European Open - 30.9.2015

Quarter end flows started impacting the markets yesterday. Today marks the half year end for JPN, end of month and Q3 for others. Asian equities bounced in line with yesterday's NY action...relief rally or reversal is still unknown. For now I define it a lack of bearish momentum, in a downwards trend.

Jpy pairs not that inspired by overnight equity action...and leading into EU nothing is really appetizing.  Month end can also be quite volatile so be cautious out there.

Today we have various important data prints: German Unemployment, UK Gdp, Eurozone CPI, US ADP & Chicago PMI, Cad GDP and finally Yellen's speech tonight. Busy day ahead although the only charts I am attracted to today are below.

Charts for today:

European Open - 29.9.2015

Evident risk-off theme overnight: Nikkei & ASX currently down almost 3%, with Shanghai down 2%. Global commodity weakness is impacting giants such as Glencore & Noble. In the FX market this translated into the usual Jpy buying and the best pairs going into today seem to be GbpJpy, CadJpy, AudJpy. Vix edging back up, as equities remain under pressure. Might be easier to short into EU equities however, rather than play this risk-off theme via FX. Recently, it seems that FX market participants are taking cues from Equities anyhow.

German September CPI is the only relevant data print today. Otherwise the focus is again mainly on

central bank speakers, including ECB's Coene, BoE Governor Carney and the ECB’s Weidmann.

The watchlist for the week has been shuffled around due to recent market developments. Here's what I'm watching now:

Month End Flows for September 2015

Easy-peasy month end flows analysis: Dax is posting the worst performance since the beginning of September amongst DM equity indices; Nikkei barely negative, while Ftse & Dow are the only positive ones (barely)...so there will likely be heavy Eur buying, light Usd & Gbp selling as we approach month end.

Source: Tradingview.com

European Open - 28.9.2015

Quiet start to the week with  Hong Kong, Taiwan and Korea markets closed for Mid-Autumn Festival. Equities initially weak (so UsdJpy also off the highs) but little follow through thus far. Concerns about China and speculation over when the Fed will begin to raise interest rates are likely to continue to be the main themes (for details see the weekly game plan). Today we have both a healthy US macro calendar and some Fed speakers that could impact on interest rate expectations.

Dull morning expected in Europe. 

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

Weekly Game Plan - 27.09.2015

1. Themes for the Week

Emerging markets still weak & no bottom is yet in sight; this is the largest risk factor present. More EM weakness will likely pressure equity markets and I still prefer shorting Dax/Eurostoxx instead of US boards. China official PMI will also be influential in this context.

Main focus will likely be on the US employment report and slew of Fed speakers: Dudley (Mon, Wed), Evans (Mon), Fed Chair Yellen (Wed), Brainard (Thu) and Vice Chair Fischer (Fri). Other speakers include Williams (Mon, Thu) and Bullard (Wed). NFP is expected to show continued strength, with a 200K+ print. As we've seen recently, average hourly earnings will likely be more important.  Currently the market is pricing in a hike in December...but we're in data dependant territory and things can get volatile. US data & Fedspeak both important factors for USD performance, which is still poised to the upside.

Eurozone flash CPI risks falling into negative territory. This could cap the Euro against it's trading partners, along with the growing speculation of an ECB QE extention. 

UK index of services and manufacturing PMI are due. Regarding Gbp, there appears to be conflicting views inside the MPC...so until the market can get a better read on the (future) path of interest rates, USD developments will likely overshadow domestic developments. Gbp is still in the weak pack.

Nzd...surprizing but true: it's one of the best performers into the week's close, and thus is worth watching into this week.

2. Charts Illustrating these themes

European Open: TGI-F

Yellen’s Amherst speech yesterday did inititally boost the USD because the market now understandss that rates will rise in 2015...gradually, but they will rise. However the speech had a firmly dovish tone , repeating that the unemployment rate is below the NAIRU and that an extended strong recovery would generate supply-side benefits. Nevertheless it was enough to stress that no Fed rampage was on the way. The key message, I think, is to expect  a very dovish December lift-off. October is possible but she did not go out of her way at all to make October live.

Asian equities recovered from the fall yesterday, although concerns over China continue to block chances of a rally. Not a day that inspires action on Equities.

Looking ahead to today’s events, speeches by Fed members Bullard and George are likely to attract some attention given their relatively hawkish stance compared with the rest of the FOMC, despite not being voting members this year.

Datawise, we only have US GDP but in the way of trades for today, my suggestion is to stay flat. 

The trending pairs have pushed far enough for a week based on my estimates, and today the probability of further continuation is quite low. 

European Open - 24.9.2015

Japan is back from the Silver Week holiday, and is catching up to negative developments elsewhere. Nikkei down over 2%, while other asian bourses were in the black. So a mixed asian session, little direction from there. Still, negative vibes across European boards are the clearest to play still.

Nzd higher on Fronterra news although the trade balance was worse than expected. So going into today, Aud is more favoured for losses although I still see the whole commodity complex as the weakest in the pack. Aud (more than Nzd) is taking cues from China's issues and depressed commodity prices.

Busy day ahead: German IFO and another ECB TLTRO allotment; US durable goods and initial jobless claims during the US session. Fed Chair Yellen is also set to speak later tonight, but being so close to the FOMC press conference, I don't think her tone will have changed all that much.

Charts for Today:

European Open - 23.9.2015

Asian Equity markets were under pressure again overnight, as the China Manufacturing PMI disappointed, falling to a 6 yr low of 47 vs 47.5 expected. So more selling after a risk-off session in NY yesterday. I still favour European bourses for shorts however.

Commodity currencies under pressure and Aud has inverted it's role as the lone survivor. So the whole commodity complex is now suffering - especially after more negative news from China. I still favour Cad & Nzd shorts vs. USD.

Euro also under pressure – and it's not acting as a funding currency as it previously did. This implies that EUR-specific factors may be contributing to the move..perhaps augmented expectations for additional ECB easing? This sets a high bar for dovishness at President Draghi’s quarterly hearing before European parliament later today. I'm not playing the Euro yet...rather, I want to hear what Draghi has to say, and see how the market reacts.

Investors seem to be questioning the signals received  from the Fed...in particular, is seems that the USD is poised for more strength, as jawboning from various FOMC voters this week have been much more positive than the initial perception led us to believe.

Charts for today:

European Open - 22.9.2015

Another dull asian session, but we are seeing some spotlight pairs (from the watchlist) prepare for potential moves. As well, sentiment towards the Euro has also turned bearish and there are a couple of pairs (EurGbp & EurAud) that look better positioned to take advantage of any continuation. I still don't expect much today though...investors will remain largely sidelined leading into the end of the week wherein focus will turn to key Chinese manufacturing reports (tonight), US quarterly GDP data and commentary from Fed President Janet Yellen and ECB's Draghi.

No data on tap todayeither if we exclude minor data on Gbp and Shafik on the wires. Fed Officials yesterday fuelled some sort of rally in the USD which I like to play via NzdUsd shorts & UsdCad longs.

Charts for today:

European Open - 21.9.2015

Market participants will likely continue to digest the ramifications of the FOMC's  decision to leave rates unchanged. Three FOMC members made comments on Saturday:

a) Lacker was the dissenter last week, so his comments in favour of a hike are nothing new. 

b) Bullard (voter in 2016) said “I argued against the decision to postpone the hike at the

FOMC meeting”... “FED is ready to go” if conditions warrant it..."was a close call at this

meeting”. 

c) Williams (voted against a hike last week) said “was a close call in my mind, in part reflecting the

conflicting signals we're getting”. 

Boring day today most likely. Focus on ECB Speakers:

Hansson at 13:00 BST, 

Coeure at 13:45, 

Nowotny at 17:00,

Praet at 17:30. 

Later tonight Atlanta Fed President Lockhart (voter) and Bank of Canada Governor Poloz

speak.

 US existing home sales likely to attract only limited attention.

Definitely not inclined to put on any fresh positions this morning given this dull environment. Will take a look after US data but really don't expect much. Please refer to the Weekly Game Plan for charts/watchlist.

Weekly Game Plan - 20.9.2015

Themes for the Week:

- Japan is closed for the “silver week” holiday until Sep 23.

- The Fed is on hold for now: keep an eye on wage pressures & external developments (China & EM). Relatively quiet week datawise for the US. Upside in UsdJpy is capped with Fed on hold...and any external negative developments (EM?) could spur further selling in Jpy crosses.  

- 4 FOMC members will be speaking this week; also, ECB members, Draghi, Praet, Couere and Weidmann are scheduled to speak this week. Jawboning to outweigh PMIs..unless of course we get negative prints on the IFO & Zew. 

- Unless something else pops up, risk appetite this week will be focused on the Chinese Caixin Flash PMI manufacturing (which is expected to print 47.5 vs. 47.1 prior)...which is still a very low level expectation and reflects downside risk to Chinese growth. Equity markets & jpy pairs will be the most receptive. I prefer European equities (Dax/Eustoxx) to short, as opposed to US boards.

- The Greek legislative election should attract attention, but to a lesser extent than it did during the summer as Greece is again under a programme. Don't expect Euro to be reactive on this.

- BoC Governor Poloz will be talking on Monday, so Loonie traders may have their day in the sun!

Charts in line with these themes:

European Open: USD on Sale

Today we must start with the key takeaways from the FOMC.

(here is the link to the full statement: http://www.federalreserve.gov/newsevents/press/monetary/20150917a.htm)

- International conditions weighing heavily
- Financial market volatility, stronger, USD, volatility etc weighing against hikes
- Labor market one of several indicators, but less dominant than it seemed in July
- Inflation softness and drop in inflation expectations given higher profile
- Yellen suggests that her NAIRU is below current levels
- Dots the only thing pointing to 2015 now
- 2% not a ceiling will move before 2% but no timing on when
- General message is things are getting better but we are not there and are more focused on the risks.

This is definitely dovish for Risk Assets & USD (scenario C from yesterday's note). Shorting into rallies on equities, and buying into GbpUsd (after a solid CPI print) & AudUsd (after bullish comments from Stevens o/n) dips seems like a solid play for now. See the charts for more.

Charts for today:

European Open: FOMC Day (at last)

No trade ideas from me today - participation will be light, and I expect range trading despite a rather busy calendar. But more on that later. Got some M&A news today, that could impact FX flows in the coming days: InBev NV wants to buy SABMiller PLC;  Altice SA is in advanced talks to buy Cablevision Systems Corp. 

Now onto recent developments. Nzd data overnight confirmed the RBNZ's dovishness: GDP missed expectations, and the recent surprize in dairy prices is definitely seen as temporary. So the strategy remains to sell rallies in Nzd until something gives. 

And now onto the main event: FOMC. The market is not pricing in a rate hike, and the CPI data from yesterday only strengthened this convinction. In any case, the decision will have a decisive impact on FX rates and just remember that low liquidity & higher spreads during and immediately after the release make trading conditions poor. Best to wait until the dust settles, before looking for a clean shot.

So onto the scenarios: 

a) Dovish  Hike: I would  expect the USD to spike higher, followed by a  reversal. This could also prove to be bullish for risk-assets.

b) No hike but hawkish statement: I would expect USD weakness, followed by a recovery. This will also be bullish for risk assets.

c) No hike and dovish statement: decisive decline in USD. This would be slightly negative for risk assets, implying that external developments weigh more than expected.

d) Hike and hawkish statement: decisive rise in USD and this would instead put more downwards pressure on risk assets.

In the FX market, Aud (as Sean has also been highlighting recently) remains one of the best currencies to play vs. USD weakness. At the same time, a rally in risk-assets would imply selling Jpy (& Eur possibly) vs. USD.

How is all this useful? Simply stated: now you have alternative scenarios (& tactics to deploy) depending on the outcome this evening. 

European Open: Aud still in focus

 Mixed performance from USD pre-FOMC, with gains vs. majors & losses vs comm-dolls. This comes despite yesterday's strong retail sales report. By observing the performance of risk assets (equities, Jpy currencies), it seems that the market is still less convinced of a FED hike this week. If this were the case, expect much more USD weakness.  I have recently been tracking Aud to the long side, and although volatile, it seems to continue to attract interest in these conditions.

NZD gains on the third strong dairy auction in a row. Don't buy into this short term strength just yet though. RBNZ has been one of the most dovish central banks recently and between dairy prices and monetary policy, there's no doubt which weighs more. 

Big data day today for Gbp, Euro & Usd so it may prove to be another volatile session pre-FOMC. 

Charts for today:

European Open: Comm-dolls awake

Overnight, Malcolm Turnbull defeated Tony Abbott in a leadership ballot, so he becomes Australia’s new Prime Minister. AUD took the news as positive as Turnbull apparently has experience in financial services and is seen as business friendly. Aud is above last week's high and might continue higher towards 7210s pre-FOMC unless the RBA's dovishness rains on the parade.

JPY  lower  after BoJ left monetary base unchanged, with no hint of QQE expansion. Market participants were looking for more dovish remarks by Governor Kuroda. Equity markets also held the Jpy pairs down, but it will take some decisive dovishness from the Press Conference (in about 30 mins time) to pop the Jpys back up.

While most of the market is playing a waiting game ahead of the FOMC decision,some Nzd and Cad pairs are starting to show some life signs today (see charts). Gbp has some data out today, so be cautious: play a setup early into EU, or (more conservative play) wait until the data is out of the way and see how we stand.

Charts for today:

European Open: stabilization continues

Markets continue to stabilize ahead of the FOMC and the BoJ this week, in a quiet Asian session.

No decisive action from Nikkei, few flows on the Euro and the Jpys but nothing decisive. 

Mixed data from China yesterday, although the more influential Industrial Production came out worse than expected. But not enough to spark a risk-off theme.Volatility is dropping slightly actually, which may support risk-on this week. 

BoJ comes into focus tonight. The central bank is broadly expected to leave its policy unchanged & Governor Kuroda is expected to maintain his optimism. However, recent jawboning & data support a more dovish view of conditions in Japan, which could help to fuel expectations for additional easing. I expect this to be positive for Jpy pairs and for risk-appetite.

However for today in particular, with no market movers on tap, and dull action into the EU session, it looks best to sit this one out. Refer to the Game Plan for the pairs on my watchlist.

Weekly Game Plan - 13.9.2015

1. Themes for the week

- FOMC faces a key decision whether to raise rates for the first time in this cycle. USD likely neutral before the decision. Opinions are mixed on expecations, but Fed Funds not discounting a hike yet.

-  Concerns about China likely to continue to weigh on markets. Risk on/off can be guided by this, so watch Industrial Production for clues, with an eye on the wires for PBOC intervention as well. For now though, equity markets remain range-bound waiting for FOMC.

- China slowdown much more a risk factor for EM FX than DM FX.

- GBP inflated by bullish rhetoric from Forbes. This week, we also have UK inflation which could surprise on the upside. Gbp crosses could be good places to look for opportunities.

- BoJ policy announcement to add volatility to Jpy pairs. No adjustment expected, but into the Oct. 30th otlook, lower commodity prices and downward revision in CPI could require more action. As a reminder, any accomodative measures are usually Jpy negative (risk positive).

2. Charts illustrating these themes

Generally I prefer to stay away from the USD pre-FOMC. Instead I'll be watching crosses for opportunities. Global Equities stuck.

European Open - 11.9.2015: TGI-F

Dull Asian session inspires a "wait & see" stance today as we approach Europe. Market participants likely patient ahead of FOMC next week (17th) and Chinese data upcomming over the weekend. Also, Singapore was closed today for elections.

Barely any decent flows seen, so might be better to sit this session out. Instead of the usual note, let's end the week with a "lesson" on finding what might be in play during the day. This can be a daunting task in FX, given how flows can pass through crosses and not just the majors. One easy way to see whether one particular currency is in focus or not, is to view on one screen the price behaviour of the main trading partners. So below are the two "screeners" that make most sense to me today. The market has it's eye on Aud and Gbp.

It seems that Gbp has more upside, given the "less dovish BoE" yesterday.

Instead, Aud is in focus but less certain. It's trying to rotate off the recent lows but my personal bias still remains neutral until we see more trendiness on one side or the other.

European Open - 10.9.2015: Super Thursday

NZD  took a hit following the (much expected) interest rate cut. The only explanation for this is that market participants had reduced their positioning prior to the meeting, and then loaded up again (short) when they received confirmation. The RBNZ continued to suggest rates could go lower, with  data dependent moves. However, the rest of the statement was clearly dovish. 

However, we have already moved quite a lot today and I do not like fresh Nzd short bets at current levels.

Stronger than expected AUD labour report supporting Aud despite being back in "sell rallies" mode. The Aud was also supported by good China CPI, and the BHP dividend payout. Despite the strong trend in Aud, it is not compelling to short today.

Jpy spiked following comments from LDP lawmaker Kozo Yamatomo hinting at possible further easing by BoJ during the next meeting (Oct. 30th). Nothing too important.

Today’s  real focus will be the BOE’s monetary policy decision. Expectations are for rates to remain unchanged. Today is called "Super Thursday" because we get the simultaneous publication of the meeting minutes. These will be the main event,  and will provide a timely sense of how the perceived balance of risks is shifting in the eyes of the MPC. So watch Gbp today, but act only after we see the colour of the minutes.

Charts for Today:

European Open - 9.9.2015: Risk On

Risk appetite continues to improve as Vix dips towards 20 and the S&P/Dow/Nikkei start crawling back up the ladder. European boards less brilliant. Jpy crosses bid.

USD was lower overnight, continuing the retracement initiated yesterday. This throws a wrench into current trends that saw Aud, Nzd, Cad as easy shorts vs. USD.  Given the extent of the move, this may be due to market participants reducing USD exposure, as if rate hikes were less probable.

Big day for Cad & Nzd: rate decisions looming. Market participants expect a cut and dovish guidance by the RBNZ, but also pay attention to the forecast on Dairy prices. Overall, bearish picture on the Kiwi, that may remain weak. Different story for Cad, with BoC expected to remain on hold.

Charts for today:

UK data today & BoE tomorrow make Cable tough to call. Short term 

momentum is positive so the easier path remains higher for the time being.

Similar story on GbpJpy where risk appetite might spur some further 

short term strength, depending on how the EU bourses act.

Kiwi is not out of the woods yet. Surprizes may be

in store on teh RBNZ tomight.

UsdCad stuck in consolidation mode. Play the range

while it lasts, with a slight upwards bias.

Preferred play is to wait until after the BoC, then decide.

Learn

Many aspiring traders approach this business in search of a quick fix, a quick path to riches. There are no barriers to entry, no official education or degree that "qualifies" a person as a successful market participant. And these are probably the main reasons why the failure rates are so high.

The other consideration is that trading, like other jobs, requires "hands on" training and experience. Through the coaching service at FXRenew  and the skype trading room CoinFlippingCorner, I attempt to do just this: provide a live learning experience where participants can interact and see my own ideas, as well as those of a multitude of different traders. It's all about establishing a successful process for you to follow.

Of course coaching and/or the skype room are not constructed as a signal service although live trades are touted/shown in there. But copying trades isn't the point. Too many people are focused on what somebody else is doing or what trades they are taking. All of that doesn't matter unless it's comparable to yourself and that means:

same psychology, same preparation, same strategy. Otherwise you are copying without understanding.

What really matters is:

a) understanding yourself (your own personal situation, your beliefs, your risk tolerance, why you approached trading in the first place, etc.)

b) understanding price (why price is moving in one direction rather than another, what kind of movement (volatility) we can expect, key levels where longs and/or shorts are likely watching, 

c) understanding market drivers (day to day sentiment & flows, longer term drivers).

Without a genuine appreciation for these key items, long term success in this business is not possible.

There are generally 2 ways you can approach this business, if you're serious about succeeding. 

1. You can pay tuition to the market, learning by doing. Generally this means exploring forums, reading books, browsing  websites in search of a trading strategy that has an edge; testing it, adapting it to your own self, and attempting to emulate/replicate it.  

Pros: you do everything yourself and can potentially save money (if you use a demo until you are consistently successful)

Cons: you can spend years attempting to find your way around the markets and climb the learning curve. This can lead to frustration and may discourage you. You may have the personal qualities necessary to succeed, but never make it because you never stumble on the right material.

2. You can pay tuition to an experienced market participant. Generally this means doing some research, finding a person you can trust and that has been an active participant in the markets for at least 10 years and has references available. 

Pros: you can shorten the learning curve and avoid common pitfalls. I probably made every mistake possible, before achieving consistency. So at the very least, I can help you avoid all those mistakes!

Cons: mentoring can be expensive for some pockets.

If you're serious about your future as a trader, then feel free to contact me. I will send you a few questions that will help me understand your current situation, and your objectives, and based on your answers we can schedule a quick chat and discuss how to proceed.

Skype: JupaFX

Email: jupafx@gmail.com

I look forward to hearing from you!

EU Open - 8.9.2015: Retracements Abound

Usd selling this morning is facilitating counter-trend moves across the board. In particular, Gbp seems to be driven by M&A flows (Mitsui buying Amlin & Tesco selling it's Korean business unit to MBK). 

Worse Chinese trade data left little initial impact on risk sentiment overnight, Euro & Jpy were initially stronger until downward revisions in Japanese GDP generated some weakness in the Jpy. Usually Jpy doesn't react to domestic data, so this means that market participants believe further easing is a possibility if data continues to disappoint.

For now, these moves we're seeing this morning can be considered retracements against the broader trend. Key levels still in place on the cleaner instruments, as illustrated in the charts below:

European Open Report - 7.9.2015

G20 was the usual flop. Some analysts believe there was a slightly stronger language on FX in the concluding statement, as they stated:

“We will refrain from competitive devaluations, and resist all forms of protectionism.”

 “We will carefully calibrate and clearly communicate our actions, especially against the backdrop of major monetary and other policy decisions, to minimize negative spillovers, mitigate uncertainty and promote transparency.”

But the markets shrugged that off - Labour Day in the US has a large chunk of market participants still in bed or on holiday. That's also the reason for no indications today. When a major player is missing, the game is off.

Enjoy this extended weekend and refer to the Weekly Game Plan for focal points.

Weekly Game Plan - 6.9.2015

1. Themes for the Week

- Labour day holiday Monday 

- Market participants still trying to gauge the extent of EM weakness.  China outlook concerns to be highlighted by August trade report. More bad news and the "risk off" trade will be back in vogue.

- Save the date: Septemebr 17th. Absence of key US data to leave markets guessing over September Fed move. Uncertainty in global equities into the close of last week, but USD marginally stronger.

- Super Thursday:  MPC to remain cautious amid uncertain external backdrop, the Minutes this week will likely speak about a weawker inflation outlook. Gbp remains weak.

- ECB keeps Eurozone on life support via QE while the FED prepares for liftoff: the policy divergence trade is alive & well, and will most likely keep the Euro subdued.

- Another key policy divergence trade remains UsdCad. With depressed commodities and slow domestic growth, the BoC is closer to cutting rates than it is to raising them. Hence, whether the FED hikes or not, UsdCad seems poised higher.

2. Charts Illustrating the themes:

Dax showing indecision...equity markets waiting for a cue.

The FX charts, instead, are where the best opportunities lie

(for the time being, until something changes).

Good Luck!