Financial turmoil news and trading

G

Gringinho

These market conditions we are having undoubtedly provide a lot of opportunities, but sometimes behave a "little unpredictable."
Lots of outrage in the populations increasing as well, with unrest. Asia and Israel are seeing lots of extreme acts - and it is interesting how related these might be to the world turmoil right now. Some politicians (e.g Sarkozy) have talked about "economic warfare" going on right now - and I guess they may be right.

George Soros will be talking in an interview on CNNI in 30 minutes, and I found his latest insight Sunday 9 days ago very spot on... so I will be getting this one as well.
 
Asian sessions have been complete murder this week.
These new lows, then with huge retraces - and all the volatility in between, they are not making it possible to discern any resistance or support. Markets are illiquid as well as being seemingly totally unpredictable.

It may be a "financial/economic warfare" of sorts - intentional or not - it is some crazy shit. Especially the Yen is all over the place.

None of the commentators have seen anything like this - and I guess no trader has really seen this kind of market turmoil.
 
Yen strikes 13-year high vs dollar on global gloom
Fri 24 Oct 2008 02:51:00 AM BRT


TOKYO, Oct 24 (Reuters) - The yen hit a 13-year peak against the dollar and a six-year high versus the euro on Friday as fears of a deep global economic recession and emerging market troubles prompted many investors to cut overseas investments and repatriate funds.

But the dollar jumped to a five-year high against the pound and held near two-year highs versus the euro as deepening financial turmoil forced more investors to dump investments around the world and raise their cash holdings in the greenback.

Emerging markets, from South Korea to Mexico, have been hit hard by the global credit crisis in the past few weeks, as worries of a sharp global slowdown have spurred heavy investor selling of risky positions built up in recent years.

All week, traders in Tokyo have cited Japanese fund managers and institutional investors as selling some of their huge holdings of foreign assets and yanking money back home.

The yen has also soared as market players have unwound carry trades built up over the past several years, using the low-yielding yen to buy high-yielding currencies, commodities and emerging market assets.

'Players are now focused on emerging markets as the credit crisis takes its toll on them,' said Mitsuru Sahara, a senior manager of foreign exchange sales for Bank of Tokyo-Mitsubishi UFJ.

'Nobody is willing to take risks under the current circumstances, and risk aversion will only accelerate,' he said.

The yen may gain the most on the emerging market instability and as Japanese investors -- insurers, mutual funds and portfolio managers -- were expected to keep trimming overseas investments, he said.

Between 2005 and 2007, Japanese investors purchased about $500 billion of stocks and bonds abroad to make up for low domestic interest rates and returns.

The dollar fell 1.6 percent against the yen to 95.69 yen, after tumbling as low as 95.35 yen on trading platform EBS, the lowest since 1995 when the U.S. currency struck a record low.

The euro fell 2.6 percent to 122.20 yen after sliding as low as 121.70 yen, a six-year low.

'The key words are repatriation, risk aversion and emerging markets,' said a senior dealer at a Japanese trading house.

Asian equities slid across the region, dragging down Asian currencies such as the Korean won, with Tokyo's Nikkei share average plunging below the 8,000 mark to its lowest point in 5- years.

The Australian dollar, the bellwether of the carry trade, shed 7 percent to hit a seven-year low near 61.50 yen.

'Stocks are volatile, and as long as stocks are sliding, risk appetite will shrink further, accelerating repatriation moves,' said Takao Yahata, a currency trading manager at Mitsubishi UFJ Trust and Banking.

Sterling fell 1.8 percent to $1.6032 after dropping as low as $1.6027, a five-year low, dragged by its fall against the yen to an eight-year low below 153 yen.

The euro fell 1.6 percent to $1.2767, down from an earlier high of $1.3007 and moving closer to a two-year low of $1.2726 hit on Thursday.

The dollar index, a gauge of its value against a basket of six currencies, was up 1.1 percent at 85.513, after rising to a two-year high of 86.120 on Thursday.

In a further sign of the spreading credit crisis, the International Monetary Fund was hurrying to approve by early November a package that would let some 'top-tier' emerging market economies exchange local currencies for dollars to ease strains, officials familiar with the plan said.

So far, Hungary, Iceland, Belarus, Ukraine, Serbia and Pakistan are in talks with the IMF on economic programmes backed by financing. But the IMF denied market speculation that it is preparing a $1 trillion aid package.

Brazil's central bank intervened on Thursday on the spot market to offer dollars and said it was ready to sell dollar swap contracts up to a hefty $50 billion. The central banks of Brazil, Turkey and Norway acted to boost liquidity.

Credit rating agency Standard & Poor's cut its outlook for Russia to negative from stable on Thursday, warning of the costs of bailing out troubled banks and a rising risk of a budget deficit.
 
This is just completely... well, I don't know really - it is terrible, I guess.

The ramifications will be enormous - for many years.
Seeing the strong Japanese repatriation - on the back of the US repatriation and emerging market corporations hoarding USD to offset their own weakening currencies... it has been very wild.
 
For the EURJPY - everyone seems to be eyeing the 120 and talking about 119.85 as the Fibonacci projection target.
Well, maybe that "makes sense" to some.

Real resistance noted on 123 and 125 for the EURJPY, but my guess is they will be no match for a retrace if a bottom first forms on the EURJPY.

Germany is really active nowadays with fruitful talks with Russia and China - actually getting in place a lot of bilateral agreements. This is essential for the economic health of the whole of Europe forward. China now agrees to intentions of "new market rules" along with the EU.
A crawl of the EURUSD should be possible for the long run - but that has been my bias all along, as I have watched USD influence diminished and US consumption becoming unsupportable over the years.

European open looks to be brutal - as more repatriation is going on. Fortunately there are some "structural good news" - re Germany and China. US futures down more than 4%... this will be a dreadful weekend for many. I'm glad I'm not making a living off trading...



Holy shit... I'm not sure 120 on the EURJPY will be any support, although some might take profits around there... it looks really, really bad...


Japanese finance minister Nakagawa said there are close talks with BoJ now - and the market is very wary of intervention signs - however they said that the Yen strengthening and the downturn are related - so that means that we will wait for the panic to stop, repatriation to slow down before we see any actions. That might not happen this year either, in my opinion - given the promises from the new LDP prime minister Aso - about budget balancing and tax cuts promised. I think Japan is playing it very careful right now.

On the other hand the later European session and start of the US session might see some strong bounce from these low levels...
The risk lies in "pre-emption" - if you get in too early and do not have the BoJ support or confidence - then there will be more fear/panic. If you pre-empt a move, then the BoJ will wait and see - so what happens is that it keeps free falling. Therefore a "measured statement" is probably how we will see the "real bottoming" emerging. Then when the BoJ sees the market reacting to it's statements - the real push will come. That is what would make most sense, I think.

Taro Aso (Japanese PM) said the strong fluctuations are "undesirable" and that he was worried about exports - but not taking actions yet... so the rhetoric is increasing. Yesterday - there were loads of export-worries on NHK new.

Strong words about the USD in Asia -- many are angry at the US.
http://english.peopledaily.com.cn/ (no article in english yet on the USD anger and calls for replacement)
 
For anyone interested in diplomacy and negotiation techniques - just try and understand what is really happening now - the big picture...

Take Martti Ahtisaari as an example...
He met with the Russians before meeting with Milosevich, so there was really a done deal before they met. Now, there is no indication that the US "will be presented and asked to sign" something from Sino-EU preparations - but there will certainly be some already established positions that the US will have to conform to.

The US can ill afford to upset both the EU and China in this situation, and most seem a little upset with the US as it is.
The strongest wordings/attitudes seem to come from Latin American governments and Japanese news/folks.

The strongest US supporter which "matters" seems to be India... Israel is more of a "financial liability" I would say.
 
Quote from Gringinho:

... this will be a dreadful weekend for many. I'm glad I'm not making a living off trading...
More...


This says it all.

If you were a trader you'd be glad you were making a living from trading in these times. What are you? Some kind of journalist or economist like that dipstick SouthAmerica?
 
Excellent situation summary from Hans Günther Redeker at BNP Paribas Global FX strategy just now on Bloomberg UK news.

He said that the deleveraging process happening now forces a 2:1 buy of EUR vs USD, and that the Yen also favours from Japanese hedging on the Yen, where the steepening fall/downturn in markets further enforces this. Hans also said that 1.40 on the GBPUSD is likely now and that things will get worse. Emerging markets will also feel the pinch even more on their currencies.

Seems like a general USD revolt brewing...

More Q3 numbers next week - so more unrolling, repatriation etc may work into the currency markets - but the JPY concerns and the increasing rhetoric means that it will get pretty conflicted. A stronger stance from the Japanese government may stem this. I don't know if they will be synchronising all of this with the EU and the upcoming G20 meeting.

One thing is sure - "something" will be done. It is just too volatile to take a stand right now... but a lot of money can be made on catching this bottom, so I will be following closely in the days ahead - and weeks ahead.


Wow --- 120 just broke on the EURJPY...
It actually physically hurts not being able to enter long here on 120. :p

kiwi_trader,
I trade for fun right now - well, it was fun from October 6 until this week... :D
Now, I'm just careful again - just like the weeks before October 6.
I used to trade professionally before, but started outsourcing and offshoring projects some years ago.
I'm glad I have other ways of income - since if not, I would be getting drunk this weekend - like many traders will be -- drowning their sorrows and stress.


Micex and RTS are also extremely interesting - at least Gazprom with the new natural gas talks going on.
 
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