iBankCoin
I patiently trade the fundamentals - with a technical machete.
Joined Apr 1, 2013
69 Blog Posts

USD Slow – But Makes The Turn

It looks like the ol USD has taken its slow trip across the top  – and has now started down. The usual correlations should be in play with trade ideas long EUR/USD, GBP/USD as well short USD/CHF and USD/CAD.

The Kiwi (NZD) has already left the station , and AUD looks to be struggling at a well-known area of resistance.

I think it will be interesting to see how JPY performs in the face of renewed USD weakness, and I am particularily interested to see what stocks do. I’ve got little expectation that we’ll see much more than continued “flat” action at best, or perhaps a nice lil “pop” as retail comes in here at the top.

I’m no stock picker –  but imagine you’ll need to be as things move forward.

I could sound a lot more excited about it – but I’m not.

I’m walking softly here – and keeping positions relatively small, til I see a bit more.

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All Cash – Sitting On The Fence

Some constructive charts would have me looking to short USD against a number of the majors. The EUR has put in some healthy work over the past few days, as well GBP – although fundamentally speaking getting long either doesn’t do much for me these days. Of course that can be said for just about all “paper fiats” during this “race for the bottom” but….a guy’s gotta make a living.

Sitting in cash can be a touch challenging, especially during times of sideway market action, but as far as forex goes  – better that than having your capital tied up and grinding away.

Monday’s are notoriously uneventful so…..we’ll look to see how asia performs here later this evening.

It appears that JPY has at least stabilized for the time being, but in this case  – no trade is a good trade, as it’s too late to get short  – and pretty tough to get long.

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Baby! – Gimme My Money Back!

While 2% represents little more than a weekend getaway to the ruins in Tulum…it’s my money – and I want it back.

As much as I accept them as a regular part of trading – I’m no fan of losing trades. If you’d been staring at this for as long as I have – you wouldn’t be either. We are supposed to be good at this. We are supposed to win.

The current weakness in the Japanese Yen is truly a thing of beauty, and fits in wonderfully with my long term macro view of currency movements  for the coming year. Let it be known – I am bearish on JPY for the long run.

But now? Like this? Further downside? A journey to the center of the Earth? Now?………. How?

Putting this in perspective – the Yen has fallen around 900 pips to the Great British Pound (GBP) in a 40 hours period. This –  in the face of “risk aversion” across markets ( a market dynamic where “usually” Yen is bought  – not sold). I am dumb founded  – and at least a tiny bit suspicious.

Yes , yes we’ve heard the news – we know about the easing etc – but has this actually (fundamentally) flipped the safe have status of the Japanese Yen on its ass? – So we’ll see.

As much as I am a seller of JPY longer term – I will continue to watch like a hawk for my stolen 2%. The Nikkei spike “in spite” of risk aversion taking hold in U.S equities has me suspect that perhaps this move will be sold –  but man! talk about stubborn!

 

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Japan Eats U.S – But It’s All Wrong

I don’t get english language  T.V down here – and I’m all the better for it.

For kicks  once in a while –  I’ll hit the “CNBC Widget” in my Think or Swim Platform, pull up a chair, pour myself a Mezcal and consider it my “Seinfeld”.

I just caught an interview with some quack outling the pitfalls of Japan’s easing policies, suggesting they’ve made a terrible mistake, and that this can only been seen as negative – ooooh so negative. Wakey wakey U.S.A!

The rest of the world will not sit idle and allow Uncle Ben to destroy the U.S Dollar without a fight. QE5 coming faster than you think, as Uncle Ben will have no choice.

But he can’t justify printing at all time highs can he?

Down before we go up? – Makes sense to me.

English speaking T.V is absolutely hilarious.

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Sushi Anyone? – Kong Gets Rolled

I got rolled for  2% on short trades in AUD/JPY, NZD/JPY as well CAD/JPY taken early yesterday afternoon, as  Nikkei  jumped a massive 720+ points on the Bank of Japan’s announcement. I can’t say I’ve seen a move like that in a long time.

Some of the incredible highlights include:

  • Bank of Japan will double its monetary base thru JGBs and ETFs in 2 years.
  • Merge asset program with regular bond buys
  • Purchases of assets extended from 3-year maturities to 7/8-years maturity
  • BOJ will buy over 7 trillion yen worth of bonds each month.
  • Target on bond buying would expand monetary base to the point of reaching Y270 trillion by 2014
  • Decision to keep ultra-easing policy until 2% inflation is achieved sustainably

Car makers in the U.S can’t be happy about this, as Japanese exports just keep looking cheaper and cheaper. The BOJ’s plan has them buying everything but the kitchen sink in order to reach the inflation target of 2%.

From a trade perspective – something to be learned here, as my position long JPY was “counter trend” ( medium to long term I am extremely bearish JPY) and I was holding positions going into the meeting and announcement ( assuming we’d already priced in / understood BOJ’s easing). This lends further credence to keeping small position size when trading against the macro trend…and of course when trading against a Central Bank.

I still associate “buying of JPY” ( a safe haven currency ) with “risk off” behavior, and will watch closely to see if this “spike”  in Nikkei  – takes a roll of it’s own.

 

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Wisdom – Stops, Open Trades And Mezcal

For those of you who subscribe to the old adage “what doesn’t kill you – only makes you stronger” well…

I could tell you some stories.

As I lay there looking up towards the ceiling, she did what she could to put on a brave face. I held the bottle of mezcal tightly between my legs and gripped the arms of the foam plastic chair as to have nearly pulled them free.

3 and a half hours of slashing, digging, cracking, smashing, more mezcal, and a handful of “knock off Aspirin” later – we both recognized she wouldn’t have the “tamales” to finish the job.

I noticed the half centimeter layer of dust and lint that covered the light swinging  above me, as word of “Bank Runs in Cyprus” crackled out in spanish – from the tiny T.V in the corner. The office was dim, dark. The scene –  ugly for reasons equally horrific the nightmare unfolding  before me,  for I had open trades on back at the house……………..no stops.

A call was made, and shortly there after a large man with a leather bag arrived. As they hovered above me, mumbling to one another, strategizing  – I sweat another bucket, and prepared myself for the worst. His methods where equally crude as the “cracking and smashing” continued – but his movements where deliberate and strong.

Another hour later, with the last stitch in place, he props up my head, wipes the blood from my chin and says “Well..I think I got most of it”…..”Only 3 left to go”.

Needless to say – those wisdom teeth are still in my head and I’ve no plans to have them removed anytime soon. I’m a huge fan of mezcal and have recently considered the use of stops.

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Turning Japanese – Trading USD/JPY

I’m going  to back up a little bit, and give you some history on the trade  – as well a quick outline of the fundamental drivers.

With rumor of the possible re-election of Shinzo Abe as Japan’s new Prime Minister in Oct of 2012, and his proposed plans to aggressively weaken the Japanese Yen – JPY sold off in spectacular fashion. Going down in history as one of the most dramatic “forex events of 2012” JPY’s slide ( simply seen through the symbol “FXY” if that works for you ) continued through to mid March, and likely will resume in relatively short order.

Fundamentally speaking the dynamics surrounding Japan’s foray into the “monetary easing business” and the U.S Fed’s plans to “print their way out of debt” are very different – and well worth pointing out.

Bottom Line – Japan’s public debt is predominantly domestically owned (95% is owned by Japan’s own citizens) while the U.S owes more than 50% of its debt to foreigners. Japan’s printing will have little ramifications (globally speaking) so…essentially they can print forever – managing  this domestically, with almost no risk of default.

This in itself provides an extremely solid “fundamental foundation” for trade considerations LONG USD/JPY, as both currencies are aggressively devalued – the question really becomes “which can go down more?”

Well…..Japan ( with consideration of its domestically owned debt, and high level of savings ) could seriously keep interest low FOREVER and continue to print – while inevitably, the U.S will be forced to raise. This puts JPY at the bottom of the totem pole “rates wise” and essentially solidifies it’s place as the funding currency for Carry Trade activity.

Needless to say……Uncle Ben has had more than a couple monkey wrenches thrown his way – in his quest for a weaker dollar….all be it Japan’s………….coming in paper form.

 

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Surfing The Headlines – Pounding Sand

Alright, alright – that’s enough with the pleasantries. Now that we’re all “cozy” let’s get down to business  here.

First off, I get up earlier than you. Secondly, when I say I trade the fundamentals – I mean exactly that. You know all those Monetary Policy Statements that Central Banks put out? Oh yes…you guesssed it  – a stack of em a mile high in the “loo of Kong” as I actually read them.

If you’re merely “surfing headlines” and placing trades, let me be the first to tell you – you’ll be “pounding sand” in no time.

I could give you thousand examples where the “current news headlines” and the “underlying fundamentals” have generally run opposite one another. In a broad sense, moves in the forex market are much like those of a battleship – taking considerable time to turn, regardless of stormy seas. You’ve got to learn to decipher which stories will impact a country (and it’s currency) on a fundamental level  – and those that will only contribute to making waves.

Take Cyprus as a quick example. Scan the headlines, and one would assume the EUR is finished. Pull a weekly chart of EUR/JPY and see the pair has barely budged, with only a modest pullback – and if anything a possible opportunity to buy.

Did you consider in your analysis – that the EUR is the second most widely held reserve currency on Earth? Not to mention the second most widely traded, and that 17 countries currently depend on EUR for things such as payroll and the purchase of goods?

I didn’t think so. Point being – the EUR isn’t going anywhere any time soon, and if you’d bothered to look a little deeper than your local news rag – you’d know that.

But you already know everthing right?

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This Is Forex People – Pea Shooters Down

This is Forex –  people.

The volatility here will chew through your account like a beaver gone mad. For those who fancy
themselves “a cowboy” please say it 5 times fast- “account liquidation, account liquidation, account
liquidation…”

Seriously though, the study and practice of currency trading provides some serious insight into
market movements as a whole, and can offer valuable, tradable signals – well in advance of turns in
equities. It’s the most liquid market on the planet dwarfing daily volume on the NYSE by more than
200:1 and trades 24 hours a day, so if you like the feeling of sand in your eyes – you can watch the
“candles dance” well into the night.

I do well here – as to not wake up to morning news headlines of some CEO caught with his pants
down in an alley, or another brokerage gone bust. Sure you’ve got a couple of Central Bankers sitting
at the table with some serious chip stacks, and their printing presses in the hall – but we can
deal with that, as they’ve already more or less gone “all in”.

Its big, it’s scary, and it’s funner’n hell – so put your pea shooters down and buckle up!

Let’s go make us some pesos.

Kong…gone.

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