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Tag Archives: Draghi

ECB Rate Decision……..TONIGHT!

I believe Draghi is going to starting reining in QE as he kind of hinted in his last press conference.

However, because of the Brexit, French elections, Greece and Italy, I can’t help thinking that he might end up also being alittle dovish.

So in truth, I believe he can go either way, but the volatility on the upside seem to be higher than the down side.

I decided to execute a double down call and put option spread with the following details: –

Spot; 1.0905

Call option; BE; 1.0948 with 43bps premium

Put Option; BE; 1.0879 with 26 bps premium

Total premiums; 69bps.

Let’s see what happens. I believe whatever happens tonight will translate into market action over the next few days.

It doesn’t help that it’s a long weekend upcoming up.

 

ECB Rate Decision and Draghi Press Conference

Media buzz coming up to the ECB rate decision was somewhat subdued, most of the buzz agreed that Draghi won’t do anything today, after what he did in December 2015.

I wasn’t comfortable with today’s event so I decided not to put on my straddle and instead followed the market.

After the announcement that there was no change in interest rates and repurchase, the EURUSD stayed steady at 1.08990.

Seems that the market was looking forward to the press conference to ascertain how dovish or bullish Draghi was going to come across.

During the first few minutes of the press conference when Draghi was reading from the statement, the EURUSD shot up to 1.0925 when he said that the monetary policy taken in December was correct, more importantly, that it was in response to the economic situation.  He kept talking about comparing the monetary analysis and the economic analysis in deriving the appropriate monetary policy.

Then, when he started to say that the ECB has unlimited policy actions available to act if necessary, the EURUSD began to slide dropping back to 1.0880.

When it started to move down to 1.0850, I decided to chase the market and short the EURUSD at 1.0850.  Draghi further commented in the Q&A, that the ECB will review to reconsider to further easing if necessary and that it has unlimited tools it can use to achieve it’s goal.  The EURUSD continued its slide down to 1.0788.  At about 1.0791, I decided to square off the position and made a tidy trading profit of 59bps.  All this happened within the first 20mins of the press conference.

Ok, now I can peacefully spend Friday with my wife, to shop for the coming Chinese New Year, more importantly, we are indulging in a spa session tomorrow………..bonding time.

If I don’t get to wish everyone, here’s wishing all a great weekend.

22 October @ ECB Rate Decision!

Looking at the CFTC report last friday, it appears that the entire market was just slight net SHORT the EUR.

Since, the start of this week, the the EUR has been staying within a channel of 1.1300 and 1.1380, I suppose while the market doesn’t see any surprises coming from Draghi, one can never know.

The noise in the media was picking up this afternoon and London open, but not in a big way.

I decided to put my straddle trade on just before the press conference with the following details: –

EURUSD  –  1.1295   –   1.1315   –   1.1335

Spot was at 1.1315.

When the press conference started and the first few sentences by Draghi leaned towards a still accommodating monetary policy together with strong jobless claims numbers, it sent the EUR south, triggering my Stop if Offered at 1.1295.  The first 15 minutes it has been hovering around the 1.1225 and 1.1230 level.  Now all of a sudden it dropped further to 1.1180, I believe it’s either stop loss triggers or option triggers.  I decided to square my position at 1.1188 for a trading profit of 107bps.  THANK YOU DRAGHI!

I think this means I deserve to play golf tomorrow morning.  I am also done for this week.

I am still pondering whether or not to close my books for the year.  It just seems to tempting to keep the books open for a few more trades before the year is out.

ECB Rate Decision!!!

As expected ECB kept the minimum bid rate the same, maintained the negative deposit rate and repurchases.

As I followed the media and news, coming up to the press conference it appeared that the market was expecting Draghi to be more accommodating and supportive, more importantly, to be more aggressive to easing if necessary.

So I decided just before the press conference when EURUSD was holding at 1.1226 to put in a straddle trade with the following details: –

Stop if Bid: 1.1250 with SL at 1.1220

Spot: 1.1226

Stop if Offered: 1.1190 with SL at 1.1220

When the press conference started, the EUR started coming off. As Draghi reiterated his position to keep an easy monetary policy, the EUR went further south.

Then, Draghi started talking about potential deflation and weak growth, and expressed concerns about emerging countries.  He is clearly concern about China and let’s hope that G20 can uncover some of the mysteries that is unfolding in China.

At about 8:55pm, the EURUSD had already fallen all the way down to 1.1120, so I decided to take profit on half the position.  Five minutes later, it went down to 1.1110, and I decided to sell the remaining position for an average of 1.1115 or 75bps trading profit with a trading size of $5Bn.  IL Borro, Tuscany for Christmas.

This trade was long in coming and certainly helps to make up for the dull past 3 months, thanks to Greece!

Will we have another fun time come September 17th???!!!

What is BOE going to do next week?

Two more opportunities for this month.

USD this week……………..

We are sitting on Thursday night Singapore time and the morning of the US session.  Since just before London went for lunch, the market was seeing USD sellers bidding up the majors; EUR, GBP, JPY and AUD up all across the board.  And it is still grinding upwards, though it appears that it may be losing some momentum.

This week has been a challenging week for the US.  All data were either softer or lower.

Retail sales turned in another negative month for two negative consecutive months.

Industrial production also negative, which could also partly explain why Q1 corporate earnings has been showing misses on a number of consumable stocks; Walgreen, Walmat, Target, Home Depot.

Unemployment claims edged slightly higher to 294K but below the 300K level.

So it looks like the Fed Reserve and Yellen needs to see more convincing numbers before initiating the first interest rate hike.

Last week, RBA surprised the market by not cutting interest rates which was highly expected by the market.  For the first time, in the RBA minutes, they are now expressing some concerns about the real estate market.  It is definitely bubbling and against an economy that is not growing plus requiring structural changes……………..hmmmm…………not looking good.

ECB this week and Draghi maintained a neutral stance to monetary policy and an accommodating tone to QE.

The previous week, BOE, Carney also mentioned about keeping the status quo, though, he too, is concern about the bubbling real estate market in London.

So, on balance, the whole world is still in limbo!

And, let’s not forget there is the irritation call Greece!

Update on 2 month EURUSD call option strike 1.2990, BE 1.3175 expiring 21 June 2013

Time for me to do an update on the 2 month EURUSD call option that I  did back on 24 April 2013.  My cost was 185bps and the breakeven was  1.3175, the current spot of 1.2895, appears to be still very far from my  levels.

There is a real possibility that I  may have made a wrong call on this one and then again, I  may not, it’s really hard to say right now.

The tide which was very bullish USD may be turning this week and we might see the return of the bulls for EUR, GBP and AUD.

Mid week is going to be critical, Wednesday is the release of the BOE’s policy minutes, and also Bernanke speak on that day.

Thursday is crucial as fresh numbers on the flash PMIs will be out.

Friday is when Draghi speaks.

My hunch tells me that we will see alot of action and volatility in the latter part of the week, favoring a weaking dollar.