Handle123, forgive my newb question, I'm still trying to get my handle on forex pricing and what not. What 2 currencies are you referring to based on the 104 and 77 numbers? I can't even tell what exactly what pair farmerjohn was trading in his OP, I'm sure I'm missing it. Thanks.
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I'm in disbelief about USD
- Thread starter farmerjohn1324
- Start date
Handle123, forgive my newb question, I'm still trying to get my handle on forex pricing and what not. What 2 currencies are you referring to based on the 104 and 77 numbers? I can't even tell what exactly what pair farmerjohn was trading in his OP, I'm sure I'm missing it. Thanks.
Never bet against the us.
They are not printing money like you think, to cause hyperinflation you need a drop in supply and money printing directly in people's hands. I know stimulus checks is just that, but it causes a temporary spike and fades when the check is no longer a thing.
The bond rising is a reaction to both short term inflation spike but also people selling bonds to rotate into stocks.
I get that they are not dropping money into peoples hands like helicopter money (other than the stimulus checks), but in the long term I don't think that means a hill of beans of a difference. If money supply increases at a [23%] rate over the long term, and the economy grows at [3%] over the long term, I don't see how there can be anything other than a 20% inflation rate over the long term (which might be more or less compared to other currencies and goods in those currencies based on the growth of those countries GDP and their money printing rates). To be clear, I mean LONG term. It could take years, even decades.
So I bought bullish positions in USD about 2 weeks ago after a strong jobs report and rising bond rates. After the Fed meeting yesterday, USD tanked and I thought I would have another margin call. Here we are just 16 hours after the Fed announcement... And USD has returned to previous levels. It absorbed the entire shock in just 16 hours!!! This is very good for a long-term USD bull position, I think!!
It depends on which asset class you're betting the USD against. If it's against other fiat currencies, then yeah you're probably gonna be right. But against commodities, or assets with limited scarcity, no fiat currency would survive the long run.
USD has had a range of less than 1.5% in the last two weeks, and you almost got a margin call? Holy cow dude, just how much leverage are you using?
When I say "margin call" I mean that I have to shed the smallest increment that I can (0.1 lot) that will free up $300 each time. I don't mean liquidating my entire positions. It's 50:1.
Handle123, forgive my newb question, I'm still trying to get my handle on forex pricing and what not. What 2 currencies are you referring to based on the 104 and 77 numbers? I can't even tell what exactly what pair farmerjohn was trading in his OP, I'm sure I'm missing it. Thanks.
Eur/USD.
But you can see the pattern in most of the dollar pairs. It gained back most of what it lost in less than 24 hours
Dollar is doing wonderfull but market seems to be volatile at the moment.So I bought bullish positions in USD about 2 weeks ago after a strong jobs report and rising bond rates. After the Fed meeting yesterday, USD tanked and I thought I would have another margin call. Here we are just 16 hours after the Fed announcement... And USD has returned to previous levels. It absorbed the entire shock in just 16 hours!!! This is very good for a long-term USD bull position, I think!!
USD collapse is a favorite pastime, especially of anyone who experienced USSR and Ruble collapses.
So an important thing to understand is that central banks don’t set rates “across the curve” — they set the overnight rate. Some central banks engage in yield curve control where they hint at what level of rates they think make sense, but the Federal Reserve doesn’t do this.
So while the Fed and other central banks control the short term rate, the long term rate (10yr) will drive the bulk of fund flows and set the direction on the currency. That’s not to say that tactical trading around changes in short term rates don’t make sense.
How does this feed into inflation?
Interest rates are comprised of various sub factors. They include the real rate of interest (time value of money theoretically), expected inflation, term premia, and credit risk.
If you look at a current 1yr bond and a 10yr bond, the yields on these might be (hypothetically speaking) 1% and 1.7%. Those nominal rates are expressing a view on the aforementioned factors. So if you think inflation is going to get out of control, you would expect US rates to rise. If you think the inflation will go wild in a few years, then you should expect the spread between the 1yr and 10yr to widen.
This is how market participants express their view of inflation. This then drives the value of a currency.
Example:
You have 100k usd and want to invest it in something safe for 2 years. You compare bonds and find that the US is paying 14 basis points on a 2yr while a German bond is paying -69 basis points with the same duration. What do you buy? If you a German or Chinese company with a lot of USD (from trade), do you convert the currency into your own or would you rather hold 2 year treasuries? What does this do to demand for USD vs other peers? Etc.
So while the Fed and other central banks control the short term rate, the long term rate (10yr) will drive the bulk of fund flows and set the direction on the currency. That’s not to say that tactical trading around changes in short term rates don’t make sense.
How does this feed into inflation?
Interest rates are comprised of various sub factors. They include the real rate of interest (time value of money theoretically), expected inflation, term premia, and credit risk.
If you look at a current 1yr bond and a 10yr bond, the yields on these might be (hypothetically speaking) 1% and 1.7%. Those nominal rates are expressing a view on the aforementioned factors. So if you think inflation is going to get out of control, you would expect US rates to rise. If you think the inflation will go wild in a few years, then you should expect the spread between the 1yr and 10yr to widen.
This is how market participants express their view of inflation. This then drives the value of a currency.
Example:
You have 100k usd and want to invest it in something safe for 2 years. You compare bonds and find that the US is paying 14 basis points on a 2yr while a German bond is paying -69 basis points with the same duration. What do you buy? If you a German or Chinese company with a lot of USD (from trade), do you convert the currency into your own or would you rather hold 2 year treasuries? What does this do to demand for USD vs other peers? Etc.
I sold my eur/usd's at 1.18797 today. Profit of $801. This means my original $10k account is now $10,116. So I'm in positive territory even after the few margin calls I had to make.
I re-opened eur/usd (sell) at 1.19016 and still have a usd/chf that are open.
My TP on my new EUR/USD is 1.18500
I re-opened eur/usd (sell) at 1.19016 and still have a usd/chf that are open.
My TP on my new EUR/USD is 1.18500
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