expectation of “selling at higher levels”) and selling the news.
- Heightened expectations that “everything is gonna be just fine” and money flowing into these currencies early.
Unfortunately it requires “speculation” as to which way things are gonna go tomorrow as the market isn’t “giving it away” that easily. Low volume is also a contributing factor as price moves are exaggerated.
The Kiwi in particular is on a real tear this morning but “just now” bumping into its resistance zone.
I’ve stopped out on a couple of scalps from the night prior, as I’ve no intention of holding anything “for fun” under the current market conditions. JPY longs are a long-term hold regardless, and I’m out of all USD related pairs, more or less 85% cash – looking for entry after Wednesday’s announcement.
I’ve been watching the market like a hawk these past 2 days.
I’d spotted the weakness in USD, then in turn the Japanese “Nikkei” pushing up to its prior level of resistance…then it’s rejection, discussed the likelihood of the Japanese Yen (JPY) taking on strength in times of “risk aversion”, and just in the last few hours suggested that commodity currencies are under pressure.
I’ve taken on the “insanity trade”, and have been actively posting just about everything I can ( here and via Twitter, Google+, Linkedin and Facebook) over the past 48 hours as to what I’m looking at – and what I’m up to.
So what the hell – here’s another nugget.
I’ve exited all “USD short” positions, and am currently looking at “risk off” type positioning via “long JPY” ideas, as well a couple other “crafty variations on risk” short AUD as well NZD.
The one variable I’d not really not “nailed down” this time around, was weather or not USD would “fall along side risk aversion” ( as it has several times these past 2 quarters ) OR if the old school correlation of “risk off = USD up” might rear its ugly head once again.
Global “risk aversion” WILL have USD as well JPY shoot for the moon as “safety is sought” on a macro / awesome / unbelievable / nut bar / chaotic / monumental level – while “risk is sold” in equal fashion.
I’m pleased to be free of any USD related trades, and almost hate to say it but…….we “could” ( and I do say “could” ) be close.
Kong “debating long” USD.
JPY pairs are most certainly rolling over here as suggested with Nikkei making it’s daily “swing high”. Commods look weak so that’s pretty much a given trade. What remains to be seen is where we fit the good ol US of D. My “hunch”? – We’ll have to wait a day for that.