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EURCAD - MY MOST CREATIVE CHART YET - MORE DOWNSIDE EXPECTEDAs stated on the title this happens to be the most creative I've gotten with a chart, yet it covers one single but very important aspect which is Market Psychology. Market Psychology is key to understanding financial markets and we can see it unfold with this chart analysis. We can clearly see all the stages labeled out during the uptrend and what is now happening during the downtrend, and all these stages can be characterized by market psychology one way or another. I expect the pair to carry on with the downtrend all the way down to the 1.38xx - 1.39xx levels. The light blue colored zones are potential Demand zones. I know you shouldn't be using them as targets until they actually close in those areas, but there is evidence that makes me believe it will reach down to both of them. Trade safe and implement your own due diligence before entering a trade.
Short
by Aqua_Trader
6
NZDUSD SHORT UPDATE: EYE RBNZ GOV G. WHEELER SPEECH CLOSELY!The Govenor of the RBNZ is speaking in 16 hours time - there could be significant up/ downside volatility in Kiwi - as we have seen after the past 3wks where the RBNZ have gone through the full hawk-dove cycle in their inferences/ rhetoric. We had RBNZ Spencer's comments on house inflation back on the 7th of July which wrote off an RBNZ OCR cut - sending kiwi$ to 12m highs, then we had the RBNZ announce an Emergency economic assessment which was a dovish move - then the assessment itself was extremely dovish and reassured markets that the RBNZ would cut the OCR citing Kiwi strength/ persisting low inflation as the drivers, bringing us round circle and push kiwi to 0.69lows . RBNZ G Wheeler likely comments 1. IMO he is likely to discuss the marcoprudential policies the RBNZ can use to tame the house price inflation in NZD, in an attempt to assure markets that it isnt over looking the houseflation issues in NZD post their economic assesment which ssaid they would cut the OCR (which would potentially make the HPI situation worse) - discussing or implementing new restrictive Macropru would be hawkish but likely over seen by the OCR cut. 2. IMO Wheeler will reiterate findings from the economic assesment e.g. high NZD price, low inflation and the need to cut the OCR - this will be heavily dovish and should send kiwi$ to the 0.6900 level if not towards 0.6800 if he really emphasised the inevitability of the OCR cut in August. Risks to the view: 1. Obvious risk to this view is 1) Wheeler back tracks on the economic assessment, follows Spencers tune from July 7th and undermines the need to cut the OCR - either in itself or as a function of the HPI situation. - Any inferences that the RBNZ/ Gov Wheeler IS NOT backing the cut/ economic assesment findings and kiwi will likely bounce to 0.72 immediately, and back to the 0.73 highs within the week. - there is still 2wks until their rate decision/ meeting on the 10th of August so there is still room for Wheeler to talk hawkish/ throw another spanner in the work before actually making the decision. Trading Strategy: 1. As above - any hawkish sentiment that moves us higher/ rallies kiwi I will sell into as i believe fundamentally the RBNZ has called its hand and anything between now and the 10th is noise - its best to wait for the information to full price e.g. to 0.72 but if momentum slowed near 0.71 I will sell there. - I dont have any interest buying any hawkishness or selling any dovishness at these levels - I will only sell 0.71+ pull backs as i think the rate cut is imminent and any hawkishness is just the RBNZ trying to keep the markets on its toes - Technically we are seeing some downside deviation + MA support - with kiwi$ trading on its 3m -2SD channel line and 3m Moving Average line, this looks supportive, with kiwi$ posting a green day once it hit hit these two techncials (as you can see highlighted in red) - this could continue to support a hawkish bounce, which is good for re-shorts. Eyes on the comments closely! *Any questions please let me know - I will be providing RBNZ Gov Wheeler Highlights ASAP*
Short
by QuantumLogicTrading
2
GBPUSD SHORT: BOE/ FOMC POLICY EXPECTATIONS INCREASINGLY BEARISHFollowing today's Service/ Manufacturing PMI miss (worst contraction in 88 months - since 2009) the Sterling market has come under significant pressure as BOE rate cut expectations increase with OIS rates markets pricing a 94% chance of a 4th Aug cut vs 85% before the PMI's were released. Further, the PMI misses has attracted attention from UK Politicians e.g. Chancellor Hammond - which puts further qualitative pressure on the BOE to cut, rather than just quantitative data prints - Political pressure combined with data pressure is the best us GBP sellers can ask for when looking for a BOE rate cut. I have to say this is a breath of fresh air for GBPUSD shorts that i am holding (cable trades down to 1.30xx) - given that the start of the week was the complete opposite, with strong CPI/ Employment and Hawkish comments from MPC members Weale and Forbes; all of which reducing the pressure on the BOE to cut and thus the sterling market. Below also, following the PMIs we see Aug 4th BOE expectations from BoAML/ JPM - which call for a 25bps cut and 50bn addition to QE (with increased near-term pressure to do so/ act post-PMI) - in which imo will send GBP$ to 1.25, if not through - these expectations are encouraging for shorts thougb it should be remembered the cut was expected in July also but didnt materialise (though the minutes from the meeting did state "most members expect to ease in August". Further we see fresh recession concerns emerge as from Barclays below - once again putting downside pressure on GBP through poor GDP and increased BOE cut likihoods. Further, on the USD side of the trade, in this risk recovery we continue to view FOMC rate hike expectations rising - aiding dollar topside (and gbp$ downside) - as Fed Funds Futures Opt Implied probs now trade at 19.5% for Sept, 20.8% Nov and 40% for Dec, up from yesterday at 18.8, 20 an 39.8 - the risk-on bias already started today will likely see these probabilities continue to strengthen through the end of the day. Trading Strategy: 1. So from here after holding shorts at 1.3400 average, given this fresh and extreme impetus for downside - I will continue to hold my cable lower to the 1.285 target (unload 50%) and save 25-50% (depending if i unload 25% at the 1.305 level) for the Aug meeting itself where 1.25 is likely - where before today holding cable seemed more risky as the risks looked skewed to a hawkish BOE, which now has flipped. Unlikely, but any rallies to 1.33-35 level i will be reshorting - cable downside is a function of time imo. - I like holding short because BOJ are likely to ease, whilst the FOMC stay neutral/ Hawkish, this in turn puts more pressure on the BOE to ease/ GBP - in order to prevent GBP appreciating vs JPY (disinflationairy) BOE must ease too & hawkish FED stance puts pressure on GBPUSD lower. - Risks to the view continue to be if 1) New/ Weale/ Forbes continue to reiterate their hawkish/ no easing stance and perhaps less impactful; 2) Next weeks UK GDP reading - will not contain much Post brexit data so any upside is unlikely to give GBP strength, though downside is welcomed and could cause further selling (Low pre-Brexit GDP gives BOE more reason to cut) GBP OIS PRICING A 94% CHANCE OF A 25BPS CUT FROM THE BOE IN AUGUST (85% PRE PMI) - UK CHANCELLOR HAMMOND: Must restore uncertainty after July PMI - UK CHANCELLOR HAMMOND: BOE will use monetary policy tools at its disposal - UK CHANCELLOR HAMMOND: BOE have tools to respond to market turbulence in the short-term BoAML ON BOE: - We look for the BoE to cut rates 25bp and increase QE by £50bn in August, split between Gilts and private sector assets. - BoE inaction so far and heightened policy uncertainty leaves risk-reward unattractive in the front end in our view. - We prefer to position for potential BoE Gilt purchases, reiterating our 5s20s Gilt flattener as attractive in a QE-scenario. JP MORGAN ON BOE: - Current market pricing of a 25bps rate
Short
by QuantumLogicTrading
2
SHORT NZDUSD: GOLDMAN SACHS FORECASTS 0.68, 0.64, 0.62 GOLDMAN SACHS EXPECT 3 RBNZ RATE CUTS OF 25BP APIECE IN AUG, NOV AND MAR. In a scheduled "Economic Update" published on Thursday, the RBNZ signalled a significant strengthening in its easing bias, and dovish shift across its views on domestic inflation and domestic/global growth. At the heart of many of these changes is renewed concern about the elevated NZD. In our view, these changes make clear that the RBNZ is positioning for a deeper easing cycle, notwithstanding ongoing risks to financial stability from rising house prices. NZDUSD Targets: - 3 Month: 0.68 - 6 Month: 0.64 - 12 Month 0.62 This is largely inline with my previous posts/ reaffirms my short view of NZD$ - especially with the possibility of 50bps of cuts increasing for this year (GS citing two cuts); Plus I also see increased USD strength over the medium term as rate hike expectations/ implied probabilities ever grow - Fed Funds Futures Opt Implied probs now trade at 19.5% for Sept, 20.8% Nove and 40% for Dec, up from yesterday at 18.8, 20 an 39.8 - the firsk-on bias already started today will likely see these probabilities continue to strengthen until the end of the day. The Probability of 2 hikes this year is also becoming an ever stronger possibility with 2 hikes pricing at 7.5% in Dec - and with July Pricing a hike for the first time since Brexit at 2.4%
Short
by QuantumLogicTrading
2
USDJPY: LONG UPDATE - RENEWED JPY FISCAL STIMULUS SPECULATION?I posted earlier with my 107 USDJPY breakout trade (see attached post) - one of the reasons I said to long USDJPY on the 107 break-out was due to JPY Govt stimulus speculation. In the last few hours we have seen fresh speculation of the JPY stimulus, with JPY20trn now being discussed/ proposed to be on the table - this renewed rhetoric is nothing but positive for the 107 breakout long trade i posted a few hours ago and supports it as YEN20trn is approximately $200bn, which is certainly enough new liquidity to give confidence to markets and spur risk markets onto fresh highs - further this JPY Govt stimulus is speculated to be combined WITH BOJ easing, so markets get a compounded risk rally since there are two potential drivers (BOJ cut rates by 10-20bps + add to maturity/ purchases of JGB and EFT). Plus today after seeing the RBNZ's dovish economic assessment (where an Aug cut is almost 100%), this gives risk markets even more fuel thus encouraging $yen to trade to the 109-111 levels i expect - though BOE K. Forbes hawkish comments negate some of this. The new JPY Fiscal stimulus speculation: 1. JAPANESE GOVERNMENT CONSIDERING 20 TRILLION YEN STIMULUS PACKAGE SAYS KYODO - "The government initially envisaged compiling a stimulus package of somewhat more than 10 trillion yen . But the size is likely to double as the package will now include projects for fiscal 2017 and beyond and increase "zaito" low-interest government loans by 6 trillion yen," Kyodo reports. 2. "The government initially envisaged compiling a stimulus package of somewhat more than 10 trillion yen . But the size is likely to double as the package will now include projects for fiscal 2017 and beyond and increase "zaito" low-interest government loans by 6 trillion yen," Kyodo reports. 3. "The stimulus could be even larger, they report. And able will look for the rubber stamp from the Cabinet in early August. About half will be earmarked for infrastructure." Trading strategy going forward: 1. Trading strategy remains the same from the 107 breakout post that i made earlier e.g. 109TP1, 111TP2 - all that has changed from the post before is that the strategy has been reaffirmed/ strengthened upon this renewed JPY stimulus speculation , given this was one of the drivers i cited to move USDJPY to the 109 then 111 level once the 107 confirmation level was broken. - In early asia trading, as yesterday, net risk sentment remains stable with safe havens gold, yen and bonds down as well as risk, though risk down slightly less. For the day, I expect risk-on sentiment to win as Thursday historically is the best day for stocks (before going into the friday end of week sell-off) + post market Wednesday some large firms posted outperforming earnings which should continue helping the risk appetite move higher (Intel + Morgan stanley beating EPS and revenue forecasts) when the main LDN and NY sessions get underway down the line. *Check the "USDJPY: BUY THE BREAKOUT" post attached for more details on the trade discussed above posted 7 hours ago*
Long
by QuantumLogicTrading
7
SHORT GBPUSD: CENTRAL BANK EXPECTATIONS - BOE/ ECB/ BOJ & FOMCReuters Analyst Expectations: FOMC 1. IMPROVING DATA POINT TO SEPTEMBER RATE HIKE - - The Fed is very unlikely to spring any surprises at the upcoming FOMC meeting, which concludes next Wednesday 27th July, but a September rate hike is a distinct possibility. The statement next week should acknowledge the apparent pick-up in second-quarter GDP growth, particularly the recent strength of consumption, and also the rebound in employment growth in June. The Fed won't commit itself to a September rate hike at the July meeting, however, hints will be eyed closely. - Currently the 30 day federal funds rate option implied probability is consistant with the increasing chances of a September/ Novemeber hike view as the probability continues to increase to new post brexit highs e.g. 25bps FOMC hike probability for Sept/ Nov/ Dec increased to 24.6%, 25.7%, 41.6% from 18.8%, 20.2% and 39.5% yesterday. With Dec now pricing 2 hikes at 9.1% up from 7.1% - as risk markets continue to set new highs increasing confidence. BOE 1. BOE SEEN CUTTING BANK RATE 25 BPS TO 0.25% IN AUGUST - BoE Seen Restarting QE In August, Top Up With GBP80Bln adding to GBP375bn - Median 60% Chance Of UK Recession In The Coming Year - UK Economy Seen Growing 1.4% In 2016, 0.6% In 2017 (Prev Seen 1.9%, 2.1%) - Short Sterling constant 3m Libor Option Implied cut probabilities remained flat on the day at 30% chance of a 25bps cut - however risk markets rally buoy hawkish expectations though this is fundamentally expected to impact the BOE decision since markets are rallying as a function of the BOE cutting (its a loop that the BOE will be aware of). ECB/ BOJ 1. ECB not seen to cut rates but some analysts think there may be an extension to the maturity of ECB's APP e.g. further into 2017, though the purchase amounts is not expected to change at EUR80bln a month - nonetheless a 3m extension is an extra EUR240bn and a 6m is EUR480bn, so such an announcement on Thursday would certainly continue to fuel the rally in risk markets. 2. BOJ - there is less consensus on the BOJ meeting on the 28th, though the forecasts seem to sit between a 10-20bps cut to the key rate + an extension to the ETF purchases (Maturity and monthly purchase amounts) + an extension to the JGB purchases (maturity and monthly purchase amounts) - a BOJ surprise to the upside would undoubtably enable risk markets to continue to rally, though if it goes the other way (Kuroda underdelivers) this could be the impetus to stop the risk rally in its tracks. Trading Strategy: 1. Short GBPUSD on Pullbacks to 1.33/4 (if we see any now - unlikely but possible if retail sales outperform and the market prices the strong CPI/Employment at the same time) - 1.305TP1 1.285TP2 1.25xxTP3. - I posted this trade a few days ago when the short price was favourable - at these levels i DO NOT advise shorting. 1.33 is the minimum entry - I just posted this as a short confirmation/ central bank watch post. 2. The above supports the short GBPUSD play as 1) Easing from ECB/ BOJ puts pressure on the BOE to ease (as the GBP appreciates against the JPY/ EUR in this situation which is deflationairy) thus BOJ/ ECB easing increases the already consensus view that the BOE will ease - a BOE easing of 25bps cut and 80bn extension to the QE would certainly move us through 1.25. Infact I believe the 25bps cut alone is enough to do that. If BOE delivers £80bn in QE then that will move GBP even lower to perhaps 1.20/23. - Further, on the FOMC stance, a more hawkish FED strengthens the long dollar leg of the short GBPUSD which compounds the momentum that GBPUSD can move lower as we move towards two drivers vs just the one with the BOE easing. We now have BOE easing potential combined with ever increasing FOMC hike expectations fuelling USD demand which in turn/ combined will send GBP$ lower faster.
Short
by QuantumLogicTrading
3
SELL NZDUSD: EYES ON CPI PRINT 23:45GMT - >0.5%=0.73; <0.4%=0.67Short NZDUSD based on low CPI/ inflation = an RBNZ OCR cut is 90% likely - 105 mins after market open at 23:45GMT NZD releases their June CPI print. - In all RBNZ mandates they reiterate how they consider CPI to be their "main/ sole" target or dictator of the monetary policy they set (check any of their minutes etc). - Their target is 2%, plus recently they announced that they would hold an "emergency"/ brought forward economic assessment (this lead to increased short bets on NZD$ at the back of last week (with NZD$ falling from 0.733 to 0.710) as many speculated that this meant the RBNZ has a heads up on the CPI print - e.g. its bad). - See here for more details on NZD CPI and likelihood of a RBNZ OCR cut: www.bloomberg.com - In simple terms if CPI fails to grow on the quarter for NZD e.g. 0.4% or has in fact fallen e.g. 0.3% or less - it is highly likely that the RBNZ will cut their OCR rate, in order to boost the CPI, which in turn will send NZD$ likely to a terminal rate of 0.67 (could be as much as 0.65), hence why last week we saw shorts increase on the pair as fast money tries to front run the market/ print. Trading Strategy - Short NZD$ if CPI print misses or equals 0.4% - Stagnant/ low Inflation = RBNZ OCR cut likely: 1. Personally I dont have any interest in playing the long kiwi$ side e.g. if the print is higher as; 1) the RBNZ isnt happy with NZD trading so well (due to its deflationairy pressures), so action could come to reduce the NZD. 2) There is approximately 300-400pips of downside from here (at least) if a RBNZ OCR cut comes, whereas a no cut will likely see NZD$ Drift to 0.73 (maybe higher) so the risk:reward complex isn't as attractive to the upside IMO. 2. I will be waiting for the CPI print at 23:45GMT - if it is lower or equal to 0.4% I will Short NZDUSD 2lot@Market price; 0.68TP1 0.67TP2 0.65TP3 . 3. This trade is effectively betting on an RBNZ OCR rate cut; See attached posts for more details but this is already highly likely - and IMO is a definite if CPI is 0.4% (even more so if it is lower). Ideally id love to see 0.3%. - The rate cut is ranked likely if CPI comes in at 0.4% or less because 1) Inflation is the RBNZ key target, so stagnation is what they have to avoid - a rate cut is the likely tool they'll use given they have one of the highest CB rates in the developed world; 2) the NZD dollar is very expensive across the board and the RBNZ have communicated their dismay regarding the strength of the currency (e.g. saying its very strong/ causing disinflationairy pressures) - so a OCR cut is also the likely response if the RBNZ wants to depreciate the NZD dollar against all of its trading partners; 3) An OCR cut will ease any of the Brexit Commonwealth Headwinds that may or may not drift into NZD's economy of negative impact - so as these 3 reasons are compounded I believe an OCR cut is made ever more highly (80-90%) likely thus bearish bets against NZDUSD make sense to me from here. 3. This CPI trade, if comes in on target (0.4% or less), is also good as LDN and NY session's will have 8-14 hours until they start - so you will be able to get ahead of the market/ mostof the largest FX flows. Though the Asia session will be in full swing so dont expect an easy ride - IMO fingers should be on the trigger to execute the short immediately if 0.4% or less is seen - NZDUSD will likely drop 200+pips in less than 30seconds if these figures are the case (if not even quicker). Any questions or comments please ask - reading the "sell nzdusd @0.73 - tp 700pips" post ive attached helps support this short Kiwi$ trade
Short
by QuantumLogicTrading
19