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Action of Confidence by IMF to the Eurozone

It is great news that the IMF has advanced $1Billion on top of the earlier $10Bn by the ECB to Cyprus.

This is a vote of confidence that the IMF, ECB and EU are working together to try and solve the multiple problems in the Eurozone.

However, the real issue is not to keep on printing monies, buying up junk securities and bonds to provide the necessary funds and liquidity.

At the end of the day, the EU, ECB and IMF should try and help these troubled countries in the Eurozone to restructure the monetary policies and fiscal policies so that eventually, job will be created, income will be created, consumption will happen, growth will happen, GDP  will come back.

Unless and until this happens, the Eurozone crisis will continue unabated.

Update on AUDUSD 1 month call option @ 12 March 2013 @ Breakeven 1.0365

The market has proven us correct, the AUD continues to build on strength, the current spot of 1.04961 is trading above the 50 day average of 1.0456 and the 150 day average of 1.0439.

The trade balance posted a strong number with deficit narrowing to (0.18)Bn compared to the previous (1)Bn, this is a very strong comeback.

Our target is to close out the option when we hit the 1.05 level.

Update on EURUSD 1 month call option @ 12 March 2013 @ BE at 1.3180

Hmmmmm…………..this has been a disappointing trade, we knew back then when we were placing the option trade that the technicals showed a high probability of a breakout based on the bollinger bands, however, we didn’t know which direction it was going to break out on.

Our hunch told us that the crisis in the Euro should settle down for the time being, but the Cyprus issue really knocked down the Euro.

The current spot of 1.2805 is the lowest level for 2013 and way below our breakeven of 1.3180.  It is unlikely that we are going to make any monies from this option and the premium paid of 81bps will be a loss.

This is an excellent example of risk management.  We knew the Euro was going to breakout, but we didn’t know which direction, we made a bet on going long by buying a call option and we were wrong.

However, if we had a done a spot trade, we would be staring at nearly 200bps loss, in this case, we risk managed for a loss of 81bps.

Update on the AUDUSD 1 month call option @ 12 March 2013

The Daily Chart; shows strong support for the AUD, the trendline has broken through the cloud and is reversing the cloud’s declining outlook to a rising outlook.

You will recall that our breakeven is 1.0365 and the current spot of 1.0446, gives us a decent 81bps, I think we will hold this position.

AUDJPY

This morning at 8:30am Singapore time, the trade balance for AUD came in at (0.81)Bn and improvement from the previous month’s (1)Bn.

New Home Sales declined to -5.2 compared the a positive 4.2 the previous month.

Nonetheless, AUD strengthened alittle and the JPY weakened a little, giving us an opportunity to long the AUDJPY at 97.63 and we closed the position at 97.90 for a 27bps realized trading profit or an absolute gain of 0.27%.

We missed the opportunity to short the AUDJPY on the way down at about 10am Singapore time.

Market is possibly creating an opportunity to long the AUDJPY again, the current spot is at 97.65 and the technicals look interesting.

Update on 1 month GBPUSD call option @ 12 March 2013

We were given another opportunity to square off the option on April 2nd and we took it.

We sold the call option at the spot of 1.5240, against our breakeven of 1.5110, we realized a trading profit of 130bps or a 0.85% absolute gain.

We will stay sidelines till we get a better feel through our analysis, just where the GBP will be heading.

For now, the Daily Chart; is showing further weakness in the GBP with trend trading below a declining cloud.  The lowest level in 2012 was 1.5352, in 2011 it was 1.5467 and in 2010, it was 1.5085, so the current spot of 1.5086 is incredibly low for the GBP, however, technical analysis does not show that there is a base.

Update on GBPUSD 1 month call option @ 12 March 2013 BE: 1.5110

The GBPUSD peaked at 1.5266 on 26 March, against our breakeven of 1.5110, a very good 156bps unrealized trading profit.

However, the spot rate has since trended back downwards to the current level of 1.5147, a miserable 37bps unrealized trading profit.

Our mistake was not closing the position by selling the option earlier.  Nonetheless, we still have time before the option expires.

I believe the GBP will benefit somewhat from the mess and chaos in the Eurozone.  Let’s see.

Update @ AUDUSD 1 month call option executed on 12 March 2013 BE 1.0365

The current spot rate at 1.0434 is lower than the high reached on 26 March at 1.0495.  At the current spot rate, we have an unrealized trading profit of 69bps, not bad, however, we still have time before the option expires in two weeks time.

With all the uncertainly in the United States and Europe, I believe AUD will end up being the safe haven currency, therefore, it should benefit from further upside.

12 March 2012 @ GBPUSD 1 month call option

We executed a one month call option on the GBPUSD at the strike of 1.5000, breakeven at 1.5110, cost of premium was 110bps and spot rate was 1.4922.

28 March 2013 @ EURUSD

We were correct on our technical analysis about the breakout.  It happened both from the technical viewpoint and also from the poor political sentiment in the Eurozone and Cyprus.

At the time of the earlier post, the spot rate was at 1.2840 and after the breakout, it reached a low of 1.2749 at 10pm Singapore time.  Since then, it has recovered and is presently sitting around the 1.2788 level.

The Hourly chart shows another potential breakout with the current spot trend on the upper band of the bollinger bands.  The critical German unemployment rate at 4:55pm Singapore time will the catalyst for the breakout.

Employment still bad in Germany and we suspect that the unemployment rate will come in worse than the forecasted -2.