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Tag Archives: forex

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.

Potentially volatile week…….why……too much noise from FOMC members

This week is going to be an interesting week, not just because it’s ADP and non farm payroll numbers come Wednesday and Friday, more importantly, it’s a ‘hazing’ week by the many FOMC members who will be talking in the media from Yellen, Fischer, Williams, Dudley, Evans, Bullard and Kocherlakota.

Since, we all know to be American is to be able to stay what you feel and think, there will ultimately be a confusion of views and opinions.  We already know that there are some FOMC members who are pushing for raising interest rates and there are those who want to push-off a rate hike till later.

Former Secretary of the Treasury, Larry Summers is advocating a rate hike only in 2016.

Earnings in corporate America is flat, equity prices fueled by high P/Es, thanks to cheap monies.  Same situation in China but only worse, why, because the government is fanning the bubble in the equity markets.

People are saying that Janet Yellen is being ‘wishy washy’ in her decision whether to raise interest rates or not.  Her recent remarks in the past FOMC rate decision showed that she is acknowledging the various economic problems faced by the many different countries all over the world.  More importantly, because the USD is the main economic trading currency, any hike in interest rates will make the corresponding currencies in South America, emerging Asian countries look like ‘banana’ monies.  As it is, Indonesian rupiah and Malaysian ringgit is trading at all time lows.  The Brazilian real has collapsed and is poised to fall further.

Trade flows and money flows around the world among countries are so intertwined that it is near impossible for the United States of America to ignore the implications of its monetary policy on global currency markets and trade countries.

Since post FOMC, the USD has been strengthening against all majors and is killing emerging currencies.  I attached the Fibonacci charts for GBP, EUR and AUD.

auusd_fibo

eurusd_fibo

gbpusd_fibo

Looks like the majors are all trading at their low ranges, below or about at the 23.6% level.  This could mean a possible bounce back up against the USD if there is any negative noise about the USD.  And with so many FOMC members talking this week, volatility could potentially rise.

Let’s see.

Let’s all stay on our toes, shall we?

Post FOMC @ 18 September 2015

When I finally woke up in the morning on Friday after staying up at the office till about 3:30am, it was interesting to see how the fx rates have developed during Asian time on Friday.

If I had kept all the trades open, what would have happened?

AUDUSD would have been stopped out at 8:17am.

GBPUSD would have been stopped out at 8:28am

EURUSD would have been ok

However, the big winner would have been the USDJPY.  You will recall, I squared the position half an hour into the press conference with no win no loss, that is, all square.  If I had kept the position opened till late Friday morning, I would have made one big figure on the JPY, that is, 1.15 yen.  Wow!

Then again, it is not our business to hold spot positions opened for so long and more so, unsupervised.  Whenever, we have an open spot position, we will monitor it on screen till we square off the position and that usually happens within an hour or at the most two hours.

2015 @ Q2 Performance Review

Q2 proved to be a decent quarter with sufficient opportunities despite disruption from Greece.

I did a total of 13 trades and 2 options and turned over US$165Bn. The absolute trading profits was 56.25%.  I had one negative drawdown of 4.4%.

Q1’s absolute performance was 95.3%, so this gives us a total cumulative absolute return of 151.55% year to date.

Not to shabby for 2015. I think I am incline to close the books for this year and not trade anymore, no point taking on risks as we are moving into the last quarter of the year where liquidity starts weaning.  Anyway, it’s kind of difficult to stay away from the markets when one is being bombarded with information and feeds everyday.

 

 

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.

UK Services PMI

The UK economy has been wavering back and forth with no strong solid trend.  I felt that today’s UK Services PMI could be a telling sign as to where the economy will be heading and potentially a volatile data event.

So at about 4:25pm, I did a straddle trade with the following details: –

Stop if Bid: 1.5300

Spot: 1.5263

Stop if Offered: 1.5230

When the data came out at 4:30pm, it was weaker at 55.6 compared to expectations of 57.6, unfortunately, the the GBP didn’t really dip that much, it went to a low of 1.5238 and rebounded.  It didn’t trigger my trade, so I decided to pull the trade out.

It’s now 9:20pm and the GBP is holding at 1.5264.  So in hindsight it was prudent to pull out the trade, as nothing really happened going into early NY session.

I guess the world is more focused on tonight’s ECB and Mario Draghi!!!

2 Sep; AUDUSD Call Option expiring 26 August 2016

I decided to add on to my position when the AUDUSD came off some more, with the following details: –

Spot: 0.7015

Premium: 288bps

Breakeven: 0.7303

Expiry: 26 August 2016

25 August; AUDUSD Call Option expiring 29 July 2016

I am still a strong believer in the Australia economy and the Aussie Dollar.  I believe the economy will turn around next year and that the current levels will be a thing of the past.

I decided to buy a plain vanilla call option, strike ATM spot with the following details: –

Spot 0.7140

Premium: 280

Breakeven: 0.7420

Expiry: 29 July 2016

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.