Happy Holidays!

Seasons Greetings!

In Italy they say "Buon Fine & Buon Principio" which translated would be "happy ending and happy beginning". 2015 - the year of the USD - is at an end, and 2016 is knocking on the door. Liquidity will be drying up these days so it might be best to avoid trading, and between the 27th and the 31st trade small.

I would like to start this note by thanking all the active followers that continue to take the time to interact with me and share the content that I provide. This also goes for the 20-odd traders that continue to frequent the Skype room despite my recent absence. I'm quite relieved that the room has continued to thrive, because I have not forced anything upon anyone and I am only trying to pay it forwards by putting out there content and context that I feel useful to those who are so inclined.  It's always rewarding to see appreciation for the content so, again, a very sincere thank you. 

Lets talk a little about trading, as one man sees it. It all starts in the trader's mind. If you are not a calm person, or you cannot calm yourself down when external influences are absent, then this may not be the right job for you. It is a job like any other, and just like any other, it requires some personal attributes in order to succeed. Peace of mind is adamant. If you get caught up in the day-to-day hustle & bustle and can't stop the flow of thoughts in your mind, than it will be tough to achieve anything in the markets. 

You see, what you can take from the markets only depends on yourself. The markets will reflect your inner state and return to you what your inner state is creating. Let me explain: if you have studied a way to trade that has given good results historically and you have no reason to believe that market conditions could change to the point of invalidating your system, then it's only a matter of repetition and the profits should come. But lets say you trade and loose. And you try again and loose...you already know that your system can produce loosing trades as no one wins all the time. But you get angry and go back to studying and trying to (unconsciuosly) force winning trades out of the system. 

This will only get you into more trouble. Instead, you must sit back and take a deep breath. Sh** happens and you've got to deal with it like a champ. If you have a good understanding of market dynamics and market psychology, then you have nothing to fear. Keep plugging away, without forcing anything and without getting sloppy. It's about consistency & longevity...a job of precision and responsibility.

In 2016, I will continue to help other traders, through various initiatives:

1. The habitual blog entries here and on Forextell.com : Weekend Game Plan and European Open reports whenever possible.

2. A new collaboration with FX Renew, where I will be helping out during the Workshops (http://fxrenew.com/online-forex-workshop/) from February 2016, and subsequently through a mentoring/coaching service.

3. (Tentative): a live trading room through FXWW, where I intend to provide a useful context for traders to operate in. To pull back the curtain a little: one thing is having the news (which nowadays is cheap via outfits like Ransquawk). Another thing is knowing what the market is most likely focusing on, what the impact of certain news events might be, how the markets will most likely react depending on the outcome.  

Of course this initiative will be on the drawing board until I finish my sabbatical, also because it's difficult to put a price tag on something like that. Any suggestions or declarations of interest will be most welcome actually.

In the meantime, as you may know, I'm on a short sabbatical from full-time trading. I've always liked teaching so I'm refining my teaching skills as an ESL Teacher until May 2016. I am currently teaching children (8 yr olds), young adults (15-18) and executives at a leading international footwear company. I'm actually already starting to appreciate the effects of this new adventure: for Christmas, we have taught the kids some Christmas classics like Frosty the Snowman, Jingle Bells, Rudolph the Red-Nose Reindeer, etc. and it has forced me to unpack my guitar and get back into the groove. So this year, my  best wishes will come in the form of a "performance". This is Frosty the Snowman:

https://drive.google.com/file/d/0B1SYTv_vDtcdaVpaYzNaLTQzd2M/view?usp=sharing

I wish you all Health & Wealth in 2016!

Sincerely,

JupaFX

Retail vs. HNWI solutions

My most recent educational blog posts were attempts to steer my "retail" followers towards a different mindset - one that will keep them focused on the longer term. I am attempting to steer people away from instant gratification and towards delayed gratification. I am attempting to show the steps that can take an average individual, over time, to a position where he will be financially independent and free.  And all this without having to force yourself to trade, because not everyone has the time, the desire, the skillset to make it happen.

Through compounding, with time on your side, you can achieve things that would otherwise seem impossible. And then, solutions usually available to HNWI will become available to you. 

I have recently received a number of inquiries about "copy trading" and "signal providers" that will autotrade your account for you. While there most definitely are good signal providers out there, I remain skeptical about the whole copy-trading approach. 

Once again, I must remind everyone that the traders who'se work is worth paying for, are out of reach of the common retail folk. Take CenturionFX for example. The manager is an Italian fellow from Rome that I am in touch with, so I can also vouch for his professional integrity. If you have 1 Mln Euros, he suddenly becomes available to you. His results, by any standard, are worth paying for.

www.centurionfx.com

Objective: Thinking Like a Professional

1. Trading: no room for copycats

Perhaps you have had the experience of attending a workshop conducted  by an investment expert who explains his success secrets. Perhaps you also had a mentoring session with me, and you still can't seem to get the results I've shown you are possible.

What probably happened is something like this:

a) you were impressed while you were doing the mentoring session/workshop you attended, by the expert’s presence and skills;

b) you finished the session/workshop full of confidence;

c) you quickly opened your trading platform looking for the same setups;

d) you also quickly  discovered that you weren’t much wiser than you were before the workshop.

Something didn’t work or somehow you just couldn’t apply what you had learned. Why does this occur? There are actually a series of issues I discuss during my mentoring sessions, to help people overcome the "technical" issues such as:

a) "looking" for the same situations --> this would mean you're not being mindful and trading what's in front of you; instead you're "forcing" things, actively seeking setups which may mean nothing.

b) failing to be disciplined --> this is all about delayed gratification and one way to overcome this issue is to commit. Lose weight! Do 10 minuted of meditation each morning! Save 5% more of your income....if you can be disciplined and consistent in some other aspect of your life, then you can apply the same mindset to your trading and overcome this issue.

c) messing up with position size --> if you start betting 5% per trade, no matter how good the system is, you'll end up with a sizeable drawdown at some point, which you might not recover from.

d) lying to yourself (and/or to me) about your personal situation: if you don't have the money or the time to trade, and yet you insist on doing so, you will be under a tremendous amount of pressure that will ultimately lure you into error.

2. Think Alike --> Be Alike --> Do Alike

Source: dreamstime.com

The issue I cannot solve for most people is the thought process. I cannot force you to think like I think. When I teach how I approach the markets, the chances are my students will only superficially understand what I do, because they will tend to be looking for practical answers like:

- setups

- setups

- setups....

Now I believe that it takes no more than 1 hour to explain what I do. So if you find that after the session you still don't "get it", you were probably not paying attention to everything I said. 

There's a reason why I go through the 4 steps of my trading in a certain sequence. 

There's a reason why I show you my weekend/weekday routines.

There's a reason why I describe the background components first, and the actual setups at the end. 

I am attempting to get you to "think" like I think. So that you can actually have a chance at replicating my method successfully and see the world as I see it. I believe talent can be taught!

I believe that if at least two people can do something well, then that skill can be taught to most other

people.

3. The psychological component everyone ignores

Pressure: it will kill your performance

Most people I've had the opportunity to meet and speak to, seem to think that all their problems will go away if/when they're able to trade well. Then they can just sit back, click the buy/sell button and watch as their finances shoot through the roof. 

Unfortunately, this is the biggest lie out there. There is a reason why money tends to flow towards those who already have a lot, and money tends to flow away from people that don't have enough. People that have a lot of money may not have happiness, but they do have:

- time (to educate themselves, to learn how to trade, to test their ideas, to search for a mentor, etc.)

- options (they are relaxed because they know that if trading doesn't work, they can do something else or go back to school and learn something new, etc.)

- risk capital (therefore they are not even in the same ballpark as most people, and do not have to consider certain constraints)

If you want to have a shot at trading well, you need to be in the right personal and financial situation to do so:

a) you should have time to follow the markets during the right hours (for example, in FX this would mean being able to trade the first 4-5 hours of the London Session); 

b) you should have time to read/study the markets

c) you should not have to count on your trading performance to pay your bills - ever. 

4. How to generate enough money to actually have a chance

The objection I most often receive is  "with my current job I'll never have enough money to trade for a living". I say this: you might not even like trading full time. But that's another matter. In any case, where there's a will there's a way. So here's a potential plan (which was used in a similar manner by Van Tharp, Tony Robbins, Alpha Architect, and other well regarded planners/coaches):

Source: FCN.com

First things first:  you need to save more and spend less.  Only if you save, can you have money to invest and compound.

Secondly, compound interest is what you're looking to use as a tool. Interest on interest, over many years. Let your money work for you while you sleep. 

Finally, you should look to gain a certain amount of wealth, that can then feed you proceeds for  the rest of your life like an annuity or a perpetual bond. 

What are the steps to accomplish all this? 

1. Plan everything: plan your weekly shopping; plan your monthly house expenses; plan your Christmas/Easter/Summer holiday expenses...Know what your expenses are and reduce any expenses that are not necessary for your standard of living. Resist the temptation to buy things now, so you can buy your financial freedom in the future. 

 2. Reduce your debt, if you have any. Repaying your debt should be a priority because it will eat into the amount of savings you can achieve.

3. Reduce your taxes. Active trading has a very high tax rate in some countries; capital gains have a high tax rate; bonds typically have a lower tax rate; some insurance products (Fixed Indexed Annuities for example) are even better. Worst come worst, you can consider moving to another country where the tax rate is low.

4.  Determine what your currents assets produce in terms of rate of return and then

find something better. Cash sitting in a deposit account is doing nothing at all. So even investing in something that pays 4% per year (like common FIAs do) is much better. DIY asset allocation might be an option, depending on your net worth.

5. When you get your monthly salary, immediately transfer your savings into a separate account. That way, you can resist the temptation to spend instead of save. 

6. What's your objective? Some people think they would need 10 Mln USD to live the life they want. Realistically speaking, it takes much less to live a comfortable and stress free life. Do the math. Be realistic. What would it take for you to be happy (not rich)?  

Happiness is a mental state, not something tied to money. Money helps relieve stress and confront uncertainty. It gives you time and options. So to me personally, the important things would be:

- a low maintenance house (not a mansion - I'd have to pay a lot to keep it clean and tidy)

- a low maintenance car (like my current Mazda 3 which I've had since 2006...it went on Diesel and Oil for 8 years and only in the past 2 years has it given me a few issues)

- no debt (i currently have none anyhow)

- a life insurance policy 

- a FIA/pension plan

- the possibility to pay for all living expenses without fretting

- the possibility to pay for routine visits to dentist/barber/personal care specialists without fretting

- the possibility to have some cash left over for gifts and/or surprizes

- the possibility to travel a few times a year

And all of this, for 2 people, in a modest place in Italy, boils down to 2500 Euros/month. That's 30.000 Euros/year net. Of course if you're working a full-time job, where 50% of your pay is eaten in taxes, you'd need a 60.000 Euro/yr salary which can be difficult to obtain. But if you can reach your number, in more tax-efficient ways, you can reduce the gross number even by 30-40%. 

Food for thought, I hope. 

7. Earn passive income: write a book, create a new product or service, buy to let...something that will allow you to receive periodical payments without actively working for them.

Good Luck!

Sources:

1. Tony Robbins has written a few books on the matter, of which the last is "Money: Master the Game"

2. Dr. Van Tharp has also confronted this theme in many of his books like Trade your way to Financial Freedom.

3. Alpha Architect has great resources and tools on their website 

Why pay for Financial Coaching

"If you fail to prepare, then prepare to fail" - Benjamin Franklin

Have you ever gone on a trip somewhere far away? Obviouly you pack your bags cautiously...you think about how the days will carry out (more or less), so you visualize what clothing and accessories you will most likely need...somewhat of a real life Montecarlo simulation! What about when you buy a new car or electronic device? You do your homework right? You visit many different stores and read articles on the internet to find the best possible deal within your means.

And yet when it comes to investing our hard earned money, we usually jump to conclusions and/or follow the herd. Which is basically just as bad as not planning at all.

1. Why most people fail to plan their financial future

If you are lucky to earn more money than you need each month, there was probably a time when you could have used some advice about how best to spend, save and protect it. (so the first thing is: do NOT try to trade or invest if you don't have the capital to spare!..and NOBODY tells you this).

Source: ahtrimble.com

But if you looked around for a big national firm that swore to do the right thing, you would not have found it. Doing it right means putting your interests first, making money only through reasonable fees and not commissions earned from pushing complex life insurance policies, and talking to you in depth about your entire financial life and your goals and dreams.

That brings up two questions: Why is it so hard for any start-up or established company to provide the right kind of financial planning to large numbers of people? And what is so wrong with all of us that we are unwilling to pay for the good stuff when it is being offered?

a) First of all, admitting that you need help can be hard. There is shame in having gotten money wrong so far, or shame that you can’t figure it out or shame that it’s taken so long to start.

b) The industry, with all its various conflicts and bad actors, has also made it very difficult for the common folk to understand exactly what he's being offered or sold. Complex language, stacks of paper (which are mostly a limitation of responsibility in case of losses), and hundreds of "slightly" different "products" add layers of complexity to something that needs to be straightforward. And each layer of complexity usually costs the investor a few pennies more.

Yet nowadays it's possible to be a complete DIY (Do It Yourself) investor and/or trader with minimal guidance from a fiduciary or independent financial consultant, saving money and stripping off layers upon layers of complexity. Yet most people just fail to search for help. Why is that? Among the reasons most listed: 

- People think good advice will cost more than they can afford

- people think that the information received won't be precise enough;

- people think that  that looking for advice will take time they don’t have;

But the top reason? People say it’s hard to know which advice to trust!

2. Magic Words: Delayed Gratification

Tom Hiddelton teaches Cookie Monster about

Delayed Gratification

People don’t like to take advice in general, explains psychologist Art Markman, author of Smart Change, but financial advice is harder to stomach than most. “Financial advice is almost always about doing something differently in the short term in order to preserve money for the long term,” he explains. That’s tough for humans who are “really wired” to do the opposite.

What Dr.Markman speaks about, is a well known human bias: the desire for immediate gratification, and myopia. It's the reason why Governments borrow much more than they can possibly repay. It's the reason why smokers continue to smoke despite the scientific evidence showing that smoking will kill them eventually. It's the reason why the exploitation of the World's natural resources isn't much of a going concern...we have trouble seeing past our most immediate needs. Instead, sound financial behaviours have everything to do with delayed gratification:

a) saving more than you spend (discipline)

b) thinking about defence first (insurance policies, fixes indexed annuities, Market Linked CD's)

c) offence (asset allocation solutions such as Alpha Architect's RAA, and active trading).

Ask yourself: Why do you go to the dentist? Or the car mechanic? “You go to the dentist because he knows about teeth,” says Markman. “And you bring your car to the mechanic because they can make sure it stays running well. You do that in part because you don’t want to have to be an expert in teeth or cars.” So the question that follows is, do you want to spend the time necessary to become an expert in personal finances? “If the answer is no, you’d rather spend your time worrying about something else, it’s time to engage services that will help you.”

3. Finding a financial advisor or coach

As far as I can tell, not much has changed with the so-called “full-service” brokerage firms since my brief experience in 2004 and 2005: anything that won’t generate a commission or an annual fee of 1 to 2 percent of assets is ignored.

So most of these folks predominantly provide investment management. Fine. However, there’s no way to know if they’re providing good financial management. The financial adviser may say that his recommendations result in fabulous returns for his clients. But there’s no way he can back up his claims. He’s not going to let you see his clients’ accounts, and he shouldn’t; that would be a violation of privacy. You pretty much have to take his word for it.

Of course, after you’ve hired an adviser, you’ll get quarterly statements and can monitor his performance. Unfortunately, the problem here often lies with the client and the current lack of financial literacy. Many people don’t know enough to properly evaluate an adviser’s performance – what is an appropriate benchmark and how to adjust the comparisons for the amount of risk taken. Or clients just like the adviser enough to trust him, because he’s nice and jovial and sends chocolate during the holidays.

4. How to evaluate a financial planner/adviser

Here are some questions to ask an adviser you’re considering:

a) How are you paid?

The commissions paid for selling financial products vary widely, so there’s always the temptation to provide advice that garners a higher payout. Fee-only advisers who charge by the hour or by the project  have the fewest conflicts of interest, since the amount they are paid is not directly related to the advice they provide. Those who charge an annual fee based on the size of the portfolio have a few more conflicts of interest, but it’s much less conflicted than those who earn their keep through commissions, payments from mutual fund companies or payments from insurance companies. With fee-only advisers, you still have the problem of not knowing how their past investment recommendations fared. But the research done by Alpha Architect leads me to believe that most of them recommend low-cost, diversified index-based investments, which pulls back the curtain a bit.

b) Are you a fiduciary?

A fiduciary has a much higher legal hurdle than an adviser who only has to meet a “suitability” standard, such as the brokers who work for the big-name firms – Morgan Stanley, Merrill Lynch, UBS, and so on. In fact, brokers have a primary loyalty to the firm, not to the clients. On this note, when I was a broker, back in the day, and attempted to help a wealthy client, my boss was not happy. My suggestions had everything to do with reduced turnover, patience, waiting until the macro and technical pictures spoke the same language...with the end result of having the client make more and spend much much less with us. Happy client, irritated boss...

c) What services will you provide?

Will you receive just investment advice, or will you receive a complete evaluation of your entire financial situation (debt, insurance, estate planning, etc.)?

d) What are the risks?

Any adviser who doesn’t thoroughly explain the risks involved with the investment strategy they recommend isn’t doing his job.

e) Why should I listen to you?

We’ve already established that you can’t verify their claims of investing awesomeness. In the USA, you can visit BrokerCheck to see if they’ve had any disputes with clients, and whether they were resolved. Also, an industry  standard certification like Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Certified Public Accountant (CPA), or other legitimate designation (Certified Warren Buffett Invest-a-like doesn’t count) won’t guarantee competence or ethical behavior, but it does show that the person had to know enough to pass very rigorous exams. Also, these designations come with their own ethical standards and ways to report who has been found wanting.

f) How can you make such crazy promises?

f you hear anything too good to be true – such as high guaranteed returns – then the adviser is hoisting a malodorous red flag.

Not everyone needs the services of a financial adviser. But if you don’t have the time, inclination, or self-discipline to create and stick to a plan, asking for help could be one of the best things you ever do. Just make sure you get a good one.

I would say this: only trust advisers or educators that HAVE SKIN IN THE GAME, for their own reasons and objectives. You need to have skin in the game to be able to have empathy for the client and respect for his money.

References:

1) http://www.oecd.org/finance/financial-education/37087833.pdf

2) http://blogs.worldbank.org/psd/why-do-we-feel-poor-people-need-financial-education

3) http://www.frbsf.org/community-development/files/hogarth_jeanne.pdf

4) http://blog.alphaarchitect.com/2014/12/02/the-robust-asset-allocation-raa-solution/

European Open - 18.12.2015

TGI-F!

Quite the volatile session in Asia, where the BoJ kept rates steady but announced a new measure to support the economy: 300 Bln Jpy worth of ETF purchases per year. The markets have digested the news however and are carrying on their normal path. Equities closed lower yesterday and we may see a "risk off" Friday due to book squaring.

Today is all about option expiries and positioning. There is the expiry of stock index futures, stock index options, stock options and single stock futures. Furthermore, the Euro has a huge 5.7bn 1.0800 expiry today, along with other two 5bn expiries at 1.0700 and 1.0900.

Looking Forward: we only have Canadian CPI and Richmond Fed President Lacker speaking on the 2016 economic outlook at the Charlotte Chamber of Commerce at 18:00 GMT.

No trades for me today although I do feel we'll get more declines in equities.

European Open - 17.12.2015

The Fed delivered and met market expectations. Volatility was low, moves were contained (mostly). The US economy is doing fine, and there is room for gradual data dependant hikes. The long-USD trade is still in play but the bandwagon is getting stuffed. So be cautious, especially into year-end where position-squaring and window dressing can generate erratic moves.

Asian equities gave back some of the post-FOMC gains but remain supported. The general tone from FOMC was risk-positive, and Vix shot back down. For now, complacency is kicking in. European equities actually look better than US or Asian counterparts.

NZD GDP beat expectations but the market sold Kiwi after the release. This likely reflects several factors: expectations had been for a pick-up, the release came shortly after the Fed decision and liquidity is vanishing. So Kiwi may not be a good buy today, but it's still one of the best performers out there.

Looking forward:  attention today will be on UK retail sales (where the probability of a surprize is high) and  German IFO ( ZEW and PMIs surveys already released this week pointed to a solid end to 2015 and today’s survey should confirm).

Charts for today: UsdCad longs still look good to me.

European Open - 16.12.2015

Welcome to FOMC day. After 10 years, the FED is ready to raise interest rates by 0.25%. This will be the last major trading event of 2015, after which liquidity will dry up. I would suggest sleeping in or relaxing today ahead of the event, wait for the announcement and the tone of the press conference.

Market Positioning appears to be more balanced going into today's meeting as recent flow info has shown short covering from real money and leveraged players. So a USD sell-off isn't a done deal. Actually, this means that a USD rally on a hike with hawkish rhetoric  is more easily accomplished. Remember that consensus is for a hike with dovish rhetoric, so we will most likely not see much of a USD sell-off unless we get a big surprize either way.

I like UsdCad for USD-long plays and NzdUsd for Usd-short plays. On top of the USD moves, NZD has also been benefitting from higher Milk prices so it's also moving on it's own dynamics.

Looking forward: we do have a data rich day, with UK labour market statistics where average earnings are expected to fall, and the jobless claims change is expected at  0.8K. We also have Eurozone PMIs , which are expected to be little changed. Eurozone Inflation is more important and the markets are expecting more weakness with -0.2%.

Again, I'm going to stay flat today and just wait for the FOMC.

Good Luck!

European Open - 15.12.2015

Asian equities attempted to stage somewhat of a recovery, following Wall Street's rebound late yesterday. We have bounced November lows, so while the picture remains bearish, we might have something of a retracement/consolidation, especially if we start climbing above yesterday's high.

Commodity currencies are slightly stronger after Crude & Equities found support and retraced from the lows. AUD also helped by upbeat RBA minutes. Nzd also strong, with USD largely weaker today.

Looking forward: UK inflation on tap and markets are expecting a slight rise;  German ZEW is expected to increase modestly signalling further improvement in the German business cycle. As for US data: ahead of the Fed decision we will see inflation numbers and core inflation is expected to rise 0.2% m/m. This will take the annual core inflation rate to 2.0%. A dovish surprise won’t generate much market reaction, but a hawkish surprise would generate some risk-off, adding to pressure on commodity currencies and EM. The US also releases the Empire manufacturing survey as well as the NAHB housing survey.

Charts for today: 

European Open - 14.12.2015

Asian equities were mixed but Europe is showing signs of a recovery after better Chinese & Japanese data overnight. I'm in no hurry to jump into the markets early this week and will only keep an eye on EurCad & EurUsd (to the long side) during the late EU morning/early EU afternoon with Industrial production (11 CET), Nowotny (11 CET) speaking in Austria,  President Draghi (12 CET) speaking at a conference in Italy.

In the UK, BoE’s Shafik speaks (at 13.00 CET) after last week’s MPC minutes, which mentioned that wage growth has “flattened off”, were perceived to be slightly more dovish than had been anticipated.Then, finally, ECB's Costa speaks at 16.00 CET in Lisbon.

For charts, refer to the Weekly Game Plan issued yesterday.

Weekly Game Plan - 13.12.2015

1. Themes for the Week

- Fed is expected to deliver a dovish hike.

- Inflation to pick up in November in US and UK.

- UK retail sales expected to edge up this week.

- The coming week will also see central bank policy meetings in Sweden (Tues), Norway (Thurs) and Japan (Fri). The only change expected is a 0.25%  cut in Norway.

- Crude continues to drop, keeping the pressure on Cad.

- Stocks under pressure, giving strength to Jpy.

2. Charts in line with these themes

European Open - 11.12.2015

TGI-F!

Asian equities tried to recover overnight but we have seen rising volume on declines in global equities recently, and the charts on S&P and Dow are pointing towards a bearish break lower. Just in time for the Fed to make it's dovish hike next week.

Crude is still at multi-year lows and this is keeping Cad under pressure; Gold is also quite subdued.
In FX space, Kiwi is the best performer although I'm not a fan of fresh entries this morning as we have already travelled quite a lot in one direction this week.

Looking forward: we have UK construction PMI & BOE's Inflation expectations; ECB's Cœure & Liikanen at a press conference in Helsinki; ECB's TLTRO; and finally US retail sales. Expectations are for a firm report, so the most market moving outcome would be a weak number, which would only reinforce the dovish hike scenario and encourage further paring back of long USD positions.

European Open - 9.12.2015

Asian equities were generally weaker overnight, pulled lower by commodity weakness but yesterday's close also looks like a pause in proceedings in the short term. So it looks like UsdCad/Crude may be in for some consolidation/retracement today as opposed to the continuing momentum seen earlier this week.

Against the declines in Crude & hard commodities, milk futures have extended their recent rise. However, since the rise in milk prices (and strengthening in domestic data flow) argues against the 0.25% cut expected by the RBNZ, NZD long positions might be more advantageous going into today's meeting.

Looking forward: central bankers are set to take the spotlight. Today’s speeches by ECB's Lautenschlaeger, Nowotny and Hansson may shed some light on last week’s surprisingly tepid ECB policy loosening.  In the UK instead, the record of the Bank of England’s November Financial Policy Committee meeting should provide further clues on the Bank’s thoughts.

Charts for today:

European Open - 7.12.2015

Asian equities were higher overnight, taking cues from Friday's stellar recovery on Wall Street, based on better expectations for the US and global economy. In contrast, Canadian unemployment numbers were weak and that, along with OPEC's decision to keep production stable, is keeping a bid tone on UsdCad and generally Cad weakness.

So along with the charts on the weekly game plan, I'm adding UsdCad (long) to my watchlist.

Beyond UsdCad, I don't see much else that's compelling as of yet.

Weekly Game Plan - 6.12.2015

1. Themes for the week

Keep in mind that trading will be winding down now for the Holiday season. So expect worse liquidity and less predictable reactions from the market.  It might be wise to reduce the amount of risk you allocate to fresh positions.

- Strong US November employment report supports market expectations for Fed hike. This week we basically only have Retail Sales (Fri) to help with those expectations. For risk appetite, figures on China’s November international trade (Tue) and CPI (Wed) should provide some reassurance that the
midsummer fears of a hard Chinese landing are unlikely to transpire.

-  Draghi underwhelmed, even though some expansion of QE was delivered. Markets will be hoping that upcoming speeches by several Council members including Constancio (Mon), Nowotny (Wed), Weidmann, Liikanen and Coeure (all Thur) shed more light on the contours of the debate as well as the prospects for further action over the coming months.

-  UK Monetary Policy Committee to maintain policy stance (Thur).

-  OPEC announced that production would be left unchanged, in line with what most analysts expected. Pressure is still to the downside in Crude.

2. Charts in line with these themes

European Open - 4.12.2015

TGI-F!

Asian equities traded lower overnight, after a less than extensive package of measures from Draghi that did not include additional QE Measures. Furthermore, Draghi is facing increasing opposition by Weidmann & co. There really is no favourable risk-reward to be seen in the Euro pairs today after that move. Some traders I speak to are already thinking about closing the books until 2016.  After all, Draghi is dovish in any case, whereas Yellen is going to raise rates in any case. So there really isn't much uncertainty left to trade into year-end. NFP could very well be the last nail in the coffin, especially if we get a miss.

Looking forward: today's highlight will be NFP of course, but don't forget the OPEC meeting in Vienna.  Pressure is growing on OPEC to reduce production and support oil prices, but as P.T. Jones said back in the 80's: "when you get 12 men in a room from different backgrounds and with different agendas, it's pretty tough to expect some kind of agreement".  After the EU close we also have Draghi speaking in New York, Bullard and  Kocherlakota speaking in Philadelphia.

No charts for today...not really inclined to participate in this environment but risk-seekers can look for the calmer trending waters on Kiwi & Aussie today maybe.

Connectivity Issues - 3.12.2015

I'm currently having internet connectivity issues. Very sorry for this but it's beyond my control.

Go figure it would happen on ECB day -_-

Good luck to you all and I hope to be back online ASAP.

European Open - 2.12.2015

Asian equities were mixed overnight. The whole week so far has been mostly a wait and see...everyone on the sidelines waiting for the big risk events. Just to note, yesterday's headline ISM disappointed, but the employment component jumped significantly. This points to upside risks for the forthcoming payrolls data. However the key component will still be Average Earnings. We will need a significant surprize there, to get a fresh USD rally I think. The market has discounted more or less all other scenarios and the "feeling" I'm getting is that a USD shakeout is near.

The Aud got another burst of life after the release of third quarter GDP, but there was no followthrough. There may be some space intraday for longs but a drop on better news means weakness, not strength. 

 Looking forward: this morning we have the UK Construction PMI (expected to rise slightly), EU preliminary CPI for November (Expected to remain at least stable, so not strong enoguh to fight Draghi's pessimism), ADP empolyment data, the Bank of Canada's decision (expectations are for no change to the neutral/dovish tone), and finally Yellen's speech to the Economic Club of Washington at  17:25 GMT, where market participants will be watching for renewed hawkish remarks.

Charts for Today:

European Open - 1.12.2015

Asian equities were mostly positive overnight, especially ASX and Nikkei. China suffered from the worse than expected Caixin PMI. China also achieved SDR inclusion but market response to the move was largely subdued. The fact is that there is RMB liquidity for central banks but not for private sector capital flows. 

AUD resilient after the RBA. There was no mention of FX strength and the CAPEX weakness was deemed as transitory and improvement in other sectors will offset gradually. This does give strength to Aud buyers, especially as USD longs have been somewhat pared. 

NZD is equally dominant in it's performance this week, having broken last week's highs. It seems that the spotlight pairs (Euro, Gbp) are waiting for their regional data before committing to another move.

Looking forward: initial focus will be on the release of the BOE's Financial Stability Report & Carney's presser. Then we have German Unemployment & PMI, EU PMI, UK PMI and US PMI to look out for.

No charts for today.

European Open - 30.11.2015

Slow start to a big week. Remember it's month-end so we may see some EurGbp strength (Buba purchases), alongside relative equity rebalancing which would see some Euro selling and Jpy selling since Dax and Nikkei were the outperformers in November. 

Asian equities and commodities were all lower overnight. Looking forward,  today’s German November ‘flash’ HICP will be watched as a preview of Wednesday’s data for the EU as a whole. Both are expected to print slightly better than previous, but not good enough to stop the ECB from announcing further easing measures on Thursday.

Charts for today: see the Game Plan issued yesterday.

Weekly Game Plan - 29.11.2015

1. Themes for the Week

- Policy Divergence: the ECB meeting and the NFP report will most likely cause large moves this week. Draghi is expected to ease policy further, and NFP is expected to reinforce the FOMC's rate hike scenario. For the US, we also have ISM PMIs (Tue & Thu) and some Fedspeakers. We will also have German unemployment and EU PMIs to take note of.

- Macroprudential policy action could buy the BoE time before raising rates. Gbp might have some volatility with the PMIs out this week, but is definitely not the protagonist this week.

- RBA and BoC also in focus, but no change expected from either.

- OPEC meeting on Friday will be worth watching, since there have been signs of increased cooperation from Saudi officials.

2. Charts in line with these themes

European Open - 27.11.2015

Asian bourses were dull, as the US was on holiday and thus there was no sentiment to carry over to Asia. The Shanghai Composite was hit hard after the CSRC started investigating Citic and Guosen securities. Don't expect much today either, being Black Friday and with no macro data to push sentiment around. Maybe just keep an eye on month end flows. Based on relative equity performance, I'd expect some selling of Jpy and Euro, above and beyond the usual EurGbp demand by the Buba.

Happy Thanksgiving!

European Open - 25.11.2015

Asian equities were choppy and weak overnight, with participants still wondering whether there will be an escalation between Turkey and Russia. There were light risk-off flows yesterday, but they still took the back seat to more evident position closing/book squaring pre-Thanksgiving.

In FX, the Aussie is the leader of the profit-taking pack, being the strongest currency out there vs. USD at the moment. It also got a lift after Stevens showed just how relaxed he is, saying "We've got Christmas. We should just chill out, come back and see what the data says." RBA's Debelle speaks this morning in London so there might be some more action to be seen in the Aud.

Looking forward: we have some important releases in the US today ahead of Thanksgiving and Black Friday. Main focus will be on core PCE inflation (the inflation measure FOMC targets) which is expected to rise 0.1% m/m  (1.3% y/y).

No charts today. I'm not looking for any fresh entries this morning.

European Open - 24.11.2015

 Asian markets were broadly lower overnight, following a lackluster NY close. Nikkei was back online after Monday's public holiday. In Australian markets, miners were lagging the ASX 200 amid commodity volatility. Greater Chinese markets also lower. 

Crude: Saudi Arabia issued a statement yesterday stressing its desire to cooperate with both OPEC and non-OPEC oil producers in stabilizing prices. Oil saw a modest bounce and UsdCad has traded lower.

Coming into today's speech by RBA Governor Stevens at the Australian Business Economists’ Annual Dinner, AUD continues to demonstrate resilience. The base case is that Stevens will support the view that the RBA is on hold. So any verbal intervention to talk down the Aussie will hurt.

Looking forward: German IFO (expected to rise), Bank of England MPC testimonies (Carney & Haldane expected to restate the weakness in CPI) and the second estimate of US Q3 GDP (expected to be revised upwards) are the key events. 

Charts for today:

European Open - 23.11.2015

Dull start to the Asian/Pacific trading week with Japan off for Thanksgiving Holiday. Asian equities were mixed in lateral trading.  The energy sector and metals opened the week with another drop which, along with continued USD strength,  is hurting comm-dolls the most.

Looking forward: today’s  focus is likely to be on the ‘flash’ estimates of Eurozone PMIs for November. The data will provide a further read of activity trends in Q4 against a backdrop of comments from ECB officials on whether and what form of further policy easing may come on December 3rd. In the US session, we have Manuf. PMI and Existing Home Sales to watch also.

Charts for Today: see the weekly game plan.

Weekly Game Plan - 22.11.2015

1. Themes for the Week

- It will be a holiday-shortened week for the US, with Thanksgiving on Thursday. Q3 GDP figures should reassure FOMC about the US economy's momentum. In addition, we have  consumer confidence (Tue) and home sales (Mon & Wed).  The Fed will most likely be staging a dovish hike in December - and there might even be some attempt to talk down the USD. It makes sense to play USD longs up to the first week of December but after that, it might be a while before the greenback comes back into focus. Buy rumour (of a hike), sell the fact (of a dovish hike).

- UK Autumn Statement set to tackle fiscal slippage, especially after last week's public finances numbers. Gbp likely to stay under pressure in the near term.

- ECB still on track to loosen policy at December meeting and this week's data (preliminary EU PMIs) is expected to reaffirm soft Q4 activity.

-  CNY might lose some ground now that  it's in the IMF's SDR basket. Beyond this, as a longer term theme, the overdue rebalancing of the Chinese economy (from investment- to consumption-driven growth) will be a major drag on the global economy in the coming years. Even China must get accustomed to single-digit growth numbers.

2. Charts in line with these themes

European Open - 20.11.2015

TGI-F!

Asian equities were still supportive overnight, and continue to buck the trend. Risk is still bought and the Vix remains subdued. In FX, the ECB Minutes appeared to be quite dovish. This supports the view that aggressive easing is coming in December. However one cannot simply short the Euro...the Eur short/Usd long bandwagon is quite full and it will take ongoing negative news to keep it down. 

Looking Forward:  markets will continue to scour comments from ECB officials on to what extent the QE programme will be expanded. Today sees scheduled speeches by ECB President Draghi and other Executive Board members, including Coeure, Praet and Constancio.  There are no major US data releases today, but Fed speakers include Bullard, Dudley and Williams. 

Charts for Today:

European Open - 19.11.2015

Asian equities took  cues from Wall Street and continued to rally into EU trading. Actually the risk-on flows are the reason UsdJpy is still holding up despite a more lackluster performance of the USD. 

BoJ noted some weakening in domestic inflation expectations but nothing really market moving. Comm-dolls experienced something of a position squeeze, but the underlying dynamics have not changed. Illiquid markets make for challenging trading sometimes.

The minutes of the 27-28 October FOMC meeting were more or less as expected and thus the market reaction was limited.  Due to the very strong jobs report for October, a December hike is more or less a done deal and thus the FOMC minutes were in fact already old news.

Looking ahead: we have a very busy day today. ECB and Fed speakers on tap, and the markets will listen carefully for any comments on monetary policy. UK retail sales in October are due. The September number was very strong (some say it was due to the hosting of the Rugby World Cup) so we may see a downward correction. Initial jobless claims in the US are estimated to have stayed more or less unchanged around 275K.

No charts for today - nothing inspiring to my eyes today.

European Open - 18.11.2015

Asian equities modestly higher while geopolitical tensions still linger. We're still positive on the week in Nikkei, Dow, S&P and today's FOMC minutes will most likely dictate the next move. The market is now pricing in a 75% chance of a rate hike in December and is evidently long USD. We will need continuous support from data/speakers to keep this ball rolling. As the bandwagon fills, it gets easier to disappoint the crowd.

Beyond the USD, Kiwi was in the spotlight after Fronterra saw a steep decline in whole milk powder prices, which dropped 11%. This fits with earlier declines in milk futures and suggests ongoing drag on the economy which should add to risk for RBNZ easing early next year.  Why is Kiwi not weaker? Partially because the USD is pulling back ahead of FOMC minutes; partially because the bad news was expected. 

Looking ahead: it is quiet data-wise today (just US housing starts and South African CPI and retail sales) but the Oct FOMC Minutes are due and we also have a wealth of central bank jawboning: the ECB’s Mersch, Lautenschlaeger and Coene, the BoE’s Broadbent, the Riksbank’s Floden and the Fed’s Dudley, Mester, Lockhart and Kaplan – though of those Fed speakers, only Kaplan is speaking on monetary policy. 

No charts for today - want to see more evidence of further USD strength or temporary weakness before taking another swing. 

European Open - 17.11.2015

Asian equities consolidated overnight, after a swift recovery yesterday despite the man-hunt after the Paris events.  The rise was also facilitated by a rebound in the energy sector. Metals remain soft instead.

Elsewhere, RBA Minutes did nothing for AUD except reinforce the "wait & see" stance. The lack of dovish rhetoric might actually be good for AudNzd ahead of the milk auction this evening.  Milk prices have retreated and the expectations for today are for a bad number. This would evidently weigh on Kiwi.

Looking forward:  UK CPI and retail sales are the highlights for the EU session, along with ZEW. The market  is expecting a slightly stronger print on both UK & EU data, so if we get a disappointment, look out below.  During the US session, we have CPI, Industrial Production & Manufacturing Production which are all expected to rise. 

The USD is still king in FX, and in accordance with the game plan I will continue to look for shorts in Euro & Kiwi, and longs in UsdCad with opportunistic forays into UsdJpy also.

Charts for today:

European Open - 16.11.2015

Asian equities discounted the Paris attacks on the open, as risk-off sentiment hit and drove Gold higher, Euro lower and Jpy pairs lower. However, this is not 9/11 and markets are already stabilizing. So I'm not going to change the watchlist just yet. Some opportunities to short EU equities might open up but on FX I'm sticking to yesterday's watchlist.

Looking ahead, ECB’s Constancio (9.30 CET), Draghi (11.15 CET) and Coeure (17.00 CET) will speak during the day and the market will keep an eye out for signals on monetary policy ahead of the next ECB meeting in December. We also have EU CPI so focusing on the Euro pairs should prove to be beneficial today.

Weekly Game Plan - 15.11.2015

1. Themes for the Week

- Attacks on Paris & the Euro: we already know the market is heavily short EUR and it doesn't take much to trigger a short squeeze.  Of course, any short squeeze will be an opportunity to short at better levels, but the attacks in Paris do not reduce the possibility of further ECB action. The attacks might actually stimulate further need for accomodation and hence be a Euro negative.

-  US data to support December "liftoff". Beyond the all important CPI, we have industrial production (Tue), the Empire survey (Mon) and the Philly Fed survey (Thu), which are expected to show some improvement. We also have speeches by several Fed members, which will be worth some attention.

- Commodity prices continue to remain weak, however the Paris episode can trigger risk-off flows on the open and send gold, silver, Jpys and Chf higher.

- UK CPI inflation still negative and slow to return to target. This will inevitably keep the BoE on hold. 

- RBA minutes (Tue). The recent strength in the Australian labour market figures give less excuses to cut rates this year. The only excuses left are the weak global commodity prices. 

- The Bank of Japan (Thu) is expected to keep policy unchanged. Focus will be on Governor

Kuroda’s press conference for clues about the possibility of additional stimulus. 

2. Charts in line with these themes

European Open - 13.11.2015

TGI-F!

Asian equities were weak, generally following NY's negative close. Only the Nikkei tried to retrace some of the losses. 

Draghi did all he could to weaken the Euro yesterday saying:

“….downside risks stemming from global growth and trade are clearly visible.”

“Signs of a sustained turnaround in core inflation have somewhat weakened.”

“From today’s perspective, this suggests that a sustained normalisation of inflation could take longer than we anticipated in March when we first appraised the overall impact of our measures.”

However as we've been saying recently, FX these days is much more about positioning and yesterday we did experience a short squeeze despite Fedspeakers holding their ground also. Even Fed Vice Chairman Fischer reiterated his hawkish stance, downplaying the impact that the strong USD will have. Still, the comments did little to support USD.  It seems we will need a further suriprize in US data to get USD-bulls back in their seats. 

Looking ahead:  this morning’s focus is on UK construction data and  the market is looking for a bit of a bounceback, retracing some of August’s weakness . Then this afternoon, US retail sales, PPI, and the preliminary University of Michigan consumer confidence figures are the highlights for the USD.

Charts for Today: