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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.

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.

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.

 

 

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.

5 June @ Non farm payroll?!

Given that the Federal Reserve is poised at raising interest rates this year as stated by Janet Yellen, clearly, all eyes are on employment data, GDP growth and consumption.

Today’s non farm payroll numbers is strong or weak will be a market mover.  Wednesday’s ADP was an indication though a marginal one.

I decided to place my bets on a strong non farm payroll number and did a stop if offered sell EURUSD and GBPUSD with the following at 8:20pm: –

EURUSD  –  Spot at 1.1222, Sell Stop if Offered at 1.1190

GBPUSD  –  Spot at 1.5329, Sell Stop if Offered at 1.5300

The non farm payroll number came out strong at 280K verusus expectations of 222K.

EUR and GBP crashed.

I squared my positions half an hour later at 1.1100 and 1.5238 for a trading profit of 90bps and 62bps respectively.

Not bad!

29 April @ Advance GDP

The talk about the US is all about economic growth, employment, consumption, so GDP will be a data that will be eagerly looked at and will potentially be volatile.

I decided to do my spread trade going into the announcement: –

 

GBPUSD  –  Stop if Bid at 1.5410, Spot at 1.5380, Stop if Offered at 1.5250. SL at 1.5380 for both trades

EURUSD  –  Stop if Bid at 1.1050, Spot at 1.1026, Stop if Offered at 1.0990.  SL at 1.1026 for both trades

 

The Advance GDP came out very badly into negative territory and the previous month was revised downwards from 2.6% to 2.2%.

The USD got killed, I wished more, but the market move sufficiently.

I squared the EURUSD at 1.1165 for a trading profit of 115 bps

I squared the GBPUSD at 1.5478 for a trading profit of 68bps.

Not bad for a Wednesday night, thank you United States of America.

24 April @ Durable Goods

Crazy Singapore night!

Believing that durable good will be a volatile data, I decided to put a bid and offer spread trade on both the GBP and EUR as follows: –

 

GBPUSD  –  Stop if Bid at 1.5150, Spot at 1.5125, Stop if Offered at 1.5100

EURUSD  –  Stop if Bid at 1.0850, Spot at 1.0830, Stop if Offered at 1.0810

 

Market turned out to be dead boring…………..hardly moved.

I squared the positions 45 mins later flat!

ECB?!

Market and media hype coming up to last night’s ECB rate decision and press conference was not strong. Market pretty much expected Draghi to keep things calm especially with the lack of growth and inflation in Euroland and more importantly, the big irritation of Greece still on the table.

At about 8:25pm, just before the press conference EURUSD spot was trading at about 1.0575, I placed a spread trade; Long, Stop if Bid at 1.06 and Short, Stop if Offered at 1.0550.

6 mins into the press conference, my 1.06 trade was triggered.  Mkt went all the way up to 1.0673 on spike, however, we managed to take profit on half the trade at 1.0655 for a trading profit of 55bps.

I kept the balance half trade till today to see how Australia and Asia would react.  Wow……….8am this morning during Aussie session, it bid the EURUSD all the way yup to 1.0733.  I took profit on the remaining half of the trade at 1.0700 for a trading profit of 100bps.

On consolidated basis for this trade, the trading profit was 77.5bps…………not bad!

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….(“,).

6 February @ Non farm payrolls!!!

Market was anticipating the much awaited non farm payroll numbers and the unemployment numbers to confirm that the U.S., is on track in its economic growth recovery.

Wednesday’s ADP number was not encouraging at 213K against forecast of 224k, however, it was mitigated by the upward revision of December’s number from 241K to 253K.  This means that there is a possibility that the non farm payroll numbers could surprise on the upside of forecast.

Market was steady at about 9:10pm Singapore time.  My hunch told me that the non farm payroll numbers would be better, so I decided to bet on my hunch.

Orders: –

1.  GBPUSD – Stop if Offered at 1.5290 when spot was at 1.5323

2. EURUSD – Stop if Bid at 1.1500 when spot was at 1.1486

3. EURUSD – Bought a put option expiring Monday, February 9 with a premium of 36bps, spot at 1.1486 an breakeven at 1.1450

4. USDJPY – Stop if Bid at 117.60 when spot was at 117.28

Of course, all of us knew what happened, the non farm payroll numbers came out at 257K busting forecast of 236K and the highest in the past 6 years.

Market sold off the GBP, EUR and the JPY in a BIG way!

At about 11:15pm, I decided to square off all the trades.

Squared off the GBPUSD at 1.5248 for a trading profit of 42bps.

Squared off the USDJPY at 118.88 for a trading profit of 128bps.

EURUSD stop if bid order was not triggered.

Sold off the put option at 1.1326 for a trading profit of 124bps.

In absolute terms, we made 294bps in totality for all 3 trades.

WHAT A NIGHT!  THANK YOU UNITED STATES OF AMERICA!