Neither Tech nor Macro

[fxintruder]

Remember that core EurChf long taken since long ago, closed it with +22p before my last break. The number of pips was not important in this trade but the size was, since the risk was limited by the SNB floor.

The pair is now returning below 1.2035 and I am stacking pending longs again from there to 1.20; building a no brainer massive size trade targeting for the upper add ons like 20-30 pips not more. Filled already at 1.35 last night GMT and won’t take anything above; being filled below won’t be easy, unless we have some specs positioning during thin liquidity moments or the US decides to go above the fiscal cliff . But this trade is purely tactical and build on the aberration of a central bank floor in a free floating exchange market; aberration I consider as a rare opportunity.

Risk to the trade: The huge sell Stops below 1.20 triggered while SNB is sleeping and driving in a second the price in the far south liquidity desert, unlikely though. Unlikely but not impossible if we think that the stops gathered there can be exceptionally huge implying a never seen slippage. Since a stop loss is useless because of the possible slippage, I have a pending long put on the pair if price goes below 1.1980, this not only limit the risk but also gives time to the SNB to react.

 

[fxintruder]

JPY Abe weighting more than the fiscal cliff,


I thought that the fiscal cliff would heavily weight on UsdJpy until something is hinted by the Gop. Clearly the Yen is shrugging the cliff off since Mr Abe the likely new Japan boss , is asking out loud for an open ended easing by the BOJ. Clearly the Japanese econ is falling apart and there is no more doubt about how will be the next fiscal and monetary policies starting after the mid December elections. The easing is going to be huge. The 3% inflation rate can’t be achieved without a very wide expansion of the Boj balance sheet, that is money for free.To that you add all the fiscal incentives to boost domestic consumption and all the financial engineering to weaken the Yen for exporters. Japan is in a urgent need of inflation and a weaker Yen; the question is when the market will believe that this time it can succeed.

Beside the timid option strategy I have put in place (mod butterfly Dec21 80.82.84) mentioned here; I have now a long from 80.50 with no clear target so far. Remember that I had a core position from 77.44 I closed after Obama election (market focus shifting on the Fiscal Cliff), so why this new long? :

This position high in the current range, is motivated by the new development that happened yesterday, that is the dissolution of the current Gov and the call of new elections in December, with Abe largely heading the polls. This market discount is probably going to establish a new higher range above 81.00, but we must keep in mind that the sentiment about the fiscal cliff can turn into a panic mode, with an uncontrolled flight to safety strengthening the Yen and shrugging off Mr Abe election. That is why I plan to lock this one below 81.00 when price goes above 81.50.

Concerning the butterfly the max reward is when the 82.00 body level is reached when the option expire, not higher. That’s why I consider the strikes as a bit timid. Hopefully the fiscal cliff uncertainty in the background would cap the upside. Otherwise the spot long can maximize the position reward.

 

[fxintruder]

Quote from fxintruder:

[B
Conclusion: this fiscal cliff is weighing heavily on risk. But these are the best moments to get positioned, hence I am looking at cheaper price on Aud pairs and Oil. Concerning the intraday tactical trades on news, barriers etc.. because of the speed of the decision making i am twitting them @neoflytox real time but not on my blog or forums. [/B]

As said in the weekly intentions quoted above I am now in an AUDUSD long:

Analysts so far weren't able to give a common explanation to the last fall of Aud vs the Dollar and the Euro. We heard for sometimes times now that RBA rather than offsetting its FX inflows are accumulating them in a kind of indirect intervention. We also heard that hedge funds are unwinding their risky assets positions ahead of their end of the year statements. Talks also about redemptions flows, SPX like behavior due to the fiscal cliff and many other reasons but all not convincing enough. It often happens in FX to see a pair moving out of sync for days without consensual reasons. It's often the techs, those on big levels, that are playing a nice setup, ignoring the prevailing sentiment and the upcoming key events. They drive the market since the other participants are sitting on the sidelines until the possible threat is cleared. As I said in this week intentions here, I was looking at an opportunity to enter on the Aud, therefore I was pending at a big tech confluence that is the 200 DMA, the 38.2% fib, a daily TDL and 1.030 rounded number. These kind of confluences are easy to play, since the order dynamics push the price back allowing to lock the position very quickly and let it go on her own (fire and forget). I am now in at 1.3220 and locked at BE+. I am not going to target any tech level neither to move the lock. When I'll have a clear opinion on what is driving the currency I'd decide how to manage it if it hasn't been closed already.

 

[JB3]

Well, we almost entered the AUDUSD long at the same price. I'm in at 1.03230. I'm in fairly heavily, so I will monitor it closely.

I would love to hear you take on the AUDUSD when you figure it out.

I'm in this trade because it was a good technical area to get into, we have the October low to know where to get out if wrong. I think the market will go to a "risk on" perspective when the US lawmakers extend the fiscal cliff or do something that will just get rid of the debt ceiling...and continue to QE and devalue the USD.

 

[JB3]

AUDUSD opened higher, so I closed my position at +50 pips. But I would still like to read your thoughts when you get a chance. Congrats on your trade too. Cheers.

 

[fxintruder]

Week 47 intentions
We had some pressure released by the end of last week when President Obama met the congressmen. Nevertheless uncertainty is still prevailing with a very high sensitivity to any facts or rumors about the fiscal cliff. Beside playing some tech levels, barriers and news releases, I don’t have any strong conviction on the short term (up to 1 month) about what is driving the majors. But I do have for along time now a bearish view on the Yen and it is still the case. Beside the Yen I see the main pairs ranging in 300 pips wide channel with fast erratic moves time to time, since the lack of liquidity due to many participants on the sidelines.

EurUsd Neutral: Too many questions and no clear answers so far. We can see some upmove this week pricing in a positive outcome from the EcoFin meeting on Thursday. The focus is on the disbursement of Greek aid on one package that seems more or less agreed on even by Germany. I am not excluding to play this buy the rumor sell the fact fact with the help of tech levels.

UsdJpy bullish: As explained here I am still holding a locked long from around 80.50. The barrier at 81.50 has been taken out this night Gmt ( tweet call posted on friday @neoflytox). I plan to load heavily until the Japanese elections in mid December. More on this during the week.

AudUsd Neutral: The lock at BE+ of the one taken near the big confluence detailed here has been hit. Those who heard the call and had a tech stop at 30% ATR (30), are very happy now. If I was still in I would target 1.0400-1.0450 for a partial TP and lock the remainder just below 1.0400 . Why?

We know for sure now that RBA has intervened during October and debut November to weaken the AUD. They can do it again; usually when market is thin to drive price more easily while slamming the specs. Also we were surprised by the RBA holding its rate against all the expectations and this is conflicting with the stealth devaluations. Some are now thinking that now RBA is going to hold its rate again, others that they are going to cut a bigger slice, like 50 bps. On the other hand tha pair can go higher because the Chinese econ picture is improving, but the commodities global business cycle is ending, meaning that a bottoming China might not be enough to improvee Australian fundamentals. The picture is very blurry, though we could get some hints at how dovish is the RBA when the minutes are released on Tuesday. My take on this is that RBA is dovish because of the competition in the devaluation game between all the centreal banks, but is this enough to weaken the AUD; not sure. On the tactical until the RBA minutes I am not planning to play anything because we are too high in the range.

EurChf tactical longs: Still holding this opportunistic trade explained here. As expected nothing below 1.2035 has been filled, though still pending. The last time I did this from 1.2030 it reached at its high 1.2190, I didn’t close because at that time I was expecting Rajoy to ask for a bailout. This time if it is substantially filled I’ll monitor it closely. We must keep in mind that this artificial floor is due to the Tail risk not to the Euro fundamentals. Anything confirming the end of the tail risk, like the first use of Draghi’s OMTs would push the price at a high level.

 

[fxintruder]

Twitted @neoflytox real time I am now long AudUsd and AudJpy inside the current tiny range, and pending to add lower. As said in the weekly intentions here I was waiting for the minutes of the last RBA meeting. Though not excluding further easing, they show the board taking into account improving US and Chinese econ data while looking at the CPI reaching the higher target. This is not likely to change in the medium term. Actually I don’t really mind whether RBA is going to cut at the next meeting, I am focusing more on what the market is expecting. It seems so far that a consensus is starting to build on the no easing side. Therefore using the probably positive outcome from the EcoFin later in the day that can push the price quickly higher from the entry level, and the spreading positive sentiment on the fiscal cliff, I am going long. Long vs the Yen since I am bearish on Yen for a long time now and long vs the Usd because it’s a risk on plan. The target is probably going to be calendar based, that is, just ahead of the next RBA meeting. Some TP could be taken on big levels, if it goes well.

Risk to the trade:

1: RBA stealth interventions, as it happened in October. Clearly this is the bigger risk and no solution to this.

2:No Greek aid today and this can plummet, so why entering ahead of the meeting? Because the outcome of a meeting is often known before it starts. Hence I expect the market to begin discounting it on the positive side at the first lose lips.

3:Fiscal Cliff tensions: This is going to likely occur since we are dealing with politicians. But if the price Is pushed north quickly due to the Greek package, this will give room to further pullbacks hence limiting the drawdown.

 

[fxintruder]

Quote from fxintruder:

JPY Abe weighting more than the fiscal cliff,


I thought that the fiscal cliff would heavily weight on UsdJpy until something is hinted by the Gop. Clearly the Yen is shrugging the cliff off since Mr Abe the likely new Japan boss , is asking out loud for an open ended easing by the BOJ. Clearly the Japanese econ is falling apart and there is no more doubt about how will be the next fiscal and monetary policies starting after the mid December elections. The easing is going to be huge. The 3% inflation rate can’t be achieved without a very wide expansion of the Boj balance sheet, that is money for free.To that you add all the fiscal incentives to boost domestic consumption and all the financial engineering to weaken the Yen for exporters. Japan is in a urgent need of inflation and a weaker Yen; the question is when the market will believe that this time it can succeed.

Beside the timid option strategy I have put in place (mod butterfly Dec21 80.82.84) mentioned here; I have now a long from 80.50 with no clear target so far. Remember that I had a core position from 77.44 I closed after Obama election (market focus shifting on the Fiscal Cliff), so why this new long? :

This position high in the current range, is motivated by the new development that happened yesterday, that is the dissolution of the current Gov and the call of new elections in December, with Abe largely heading the polls. This market discount is probably going to establish a new higher range above 81.00, but we must keep in mind that the sentiment about the fiscal cliff can turn into a panic mode, with an uncontrolled flight to safety strengthening the Yen and shrugging off Mr Abe election. That is why I plan to lock this one below 81.00 when price goes above 81.50.

Concerning the butterfly the max reward is when the 82.00 body level is reached when the option expire, not higher. That’s why I consider the strikes as a bit timid. Hopefully the fiscal cliff uncertainty in the background would cap the upside. Otherwise the spot long can maximize the position reward.

UsdJpy, Boj on the hot seat


Remember that long UsdJpy above taken after the Japanese opposition leader, and likely next prime minister, publicly asked for a 3% inflation target. Here’s the follow ups :

1: The butterfly has been modified by buying back the body at low cost while keeping the two bullish wings.

2: A second long was filled this morning Gmt during the BoJ press conference where Governor Shirakawa restated it’s independence dismissing Abe calls. The former, near retirement is leaving soon and will be likely replaced by a dovish probably appointed by Abe when in office. It’s just to say that Shirakawa stance has been clearly shrugged by the market and the yen is continuing his way north until mid December, the election date.

3: The last long is heavy and hopefully will be reduced in size when the 82.00 barrier is taken out, probably during the Asian session (thin market)

 

[fxintruder]

Even though the Eurogroup failed to find an agreement, thus didn’t help some of my positions to get away from the price; I am rather OK with this week trades.


UsdJpy long here and here :

@ 80.55 +160 p so far, still running and locked below 81.60

@ 81.15 +100 p closed half at 82.00 barrier since very heavy, remainder locked below 81.60.

The 2 different strikes long calls are just amazing (ex butterfly).


AudJpy long here :

@84.53 +80p still running, locked at +50p

@84.15 not filled and cancelled


AudUsd long here :

1@ .0386 Averaged position is -15p right now. This one wasn’t helped by the Eurogroup meeting as expected. This was not the incentive , rather a catalyst intended to push the price away from my position. The use of 2 orders on an averaging platform at different level is explained by 2 things:

1: I wanted to be in after the RBA minutes, and expected the tiny range to breakout either way.

2: Meanwhile I was looking at a position below 1.04.

I often compound my positions this way, mainly on add ons or while trying to initiate a core position. On well established core positions, that have accumulated significant gains, I can have sometimes around 10 add ons trying to catch a second leg or an upcoming move. You can see the way I do it if you read the posts about UsdJpy core trade I closed after the US election.

 

[JB3]

Sounds good. I'm back in the AUDUSD long @ 1.0347 myself when it retraced like 5 minutes ago. And I'm also in USDCAD long @ 0.9967.

So these two are hedging each other at the moment. Both were entered near the support and resistance to limit the losses if it goes wrong direction.

Your analysis with the RBA is the same as mine.