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Tag Archives: forex

BOE Rate Decision!!!!!

Having a strong hunch that the BOE rate decision will be a volatile event, I decided to place a straddle trade at about 6:50pm: –

Spot: 1.5600

Stop if Bid; 1.5630, SL 1.5600

Stop if Offered; 1.5570, SL 1.5600

It was no surprise when the decision was announced, where the rate was held at 0.50% and asset purchase maintaining at 375Bn.

What is more important is what Carney is going to say.  I was of the opinion that he would talk the GBP up as the UK wanted to cool down property prices as the property market was showing signs of a bubble.  However, as it turned out the comments revolved around inflation and the fact that inflation went down to zero in June, rather far away from the target of 2%.  I believe the UK should adjust its target going forward much like the U.S.  In the case of the U.S., the inflation target was lowered from 2% to 1.6%.

Reasons given by Carney for the low inflation environment is because of low commodity prices and underutilized capacity.

As it turned out the GBP collapsed to a low of 1.5465, however, the real flows were at about 1.5488.

My trade was triggered but in the opposite direction from my hunch which was fine.  It triggered the offer trade at 1.5570, and I squared the position at 1.5500 for a trading profit of 70bps on a trade size of 3Bn.

The GBP is now rising back to 1.5530 on slightly elevated unemployment claims out of the U.S.

This is a great lesson in not trying to second guess what the central banker is going to do, or for that fact, what the data is going to be, what’s more important is to ascertain whether the event is going to be a volatile one or not and if it is, then, my fx strategy will ALWAYS work!

What a TRADE!  I am done for tonight!

 

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

 

FOMC Tonight! Any surprise from Janet Yellen?!

Alot of buzz in the media about Janet Yellen and FOMC tonight or rather 2am Singapore time.

Is she going to surprise with a rate hike?!

Market talk is July…………….September……………November………….take a dart and throw it on the board!

Personally, I don’t think she will surprise the market by hiking rates, although, I do believe she will shed some light on how she is going to access the US economic and interpret its projections going forward.  This should provide some clues as to when?!

Recently, she has been spending time talking about the world economy and how it’s not doing too well. While non farm payrolls has been trending above 200K, the last two months has been showing a slight downward movement despite the stronger number last month of 280K versus forecasts of 222K.

Housing is still a mixed bag of information.  Retail sales as well.

However, whatever Janet is going to say will provide CLARITY and that in itself will be USD positive.

Just checked to do a put option till Friday GBP and EUR averages about 80bps.  Am I prepared to gamble 80bps?

Let me think about it in the next few hours and update all of you.

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!

Withdraw GBPUSD OTM trade

UK Claimant Count came out better at (6.50) versus expectations of (12.5).

GBPUSD, jumped 35 bps higher and holding at 1.5708.

I withdrew the OTM put spot order.

UK; Claimant Count and Unemployment

GBPUSD has been trending upwards the past week, while the EURUSD has been going the opposite direction.

I don’t believe the GBPUSD is sustainable and any negative economic data will see a significant reversal.

This time around will be a triple top; once on May 14th, another on May 22nd. Near this year’s high of 1.5780 on May 14th, happened once this year.

I am going to take a punt and do a OTM put trade: –

GBPUSD  –  Spot 1.5662; Stop if Offered at 1.5640 and SL at 1.5660

Let’s see what happens in the next few mins.

Trade done on 21 May @ UK Retail Sales

Did a GBPUSD trade hoping to catch some action on the release of the UK retail sales.  UK and BOE looking at economy closely; housing prices, retail sales, and services PMI are data that will be volatile.

I decided to do a straddle: –

GBPUSD  –  Spot at 1.5600, Long Stop if Bid at 1.5625 and Short Stop if Offered at 1.5575.

The data came out in favour of the UK at 1.2% stronger than forecast of 0.4%.

However, the GBP didn’t really move that much, so I squared the position at 1.5660 for a trading profit of 35bps.

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!

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.