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Tag Archives: U.S.

15 October @ US CPI and Jobless Claims

As this is a sensitive data for the Fed and the world, I decided to put on my straddle on three currencies as follows: –

EURUSD   –   1.1416   1.1436   -1.1456

GBPUSD   –   1.5427   1.5457   1.5497

USDJPY   –   117.90   –   118.26   –   118.56

Core CPI was slightly elevated, overall CPI was flat, jobless claims improved to 255K against forecast of 269K, and Empire state manufacturing came was weaker at -11.4 versus expectation of -7.3.

Overall, USD bias, but the market didn’t move very much.  I took out the GBPUSD order, leaving behind the EUR and JPY order.

Both the EUR and JPY orders were triggered on the Offered side.

I squared the EUR at 1.1370 and the JPY at 118.70 for a trading profit of 46bps for the EUR and a negligible 0.14 yen.

This is what I mean when the event or data is not expected to make the fx market volatile, this strategy of the straddle trade doesn’t really work well.  It needs the volatility.

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.

Hollywood; The drama surrounding the debt ceiling limit

The Americans are so into the theatrics, they just love Hollywood, they love to create a Wow factor at the 23rd hour 59th minute………good or bad.

I believe the debt ceiling limit will be raised again, why?  Simply because it was raised twice before during the past 14 months; from US$14Tn to US$15Tn to US$16.9Tn.  However, as responsible people in positions of power and responsibility, they just can’t simply raise it without giving the impression to the public and the world that they have grieved over finding a solution and ‘cracking their heads’, and finally, they have no choice but to resort to raising the limit again.

The basic government revenue model is flawed as the inflows is less than the outflows with each passing year.  The government does not have any proactive revenues, all their revenue stream is the traditional passive; taxes and duties.  Until they solve the basic revenue and expense model, the deficit will never be reduced, unless, there cutbacks in the outflows.

Today, the US credit rating is not in question so far, though both Fitch and Moodys have changed their view to ‘negative watch’ but still ‘AAA’.  If the US doesn’t increase the debt ceiling limit, by the end of November when a huge sum of monies is required to pay for the coupon on the outstanding treasuries held by governments and central banks around the world, will not be honored.  This will have a tsunami effect across global financial markets.  Can the US really afford this to happen, let’s not forget that the backlash to the US will be greater than the pain caused by the US to the rest of the world.  Can the US afford to have a credit rating downgrade?  I do not believe so, the US will defend its AAA rating with its life.  Let’s not forget that Japan and China has majority stake in all outstanding treasuries around the world.  If they dump the treasuries, what will happen to the US?

The American people have been living off credit and borrowed monies for the past two decades, if there are going to be casualties, they can only blame themselves.  I mean the US government is the biggest culprit of living beyond their means and running deficit for the past 10 years.

However, because the the huge uncertainty, it is nearly impossible to work out a strategic potential trade.  Coming up with a risk adjusted trade idea based on fundamentals and or technicals is a better bet than betting on the whims and fancies of politicians……..we are guaranteed to lose………and lose big time.