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Tag Archives: foreign exchange

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!

2015; Q1 Performance Review

2015 has turned out to be a great start!

After a challenging 2014, the first quarter of 2015 presented wonderful opportunities to us, which of course, we capitalized on the opportunity.

For the first quarter ending March, we did a total of 13 trades, total volume of 155Billion and locked in an absolute return of 95.3% against our principal investment.

A phenomenal start to the year.  As you can see, we averaged about 4 trades a month.  In hindsight, we missed some opportunities, however, the important point is that we made on every trade with no drawdown at all.

I believe the appropriate style of trading is more one of strategic and opportunistic trading, and not trading for the sake of trading.

Going forward, this year will be another year where central bankers will be focused on; what they say, what they feel and what they are not saying.

Stay very close to the media, it will continue to tell us about the sentiment and volatility in the marketplace.

Now that we have already met our target for 2015, I do not intend to take on any unnecessary risky trades and will just continue doing what I have been doing………slow………steady………and confidently.

Here’s wishing us all continuing success in fx trading for the rest of the year.

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!

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!

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….(“,).

18 March @ Long GBPUSD

The past two weeks saw focus by BOE and the media on the strength of employment and job creation in the UK.  Today’s Claimant Count and Unemployment Rate would be in focus.

I decided to do a stop if bid and offered spread.  At about 5:25pm, spot rate was 1.4750 and I placed a LONG stop if bid at 1.4775 and SHORT stop if offered at 1.4720.

The data came out just slightly weaker with unemployment jumping up to 5.7% and claimant count increasing slightly.

Market didn’t like it and sold the GBP down to 1.4620 at about 6:45pm, but I squared the position at 1.4672 at 5:45pm before leaving the office.

Made a tidy trading profit of 48bps.

Yesterday’s action

Yesterday, was an interesting day.

At 1:30pm, weak China data; lower industrial production, poor retail sales and lower fixed investments, didn’t do much to the AUD, as I believe the AUD has already been taken down quite a fair bit.  Nonetheless, just based on flows into the US session, the AUD was about 50bps+ lower to 0.7564.

I must have been something that was said by Draghi at 4pm during his speech, because the EUR tanked from 1.0700 down to 1.0527 during NY midday session.  It has now settled at 1.0509.

I was focusing on the UK and manufacturing and industrial production at 5:30pm yesterday as it was a topic much talked about for the past two weeks leading up to it.  Therefore, I felt that if there is going to be any off data, there will be significant moves on the GBP.

At about 5:20pm when spot was trading at 1.5055, I decided to place a stop if bid/offer spread at 1.5080 and 1.5020.  As it turned out, the data came in very weak, in fact, in negative contraction.  However, the market didn’t really respond to it…………till the NY session.  At NY opening, the GBP was taken down severely.  At about midnight or midday session, the GBP was trading at 1.4937.

At that time, I decided to square off the trade for a trading profit of 83bps.  Not bad.

Yesterday’s trading was a classic case of if the market doesn’t respond during London session, it certainly will respond during the NY session.  As we all know, both the London and NY markets is where the bulk of the flows reside.

I am still interested in what Draghi said, because the EUR really collapsed.  Will find out and comment on it.  Looks like market sentiment, the media and flows are really going to push the EUR towards the parity level?!

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.