Forex Experience

[fxintruder]

Forex Daily Recap

GBP Trade:

Our GbpUsd pending was filled around FOMC minutes. We warned about the re-positioning taking stops out, it will continue until the Econ Data (retail sales) due tomorrow. We hold the lower position.

EurUsd
We were filled as planned.

AUD trade:
EurAud and AudJpy Seems recovering, will wait for now.

FOMC minutes:

The Fed let the door open until December, this means that market will be very sensitive to Econ data until then. It's not a quiet journey.

Stock market recovering after the minutes. What does this means for the USD ?
Nothing, because we are more interested in where is the balance between those who think that a rate hike in Dec means a stronger economy and those who fear the End of the Easy money (QE), than how impacting is the SPX/USD correlation. This means that in this pivotal moment (the beginning of the End of global QE's), market perception is neutral because both outcomes are neutralizing themselves.
The real thing is the new agreement between the US and Russia, after the Paris terrorist attack, ending the risk of a proxy/global war . This is way more important than the looming end of QE's because unstable Geopolitics are always more stressing than any Global macro competition. To make it simple market Euphoria is driven by US/Russia relaxation than by Janet Yellen. Nevertheless market will return to its usual drivers when the relaxation is priced in.

 

[fxintruder]

GbpUsd :

Yesterday we warned about the repositioning that will take place until the Data due this morning GMT. We used it on intraday to to sell another -100k.

How to tell between a repositioning and a real reversal:

1. Even though a ranging GbpUsd is possible, a GBP bid vs the USD is just a nonsense in the current market consensus (never go against consensus).
2. The USD was sold after the FOMC minutes confirming a liftoff in Dec, because some particpants were playing the "sell the rumor buy the fact" scenario. They pushed the price higher where they can sell at a better price. The scenario play is a fake because it never occurs before the real fact (due in December).
3. The scenario was deployed even on the EurUsd which is just a joke, pushing the price above 1.0700 for heavy short positioning.

Nevertheless these plays are dangerous because they can trigger "short squeezes" generating in heavily sold pairs some uncontrollable price formation dynamics.

Here you can see that we were pending for a sell below the price (Sell stop) before the retail sales announcement. However were the retail data (good or bad), our order would've been probably filled during the knee jerk. This is because we are more interested in optimizing our positioning above 1.5250 (repositioning) than fearing any movements structurally limited on the upside (GbpUsd is not as heavily sold as is EurUsd hence a limited risk of massive short squeeze).

For those wanting to understand how to initiate a trade, these are the best moments to sell at a better price with small increments and a stop above the intraday highs until the obvious consensus is established. It's not what we are doing on this pair, as we said we are a bit aggressive and the trade is tricky. Furthermore our lower positions are limiting our capacity to add more at these better levels.

 

[fxintruder]

AudJpy:

We locked the upper position because the BOJ conference this morning didn't give any clues about their intentions.

The JPY is bid vs the USD even though it's due to active repositioning we can see some flows on the pair. Furthermore this level can generate significant pull back because of liquidity above 88.50

 

[fxintruder]

EurAud:

We locked the 3 lower positions because we are heavily exposed on Eur.Usd while the USD is sold during repositioning with short squeeze risk.
The Stop is above 1.4950

 

[fxintruder]

AudJpy:

We locked the upper position because the BOJ conference this morning didn't give any clues about their intentions.

The JPY is bid vs the USD even though it's due to active repositioning we can see some flows on the pair. Furthermore this level can generate significant pull back because of liquidity above 88.50

View attachment 159416

EurAud:

We closed ALL making 144 pips on the pair, but hindering our attempt to establish an AUD trade.

We don't like the JPY pulling back vs USD after the ECB minutes. We need a better picture on JPY.

 

[fxintruder]

Busy day cos tomorrow is front month expiry day and I trade options on stocks through another Experience. We startes with a $3K account on Sept 22nd and we are now like $6.6K banked in. Options traded as a substitute for stocks (not for vola.) are less time consuming and way simpler than Forex. Here is our current P&L ($6750), one contract is opened currently with +$200 so far.

Yes but this thread is about Forex.

EurUsd:
Short squeeze is still in place and we would like to see the price returning inside the previous range, below 1.0700.

Why didn't we lock since we were only 100 pips from the target (1.0500)?
Because as we said it's a fake. No big player is going to buy the Euro ahead of a likely easing on December.Without big players the squeeze can't be sustained for too long. Furthermore the Euro isn't bid it's the USD which is sold all over the board.

Why the USD is sold ahead of a looming rate liftoff ? Beside the FED no central bank wants to see a weaker USD and the FED is not used to stealth intervention. We remain with 2 solutions:

1. Late sellers covering when some liquidity search pushed the price higher, triggering some stupid algos which in turns triggered some other hypnotized techs (Here the threat is more serious since End Of Day techs are now in the game).
2. Market is now seeing Parity in medium term and big players take profit to reposition higher, generating a short squeeze helping the price to get even higher involving EOD techs.

Is the squeeze over? Not sure, this can reach 1.08 and even 1.10 because keep in mind if big players are massively repositioning the higher the price goes the better it is for fading.

For the above reasons we are probably going to lock the positions inside the 1.07-1.08 range. But not now because tomorrow morning we have Draghi speaking and the first goal of Draghi these days is a Euro at parity. And also the conditions for a very dangerous squeeze are not met here, because we are not far in time and distance from the previous lows (1.04) who by the massive liquidity waiting there act as a magnet. This is more obvious on the weekly.

 

[fxintruder]

AudJpy:

We closed ALL making 144 pips on the pair, but hindering our attempt to establish an AUD trade.

We don't like the JPY pulling back vs USD after the ECB minutes. We need a better picture on JPY.

View attachment 159422

AUD Trade

AudJpy:

Since we are now covered with the EurAud trade we are preparing to reenter on AudJpy if we have a pull back around 89.13 (maroon line).

We still don't have a better picture on JPY but since the Jpy was weak vs Aud even when the Yen was rallying vs the USD yesterday during the squeeze, we think that carry traders are returning to the pair like they are doing with EurAud.

EurAud:

The higer positions are locked and we added-50K lower.

Our view on AUD starts to gain some adhesion among market consensus, though we are still front running the market here but with limited risk due to a capped Euro on the upside.

 

[fxintruder]

EurUsd:
Short squeeze is still in place and we would like to see the price returning inside the previous range, below 1.0700.

Why didn't we lock since we were only 100 pips from the target (1.0500)?
Because as we said it's a fake. No big player is going to buy the Euro ahead of a likely easing on December.Without big players the squeeze can't be sustained for too long. Furthermore the Euro isn't bid it's the USD which is sold all over the board.

Why the USD is sold ahead of a looming rate liftoff ? Beside the FED no central bank wants to see a weaker USD and the FED is not used to stealth intervention. We remain with 2 solutions:

1. Late sellers covering when some liquidity search pushed the price higher, triggering some stupid algos which in turns triggered some other hypnotized techs (Here the threat is more serious since End Of Day techs are now in the game).
2. Market is now seeing Parity in medium term and big players take profit to reposition higher, generating a short squeeze helping the price to get even higher involving EOD techs.

Is the squeeze over? Not sure, this can reach 1.08 and even 1.10 because keep in mind if big players are massively repositioning the higher the price goes the better it is for fading.

For the above reasons we are probably going to lock the positions inside the 1.07-1.08 range. But not now because tomorrow morning we have Draghi speaking and the first goal of Draghi these days is a Euro at parity. And also the conditions for a very dangerous squeeze are not met here, because we are not far in time and distance from the previous lows (1.04) who by the massive liquidity waiting there act as a magnet. This is more obvious on the weekly.

View attachment 159431

EurUsd:

As we said above we locked the positions between 1.0700 and 1.08000 (dashed line is an alarm) helped as expected by Draghi speech this morning.

We are very badly positioned on the lower range (1.07-1.06). The 3 positions below 1.0650 are dangerous and can generate quickly significant drawdown. That's why we are ready to take profit from those in the range above the dashed line.

What are the current risk:

1. Some significant real money players (banks) are now thinking that the USD has bottomed since the Fed cut is priced in and the pace of tightening during 2016 will be slow (according to the Fed). This means that the USD can be capped on the upside, fortunately the Euro is capped on the upside too.
2. Massive repositioning as explained in the quote above.

What to do:
We are going to pay for the risk we are taking (the lock) and our strategy here is to hold the lower positions until the 3rd Dec. We think that market will reposition around our target before that date in "sell the rumor buy the fact" (or vice versa) scenario play. As we said the move will be helped by the liquidity below 1.050 acting as a magnet. This liquidity is needed by heavy long term shorts to liquidate without pushing the price higher against themselves while closing.
3rd Dec is going to be the main focus in one week from now (look at an econ calendar).

 

[fxintruder]

GbpUsd :

Yesterday we warned about the repositioning that will take place until the Data due this morning GMT. We used it on intraday to to sell another -100k.

How to tell between a repositioning and a real reversal:

1. Even though a ranging GbpUsd is possible, a GBP bid vs the USD is just a nonsense in the current market consensus (never go against consensus).
2. The USD was sold after the FOMC minutes confirming a liftoff in Dec, because some particpants were playing the "sell the rumor buy the fact" scenario. They pushed the price higher where they can sell at a better price. The scenario play is a fake because it never occurs before the real fact (due in December).
3. The scenario was deployed even on the EurUsd which is just a joke, pushing the price above 1.0700 for heavy short positioning.

Nevertheless these plays are dangerous because they can trigger "short squeezes" generating in heavily sold pairs some uncontrollable price formation dynamics.

Here you can see that we were pending for a sell below the price (Sell stop) before the retail sales announcement. However were the retail data (good or bad), our order would've been probably filled during the knee jerk. This is because we are more interested in optimizing our positioning above 1.5250 (repositioning) than fearing any movements structurally limited on the upside (GbpUsd is not as heavily sold as is EurUsd hence a limited risk of massive short squeeze).

View attachment 159407

For those wanting to understand how to initiate a trade, these are the best moments to sell at a better price with small increments and a stop above the intraday highs until the obvious consensus is established. It's not what we are doing on this pair, as we said we are a bit aggressive and the trade is tricky. Furthermore our lower positions are limiting our capacity to add more at these better levels.

View attachment 159408

GbpUsd :

TP the 3 lower positions to limit risk exposure to USD seen as loosing steam.
More on this later.

 

[fxintruder]

AUD Trade

AudJpy:

Since we are now covered with the EurAud trade we are preparing to reenter on AudJpy if we have a pull back around 89.13 (maroon line).

We still don't have a better picture on JPY but since the Jpy was weak vs Aud even when the Yen was rallying vs the USD yesterday during the squeeze, we think that carry traders are returning to the pair like they are doing with EurAud.


View attachment 159449



EurAud:

The higer positions are locked and we added-50K lower.

Our view on AUD starts to gain some adhesion among market consensus, though we are still front running the market here but with limited risk due to a capped Euro on the upside.

View attachment 159451

AudUsd:
+50K during the pull back. We will probably continue adding below 89.000

Very tough barrier at 90.000