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Czech Koruna CZK intervention
- Thread starter m22au
- Start date
Yeah, your reasoning makes sense... If things work out, EURCZK is another EURCHF. The concern here is, obviously, that the mkt tested the Swiss a few times before EURCHF stabilized. We haven't yet seen a test of the CNB's resolve. Obviously, the other issue is that you're long EUR, which can get interesting if the Eurogeddon stories come back to life.Quote from m22au:
For sure, you're not responsible if I make a losing trade.
I agree that it's not their current intention to push it above 27, but so long as any further depreciation is orderly, I doubt they would fight it.
From my charts I see that EUR/CZK has not traded below 26.93 since 10am ET on Thursday 7 November.
Assumptions:
* The depreciation to 27 is not successful in generating massive inflation (let's say, above 10% per annum) leading to the second assumption
* Constant CNB sales at 26.93 or higher to keep EURCZK close to 27.
Based on the above, one could buy EUR/CZK with a stop at 26.92, and then wait and see what transpires.
One concern I have is that the trade idea seems a bit too obvious.
Carry on the EURCZK long is very slightly positive (-142 fwd points for 1y fwd).
Quote from Martinghoul:
Yeah, your reasoning makes sense... If things work out, EURCZK is another EURCHF. The concern here is, obviously, that the mkt tested the Swiss a few times before EURCHF stabilized. We haven't yet seen a test of the CNB's resolve. Obviously, the other issue is that you're long EUR, which can get interesting if the Eurogeddon stories come back to life.
Carry on the EURCZK long is very slightly positive (-142 fwd points for 1y fwd).
With the EUR "issue", even in the second half of 2011, EURCZK did not (1) break below 24 and (2) break below the Jan/Feb 2011 low.
Obviously past performance is not a guarantee of future performance, but it does suggest that EURCZK may not be affected too much if and when there were Eurogeddon concerns.
Yeah, so your trade overall sounds quite reasonable...Quote from m22au:
With the EUR "issue", even in the second half of 2011, EURCZK did not (1) break below 24 and (2) break below the Jan/Feb 2011 low.
Obviously past performance is not a guarantee of future performance, but it does suggest that EURCZK may not be affected too much if and when there were Eurogeddon concerns.
The carry on Oanda is about -1% per year. I did a similar trade on CHF I think last year. I didn't had the patience to wait and didn't participated on the EUR rally gainst it when it popped (got unlucky too, I think I closed the trade 2 weeks before it rallied nicely) but the risk was quite limited. If I were to put a trade like this again I would bet bigger so any decent sized move in my direction would already be a good return. Where to take profits is not an easy decision because the longer you wait (in terms of letting it run) the better you have to be a predicting their CB and knowing about their economy, etc.
I am interested to read the words from their central bankers. Words are cheap, so I was to see the cheap words.
Quote from Martinghoul:
What's stopping you then, amico? You clearly have access to them Internets, so pls feel free...
It is not free as it costs time to find their words. I wanted just to check my model about them - which predicts them without ever hearing one ass of them talking. How could I know without even hearing their words? The thing that is inside them is all the same.
Basically Czech national bank claims that there is a possibility of deflaltion in a country so they try to intervene since Czech is mainly import based country as this would drive import prices up and thus inflation and help export.. blah blah what we know from economics 101. People are of course fairly unhappy due to rising prices. However notable is that CNB claims that further interventions are serious possibility if deflation still continues. So these might be a reasonable trade. A lot of money was made already on this intervention since local banks.anticipated it. Free money was on the table.
Well, pls don't let me take up your valuable time any more... Not that I understand what you said above.Quote from tradingjournals:
It is not free as it costs time to find their words. I wanted just to check my model about them - which predicts them without ever hearing one ass of them talking. How could I know without even hearing their words? The thing that is inside them is all the same.
At any rate, m22, you might be interested to know that, according to the CNB's weekly FX reserves data, they only bought arnd EUR 1.8bn, which is less than what the mkt expected. Might be a sign of them being less aggressive, more generally.