Neither Tech nor Macro

[fxintruder]

AudUsd, RBA selling her soul before China PMI


No clear explanations about the persistent sell off on AudUsd. I mentioned here the major risk to the trade is the RBA intervention during thin market, The intervention seems to be light though. They are not offsetting their FX inflows, hence selling continuously the nation’s currency. Not sure this is going to resist to carry traders knowing that a further rate cut seems unlikely before the February meeting.

The position on AudUsd here , now at -40p is still running, I will decide what to do with it after the release of the China HSBC PMI this night GMT. The AudJpy position is dragged north by the Yen and for now is largely offsetting the loss of the other. Remember that I’ve opened these positions based on the same incentives considering them as the same trade. One position versus the Yen because I am bearish on it; the other versus the dollar because it’s a risk on play (US and China econ improving). Fundamentally I think that this position worth it and I am probably going to add to it if and only if :

1: The risk is still covered at that moment by the second position.

2: If the HSBC PMI is above 50 (cons 49.50). I think this is going to be above expectations, just my 2 cents.

Anyway, if the Chinese economy is perceived as improving, the market will start to price in a good number very soon. If not and the PMI surprises above 50 it should pop up in thin market (Asia). If it doesn’t move after the good number, it’s a kind of proof that RBA is selling her currency, establishing a hidden floor SNB like. Is it going to resist to the risk on sentiment and carry traders is another question.

In short I shoulda, woulda, coulda have kept the tech one taken here on Friday.

 

[JB3]

I just closed my AUDUSD long for another +50 pips. So I'm just left with USDCAD long open for now.

I think the RBA will cut rates at some point, it is only a matter of time. So how will the AUDUSD react when RBA cuts the rates? And when will it happen? I really don't know. I always gauge the effect and timing based on the economic data in Australia. You are right, China will have a big effect on the commodity prices that Australia depend on.

 

[fxintruder]

On UsdJpy, the barrier at 83.00 is said to be heavily loaded with offers. I added a significant size ahead of it targeting 82.95 for 3/4 of it.
The other thing is that I am looking at a pull back from there. If it retrace I'll be pending with orders above the price (buy stops) in case some specs during these US holidays tried to get a better price by pushing it lower. Consensus now is strongly Yen bearish (like vs Usd above 85.00 before the elections ). The trade is posted after the fact since it's a tactical play, though twitted real time @neoflytox.

1: In terms of risk I am covered by the lower positions, not to mention all what have been accumulated from 77.45.

2: Thin market is prone to barrier attacks,

3:Beside being a global macro swing trader, barrier attacks are my favourite tactical setup when I play intraday, (warning: it is not an easy play though).

 

[fxintruder]

Quote from fxintruder:

AudUsd, RBA selling her soul before China PMI


No clear explanations about the persistent sell off on AudUsd. I mentioned here the major risk to the trade is the RBA intervention during thin market, The intervention seems to be light though. They are not offsetting their FX inflows, hence selling continuously the nation’s currency. Not sure this is going to resist to carry traders knowing that a further rate cut seems unlikely before the February meeting.

The position on AudUsd here , now at -40p is still running, I will decide what to do with it after the release of the China HSBC PMI this night GMT. The AudJpy position is dragged north by the Yen and for now is largely offsetting the loss of the other. Remember that I’ve opened these positions based on the same incentives considering them as the same trade. One position versus the Yen because I am bearish on it; the other versus the dollar because it’s a risk on play (US and China econ improving). Fundamentally I think that this position worth it and I am probably going to add to it if and only if :

1: The risk is still covered at that moment by the second position.

2: If the HSBC PMI is above 50 (cons 49.50). I think this is going to be above expectations, just my 2 cents.

Anyway, if the Chinese economy is perceived as improving, the market will start to price in a good number very soon. If not and the PMI surprises above 50 it should pop up in thin market (Asia). If it doesn’t move after the good number, it’s a kind of proof that RBA is selling her currency, establishing a hidden floor SNB like. Is it going to resist to the risk on sentiment and carry traders is another question.

In short I shoulda, woulda, coulda have kept the tech one taken here on Friday.

That AUD combo trade recently mentioned here is rather surprising on its AudUsd component. It’s a classic behavior for a pair to discount an event and go the other way when the fact is known. Usually when the event can be a game changer , the market returns to at least its previous high. The Chinese HSBC PMI ,the unique reliable indicator about China , is above 50 for the first time in 13 months; the broader sentiment is ” risk on “, the European PMI (German and French) are better than expected, the next RBA meeting is not before 2 weeks from now and this pair is not moving, even falling. As said in the initial post, RBA can be behind this. Not able to cut its rate because of inflation reaching the maximum threshold, they are selling AUD by accumulating foreign currencies, mainly USD. This kind of semi-intervention is openly done by the SNB with its 1.20 floor. RBA is hiding it, probably because there is a limit to this game without a printer (at the contrary of the SNB where FX inflows are huge as Switzerland is considered as a structural safe haven). The other possibility is the hedge funds de-leveraging from risky assets before their end of year statements. Any way I am closing it at -25p but not excluding to buy again if it returns near the 200 DMA, in case the pair is tech driven. The AudJpy is still running locked at +50p. and now around +100p.

 

[JB3]

I like the way you pyramid into the USDJPY positions. I need to learn how to do that because I always take the profit off the table, and never really let my positions pyramid. What will you do if the USDJPY direction reverses on your below you top positions? Do you keep a tight stop on them? Or do you just let them average out?

I'm in a few USDCAD longs right now, and I feel like I can pyramid into them as well. But I'm not sure I'm comfortable either. But I guess we all have to just try it.

 

[Instant Karma]

Top notch Journal..Keep it up !...Thanks.

 

[fxintruder]

Hopefully RBA is running out of cash.

Again trying to obtain an initial position on AudUsd. The trade is based on the same incentives than the one closed yesterday (pasted below) . Keep in mind that it’s the second component of the position, the first being the AudJpy, helped by the Yen developing weakness. The call was made real time on twitter @neoflytox .

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 discount of a positive outcome from the EcoFin on Monday 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 Aussie selling . Clearly this is the bigger risk and no solution to this.

2:No Greek aid on Monday 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]

Doji thing and Specs dumping the load
UsdJpy, doji thing and specs dumping the load.


The barrier attack failed few pips off the target. As explained in the initial post here, I was expecting the price to reverse for the reasons I detail below:

1: Imagine you’re a spec fund manager, heavily loaded on the pair from the lows. You know that the 83.00 is going to be defended since the presence of seizable exotic have been leaked. You know also that techs are pending there (61.8% fib and rounded number) and also that the positioning is stretched since the beginning of the week, meaning that some consolidation is about to occur. In short that area is a significant liquidity cluster. The sooner you dump your load (close by selling your positions) the less you drive the price too far against you . Even though you’re filled at an average below the peak you make a massive profit. Many specs are doing this the same time, followed by the herd of techs seeing the pull back on the fib. This is done during low liquidity period, because of the US and Japan holidays, hence the liquidity search is going to drive the market south and this is amplified by weak hands fleeing the position while the counter-parties (bidders) are lacking. Specs, who initiate the move, are just waiting for the techs and the weak hands to bring the price near a significant liquidity cluster where they can buy a gain at a cheaper price , eating in the same time the market orders of all those jumping in the south move . They will be joined by those who missed the big north move, by other techs driven by whatever signal and by new weak hands who are chasing the price.

2: As I am on averaged far from that fight, I keep my upper position even though this one was aimed at the option barrier. Usually I don’t join a barrier atatck if it is the first tentative unless:

The level is an old one, price hasn’t been there for a while.
Sentiment is strong.
Momentum not too stretched, meaning it doesn’t need to consolidate yet.
I am already positioned far from the price.

In this case the momentum was stretchered that’s why I was targeting 5 pips before the barrier but ten were needed.
Keep in mind that attacking barriers is not an easy play.
Retail traders should consider these specs tactics as a good moment to get a cheaper price if they’ve missed the initial move. It’s not easy to know where the price will reverse, and specs didn’t have the full control. They need confluences of other participants, catalysts and liquidity. But in a well established sentiment based on a broad consensus it’s not easy to derail the train for too long.

 

[fxintruder]

Week 47 recap.

Aud long:

AudUsd
@1.038 +60p
@1.0400 +45 p

AudJpy
@84.50 +190p

What is intersting here is the correlation between 2 global macro views, one about a weaker Yen and the other about a risk on sentiment. UsdJpy is now stuck but Aud is dragging AudJpy and AudUsd, yesteday it was the yen who was dragging the UsdJpy and AudJpy while AudUsd was ranging.

UsdJpy long
@80.50 +180p
@81.15 +120p
@82.43 -10p

Have a good week end.

 

[fxintruder]

Week 48, EurUsd forget the greeks and wait for Godot again.
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What’s new ? Nothing really, market still waiting for the Eurogroup outcome, forgetting a bit the fiscal cliff.

EurUsd long: may be the most interesting and also the most tricky plan for this week. I am thinking that the Eurogroup is going to deliver and, as usual, I am positioned below the likely 1.30 barrier at 1.2970. In terms of tactics, any positive rumor or lose lips can be used by specs to trip the stops above 1.30. joined by those attracted by the barrier. After that a positive outcome from the Eurogroup should pro-pulse the price way above the 1.30 psychological level. But the main Idea is to keep half size of the trade as I think that the market after the Greek debt solution, if any, is going to price in the spanish bailout request. I came to this plan because different official comments are suggesting that Spain is preparing to ask for aid.

1:The first hint was given by the European commission openly stating that Spain doesn’t need any further measures to benefit from the European funds; this was the main fear of Rajoy.

2:The ECB released ugly econ projections about Spain for the year 2014, meanwhile clearly saying that the Spanish is going to ask for help.

3:The Catalan election is over and the nationalist party, threatening to split with Spain, have lost significant ground. This election could have incited Rajoy to wait before requesting for help.

4: The Greek aid agreement between the Eurozone and the IMF, could have rein in the Spanish request, allowing the Eurogroup to deal with one problem at a time.

Risk to the trade:

1: No Greek agreement today can generate significant drawdown.

2: Of course this is purely speculative, and I lost significant pips on more or less the same incentives the last time I took a position on the Euro based on the Spanish bailout, commented here.

Target: 50% at 1.30, remainder to see if I can initiate a position based on a calendar target that is the Spanish request while helped by the market discounting it.

UsdJpy long: The current situation has been anticipated accurately in the post here. I have added another size around 82.00, not sure it’s the bottom though. Anyway all the add-ons are covered. See chart below.

Aud combo: Still holding the same positions on AudUsd and AudJpy, and will probably add into but on AudJpy only; to benefit from the Yen sell off and the risk on mood. The current positions are shown in last week recap posted here.

ES_F : I usually don’t post my trades on ES and Oil, just to say I have added below 1400.00 to a long from around 1300.00 taken in June. That trade was drastically reduced in size by closing the add-ons during the last big pull back to 1340.00. I intend to post more on ES-F and CL.

As you see , beside the EurUsd intention, nothing really new. But I think that a new global macro picture is starting to appear. This is probably going to question the global currencies statuses and modify the current correlations. Nothing is clear on it so far but it’s just the beginning.