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Gotcha. Check out my USD/JPY and AUD/USD calls...making me some $$ now.
Like the beast...don't see a pincher though? What time frame. FYI the USD/JPY broke the neck line. Nice little drop. Fib retracement points at 86.46 (32), 89.32 (50), and 89.108 (61.8). Lets see if we can get a bounce play of any of these. Or it could retest the 88.10 crucial support.
Simple,
Also keep an eye on the AUD/USD which is hovering at key resistance @ .6660, which happens to be the 61.8% fib support from the prior run up. It's been pretty well correlated with the EUR/USD lately so keep an eye on that to get an idea as to whether it could break. Analysts are calling for a drop to the .65 range where the previous long-term downtrend line was broken.
Yeah, didn't quite have enough umph to get all the way through. Not its forming a head and shoulders on the 5 min (see the 1 min for more detail). Break of neck line at 89.50ish and we should see a nice drop.
USD/JPY caught in the murky 1min channel. Thinking it may break through and bottom at 89ish--bout a 60 pip play possibly.
Major technical level breached in EUR/USD at 1.33. Gonna ride this puppy down to 1.30ish (we'll see...). Craziness... Euro falling as predicted. Thursday rate cut decision should be interesting.
Well, worse case scenario was over 600k, so I think it's not that bad...relatively speaking.
I expect a lot of it to be priced in already, but there will be some big moves one way or another. I'm thinking we see a pretty bad NFP. So, am looking for a nice rise against the dollar in all pairs. I wouldn't mess with it until the news actually comes out unless you are really bold.
A nice long indeed. The E/U has me perplexed though. You get some of the worst economic history ever for the eurozone, which will necessitate a probable rate cut, and the Euro increases!! against the dollar? I expect a major drop tomorrow after the rate decision. Should be some nice scalping opportunities.
Deflation is a real threat to the eurozone. People think they took too long to act in lowering interest rates. Expect a cut this Thursday. Couldn't resist holding an overnight position on the the E/U to catch another potential big move...paid off.
Closed out my long for a small profit...looking to maybe short it here.
Looks like it tried to carve out a bottom at 1.3560s. Took a long position there, we'll see if it can break through the tunnel to the upside at the 1min.
Holy crap, the Euro took a nosedive. Too bad I didn't capture that 300+ pip movement...jeesz. Might be a nice place to look for a bounce, but could be a dangerous play.
E/U exploding up...want's to test the 40's.
I think you're right on to point out the number of dollars being pumped into the economy. It will be interesting to see whether this and the fed's quantitative easing approach create hyper-inflation that simply cannot be harnessed. I know that deflation is the 800 pound gorilla, but we should be worried about whether the fed can control the flow of money enough to keep inflation at sustainable levels.
Also, get ready for the trillion dollar stimulus plan from 'Bama -- the modern day equivalent of Roosevelt's New Deal legislation -- that he hopes to sign before January even ends. While history teaches us that swift action is necessary here (see the disaster created when Hoover sat on his hands), I'm not sure it is enough. If the U.S. cannot fight off the early symptoms of a depression then we might just see an overall shift from the dollar as the world's safe haven currency as you suggest. We live in interesting times indeed...
Hey no problem. Just here to help and share ideas. It's refreshing to find a board where people collaborate together to make money instead of all the equity boards where you have to read each poster's threads with scrutiny trying to discern what their ulterior motive is.
Can't say enough how much I like forex. I'll eventually get back some in equities, but I don't want to touch it now with a ten foot pole.
GB,
I noticed the positive correlation this past week. I'd chalk it up to the low volume at the end of the year. You can usually see correlation tables based on week, month, and year. The USD/EUR is usually almost 100% negatively correlated with USD/CHF, so when one goes up the other goes down. However, I've been focusing the past week solely on the USD/EUR pair (mainly b/c of the low pip spread and the big moves it was making) and sometimes I'd enter a short trade on the E/U and a long on the U/C hoping to catch movements in either pair while hedging against the possibility that one wouldn't move much. At times it worked perfectly, but at other times both pairs would go in the same direction. Definitely weird.
But...I don't think the euro and dollar can go down at the same time long term unless there is fundamental switch to a new safe haven currency. Usually the dollar is viewed as the popular currency during risk aversion periods whereas the euro strengthens on risk appetite, i.e. people become more speculative. This in and of itself creates the negative correlation that we are so used to.
Also, I believe that the early part of 2009 is critical for the euro. It made a huge move up to the 1.40 range after bottoming out in fall. It's now retraced to the its 32% fib support at 1.38 and could break through. But many analysts are looking at the descending wedge that is forming which suggests a possible bullish reversal to the upside resistance at 1.41. My personal bias is that the euro is due for a correction as the eurozone's capacity to thwart financial crises is not nearly as extensive as the United State's. It's a lot harder to regulated multiple countries within a region compared to the US only having to regulated multiple states who have been members for over 100 years. The fact is the eurozone has not faced a crises of this magnitude EVER while the U.S. has been there done that. I'm willing to bet experience prevails here...but of course, we'll see.
If you're just starting out, I'd suggest doing the babypips tutorial. It's a good jumping off point. After you feel comfortable with that, check your local bookstore, spend a couple Sat/Sun mornings there reading all the books you can find on technical analysis, forex trading (fx bootcamp is a great one), and some of the tech magazines (stocks and commodities and active trader are pretty awesome).
It is impossible to make money at this game without being properly educated. You can only learn so much trading. It must be done in conjunction with technical education. It's like trying to practice law without going to law school -- you'll eventually get it, but it takes a LOT longer.
Good luck!
Good to see its all in the family simple.
Increasing the NAV is what it's all about. Went live this week with $97 after about 3 months of intense studying of tech. analysis and education. Did the demo for a month and was popping 100% trading days so felt it was time to start making real money.
I wanted to start with a small balance and see how high I could grow it. This way I was still learning but not risking a bunch of cash. So far this week I've tripled my NAV to $300 and were it not for some stupid trades I'd be at $400. My goal is to build it up to $1000 by mid January and then I will fund my account with real money and then make some good profits.
To me, the demo is like college baseball, trading mini lots is like the minor leagues, and then once you've gotten good you get the call up to the big leagues. So far I'm hitting a couple homers but mainly solid RBIs. I'll keep you updated...
yep, very nice. Love the tunnel plays
USD/CHF testing the 1min tunnel...keep an eye on it.
Yeah some major moving happening today. I rode the EUR/USD all up and down today like a cheap ride. Not sure what caused the unwinding...
Been shorting the euro all day. Making bank today. Went live last week and so far so good.
Good stuff there d. Look for a EMA 62 break for a true confirmation. Buy in before the break for a riskier trade.
Nonetheless, I'm saying it now...4X in 2009 is going to make a LOT of people $$$. Soooooo many currencies are either overbought or oversold. The geopolitical landscape cannot be more conducive to high volatility trading. Can't fracking...wait
Simple that's awesome. How long has she been trading and is she living independently and making a living trading just forex?
Be careful with the yen...BOJ gonna take action soon.
Today was the day to short the Euro. Some nice money to be made. I'm hoping I can trade for a living someday. I've got a pretty sweet job, but autonomy is better than anything else.
Congrats...you trading for a living yet?
Nice article on getting back to the carry trade for early '09 courtesy of daily fx.
Measuring The Carry Trade Candidates For 2009 After The Fed Cuts Rates To Near Zero
Interest rates have changed dramatically over the past year to eighteen months with the upheaval in credit markets and the onset of a global recession. And, while the resulting plunge in investor sentiment has claimed many casualties along the way, the carry strategy seems to be one of the hardest hit. However, investors will not sit on idle capital for long; and eventually a turn in sentiment will put investors and banks back on to yield and into the carry trade.
In this article we will go over the arguments for and against carry, as well as the likely timing for this prolific strategy to regain its place in the market. Then, we will look through the individual currencies and determine which are best suited for playing a funding roll, carry roll and those that should simply be avoided.
Arguments Against Carry
Considering the current level of uncertainty and risk aversion in the market, the carry trade is not an attractive strategy right now. Through past months, the need for liquidity, steady drop in global interest rates and persistently high level of volatility means that a reversal of the traditional carry trade has been one of the most consistent trends through the developing financial slump. What’s more, as long as all of these conditions are still in place, the risks related to this strategy will outweigh the benefits.
Before banks and the other large pools of capital return to this strategy, a few things will need to happen. First and foremost, credit conditions must improve. Without access to credit, the levels of total capital and leverage will remain severely depressed. Furthermore, the concern this produces for liquidity is one of the primary pillars for the market fear that has led to the unwinding of carry. A natural derivative of liquidity is volatility. As carry is a passive strategy that collects yield differentials, the potential for dramatic fluctuations in the underlying exchange rate means capital losses could be equal to or greater than the yield income. Another issue that must be addressed is the outlook for the global economy. As long as growth contracts, net wealth will shrink; and caution will keep investors on the side line. All the aforementioned issues involve risk; but for investors, the potential for loss is always balanced out with expected return. Therefore, there must also be the potential for yield income. Ultimately, the lower risk is considered to be, the smaller yield differentials will have to be to encourage investment. So the market will have to find its balance.
Arguments For Carry Going Forward
Given current market conditions, it comes as little surprise that the carry trade is still under heavy selling pressure. However, just like any natural economic cycle, this downswing will come to an end. We have already seen policy makers around the world step in with bailout and stimulus packages aimed at thawing the credit markets, boost investor confidence and recharge economic activity. While the momentum behind the unfolding global recession will need to play out in its own time (with financial markets in tow), uncertainty is becoming less of an issue.
The majority of economists and government officials may forecast further contractions through the coming months; but there is a growing consensus that the global recession will bottom out some time in the first half of 2009. When this reversal takes place, investors and banks will no longer be solely focused on capital preservation but will slowly venture back into the markets in search of return on their idle capital. In the aftermath of the worst downturn in decades, speculative interests will be fully flushed and interest rates will be exceptionally low, meaning volatility will be similarly anemic. This will represent the ideal investment conditions for large pools of capital that are looking for consistent returns and deep liquidity. However, which pairs present the best characteristics to draw in carry interest will depend on the individual characteristics of each currency.
Top Funding Currencies
US Dollar – The US dollar has completely flipped its role in the currency market. Through the first half of 2007, the greenback was a well known carry currency with a benchmark lending rate that reached as high as 5.25 percent. Going forward however, the dollar looks to be the best candidate for a funding currency. At its most recent policy meeting, the Federal Reserve lowered its benchmark lending rate to target a range between 0.00 percent and 0.25 percent. This is essentially a Zero Interest Rate Policy (ZIRP) without the stigma of being considered such. For the carry trader, this represents free money – a situation similar to Japan between 2001 and 2006 during the long boom in the carry speculation. Beyond bare bones interest rates, the more important foundation for the dollar’s funding status is the commentary by the Federal Reserve statement suggesting the federal funds rate would likely be held at “extraordinary low levels” for “some time.” Another benefit of borrowing in the US (and shorting the dollar) is deep liquidity. This means that in the next wave of unwinding, there will be little trouble in offsetting positions with minimal loses.
Japanese Yen – With a stable benchmark lending rate at 0.30 percent and ample capital, Japan is another obvious choice for a top funding currency. The yen was the backbone in the carry trade’s rally to new record highs through 2007. The currency’s characteristics have changed little since then. In fact, the Japanese unit may have further proven itself as an ideal funding currency in the interim as the benchmark lending rate changed very little in over a decade. For the carry trader, this means a consistently growing yield differential when global interest rates start turn higher as the Japanese target will likely hold steady while its international counterparts rise.
Swiss Franc – Like the Japanese yen, the Swiss franc was one of the primary funding currencies through the last carry trade build up. Going forward, its appeal has only improved. From a peak of 2.75 percent, the Swiss National Bank has pursued an easing policy that has lowered the benchmark lending rate to 0.50 percent. What’s more, there is abundant liquidity to build up a carry base as the safe haven economy is known to house the world’s capital. However, unlike the US and Japanese rates, there is a higher probability of fluctuation in the Swiss’ main rate going forward.
carry_121708_01
Top Carry Currencies
Australian Dollar – In looking for the best currency to take advantage of the eventual rebound in carry, we need to look for already established returns and a promising economic outlook. The Australian dollar meets both of these requirements. Currently its benchmark is at 4.25 percent after a series of sharp rate cuts. However, statements and commentary that have followed the rate decisions are backing off the dovish rhetoric and raising expectations of a neutral rate stance in the near-term. Even a reduce pace could keep the benchmark lending rate well above that of the US, Japan or Switzerland when investor confidence. Another attractive trait that the Australian dollar possesses is a relatively strong economy. Australia is the primary commodity provider for Asia and domestic demand is still fairly stable.
Euro – The antithesis of the US dollar, the euro holds a unique position among the potential carry currencies. From an interest rate perspective, the European Central Bank has been one of the most reserved policy groups in lowering its target rate. More importantly, officials have suggested further easing will come at a much slower pace. And, while the European benchmark rate does not have as much yield potential as its Australian counterpart, the stability of their monetary policy and the bank’s focus on inflation put its on a solid foundation.
New Zealand Dollar – Just a few years ago, the New Zealand dollar was the premier carry currency with a benchmark interest rate that was unprecedented among the G10 at 8.25 percent. However, backed by a very small, export-based economy, the currency was one of the first to respond to the shift towards risk aversion. Reserve Bank of New Zealand Governor Alan Bollard has loosened rates substantially (with large rate cuts adding up to 325 basis points so far) and the potential for further easing is relatively high. However, with a benchmark still at 5.00 percent, the kiwi dollar could be in a good position should global rates stabilize soon. On the other hand, given the country’s shaky economy and thin liquidity, this currency may lag in the upswing in carry interest.
Canadian Dollar – Through the last carry build up, the Canadian dollar did not enjoy the level attention that its Australian and New Zealand counterparts had received; but a relatively high yield did attract considerable carry flows. Since then, however, the benchmark lending rate has been lowered significantly and falls near the lower half of the curve at 1.50 percent. To remain a viable candidate, policy easing will have to let up to avoid rates near zero. Alternatively, compared to its neighbor the United States, Canada’s economy and markets have proven to be relatively robust. This garners the Canadian currency considerable potential for a hawkish turn in global rates.
A Currency To Avoid
British Pound – The British pound cannot be easily placed into either the ‘funding’ or ‘carry’ currency categories. Over the past year, the United Kingdom has dove into a considerable recession; and the outlook is even bleaker. What’s more, as the financial capital of the world, credit has been a particularly heavy weight for the pound to bear. In an effort to secure its markets and economy, the government has resorted to nationalizing major financial institutions and the Bank of England has moved with sharp rate cuts that have lowered the benchmark to its current 2.00 percent. Forecasts are guided by discussion of a soon-to-be zero interest rate policy and policy officials suggestions that growth and deflation may still be problems even if lending rates are brought that low. With such uncertainty, a low yield and a history of sudden shifts in the BoE’s policy stance, the British pound will prove a risky currency for investors that will be looking for safety of funds first and foremost.
carry_121708_02
Terrible time to be doing anything. Credit markets are frozen. People are afraid to spend money to travel. Feds pumping a shitload of money to already liquid banks to increase liquidity???
Not a good time to be a start-up company...assuming CINT was ever going to be a start-up in the first place.
USD/CHF picking up some lost ground from severely oversold status while the EUR/USD is selling off a bit. Long on former short on latter. Nice hedging strategy that is working out good so far.
Anyone been following the USD/CHF? Dropped like a ROCK! Easy money making opportunities yesterday. Talking about a multi-100 pip short trade on the USD/CHF. Crazy...
EUR/USD gonna break 1.35 here possibly...We'll see how it fares overnight.
What are you guys playing tonight? I'm not touching the EUR/USD...can't get a read on it to save my life. Still maintaining a bearish bias long term though. USD/CHF looks tempting as it is touching long term trend line. People are saying there is .75 rate cut already priced into market. Should be interesting to see what the FED does this week.
Keep an eye on E/U. If auto bailout goes through the house then market will probably react positively and risk appetite may be back short term, which all equals a probable upward swing in the Euro. Another possible test of 1.3 range is likely today.
Now its falling some. E/U is hard to read...Gonna leave my shorts in and see what happens. Gonna get some zzzs...gotta get up early to squeeze in some trading b4 work.
E/u is really running now...
Shorting EUR/USD...lol Took a nice ride earlier on the USD/JPY on a decent long. E/U could be nice it if broke through the 5 min quad tunnel. Right now my short is being cooked.
What are you playing tonight?
Who knows man. The longer the global financial crisis persists, the greater the run towards safe-haven currencies like the dollar. Also, the Eurozone economy was looking at a correction even before the crisis began. Now they are facing a double whammy of hit and many think the central bank took too long to act because they thought the crisis wasn't as serious as it initially looked.
It's rallied as of late though. It needs to pierce and hold above 1.3000 to signal any new bullish trend.