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Tag Archives: audusd

Black Monday……Grey week of August 24th????

Thanks to China, my AUDUSD call option expiry this Friday, August 28th will be worth nothing and I have basically lost my premium of US$3Million.

No wait a second, I didn’t.  Apologies for the silence the last two days as you can well appreciate the financial markets, that is, the equity markets and the fx markets were crazy.

Given, all the bad news coming out from China; devaluing the renminbi, slowest growth in the past 5 years, PBOC cut interest rates twice and then again today, no short selling on 500 stocks in Shanghai and Shenzhen markets, lowering bank reserve ratios, buying less raw materials such as metals and ores, lowest exports in the past 4 years……………..all these pointed to China going down South!

This means SELL SELL SELL SELL AUDUSD!

So, silly me decided to be brave and stupid and chase the market, but of course with stop losses as well.

The deterioration in the AUD since last Friday from 0.7353 and downwards…………

The drop off the cliff on Monday at about 9pm Asia time, gapped from 0.7232 down to 0.7032, then, stabilising at 0.7142 and went back up to a high of 0.7232, right back where it started.

Last night, at about 8:50pm, my Ichimoku told me to sell the AUD, after cutting up and down two times within the last 24 hours, so I short the AUD at 0.7207.  By 2am in the morning, the AUD has fallen to 0.7157.  I decided to take profit and go to sleep for a trading profit of $1.25Million or 50bps on a nominal size of $25oMM.

So, I have now improved my call option losses from $3MM to a lower $1.75MM.  You really can’t win all the time………life!

The real issue now is where do we go from here?  Do we look at shorting the GBP and the EUR?  Well, let me share my thoughts with you in my next article on ‘Thoughts’.

I also have a thought provoking view that a conspiracy was started by China to encourage if not compel Janet Yellen from raising interest rates next month.  Again, I will share my thoughts with you soon, so stay tune.

24 July @ AUDUSD Call Option expiring 28 August

After the AUDUSD went down again below 0.7300, I felt that there might be a short term retracement, so I decided to buy a one month call option expiring 28 August with the following details: –

Spot: 0.7275

Strike: 0.7300

Premium: 100bps

Breakeven: 0.7375

Let’s see what happens

8 July @ AUDUSD Call Option expiring 27 November

The outstanding Greece issue, collapse of commodity prices and the collapse of the Shanghai and Shenzhen equity markets was all the right ingredients to push the AUDUSD below 0.7500, then, 0.7400.

RBA Stevens also reiterated in his statement while holding rates at 2% that further weakness in the AUD is expected and necessary because of weak commodity prices.

I have a different opinion and believe that the AUDUSD should be trading at a fair value of about 0.7700.  Australia is not all about commodities, it has a strong agriculture based export industry, including dairy and other foodstuff.  Health products and pharmaceuticals are also significant.  Property market be it supported by Locals or foreigners is buoyant because of cheap mortgage rates.

I see AUDUSD spiking to 0.800 and then coming back down to the 0.7700 range within the next the next 3 months and our option is good for 4 months till end November.

Since the start of 2015, AUDUSD started out the year at about 0.7720 and hit a low of 0.7566 in March/April.  A strong pike to 0.80 happened in late April and a new high for the year at 0.8115 in mid May.  All fundamentals in Australia has been the same for the past 6 months, so will we see the pattern repeat itself?  I believe so.

Spot: 0.7390

Strike: ATM spot

Premium: 200bps

Breakeven: 0.7590

Expiry: 27 November 2015

 

3 month AUDUSD Call Option expiring 29 May 2015

Since I did the trade on Feb 25th, I did not see daylight, till late March when it peaked at 0.7897 and then came off again.

Another opportunity came on April 29th when it hit a high of 0.8063.  You will recall our breakeven was 0.8097 and the premium paid was 97bps.  At that time, I could just square off the trade and made a negligible loss, but I decided to hold on to the position after all, I still have another month to go.  After making the decision to hold off, the AUDUSD started coming off and high a bottom of 0.7811 on May 1st.

An opportunity came on May 13th when the AUDUSD hit 0.8116, I decided to square off the option by selling it. I made a very small profit of 19bps.

In reality after doing the trade in Feb, the onslaught thereafter of negative economic data out of Australia dashed by hopes of it ever recovering.  So, on balance, I am just happy to get out almost breakeven.

It peaked on May 14th at 0.8160 and thereafter, it was a landslide all the way down to the current 0.7689.

Phew!

5 May @ RBA Rate Decision; to cut or not to cut rates???

Majority of the street expected the RBA to cut rates the last time and it didn’t, this time around, it’s expecting RBA to cut rates by 0.25% to 2%.

I decided to put a spread trade: –

AUDUSD  –  Stop if Bid at 0-.7890, Spot at 0.7852, Stop if Offered at 0.7820. SLs at 0.7870 and 0.7830

As it turned out, the RBA did cut interest rates by 0.25% to 2%, but what was more surprising was the chopiness in the spot rate.

I was triggered on both trades and also stopped out on both trades for a trading loss of 44bps.  Aarrggghhhh!

Oh well, S _ _ _ happens………..hahahahahahahasha.

Australia Employment and Unemployment!

The last round,  RBA held rates instead of cutting rates as much expected by the marketplace.

So to me, the labour data this week is going to be a BIG deal.  As it would give us a strong indication of whether RBA will cut the next round or not.

Truthfully, there is no way to guesstimate what the data would be like this morning.  Since the previous month’s employment data was about 15K new jobs, the expectation was flat for this month.

Nonetheless, since this is a highly anticipated event, I decided to place a spread trade 5 mins before the event when spot was trading at about 0.7714: –

Long, Stop if Bid at 0.7744

Short, Stop if Offered at 0.7684

When the announcement came out……………Wow! Previous month’s data revised significantly upwards from 15K to 42K and this month’s forecast of 14.9K was blown out with a 37.7K.

AUDUSD shot up through the roof, hitting a high of 0.7780.  I squared the trade at 0.7770 for a trading profit of 26bps.  Ok lah……….good for a nice lunch!

RBA………….part 2

This morning at 10am when my AUDUSD call option expired, the spot was at 0.7641.

So the buyer of the call option will not exercise me as the call option was priced at 0.7690.

The overall trading profit for the last trade is 64bps.  Not bad, thank you RBA!

RBA Rate Decision today!

70% of the banking community was expecting RBA to cut rates today, 80% of the economists were expecting RBA to hold rates.

What do I think?  I don’t know, however, what I do know is that the media has been playing up the RBA rate decision since last week, so market sentiment is high, which means implicit volatility will be high.

At about 12:20pm, when AUDUSD spot was hovering around 0.7600, I decided to place my order;

Long, Stop if Bid at 0.7630 with SL at 0.7600

Short, Stop if Offered at 0.7565 with SL at 0.7600

What happened?!

RBA surprised the market by holding rates!

AUDUSD shot up to a high of 0.7710 at about 1.21pm.

I of course, decided to square off half the trade at 0.7685 for a trading profit of 55bps.

Thinking that there might be some more ‘legs’ in the AUD, I decided to write a call option at 0.7690 expiring tomorrow and I received premiums of 33bps.  My breakeven is 0.7657.

I placed a sell order at 0.7670 and it was hit, so I locked in profits of 40bps + 33bps = 73bps.

Now at 9:25pm Singapore time, the AUDUSD has corrected back down to 0.7647.

The only exposure left now is the open call option which I sold at 0.7690.  I have placed a Long, Stop if Bid at 0.7690.

19 March @ FOMC

The much awaited FOMC meeting and statement.

Not knowing where the market would go, but confident that the market swing would be significant, I decided to put spread spot trades on a stop if bid or offered basis.

EURUSD: 1.0690 and 1.0625 with spot at 1.0662

GBPUSD: 1.4760 and 1.4700 with spot at 1.4730

AUDUSD: 0.7690 and 0.7630 with spot at 0.7665

I squared the position just before the press conference; EURUSD at 1.0775, GBPUSD at 1.4848 and AUDUSD at 0.7728.

I locked in 211bps of trading profit…………Yum Yum!  Thank you FOMC….(“,).

Update on the 3 month AUDUSD Call Option expiring 29 May 2015

When the dust settled after the rate cut by RBA on February 3rd, and looking at my charts, it seemed at that time a potentially good trade to do the 3 month call option.

If you recall my breakeven is 0.8097, the spot is now 0.7625, so we are more than 400bps+ away from my breakeven.

This is the currency markets for you.

Seems the RBA is more concerned about rejuvenating growth than to tame asset bubbling.

Well, we still have time and who knows anything can happen.  Time is still in my favor.