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发表于 2009-4-6 17:25
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March 22nd, 2009 at 9:33 am
March Madness is under way. While not a great fan of collage basketball, had to bring it up for obvious reasons- the madness part. It is only fitting that seasonal madness is discussed in a place where madness always rules. At any rate, had some people over yesterday to watch the games by state teams. Results were split, with UW going home and Gonzaga going to Sweet 16. I find Gonzaga rather an interesting story. Not even a Division 1 school, yet they can play withe best of them, year after year. Amazing.
I have an active interest in natural phenomena. For the most part it is focused on space and astronomy, but large scale developments here on earth do not escape my attention, either. That’s why I’ve been following underwater volcano eruption of the Tonga coast. Anybody who watched news over last 2-3 days knows what I’m talking about. Explosion was taped and widely distributed and by now most people surely had a chance to watch it. Originally I wanted to include one of them here, but then I found these great pictures. They are of excellent quality.
Personally I think the are better than the videos. Find it fascinating, the process of creation and destruction, which, ironically can be happening simultaneously. On one hand an island is born, on the other anything and everything in its way will get destroyed. Zero sum game, just like Forex trading.
Onclosed two trades in Yen pairs. NZD-JPY was longer term, while AUD-JPY lasted only few hours. Both of them were profitable and I managed to close them near the high of the day. This is always satisfying, but not something that can be counted on too often. Profit is what matters. At this time another one of JPY crosses looks inviting. Canadian Dollar has been lagging behind other currencies that got stronger last few week. I don’t know if CAD will be next one to move sharply, but it is enough if it only stays in pack with the others.
This is 4H chart of CAD-JPY. Buy order is placed an a break above 78.17. I would be seeking 250-300 pips if this move happens. Problem is, that so far this pair moved in very ugly fashion, with deep pull backs, which tend to shake traders out. This behaviour has already lasted some time, so maybe next breakout will be directional? We never know for sure what will happen.
I want to try EUR-GBP on the short side, too.
This pair has had a prolonged move up, on hourly charts at least. Think it is time to start looking for top, even if temporary. My sell order is placed at 0.9348, with 100 pips target. This is 1H chart, so, if executed, trade shouldn’t take as long as the one before. Should it fail, I will be tracking higher lows with sell orders, looking for next short opportunity. If neither of these trades happen, I will show a chart of GBP-JPY with my perpetual 5M buys there.
March 21st, 2009 at 11:37 am
After loosing ground for years to other currencies, over last few months US Dollar regained the status of safe haven in turbulent times. Dollar has recorded impressive rally since the beginning of the global financial crisis in summer last year. Now, following Federal Reserve’s recent action, this status is challenged again. USD suffered massive set back after FED had announced an adoption of quantitative easing, which, as far as I’m concerned, means debasing of the dollar by expanding the balance sheet.
Other currencies, which also were considered “safe”, went through their own pains lately. Japanese Yen is clearly way of its highs and likely to continue lower. Same fate befell Swiss Franc, historically the “safe haven” currency outside the dollar. SNB sold Franc on the open market as well as announced plan to start buying bonds, action similar to the one adopted by FED. This would leave Euro as a possible candidate to the title, but ECB is expected to follow example set by other central banks. If this happens, Euro will be next to join the “currency wars”, a rather strange race between countries to devalue their respective monies.
Is there anything safe left in the world of Forex? Well, there is and there isn’t. Not one single currency meets the needs of everybody to be declared a replacement for Dollar or Euro in times of turmoil. It would have to be monetary instrument of a large, growing economy with a stable government. Interestingly enough, currency must have a relatively large debt market , in the form of notes, bonds and other debentures. This market needs to be of some size, to make money flow, both in and out, cheap, fast and easy without undue price swings. Possibly a basket of currencies could serve this role, once a standard for such is created and adopted by international financial community.
Commodities currencies can, and to some degree, do play part of a safe haven. Their fortunes are tied to prices of commodities, which are typically expressed in USD. With dollar loosing ground, these markets are rising which is reflected in currencies like Canadian Dollar, Australian Dollar and New Zealand Dollar. More and more often Norwegian Krone is mentioned among them. This subject has been brought up in financial press recently and is creating some interest.
Norwegian Krone (NOK) has been named by analysts as “preferred major currency with expected sustained appreciation over the next 18 months”. This might seem surprising. Only last December the Krone dropped to a record low against the Euro, as falling oil prices took their toll on the currency. But, as crude prices have stabilised, the oil producer’s currency has fought back strongly. At this time currency stands out with unquestionable safe sovereign structural fundamentals, sound macroeconomic policies, relatively strong domestic banking sector quality and higher yields. Currently NOK pays about 2.5% in interest.
Norway’s economy grew 1.3% in the fourth quarter of last year and is not expected to experience as big a downturn as most other leading economies this year, remaining on a relatively even keel. Norway, as a country, has a large current account surplus. The cost of insuring against sovereign default in Norway is the lowest among the countries with the ten most traded currencies. This is done through credit default swaps.
This chart shows large move in USD-NOK last couple of weeks in Krone’s favor. Certainly looks like there is more to gain. I am not looking for a trade here, for a number of reasons. First, I don’t really see a set up to my liking. Even when fundamentals look great, I still must have a very specific trading situation. Second, when mainstream press picks up a story like this, it is probably too late for a “great” trade, price has already moved and is obvious to everybody. This is apparent on next chart.
As we can see price has turned some time ago. From my point of view, the easiest, and best, opportunity has gone already. Like the trade in EUR-SEK that was featured here couple weeks ago. To be sure, there is more downside potential, but objective is far more limited at this time.
Even though NOK is likely to get stronger over near future, it does not qualify as safe haven currency. It is too one dimensional, with strong correlation to oil prices. We can see how Krone collapsed with crude last summer, which is the opposite behavior than one would seek in a safe haven asset. Also, lack of liquidity, small market size, prevents it from being any real prospect for reserve currency of choice. More like darling of the month, a title that will likely be shared with other currencies for the most immediate future.
At the moment safe haven status of any one currency is questionable, at best. Thankfully, me, and most individual traders don’t need to fret over this. Since we don’t have several billion dollars to park safely over night again and again, this is of secondary consideration to us. We can afford to wait for a trade in any currency, no matter what its status.Mike K.
I’m glad this week is coming to an end. Of course, I say that every Friday and so do most people. Frankly, though, I need some time to go over charts and do some “profound” thinking. I can’t do it while starring at screen and looking for the next trade. Have this need to ponder over FED’s action on Wednesday, or rather the consequences, and try figure out in very broad terms what will happen next. In this context “next” means 6-9 months down the road. While most of my trading is short term, for those of you who don’t know, I also have a service for commercial hedgers and that requires long term view.
Some newspapers termed Wednesday’s action “Shock and awe”, while I see it as “Shock and … what?”. It didn’t hit me until few hours ago that in response to the news Dollar suffered biggest fall ever against the Euro since the creation of the single currency. When I look at it from this angle, only now realization comes of just how important this might be. Commodities surged wildly, with oil breaking above $50 mark. Markets are screaming “inflation ahead”, but how far down the road? Does it mean a start of another long term slump for USD? That’s what I mean, some heavy duty thinking is needed. Not that it will lead to any earth shaking conclusions, but at least I will have tried.
My short term trades will likely be as they are now, they mostly rely on shorter price swings. Like the onesThere was a buy order in GBP-CHF, which didn’t materialize. I’m leaving it in place for now. If warranted it will be discussed again. Aussie-Yen buy was executed at 65.65. I closed it about 45M ago, being done for the week. At 66.27 it was short of target, but still 62 pips ahead.
It really was not a bad trade. Nice move after the breakout, no pullbacks. My trade in NZD-JPY started to get a little too long for my taste, so I closed it also. It was mentioned on these pages many times, most recently two
I took about 2 weeks from the time order was placed to execution. There is more potential here, but I’d rather look for it on shorter time frame. Besides, this was a nice move and I really don’t want to get into some sideways move or deep pull back. Also, 300+ pips is not bad at all, something I can live with. With this, all trades mentioned in this blog are closed now, I think. Some orders remain valid, like sell in EUR-PLN or the fore-mentioned GBP-CHF buy. Will start fresh on Sunday.
Mike K.
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