forex trading

USD Headed Lower – And Then Lower

Forex Kong 24 Comments

This won’t come as a surprise…coming from me but – USD is headed much lower.

I think it’s about time – we’ve had enough of this “mucking around” at these levels, having more or less “danced around” the past few months. It’s time for the next leg down.

I don’t have time here this morning but if you want to pull up a general chart of the $dxy or in some platform (like stockcharts) $USD, I’d get your sights set on a serious of long red candles taking us down into that area around 75 – 72 in coming months.

If this “doesn’t” correspond to an “inverse move” in the price of gold and silver ( looking at is as such a dramatic decrease in USD value ) I will be forced to take on “the Habanero challenge” as I have offered several times in the past.

Up 3% overnight alone with the majority “still coming” from trades entered in GBP vs Commods in the weeks past. I suspect the Nikkei will “attempt” a solid double / retest top at 16,000 ( the high from May ) as JPY futures inversely “double bottom” shortly.

Enjoy:

Epic Close – New Highs For Dummies

Forex Kong 8 Comments

Another fantastic week of trading comes to a close.

An epic close at that, as U.S equities continue their relentless climb higher – higher indeed, to the absolute highest level ever. EVER!

THE U.S EQUITIES MARKET HAS REACHED IT’S HIGHEST LEVEL IN THE ENTIRE EXISTENCE OF MAN.

I applaud the U.S Federal Reserve for their achievement. Bravo! You’ve done it.

You’ve successfully devised a system, “where in” you and your cronies eat lobster and fillet mignon for breakfast lunch and dinner, every day of your lives – while passing the bill on over to the waiter, bartender and busboy ( frantically scrambling for any “scraps” they can tuck away in their gym bags) leaving pennies for a tip.

Bravo! Bravo! Everything is coming together perfectly – exactly to plan.

This chart on U.S Macro Data…………again.

US_Macro_Data

US_Macro_Data

How come I keep killing it with generally “bearish stock market calls” and “100% bearish currency movements”?

Duh!

This thing is being sold on a level you’ve no possible comprehension of.

No “possible” comprehension of.

Have a good weekend all. Buy buy buy!

Pffffffff……….

 

Japan As A Model – Slaves To The Bank

Forex Kong 17 Comments

Japan is the world’s third largest economy and a key trading partner to all of the large powers with a current “debt versus the country’s GDP” at 230% – the highest in the developed world. And if you add in corporate and private debt, total Japanese debt equates to more like 500% of GDP.

Think about that for a moment.

Any given year the country of Japan “owes” (lets average it out) 3X the amount of money that it currently “makes”. That’s what I call a serious credit card limit – totally maxed.

To illustrate just how fragile this situation is ( and possibly foreshadow a likely “similar” situation currently developing in the U.S ) if the base interest rates in Japan where to rise to a piddly 2% ( as the current rate is at 0.1% ) it would have “interest expense on government debt” equate to 80% of government revenue. That’s 80% of the countries GDP ( essentially ) going to pay the INTEREST on outstanding debt alone!

This “tiny jump” in interest rates would cause complete chaos in the bond market, be absolutely impossible to service, and likely lead to full-blown economic crisis.

So what’s the plan in Japan? Seeing that even the current stimulus plan ( 3X as large as th U.S current QE) is “barely” allowing them to hang on? More printing? More government bond purchases?

And of course when all else fails….what’s another great way a government can increase its revenue?

Raise taxes, and essentially make the people “work off the debt”.

Sound at all familiar?

Slaves to the bank. That’s what I see.

The “short Aussie” “post and subsequent trades of the last 24 hours have been spectacular as “indeed” the Australian Dollar took some serious damage overnight. Do I think it’s done? No way….The Aussie’s got a ways further to fall.

Waterfalls In Australia – AUD Going Down

Forex Kong 21 Comments

I’m not going to get into all the details here at the moment as……I imagine the majority of you could really care less.

“Just give us the trades Kong – what’s the trade Kong??”

The Australian Dollar is in real trouble here.

Considering that the RBA is opening “talking down” AUD as the currency is considered “overvalued” (and in turn hurting Australia’s economy), coupled with the fact that “it’s been a nice run” on the back of massive expansion and development of China – it could very well be time for some serious downward action.

AUD has already come down considerably but…..I might see a “waterfall” coming – in the not so distant future.

Trades short in AUD/JPY would likely make the biggest move, as well for stock traders short “FXA”.

Buy Volatility As Your Hedge – Why Not?

Forex Kong 10 Comments

I must have dreamt it but…..I could have sworn I’d posted this chart some time ago.

A quick look at $VIX.

THE VIX REACHED 90.00 AT THE HEIGHT OF THE CRASH OF 2008 IF THAT MEANS ANYTHING TO YOU.

Forex_Kong_Vix

Forex_Kong_Vix

Volatility “rises” when fear sets in. This cannot be questioned.

The $Vix has “bobbed along the bottom” for the entire Fed driven rally, and cannot / will not break below around 12.50 no matter how high the market goes. This is complacency to a degree BEYOND my scope of understanding….as it’s painfully clear that most people have indeed been “lulled back into thinking” every is going to be alright.

THE VIX HIT 90.00 back in 2008!

Risk Appetite – You'll Get It "Eventually"

Forex Kong 14 Comments

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.

Small Trades Initiated – Smaller Expectations

Forex Kong 6 Comments

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.

EU Zone Trouble – More QE On Deck

Forex Kong 9 Comments

With all the high-flying stocks out there, and the endless promotion of “recovery in the U.S”, it gets harder and harder every day – to believe anything less. The media machines are in full swing, and the general census ( I believe something like 74% of analysts / newsletter writers ) suggest that the sun is shining, the water is warm – common everyone! It’s safe! Jump on in!

You know – I bet the majority of people “actually believe” that “miraculously” – the troubles in the EU Zone have all magically vanished as well! I’ve heard the floating heads on CNBC as well CNN state this as fact. Josh Brown ( a well-known floating head on CNBC ) looked me square in the eye the other day and stated that “the recession in the EU Zone was over”.

Some facts borrowed from Graham Summers:

1) The European Banking system is over $46 trillion in size (nearly 3X total EU GDP).

2) The European Central Bank’s (ECB) balance sheet is now nearly $4 trillion in size (larger than Germany’s economy and roughly 1/3 the size of the ENTIRE EU’s GDP). Aside from the inflationary and systemic risks this poses (the ECB is now leveraged at over 36 to 1).

3) Over a quarter of the ECB’s balance sheet is PIIGS (Portugal, Italy , Ireland and Greece ) debt which the ECB will dump any and all losses from onto national Central Banks.

So we’re talking about a banking system that is nearly four times that of the US ($46 trillion vs. $12 trillion) with at least twice the amount of leverage (26 to 1 for the EU vs. 13 to 1 for the US), and a Central Bank that has stuffed its balance sheet with loads of garbage debts, giving it a leverage level of 36 to 1.

The troubles in the EU are far from over, only masked during this “latest attempt” to ensure confidence in a system that is hanging precariously near the edge.

Keep in mind Spain’s currently unemployement rate is 25%!

The European Central Bank is currently considering ( and will soon likely implement ) a QE program of it’s own with bond buying and the works, similar to that of Japan and the U.S

This, coupled with “almost guaranteed” additional stimulus from the Bank of Japan has this currency war shifting gears moving forward, and leaves absolutely NO ROOM for tightening / tapering.

I will continue to complete ignore the media, as with the example sighted above……they are “paid” to keep the puppet show going.

Sunday Trade Planning – Octopus Ceviche, Charts , News

Forex Kong 13 Comments

Sundays are special days for me.

I get up even earlier than usual – and usually start some kind of “exotic food preparation” as the sun pokes up, the birds start “doing their thing” and the wheels start turning.

It’s not unusual to find me in and out of the kitchen for most of the day actually, as an ingredient missed here or there, has me out to the market then back again – all the while “other recipes” dancing around in my head.

Sundays are for planning.

Often what I’ll do on Sundays is – break out the charts on every single asset class known to man, and pretend / imagine that I have absolutely no idea whats “currently happening in the world”, and take a look at everything from a purely technical perspective. Starting with big ol monthly charts, then weekly, then the daily and finally down to the “current action in price”. I’ll then plot some horizontal lines at key areas of support and resistance, and look to identify “how close or far” we currently are from these significant areas of price.

Chop some onions, start steaming the octopus etc….

Then I’ll do the complete opposite.

I’ll start poking around the net at the usual “news haunts” , make note of any significant developments as well any significant announcements due for the week ahead. I’ll re-evaluate / freshen up on interest rates across the board, and do what I can to formulate a general idea of where we are at – “without” looking at, or considering a single chart.

Squeeze  limes, dice tomatoes , wash cilantro…..

Putting it all together in this way, lends itself to keeping an open mind , and often provides fresh perspective where “perspective” is needed. It’s easy to get overwhelmed while you’re in the heat of battle during the week, so the “sunday reprieve” is a fantastic way to just pull back and “re align” yourself with things, get prepared for the week ahead and enjoy some fantastic food as well.

We could very well be in for some big moves here in the week ahead, but for now………lets eat.

Octopus_Ceviche_Forex_Kong

Octopus_Ceviche_Forex_Kong

Global QE – Currency Wars 2.0

Forex Kong 19 Comments

The Japanese stock market has ripped higher the past two consecutive days – pushing through overhead resistance and seemingly broken out, on the back of Janet Yellen’s last two days testimony ( I’m not holding my breath but very often these “inital moves” are the “fake out” only to be reversed days later ).

As the new chairman of the Federal Reserve, Mrs Yellen made it “all too clear” that she is indeed the “dove” everyone was expecting – and that further monetary stimulus was most certainly her “tool of choice” in the ongoing battle to right the U.S economy.

I am even more confident now that the Fed will “increase” its QE programs in the new year, and that further destruction of the U.S Dollar is all but a given. Simply put “those of us in the biz” know pretty much for fact that Japan is planning to increase its stimulus come April, and it now looks like “only a matter of time” before the European Central Bank throws their hat in the ring as well.

Given these circumstances, and the continued unemployment numbers and poor data coming out of the U.S – any idea of tapering is ridiculous, as “if anything” the Fed will need to “step it up” in order to remain competitive with the currency wars now headed for the next level.

With such an “unprecedented scenario” playing out over the coming months / year it’s pretty fair to say we’re going to see more of the same – this being the most hated “risk rally” in history. A difficult situation for “fundamental traders” as clearly the fundamentals play no role with the continued “pump of liquidity” so……..we take it day by day – rely on our technical no how , patience and experience to navigate the waves and continue to profit.

Having my longer term views yes…I could care less which way this thing goes short-term as…..which ever direction the money goes – I’ll be going there too.

I’m sticking to my guns here through the weekend and into next week, still looking at this as an excellent area to start looking “short”. The Naz short still in play, the weak USD considerations still in play, and the “inevitable turn” in JPY has only gotten juicier here as….when it does make it’s turn – its’ gonna be a whopper.