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9 October 2015 – proving a point about ‘noise’ in the media

On October 9th, there wasn’t any noise about industrial production in the Euro area.

So to prove a point that ‘noise’ in the media creates volatility, I decided to place a EUR straddle trade as follows: –

EURUSD  –  1.1255   –   1.1285   –   1.1315

As it turned out industrial production numbers came out weaker but guess what, no one really cared.

The EURUSD hardly moved, so I withdrew the order.

The point I am making is that once we know where the economy if going then we need to follow the data that supports where the economy is going.  Couple with noise in the media nearing the release of the relevant data, then, the currency will potentially be volatile when the data is out.  Sounds reasonable?  Of course.

Hindsight look at post of September 28th

On September 28th I shared an article with all of you about my findings looking at three currencies and over laying it with Fibonacci.

It showed that all three majors werre tradinig at their low 23.6% range taking into consideration the recent highs and lows of the 4H chart.

This morning when I looked at the three currencies, their were hoving at 0.7188, 1.251 and 1.5306. This effecitvley works out to a move of 157 bps for the AUD, 115bps for the GBP and 50bps for the EUR.

Although, I am not a technical chart trader, this is an interesting observation.  It just took 9 trading days for the majors to bounce back against the USD after laying in the trough for about 11 trading days.

It would be interesting to back test further other observations to ascertain the timing intervals between bounce backs from the high or from the low.

It could reveal a patten that may allow us to capture trading opportunities in the future.  However, I feel the appropriate strategy would then be using a vanilla option to buy time for the market to come to us.

What do all of you think?

BOE Decision!

For some unexplained reason there wasn’t much noise revolving around the BOE decision, however, I felt that with the uncertain UK economy and Carney’s earlier comments about raising interest rates early next year that possibly we may see some reaction from the marketplace.

At about 6:55pm, when spot was hovering around 1.5350, I placed my straddle; Stop if Bid at 1.5370 and Stop if Offered at 1.5330. with correspondingly stop losses at 1.5350.  Yes, the straddle is tighter at 20 bps higher and lower to spot rate.  Then again, because there was little nosie in the media, I didn’t think volatility would be great on this event.

As it turned out, BOE held interest rates and votes were the same to hold rates and also for QE.  Minutes indicate a ‘no hurry’ stance to raising interest rates and BOE will probably only consider doing so in the second half of 2016.

The GBP went south, triggering my Offered trade at 1.5330.  I was still in my car when I did this trade, so within half an hour of the data release, when GBPUSD hit 1.5280 I decided to square the trade and go for dinner with my wife.  Locked in trading profits of 50bps.

BOE, Carney to speak tonight at 2am Friday, morning Singapore time.  Will there be any surprises from him?

It will also be the same time that FOMC minutes from the last rate decision will be released.  Will the minutes illuminate why Janet Yellen decided not to raise interest rates?

2 Oct…………WHAT A FRIDAY!

I was expecting that the non farm payroll numbers on Friday, October 2nd will be closely watched as a signal for whether Janet Yellen will be raising interest rates this year.  The noise in the media was playing up this event.

I on the other hand, had to make an urgent business trip to KL on Thursday through Saturday.

It was so funny, I was out for dinner in the Subang area where the internet connection is not always the most stable.  I was with a group of business people having dinner.  At about 8:25pm I excused myself from the group saying that I needed a few minutes to catch up with an old friend at the bar.  I went up to this lady at the bar and explained to her that I needed to access the fx markets on my Iphone and that I would be most grateful if she would pretend that we were long lost friends and keep me with her for about half an hour.  She hugged me and started acting up the role…………TOTALLY SURPRISED ME.

It’s terrible trying to do an fx trade on an Iphone, the screen is small and at the back of my head was the worrying fear that I may lose connection anytime.

I decided to do a straddle on the GBP and EUR: –

EURUSD  –  Stop if Offered; 1.1130, Spot; 1.1163, Stop if Bid; 1.1190

GBPUSD  –  Stop if Offered; 1.5120, Spot; 1.5150, Stop if Bid; 1.5180

As we all know, the non farm payrolls came out way below expectations of 201K at 142K, but what was more surprising that the markets reacted negatively was the adjustment to the previous month down to 136K from 173K.  I don’t know how this will affect the running average, but for the time being, it’s SELL USD.

By this time, I already knew this lovely lady’s name, Cassandra and she was watching the fx markets with me on my Iphone, totally fascinated and what was happening in front of her eyes.

As it turned out the EUR popped up aggressively, the GBP was more of a roller coaster ride.  Cassandra was getting so excited grabbing onto my hand, screaming, wanting to know when I am going to get out of the trade.  She was quite distracting!  My group  who was watching from the other end of the restaurant was wondering what was going on.

At about 8:50pm, I decided to square off the trades in fear that the whole thing may get out of hand and also the fear that I may lose internet connection.

Squared the EURUSD at 1.1291 and the GBPUSD at 1.5216 for a trading profit of 101bps and 36 bps respectively on $10Bn trade size each.

Cassandra kept on screaming and grabbing onto me while I was trying to get out of the trade, really, you need a very strong resolve to focus and concentrate when you have a beautiful woman distracting the hell out of you.

I thanked her for helping me out, ironically, she thanked me as she said she never experienced something like this ever before, she whispered in my ear that she had an orgasm.  I burst out laughing and she blushed.

I returned to my group and they were all drilling me on what the F_ _ _ happened at the bar.  I just told them that my old time friend was excited seeing me after a 10 year lapse.

My blog followers have been asking me whether I hooked up with Cassandra again later in the night?  Yes……………and that’s another story……….PG.

Potentially volatile week…….why……too much noise from FOMC members

This week is going to be an interesting week, not just because it’s ADP and non farm payroll numbers come Wednesday and Friday, more importantly, it’s a ‘hazing’ week by the many FOMC members who will be talking in the media from Yellen, Fischer, Williams, Dudley, Evans, Bullard and Kocherlakota.

Since, we all know to be American is to be able to stay what you feel and think, there will ultimately be a confusion of views and opinions.  We already know that there are some FOMC members who are pushing for raising interest rates and there are those who want to push-off a rate hike till later.

Former Secretary of the Treasury, Larry Summers is advocating a rate hike only in 2016.

Earnings in corporate America is flat, equity prices fueled by high P/Es, thanks to cheap monies.  Same situation in China but only worse, why, because the government is fanning the bubble in the equity markets.

People are saying that Janet Yellen is being ‘wishy washy’ in her decision whether to raise interest rates or not.  Her recent remarks in the past FOMC rate decision showed that she is acknowledging the various economic problems faced by the many different countries all over the world.  More importantly, because the USD is the main economic trading currency, any hike in interest rates will make the corresponding currencies in South America, emerging Asian countries look like ‘banana’ monies.  As it is, Indonesian rupiah and Malaysian ringgit is trading at all time lows.  The Brazilian real has collapsed and is poised to fall further.

Trade flows and money flows around the world among countries are so intertwined that it is near impossible for the United States of America to ignore the implications of its monetary policy on global currency markets and trade countries.

Since post FOMC, the USD has been strengthening against all majors and is killing emerging currencies.  I attached the Fibonacci charts for GBP, EUR and AUD.

auusd_fibo

eurusd_fibo

gbpusd_fibo

Looks like the majors are all trading at their low ranges, below or about at the 23.6% level.  This could mean a possible bounce back up against the USD if there is any negative noise about the USD.  And with so many FOMC members talking this week, volatility could potentially rise.

Let’s see.

Let’s all stay on our toes, shall we?

Thoughts after FOMC no hike decision

Up to the last hour before 2am last Friday, noise was abundant in the media; CNN interviewed FIs and 76% said ‘no rate hike’, Bloomberg interviewed FIs and 78% said ‘rate hike’.  What perfect opposing views!

As we all know how, Janet Yellen decided not to hike rates.  So what does this mean for the USA?  What does it mean for the rest of the world?  What does it mean for the financial markets?

Granted Janet has been talking about a rate hike since May this year and respectfully, she has managed the financial markets very well through the past 4 months.  Of course, we had the great Greek distraction in the middle of the year, thanks to Tripras and the ECB and the EU and Merkel and Draghi.

In life I suppose there is always something to be said when a leader is a woman and when a leader is a man.  I am not trying to be a racist here, however, it is generally known that women are more prudent, then again, if you observe how Angela Merkel works and now Janet Yellen, it is clear that Prudence is a trademark of the fairer sex.  In the uncertain economic times we live in now and the divergent interest rate cycles of different economies around the world, Janet Yellen has the unenviable task of holding the stone and wondering whether she should through it into the pond and create ripples or tsunamis.

The world uses the US Dollar as a trading currency base or a settlement currency or a partial reserve currency, any rate hike in the US, will certainly have a large negative impact to Europe and other OECD countries.  More importantly, it may destroy smaller Asian emerging countries, and BRICs.

Globality means that the world has grown smaller, trade borders have evaporated, which means that financial impacts will become like tsunamis and not small ripples.  We saw it recently with the partial crash in the Shanghai and Shenzhen equity markets and how it affected the rest of the worlds’ financial markets.  We saw how the world didn’t take kindly to China’s central government interference with the equity markets, with the banking system and with the currency.

Frankly, if I was Janet Yellen and I was faced with two options; 1) do a rate hike and run the risk of choking the economy or 2) let the economy continue to gain more momentum in growth and jobs and inflation, then, hike rates then, as a strategy of reining in the economy before excesses begin.  Prudence would dictate that we should select option 2.

Let’s not forget we are talking about the United States of America, a very mature economy, highly domestic with little to export, a ballooning social welfare crisis, a runaway immigration problem and a widening wealth gap.  So, even on the best quarter, economic growth as spectacular as it cld be, can be, will never be higher than 3% p.a.  Since after the millennium or for that fact the past 10 years, the average growth rates has been below 2%, in the 70s and 80s, the average was about 3%.

So truly speaking, where is the concern that growth may run away and that we need to get ahead of the curve???

Noise has begun again with the media saying that Janet Yellen will raise interest rates in December.  Why?  Doesn’t the Chairman of the Federal Reserve know that, that is the worse time of the year do effect any interest rate decisions as liquidity is very low and volatility is very high.  Remember how George Soros broke the Bank of England in 1992……….Black Wednesday?!

Prudence will dictate that Janet Yellen will only make an interest rate liftoff in March 2016, that is, towards the end of winter.  Traditionally, in the U.S., jobs takes a significant dip during the winter and employment only starts picking up in spring.

What do I know?  This is just me sharing my thoughts with the world and to whomever is interested to read my trading blog.

 

Post FOMC @ 18 September 2015

When I finally woke up in the morning on Friday after staying up at the office till about 3:30am, it was interesting to see how the fx rates have developed during Asian time on Friday.

If I had kept all the trades open, what would have happened?

AUDUSD would have been stopped out at 8:17am.

GBPUSD would have been stopped out at 8:28am

EURUSD would have been ok

However, the big winner would have been the USDJPY.  You will recall, I squared the position half an hour into the press conference with no win no loss, that is, all square.  If I had kept the position opened till late Friday morning, I would have made one big figure on the JPY, that is, 1.15 yen.  Wow!

Then again, it is not our business to hold spot positions opened for so long and more so, unsupervised.  Whenever, we have an open spot position, we will monitor it on screen till we square off the position and that usually happens within an hour or at the most two hours.

2015 @ Q2 Performance Review

Q2 proved to be a decent quarter with sufficient opportunities despite disruption from Greece.

I did a total of 13 trades and 2 options and turned over US$165Bn. The absolute trading profits was 56.25%.  I had one negative drawdown of 4.4%.

Q1’s absolute performance was 95.3%, so this gives us a total cumulative absolute return of 151.55% year to date.

Not to shabby for 2015. I think I am incline to close the books for this year and not trade anymore, no point taking on risks as we are moving into the last quarter of the year where liquidity starts weaning.  Anyway, it’s kind of difficult to stay away from the markets when one is being bombarded with information and feeds everyday.

 

 

FOMC Rate Decision!

I really don’t know or didn’t know which way the flag was going to blow, simply because the media was creating alot of noise on both sides of the coin; one camp of FIs says Janet will raise interest rate, and the other camp of FIs says that Janet will hold.

As for me, I really don’t care, all I care about is the potential volatility coming into the rate decision.  The more noise the higher the volatility.  I am more interested in the verbiage in the statement and more importantly, the press conference.

I decided to put my straddle trade but with a wider goal post for safety reasons at about 1:44am: –

EURUSD  –  Stop if Bid; 1.1370, Spot; 1.1330, Stop if Offered 1.1290

GBPUSD  –  Stop if Bid; 1.5560, Spot; 1.5529, Stop if Offered 1.5480

AUDUSD  –  Stop if Bid; 0.7210, Spot; 0.7165, Stop if Offered 0.7125

USDJPY  –  Stop if Bid; 121.20, Spot; 120.85, Stop if Offered 120.35

All stop loss levels were at spot.

When the announcement of ‘HOLD’ came out, the market spiked triggering all my trades, but it also quickly settled back down and I was potentially looking at being stopped out.  Thankfully, the majors slowly moved back up before reaching my stop loss levels.

At about 2:16am, I decided to square off all my trades as follows: –

EURUSD  –  Squared at 1.1400, minus 1.1370, trading profit was 30bps

GBPUSD  –  Squared at 1.5600, minus 1.5560, trading profit was 40bps

AUDUSD  –  Squared at 0.7210, minus 0.7210, zero trading profit

USDJPY  –  Squared at 120.35, minus 120.35, zero trading profit

We did US$10Bn on each trade and all orders were OCO, which meant that we didn’t have to double up our collateral for margin.

The press conference is ongoing now, but I think I will go to sleep now because I believe her responses to questions will be to be supportive, not necessarily accommodating, probably quite neutral.

I was really expecting alot more volatility but it really didn’t happen, oh well cie la vie.  70bps trading profit isn’t too bad since we did the trades on size.

 

 

Post GE2015………….a resounding landslide victory for PAP……….(“,)

What a surprise, what a surprise, I don’t think for a minute everyone including all Singaporeans and PAP expected such a huge winning margin, and then again, why not?

Since the embarrassing results for PAP back in 2011, it truly was a wake up call for PAP and woke up they did.  The national average of 69.86% (near 70%) compared to 60.14% in 2011 is a strong affirmation from Singaporeans that they recognized the good work done in the past 4 years by PAP.  In 2011, PAP was caught with one shoe off, when they realized that grassroots, RCs and Town Councils were not feeding back the concerns of Singaporeans in the respective constituencies.  Thank goodness, after 2011, PAP took concrete steps to rectify the lack of communication.

What has been significant in the past 4 years is the strong communication channels built up between Singaporeans and PAP, be it social media, internet websites, twitter, emails, today, we can reach our MPs and Ministers via IT.  In the old days, it was IMPOSSIBLE.  Think about it, today, we can even twitter our PM, Lee Hsien Loong, could we have done that with his father, No.  What this is saying is times are changing and have changed; the way the government interacts with its electorate and how Singaporeans communicate with our government, we are coming closer.

What I also like about the approach that our government has taken is, they now have a better SOP with regards to implementing policies.  PAP now takes more time to debate in Parliament, takes more time to explain the new policies, takes more time to disseminate the policies to Singaporeans, takes more time to help Singaporeans benefit from the policies by literally engaging them personally and to make sure they do secure the benefit.  An example of this is the pioneer package and I do congratulate PAP and our government for doing a great job of it.

More importantly, PAP has demonstrated when they have made a mistake, they would readily and expeditiously rectify the mistake.  Take for example, the immigration policy that allowed foreigners to come into Singapore to take up junior and middle level management positions and squeezing out Singaporeans from a job and career.  I am glad to see how quick PAP was in dealing with the matter, of course, we will see how PAP will continue to refine the immigration policies going forward to protect Singaporeans first.  Singapore should implement a policy to govern MNCs and corporates to consider hiring Singaporeans FIRST in junior and middle level positions before looking outside, otherwise, penalties will be enforced.  I appreciate that certain senior level positions still require it to be filled by foreigners because they have more global exposure than Singaporeans, however, as more and more Singaporeans take on regional jobs, global jobs, their experience will also accumulate through time.

A near 70% national average win is a strong acknowledgement by Singaporeans of the good work done by PAP in the past 4 years.  More importantly, it also means that Singaporeans have higher expectations of PAP to deliver more to the people in the next 5 years.

Some of the social media is saying that Singaporeans decided to be ‘kiasu’ because of many uncertainties; our economy, global economy and changing times, that is why they decided to go with the safer bet, that is, PAP.  There is also internet talk that new citizens have voted for PAP.  There are always two sides to a coin, whatever, the motivation of these kiasu Singaporeans to default back to PAP, proves that they believe that PAP is the stronger party and the more competent government to take Singapore through the impending uncertain times.

As we all now know, it’s the elderly and the younger generation that voted more for PAP.  It suggests that the elderly Singaporeans have renewed their faith in PAP.  As for the younger Gen Y of Singapore, I believe a significant number of the young have had positive experiences dealing with various government departments and entities.  My friend’s son who graduated from Temasek Polytechnic in IT, started up a company with a few friends and they were able to secure various funding from Spring Singapore.  I believe the fact that PAP is more engaging in social media and the internet also helped to foster a positive relationship with the younger electorate.

2015 is a lesson for the Opposition(s).  It’s nice to see more educated people making the decision to join the Opposition(s), however, a handful does not make a strong team and does not make a government.  My suggestion to the Opposition is that all of you should consider very seriously to come together as a coalition; capitalize on your joint strengths and minimize your common weaknesses, then and only then, will you be able to make a credible fight against PAP.  What is amazing is that virtually all the Opposition parties were banging away at the same topics; education, healthcare, old age and retirement, cost of living, wealth gap, etc.  So why couldn’t the Opposition parties come together?  The answer is simple; stupidity, ignorance, arrogance, lack of leadership and the lack of vision.  Looks like we will have 8 voices from the Opposition in Parliament for the next 5 years, let’s hope that they are more credible than in the past 4 years.  I have yet to see an Opposition propose a new policy or bill in Parliament, they always wait for PAP to come up with the policy and then they criticize, but never counter proposing with a better solution.  The fact that WP won Hougang with a lower percentage at 57.7% compared to 2011’s 64.1% is an enlightening moment!  Opposition, you are starting to lose credibility and if you don’t do something about it within the next 5 years, don’t blame anyone else except yourselves if you continue to lose percentages.

Let us all look forward to a better next 5 years, it is going to be difficult because of a number of strong headwinds; weak first world economies, weak China, weak emerging Asian markets, aging population and lower productivity.  We need to dig deep within ourselves and embrace the ‘iron’ resolve that Singaporeans are known for and defend our position as a successful first world country and economy.