Global Macro Trading Journal

ralph00 · May 23, 2012

http://pragcap.com/think-like-a-chess-player?utm_source=twitterfeed&utm_medium=twitter

jj90 · May 23, 2012

Gotta give credit where it is due. I piggybacked darkhorse's short Aussie trade, shorted AUD/USD and EWA. I traded it absolutely horrendously, but did still come up ahead. Stuff like this is why I stuck with this thread thru all 600+ pages of it.

Specterx · May 23, 2012

Quote from darkhorse:

p.s. For the record, no euro position (though short Aussie from 10295 and loving it)

EWA is down twice as much

benwm · May 23, 2012

Wonder how committed SNB is to maintaining EUR.CHF above 1.20...
Euroswiss contracts have been inching up the last few days.

Would a Greek exit give SNB an excuse to stop buying EUR and send CHF shorts scrambling to cover below 1.20?

Daal · May 23, 2012

Quote from benwm:

Wonder how committed SNB is to maintaining EUR.CHF above 1.20...
Euroswiss contracts have been inching up the last few days.

Would a Greek exit give SNB an excuse to stop buying EUR and send CHF shorts scrambling to cover below 1.20?

The Lehman moment that would follow would only increase the necessity for the SNB to keep the peg given that letting the franc go would be the same as tightening monetary policy during a deflationary spiral. If anything the franc peg might be weakened(1.20+)

benwm · May 23, 2012

Quote from Daal:

The Lehman moment that would follow would only increase the necessity for the SNB to keep the peg given that letting the franc go would be the same as tightening monetary policy during a deflationary spiral. If anything the franc peg might be weakened(1.20+)

Price action (converging to 1.20 and stalling) suggests otherwise, no? Must be a load of EUR leaving PIIGS right now and moving into CHF...will it get to a point where SNB realizes they're into too deep with potential losses on EUR holdings?

Need to give it some thought overnight..

Daal · May 23, 2012

Quote from benwm:

Price action (converging to 1.20 and stalling) suggests otherwise, no? Must be a load of EUR leaving PIIGS right now and moving into CHF...will it get to a point where SNB realizes they're into too deep with potential losses on EUR holdings?

Need to give it some thought overnight..

There are no losses because the exchange rate is fixed to the downside. There are potential losses. But if they believe the franc is overvalued they believe they will make a profit in the long-run. I agree with the price action, but franc printing is something that they want to do right now as they are in deflation

Ghost of Cutten · May 23, 2012

Quote from benwm:

Price action (converging to 1.20 and stalling) suggests otherwise, no? Must be a load of EUR leaving PIIGS right now and moving into CHF...will it get to a point where SNB realizes they're into too deep with potential losses on EUR holdings?

Need to give it some thought overnight..

If you control the supply of an asset then you control the price. SNB controls the supply of CHF, ergo they can hold it at 1.20 or beyond as long as they feel like simply by printing more. There is no inflationary constraint because Switzerland is experiencing mild deflation and an EU crisis will only make that worse.

Price action going BELOW 1.20 significantly would tell us the peg is being abandoned. Buy converging to 1.20 simply tells us that outside of the SNB, most people don't want their Euros at that rate.

Ghost of Cutten · May 23, 2012

Quote from darkhorse:

Jumping too far ahead here. UNCERTAINTY surrounding Grexit is bad for EUR, as possible Grexit countermove still includes printing like hell / last minute German cave on Euro Bonds.

I'd say it's falling more on the risk of contagion - bank runs spreading from Greece to the next potential EU-exit country e.g. Ireland, Portugal, even Spain and Italy. Why keep your capital in a country that is going to replace the Euro with the economic equivalent of soggy toilet paper?

Capital flight out of 1/3 of the Eurozone, potentially triggering a continent-wide (and potentially global) banking panic is unlikely to be bullish for the currency.