Weekly Game Plan - 30.1.2016

Themes for the Week & potential opportunities

- Chinese PMI (Mon) and US ISM (Wed) could ruin the recent rise in risk assets. The recovery is under way, thanks to BoJ and Crude, but can it last?I favour cautious longs on Dow/S&P for now, keeping a close eye on Crude as a driver.  AudJpy and CadJpy remain favoured FX plays on the risk on/off theme.

- BoE February Inflation Report expected  to be dovish and revise inflation and growth forecasts. However, the market appears to have digested a fair amount of negative news so there's risk of a short squeeze. Gbp is still rather weak going into the week.

- US NFP will be the market's main focus (Fri), but FOMC is most likely not going to fret over slower job  growth. Furthermore, speeches by Fed’s George (Tue) and especially Fischer (Mon) will offer further guidance in anticipation of Friday's number.

- RBA will meet and it will be difficult for Stevens to remain steady and confident in the current environment. No cut is expected, but dovish rhetoric should be the base scenario. 

- German Unemployment & Cad Unemployment are secondary but still worth watching. Especially Cad Unemployment (Fri) which along with NFP is important for the UsdCad short trade. I still favour UsdCad shorts.

European Open - 28.1.16

Crude continues to dictate direction, despite a dovish FOMC. If equities are holding up and "all seems well" with the world, it's only because Crude is knocking on weekly highs as opposed to weekly lows. This despite a downgraded current assessment of the US economy along with upgraded concerns on international & financial developments. 

In other news, RBNZ delivered an equally dovish tone by saying "Some further policy easing may be required over the coming year". However the market was expecting a dovish slant, so we'll need further deterioration in China & in dairy prices to really pressure kiwi.

Looking forward: tomorrow we'll see the BoJ and the market is pricing in something of a 30% chance of further easing in tomorrow's announcement (in the form of JGB and ETF purchases, not outright rate cuts). How to read this? Any change in current policy will be viewed as a surprize and warrants Jpy weakness. EurJpy & CadJpy might be the best choices (long of course) if that situation materializes.

Today we'll get UK Q4 GDP and Gbp is still one of the weaker currencies out there. The market is expecting bad news, so it might take some effort to push lower, even though that's still the general slant.

European Open: it's all about Crude

Overnight price action saw a tepid rebound in risk sentiment, all dependant on Crude. OPEC production cuts are nowhere to be seen, and the market remains in a sell-rally stance. This poses significant positioning risks going into FOMC, RBNZ and BoJ. 

Crude dicates risk on/off sentiment

Australian CPI was better than expected, which is a decent surprize - so the RBA might want to "wait and see" for longer.  The hawkish surprize, along with the slight recovery in risk-appetite, has also maintained Nzd afloat despite the market's expectations for a dovish lean during tonights' RBNZ meeting. I remain bearish on Nzd unless we break 6560.

Also, the FOMC has very little to celebrate since most data prints since December have been worse. Any further dovishness should play into the hands of short UsdCad positions, where Poloz' neutral language plus the recovery in Crude have already threatened 1.40. We might get another push tonight. But again, I will play the reaction, I won't gamble before hand.

Weekly Game Plan - 24.1.2016

1. Themes for the Week

- Many investors hoping we've seen a bottom in Crude Oil and Equities. It may be easier to play the risk-on/off roller coaster via indices than FX in these conditions.

- FOMC (Wed) will most likely stand pat. However, in December it seemed like March was a "live" meeting, but now the market has toned down it's expectations given the volatile start to the year.

-  RBNZ (Wed) expected to stand pat. However, we've seen dairy prices and CPI fall so the market is expecting some kind of dovish slant by Wheeler.

- BoJ (Fri) still expected to stand pat. Some rumours say the BoJ is seriously considering expanding it's stimulus measures, since stocks have been falling and the Jpy rising. And last week we also heard that the BoJ was "checking prices"...so there is somewhat of a risk of intervention here.

- We also have US & UK GDP, as well as EU CPI which should take the back seat relative to all the Central Bank news.

2. Charts in line with these themes

It seems easier, top me, to play the Dow or Dax from the long side rather than dabble in FX. AudUsd above 7050 might be an equally interesting risk-on play, but it's not yet clear whether the China fears are overdone or not.

I also think UsdCad has at least another 100 pips to go on the downside since Poloz seems less concerned about the situation than the market expected. 

Generally speaking, we're still seeing a bounce in a clear downtrend. Many will try to sell into the bounce, so things could be tricky for the time being.

I will be watching the Central Banks this week, but will wait for the announcements rather than pre-commit to a view.

European Open - 21.1.16

The Nikkei sell-off is increasing the odds that the BoJ might act at its meeting next week. This is contributing to nervous trade: you don't want to fight the BoJ. Yesterday there were sources citing the BoJ is "checking prices", so be cautious on the Jpys.

Looking forward: enter the ECB.  No policy changes are expected but the market is still expecting somewhat of a dovish slant from Draghi. While it's true that the drop in Crude will lead to lower inflation expectations, there has been some  improvement in the Eurozone economy since the last meeting (manufacturing, services, unemployment for example). I still sense topside risk if Draghi sounds more optimistic than expected. EurGbp and EurCad longs would be my preferred play under that scenario. Vice versa, if Draghi delivers a more dovish outlook, EurJpy shorts would be my weapon of choice. Just stay cautious on the Jpys as the BoJ is "checking prices".

European Open - 19.1.16

Chinese data was slightly worse than expected but the markets aren't as stressed.  The data overall still paints a picture of stabilisation although there is still no sign of recovery in Q4. Only trade data last week pointed to a rebound in import growth - one ray of sun amongst the clouds.  However, the market has evidently absorbed a good degree of negativity on China.  Fed officials largely downplayed external developments at the start of the year, dismissing the volatility to a greater extent than was the case last year, this might support US interest rate expectations. 

Playing risk-off is becomming more consensus-like and not as easy. I still favour shorting WTI below 31 USD/bbl and Dax...but perhaps not today. 

Looking forward: today‘s update of the monthly oil market report from the IEA merits attention.

Yesterday’s monthly OPEC report pointed to 2016 as heralding the start of the rebalancing. IEA has historically been more bullish so today’s report could potentially play into the hands of dip-buyers.

In the UK, focus is on CPI inflation in December and on BoE governor Mark Carney. More and more analysts have begun to push their expectations for the first BoE hike from Q2 to Q4 as BoE seems less and less ‘Fed light’. Finally, German ZEW expectations for January are due today.

Weekly Game Plan - 17.1.2016

1. Themes for the Week

- Chinese data (industrial production, fixed asset investment, retail sales, Q4 GDP on Tuesday), will provide further clarity on the pace of things. However, even if we get good data prints, I'd be cautious of buying dips. It might take a few days for the market to shake off the negative vibes.

- Crude Oil weakness still sending negative vibes through the market. Will OPEC have an extraordinary meeting? Nothing seems likely yet. The monthly oil market assessments from OPEC (Mon) and IEA (Tue) will be pored over for updates on demand/supply imbalances.

- Positive effects of low oil prices to underpin small rises in UK (Tue) and US (Weds) inflation up to

0.2% and 0.7% respectively. 

- Unemployment and wage growth both expected to decline in the UK (Wed). Speeches by BoE's Carney (Tue) and external MPC member Vlieghe (Mon) may elaborate on the risks of any premature tightening.

- ECB and BoC to maintain policy stances. Watch out for the policy statement on Thursday where Draghi will be closely watched for hints of further easing.

2. Best looking opportunities

I still prefer to be on the short side of: Crude, Dax, GbpUsd, GbpJpy, CadJpy, AudUsd, AudJpy. Most of these trades are correlated to risk-appetite/China so it's best to either reduce positions and diversify or rank the strongest pair of losers and stick to them.

On the long side, I still like UsdCad and I'm wondering if Draghi will push the Euro back on the radar (vs. Cad or Gbp maybe) on Thursday?

European Open - 14.1.16

Asian equities ended up in the red overnight, as Crude maintained it's weakness. Aussie jobs were solid, but risk assets continued to be sold on the back of weak equities. 

Looking forward: Central banks (BOE and ECB) are the main focus today.  Today’s MPC announcements should be uneventful for GBP, with the February meeting & Inflation Report the real focus. However, recent macro data & commodity dynamics have opened the door to a potential about-face in McCafferty's hawkish stance. Should we see a 9-0 instead of the usual 8-1, I will be looking to add to Gbp shorts.

Regarding the ECB,  we get the minutes of the December ECB meeting, which fell somewhat short of expectations. The market is still somewhat bearish on the Euro and I sense a risk of further "underwhelming" today. I will actively seek intraday opportunities on EurGbp or EurCad if that were the case.

Finally, we'll hear from FED's Bullard before the US open.

European Open - 13.1.2016

 Chinese trade data for December were strong, and the CNY Fixing and Tom/Next calmed down as well. All is good withe the world and it seems like "risk-on" sentiment is returning to the markets.

I don't like the idea of playing risk-on via FX today, and instead am looking at the Dax for some longs above this week's high/monday's high.

Looking forward, there's not much data on tap today at all since Euro Area Industrial Production will most likely take the back seat ahead of tomorrow's ECB minutes. Instead, we have central banker speakers: ECB's Lautenschlaeger, FED's Rosengren (voter) and Evans (non-voter).

European Open - 11.1.16

Asian equities opened the week in the red before gradually shaking off the negative vibes. We are seeing some sort of retracement now which is still to be seen as a lull in proceedings and not a rotation. Also, with Crude still pressing multi-year lows, it's tough for risk appetite to stabilize.

Confusion regarding China’s FX policy contributed to the market turmoil last week. Focus today and throughout the week will continue to be on China and any announcements on monetary or economic policy.  Over the weekend, CPI data out of China was in line with expectations. 

The only other highlight today is Fed’s Lockhart and Kaplan (both non-voters) speaking after the London close.

No change to the weekly game plan.

 

Weekly Game Plan - 10.1.16

1. Themes for the Week

- Chinese data (Wed) could add to renewed market anxiety about extent of slowdown. So far, yesterday's CPI data printed in line with expectations.  Is the global economy ready for further FED rate hikes?

- CNY Fixing Confusion: PBoC created confusion recently, as the new fixing regime should be market-based (this was a condition of the IMF). However, there has been a lack of communication from the PBoC which has not commented on recent CNY weakening and has not explained what the goals are and how the system works. Instead, the market is left guessing in a situation with very high uncertainty, which participants don't like.

-  Fed speakers to clarify their views for US hikes in 2016. December’s median expectation implied 100bp of tightening in 2016; this week the market will be looking for confirmation.

- MPC (Thu) expected to stay on hold, with Weale now firmly a "dove". Rising chance of McCafferty abandoning rate hike call - which would be a surprize and put much more pressure on Gbp. The likelihood of a more gradual uptrend in inflation than previously expected could prompt a more dovish tone overall from the minutes.  Industrial Production (Tues) unlikely to shift market's perception.

- ECB minutes (Thu) and data (Ind. Prod. on Wed, German GDP on Thu) to shed further light on prospects of extra easing. The market expects reassurance that the door is open for further easing, but this may be too aggressive. There is a risk of further Euro strength.

2. Trends in line with these themes

In FX, Gbp, Cad and Aud remain weak vs. Jpy and (to a certain extent) USD. If the risk-off theme continues, the Jpy pairs will be better to focus on; if local themes take center stage, it may be easier to short vs. USD.

I like shorting DAX and Crude as well.

Good Luck!

Best of 2015

Greetings to all readers,

as some of you will know, the  CoinflippingCorner project has "survived" the initial stage and now is over 6 months old. 

If we're still here it's only because of everyone's support, so a great big THANK YOU is in order. One of the best things about 2015 is that the free trading room on Skype managed to attract around 20 traders and is now living a life of it's own – it no longer needs constant input on my behalf, and the traders in there have their own "meeting point". It has been my privilege to meet and help so many talented and committed traders, and provide a facility where quality information and ideas could be exchanged.

May the Skype room live on without my input for now, but know that after my sabbatical I will return to the markets full time. And in any case you can email me for more urgent matters.

I wanted to recap some of the things we've covered in 2015:

On Trading:

Profitability: a function of Volatility?
What are Market Dynamics?
Demand and Supply
Where Large Traders Place Their Stops
Objective: Thinking Like a Professional

FX:

How To Trade What You See
How To Trade Like Gordon Gekko
Momentum in FX
How to Find Themes in FX
FX Through the Eyes of a Retail Trader

Options:

How Options affect FX Spot
Option Writing Strategies (with real trade examples)

Stocks:

How to Analyze Company Financials
Warren Buffett on Company Financials
Understanding Stock Indices
Value vs. Price in Stocks
Why Value Investing Still Works
Systematic Equity Screening

I also wanted to tell you once more what I'll be doing in 2016:

1. I'll be continuing the collaboration with ForexTell, sharing my morning views and answering any questions that readers might have.

2. I'll occasionally be in the FXWW Chatroom  but on a reduced schedule until the end of my sabbatical. 

3. I'll be available to help people with their trading through FX Renew, where we will be rolling out a a new coaching section where I can have private 1-on-1 sessions with traders that are dedicated to succeeding. 

And after my sabbatical ends it will be full throttle ahead with some other initiatives I have up my sleeve. So stay tuned!

As always, reach out to me if you have any comments/questions/suggestions.

Cheers,

JupaFX

European Open - 8.1.16

After a dismal week, will we see a typical Friday reversal? So far it looks quite possible, given that we also have NFP to create some volatility. The only currency pair I'm looking to remain short on is GbpUsd so long as we remain below the Asian High and push through the Asian low. I'd expect 4550/60 to be a logical intraday target if that happens.

Small rant on all this CNY fixing: recall that the IMF decided to include the Yuan in its SDR basket.  It appears that the Chinese policy makers "behaved" until that hurdle was cleared. We are now seeing a reversion to old habits: keeping the Yuan weak to bolster the economy, despite worsening the "Currency Wars" debacle. Other EM nations will be forced to respond with their own actions (EM Strikes Back?) and finally it will lead to more outflows and reduce the necessity of tightening by the Fed.

Today we see the first NFP of 2016. Economic data since the December hike has been mixed,  but the indications are that this will be another solid employment report. Consensus is for a rise of 200k and the stronger ADP this week seems reassuring. Don't forget average earnings, which has started to drift up in recent months an is expected to continue it's ascent.

European Open - 7.1.16

China continues to pressure global equities and risk sentiment. Circuit breakers were triggered overnight again, and European bourses are poised for a large negative open. So shorting Dax, along with GbpJpy/CadJpy/GbpUsd has been and still is my preferred trade all week. How much further can they push? We've experienced a volatility expansion right from the start of 2016 which has surprized many, so I'm reducing my position size in order to continue pressing these trends in place.

European Open - 6.1.2015

Another day, another drop in risk-sentiment. Asian equities tumbled again on the back of worse Chinese data and (perhaps) the hydrogen bomb tests done by none other than North Korea. Usd and Jpy continue to be bought, and the best looking pairs out there still seem to be GbpJpy/CadJpy/GbpUsd shorts and UsdCad longs. I will personally wait for UK services PMI this morning, before tackling the Gbp. Following the unexpected weakening in the UK manufacturing PMI earlier this week, the UK services PMI is expected to soften.

 Fed Minutes come into focus today and what the market will be looking for are hints on the "pace" of tightening. The risk? That the Fed’s definition of gradual is faster than the market’s 55 bps per year over the next two years, which could make March more ‘live’ than is currently priced in. Also watch the ADP report (consensus 195K; close to the 200K expectation for payrolls) and ISM Non-Manuf (exp. 56 vs 55.9 prior).

European Open - 5.1.2016

Asian equities stabilized overnight after a  large cash injection by PBoC. Furthermore, the short selling ban in China will expire on Jan 8th and we might see the true colours of the Chinese market.

Market participants still expect Jpy to strengthen/UsdJpy to fall. The sell-off yesterday was intense and the only Jpy I'd be inclined to short today is GbpJpy. Gbp remains one of the weaker currencies in G10 space so GbpJpy and GbpUsd are both good (short) candidates on a momentum step below their asian low. Just look our for the construction PMI (consensus is for a rise to 56.0 from 55.3) and the more important services PMI (tomorrow).

We also have Eurozone CPI today and German Unemployment.

European Open - 4.1.2015

Good Morning and welcome to 2016 Trading!

This week will still see "tentative" trading: the major players usually sit back and read through all developments, and typically pick up the baton in the second half of January. So this week will be most likely dominated by  the "theme of the day", and I'd suggest to trade light and stay in "hit & run" mode. 

Asian equities dropped, China's circuit breakers were triggered as China Caixin manufacturing PMI came out weaker than expected. The market bought Usd, Euro and Jpy in the flight to safety. Aussie & Kiwi were dumped.

Looking forward: NFP is the key highlight this week as the market debates the pace and magnitude of Fed hikes this year. But don't forget the other data points: December manufacturing ISM (today) and non-manufacturing ISM (Wed), ADP (Wed), and the Dec 15-16 FOMC Meeting Minutes (Wed). 

 Charts for today: the space covered during Asia has reduced the odds of any continuation on the main suspects (CadJpy short, GbpJpy short, Dax short) so no fresh positions for today. Will look for pullbacks on these candidates tomorrow, as well as UsdCad longs.