At about 7pm on Friday, August 12th, I saw the yen starting to fall from its peak of 102.23, my gut feel was telling me that this is a window I had missed a few days back when I thought it would go higher than 102.
So I decided to square off my cash position at 102.10 against my entry of 100.80, it was a nice trading profit of 1.3 yen.
Even though ADP earlier in the week came in on the money, that is, 179K versus forecast of 171K, there was still an off chance that NFP today could come in stronger than forecast. Then again, it’s the summer and usually there are more job creations during this period.
I decided to put my straddle trade on the EURUSD and USDJPY at about 8:26pm with the following details: –
EURUSD – Stop if Offered at 1.1108, Spot at 1.1138, Stop if Bid at 1.1168 and corresponding SLs at 30bps out.
USDJPY – Stop if Offered at 100.80, Spot at 101.18, Stop if Bid at 101.48 and corresponding SLs at 30bps out.
As it turned out, NFP came in very strong at 255K versus expectations of 180K.
Both my trades was triggered.
I squared the EURUSD at 1.1048 for a trading profit of 60bps.
I squared the USDJPY at 101.82 for a trading profit of 0.34.
A pretty good end to the first week of trading in August.
It’s TGIF and I am going to shut down my computer and go meet some friends for drinks!!!
Here’s wishing one and all a great weekend.
Market had almost priced in an interest rate cut of at least 0.25% some even speculating 0.50%. However, the sensible cut would be 0.25% and the BOE did not disappoint.
Market was really waiting for whether or not the BOE will announce a larger asset purchase amount to pump more liquidity into the economy post Brexit to help boost the economy.
I decided to place a one leg straddle with the following details: –
GBPUSD: Stop if Offered at 1.3300, Spot at 1.3325 and SL at 1.3330
As it turned out the interest rate cut didn’t really move the market, but what cause the floor from under the GBP to collapse was the announcement of an increase of 60Bn to the asset purchase program totaling 435Bn (previously, 375Bn).
My trade was triggered at within 5 minutes the GBPUSD was at 1.3172, I squared the position at 1.3185 for a trading profit of 115bps. Thank you BOE, thank you Carney.
As shared in one of my earlier tweets, I believe the fx markets are increasingly more difficult to trade on leverage or on options, simply because the premiums are too expensive and the price actions whipsaws too much.
Going forward, I feel that in some trades it would be more prudent to do the trade on a cash basis. We can then hold the position for as long as needed till the market comes to us.
In the case of the USDJPY, I have seen a recent pattern where whenever it hits near 100, thereafter, given enough time, it will rebound back towards the 105 level and this happens in the short term.
On August 3rd at about lunch time in Asia USDJPY hit a high of 100.74, I decided to Long USDJPY at 100.80.
Since then, it has high a high of 101.65 and is now trending at 101.04.
I am confident that I will be able to make one to two big figures on this trade within a month.
Let’s see……….fingers crossed!
This was going to be the first set of important data to garner the impact of Brexit on the UK.
Today was Markit Flash Mfg and Services PMI.
At about 4:27pm, after the GBP had run up about 50+bps since 3pm, I decided to do a straddle trade, a small trade size on the Long position and bigger position on the Short position as follows: –
Stop if Offered; 1.3243 Spot; 1.3273 Stop if Bid; 1.3310 with corresponding SLs at 30bps off my levels.
The data came out mixed.
Mfg PMI came out stronger at 49.1 vs 48.9, but Services PMI was much weaker at 47.4 vs 48.9. Clearly, the banking and financial services sector was hit badly.
The overall composite was down 47.7 vs 52.4.
Immediately, my short position was triggered at 1.3243. I quickly closed of the Long portion of the straddle.
I followed the market till about 4:56pm when, the GBPUSD had already dropped by 100bps. I squared my position at 1.3170 for a trading profit of 73bps. Not bad at all!!!
The current spot is trading at 1.3125.
I am now going to go with my wife for a durian party at Marina Bay Sands. Enjoy your weekend everyone.
Yesterday’s UK employment data was most encouraging. However, it is data prior to Brexit, it would be interesting to see the data the following month or two. We need time to let ’emotions’ run through the economy, then and only then, will we have a more appropriate picture of post Brexit impact.
However, in the meantime, the data was good.
I decided to chase the market by going Long GBPUSD at 1.3100 and squared at 4:54pm at 1.3165 for a trading profit of 65bps. Not bad.
Had to leave for an evening cocktail. In hindsight, the GBPUSD moved higher after 5pm and again this morning at 7:30am Asia time. Currently, it’s holding at 1.3229.
Hmmmmm……..missed out on the 100bps move, oh well. at least the drinks last night was great!
I was late getting back from dinner to catch the NFP.
Got home at 830pm, NFP came out much stronger at 287K, majors weakened against the Dollar on average by 50bps.
Then within 15 minutes the majors reversed against the Dollar erasing all gains.
I couldn’t catch any trading opportunity, then all of a sudden I observed that the US JPY was down to 100.
In my last article I discussed the 100 yen level as a possible bottom to Long the yen.
So I decided to Long at 100.03 and in 20 minutes it hit 101 and I decided to square the position for a trading profit of 0.97 yen. Almost one big figure. Not bad to end the week.
By the way if this article seems strange it’s because I am using my IPhone to write this article rather than my laptop.
The EURUSD is showing an interesting pattern. Certainly compared to the GBP, it has shown more resilience. I believe it’s because the EU has less problems and issues compared to the UK.
It seems to be creating a floor at 1.0980.
This week’s european PMIs came out steady and upbeat. I believe all we need is to see more positive growth news coming out of EU and the EURUSD should easily jump back up to 1.1388.
If ADP for the US comes out weak, it may just provide the impetus for the EUR to be bidded upwards, of course, the big move will come tomorrow during the non farm payroll numbers.
It’s looking interesting???!!!
Ever since Brexit accompanied by the economic problems in Japan, it appears that a trading opportunity is emerging.
As a safe heaven currency now, every time, negative comments are made of post-Brexit and EU, JPY is usually bidded up to 100 and sometimes higher at 98.98. I noticed that the JPY has hit 100 or better three times since post Brexit and each time rebounding back to 102.70 to 103.20.
Guess what it’s back up to 100.75 now, and moving at the 20% range of the stochastic curves. Possible rebound back to 101, then to 102?
To play the plan vanilla options is not worth it as the vols are high resulting in elevated premiums.
What to do? How to capture the potential opportunity?
I am going to amalgamate both Q3 and Q4 performance together, so we can just tidy up the overall reporting for 2015.
Q3 we locked in trading profits of 17.85% and in Q4, we locked in 8.68%.
I did all in all 26 trades in the second half the year averaging about 4 plus trades per month. This also includes the trades that was withdrawn because market didn’t trigger the straddle trades.
I still have two AUDUSD call options; one expiring on 26 August 2016; BE 0.7303 (288bps premium) and another expiring on 9 July 2016; BE 0.7420 (280bps premium).
The overall absolute performance for 2015 is 178.08%, not a bad year.
Let’s see whether 2016 will bring me and us the same good fortune.
Happy trading and remember be prudent, be focused and above all, don’t be greedy.
I am born in the Year of the Tiger.
The Panthenon Investment Group 