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Monthly Archives: December 2015

The buzz in the media has started.  Some are saying that the FOMC event is fully priced in the marketplace and others are saying that high volatility is expected in this impending event.

Bernanke was interviewed last night and he was quoted saying that the Federal Reserve needs to entertain ‘negative interest rates’.

90% of all economists interviewed by Bloomberg and 95% of Wall Street all believe that Janet Yellen will pull the trigger at 3am Singapore time and 3pm NY time.

Will Janet pull out a surprise from her hat and not raise interest rates?!  She has every reason to raise interest rates and also every reason not to raise interest rates.

Wall Street is debating whether she is a traditional economist that needs empirical data to line up like the stars before she tightens monetary policy of will she act more from her ‘gut feel’ of where the economy is going.

The world today is different, inflation in many developed countries is almost non existent, way way below the 1% or low 1%.  We will not see 2% for a long time, simply because there is a real threat that the developed countries may go into a deflationary phase.  Oil below $40/- per barrel with fears that it will go to $20/- is unfounded.  The world was buzzing with strong economic growth in the late 90s and oil was at $20/- per barrel.  Demand will always be there no matter how much OPEC pumps out of the ground or Big Texas Oil.  The world has a fascination for the internal combustion engine for fast cars ,luxury cars and basic transportation.  Be it recession or not, people will fill up their petrol or diesel tanks and drive their vehicles proudly.

So why does a falling oil price be of such a concern?  Well, why did oil go up to $140/- per barrel in the first place?  I believe it was speculation, I believe it was more and more producers getting into the game and with high capex, they needed to sell it at the elevated prices, I believe it was oil sands or shale oil.  The cost of extracting oil went from $12/- per barrel to an average of $68/- per barrel.  Should Big Oil profiteer from the general public?

Real estate prices has been escalating in all developed countries from the UK to the US to Australia and Europe.  Every developed country is excluding food and real estate from the CPI basket, however, if you were to include real estate into the basket, then, we will not be looking at the current 1% inflation rate but something in the region of 10%.

So are we playing around with numbers?  Isn’t real estate or more appropriately, dwelling homes an important component to be included in the CPI basket as it affects the wallet of all consumers as in the ability to pay their mortgage payments and the fact that it is a long term financial commitment.

If we look at the EURUSD and the GBPUSD hourly charts with Fibonacci overlayed, it appears that the EUR is trading at its near high and GBP at its near bottom.



If volatility is going to happen at the FOMC, will the two european currencies swing in opposite direction?

There so many permutations: –

Raise rates + dovish press conference

Raise rates + strong press conference

Rates stay put + dovish press conference

Rates stay put + strong press conference

In all 4 permutations, it can be argued for both a case of strong USD and a case for weak USD, why?  It is because the US is in a precarious economic position.  The truth is that the economy is not growing strong enough, moderate growth with some fragility, yes!

As time draws nearer, I am sure we will see more noise in the media.

The non farm payrolls is one of the important numbers the FOMC will be looking at for the potential rate hike two weeks from now.

I decided to place my straddle at 9:28pm with the following details: –

Sell EURUSD, Stop if Offered:  1.0880

Spot: 1.0900

SL: 1.0900

As it turned out, NFP came in higher at 211 versus forecast of 201, more importantly, last month’s number was adjusted upwards from 271K to 298K.

Unfortunately, the EUR whipsawed, my trade was triggered at 1.0877 and it was squared at 1.0907 for a trading loss of 30bps.

You can’t win all the time.

EURUSD is now hovering at 1.0877 @ 9:45pm.

Ok going to shut down for the week.  Here’s wishing all a great weekend.

I suppose the whole world was looking out for this event today, wondering what Mario Draghi will do.  We all know that he will continue to ease but the real question is whether or not the easing will be aggressive or not?

At about 8:33pm, I put in my trade with the following details: –

Spot: 1.0550

Buy EUR, Stop if Bid: 1.0570

Sell EUR, Stop if Offered: 1.0530

SL: 1.0550

At 8:40pm, Financial Times leaked that there was no change in decision, the EUR spiked up, triggering my 1.0570 level, I followed it till 1.0640 and squared the position right after the media confirmed that FT made and error.  I locked in a 70bps trading profit.

I decided to put in another trade with the following details: –

Spot: 1.0600

Buy EUR, Stop if Bid: 1.0630

Sell EUR, Stop if Offered: 1.0570

SL: 1.0600

At 8:45pm, it was announced that ECB cut deposit rate to -0.3% (previously, -0.2%), market took it as a ‘whimpy’ move by Draghi and instead of the EUR falling it spiked up again.  This time driving higher than the last level a few minutes ago.

It triggered by 1.0630 level and I followed it till it hit 1.0690 and I squared the position for a trading profit of 60bps.

In totality, 130bps trading profit thanks to Draghi.

As I was not really comfortable with the event because I felt that there could be some irrational whipsaw volatility, I decided to cut down my trade size and did only US$1Bn, much lower than our normal size.  Then again, risk management is also in managing the size of your trade.

I am not going to wait around for the press conference. Almost had a heart attack earlier.

Guess what?  The EURUSD is now 1.0800, 10 minutes into the press conference.  Did I want to risk the gains in my earlier trade? No, decisions we have to make each time given the situation at the time.  Easy to say in hindsight, but when one is in the hot seat at the time, what will we decide to square the position or keep it open?

Believing that this is a data is keenly watched by the market and BOE I decided to place my straddle 5 mins before 530pm

Expectations is 58.4. 

The details of my trade:-

Buy GBP, Stop if bid 1.5070

Sell GBP, Stop if offered 1.5030

Stop loss at spot 1.5050

As it turned out the reading came in much lower at 55.3. 

It triggered by 1.5030 level. Unfortunately it really didn’t go anywhere and finally I cut loss and bought back the GBP at 1.5037

So disappointing. 

Tonight ADP and JANET Yellen speaks?!

Ladies and Gentlemen,

Given the rather disappointing straddle trades of late, I have been experimenting with some charting strategies to see whether or not it could develop into something more consistent and permanent.

Please look at the 15 minute GBPUSD price chart overlayed with Ichimoku and 50SMA.


I decided to try out a simple strategy of looking at the Ichimoku together with the 50 day SMA.

I realised that every time the 50SMA cut from below or from above, the GBPUSD will either strengthen or weaken correspondingly.

So I decided to try out this strategy, so last night at about 10:22pm, at the level of 1.5030, I decided to LONG the GBPUSD at this level with a SL of 1.5o00.

This afternoon at about 4:55pm, I decided to square the position at 1.5112 for a trading profit of 82bps.

Not bad!!!!!!!

Will continue to monitor this strategy and see whether there is some consistency in it or not.

By the way, any of you haven’t yet asked me what are my settings for my Ichimoku?

Good trading………………