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LONG DXY/ USD VS GBP: HAWKISH FOMC LOCKHART SPEECH HIGHLIGHTSFOMC Lockhart was the 4th Fed this week to imo be relatively Hawkish with his words, most notably reinforcing with the others brexits near-term stability saying "Doesn't Expect 'Brexit' to Have Near Term Impact on Economy" and " So Far 'Brexit' Reaction Largely Orderly". Most interestingly though was Lockharts view on the FOMC's positioning for future rate increases, saying "Won't Rule Out Two Rate Rises This Year" - which is extremely hawkish given most expect 1 at the most.. Back up this sentiment by insisting that the Fed is "Fed Not Behind Curve, Has Time to Decide on Next Rate Move". Nonethless Lockhart did somewhat contradict his "rate expectations" by saying "Time for 'Cautious and Patient Approach' to Rate Policy" which surely shouldn't be the case if 2 hikes are coming - that would be on the aggressive side. All in all, Lockharts comments go hand in hand with my Bullish medium term USD/ DXY view (see previous articles) - I like the USD vs EUR, JPY, GBP, AUD, NZD in the medium term so long DXY/ USD is favoured, even more so if 2 rate hikes were to be realised this year. At current levels short GBPUSD is my favourite expression FOMC RATE HIKE IMPLIED PROBABILITIES - On the likelihood of rate increases, in the past 24 hours, from the Federal Funds Rate implied probability curve we have seen rates/ probabilities firm after yesterdays "risk-break" recovery, with a 25bps September/ Nov hike steepening to 17.2% from 11.7%(Wed), and Dec setting new highs at 35.9% from 29.5% (Wed) - Dec also went on to double the probability of a 50bps hike to 5.1% vs 2.8%(Wed), giving Lockharts comments some weight. FOMC Lockhart Speech Highlights: -Fed's Lockhart: Fed Not Behind Curve, Has Time to Decide on Next Rate Move -Lockhart: Time for 'Cautious and Patient Approach' to Rate Policy -Lockhart: So Far 'Brexit' Reaction Largely Orderly -Lockhart: 'Brexit' Will Increase Long Term Uncertainty -Lockhart: Doesn't Expect 'Brexit' to Have Near Term Impact on Economy -Lockhart: Bond Market Yields Largely Reflect Flight-To-Quality Buying -Lockhart: Too Soon to Say 'All Clear' for Financial Markets -Lockhart: 'Brexit' Not a 'Leman Moment' -Lockhart: Still Expects U.S. to Grow by 2%, Expects More Job Gains -Lockhart: Economy is 'Performing Adequately' -Lockhart Says Fed Has Time to Decide on Next Rate Move -Fed's Lockhart: Presidential Election May Be Boosting Economic Uncertainty -Fed's Lockhart: Won't Rule Out Two Rate Rises This Year
TVC:DXYLong
by QuantumLogicTrading
DYNAMIC STRADDLE: USDJPY & GBPJPY - TP FROM BOJ & FOMC EVENT VOLThe best Idea to play BOJ and FOMC from a risk-averse perspective is to own both in a Long Straddle Strategy Dynamic Straddle: Long USDJPY & Short GBPJPY - TP from volatility & Event likely hoods TP levels = cannot be greedy else you may miss one trades exit point so <25 pips when it goes in your direction for each - total TP = 50pips as 2*25pips Reasoning - Traditional Straddle involves would be long and short the SAME cross.. - However i suggest we long USDJPY as UJ has proportionately MORE upside possibility: 1. FOMC is likely to be neutral-Hawkish, this will help UJ trade flat/ higher = Supports long - - *FOMC PARADOX* important to note that in this sensitive risk-off market if the FED is too hawkish/ hikes it can cause a UJ sell off, as higher rates means greater economic/ market uncertainty as liquidity and financing becomes tighter (despite rate hiking usually making USD trade higher through increased $ deposit demand for higher rates) 2. BOJ is likely to be dovish, this will help UJ to trade higher (especially in this risk averse market - easing helps calm mrkts) = supports long 3. USDJPY ISNT directly impacted by BREXIT fears as GBPJPY as USD and JPY can be considered safety assets, this helps USDJPY trade higher = supports long So we have 3/3 for long USDJPY. - Now to hedge this trade AND benefit from possible downside, we SHORT GBPJPY as GJ has proportionately MORE downside possibility. 1. FOMC neutral-hawkish, drives risk-off momentum (higher rates reduces market liquidity and undermines economic growth thus increasing uncertainty) which drives demand for Yen/JPY, increased demand for JPY supports short GBPJPY 2. BOJ being dovish/ easing potentially helps JPY sell off - however, GBPJPY will be the least sensitive of JPY seller of the JPY crosses, as GBPJPY is the perfect play for Brexit and risk-off, hence in the long run JPY selling wont last long in GBPJPY as once JPY is cheap, buyers will enter to continue hedging/ speculating on brexit with the favourite pair, poor potential/ long run JPY sell side = supports gbpjpy short 3. GBPJPY is directly impacted by Brexit uncertainty in two ways. 1) as investors wish to sell GBP as the uncertainty is only negative for GBP (especially when polls are at 55%). 2) as Investors wish to buy JPY for their "safe haven" asset play. UJ only has the JPY buying to push it lower, which is limited/ offset further as USD buying can also be considered a "safe haven asset) = Supports short GBPJPY We have 3/3 for short GBPJPY Evaluation. - We have 3 points supporting both LONG UJ and SHORT GJ - AND by playing this trade we are able to gain from ALL eventualities, we dont have to guess the BOJ or FOMC outcomes since we have a LONG and a SHORT we have covered ALL eventualities. - Also from a vol perspective, GBPJPY risk reversals continue to become negative by a significant amount 1wks lost 0.6 to -2.1 (from -1.5), so investors continue to demand GBPJPY downside puts for speculation/ hedging - supporting the short. - USDJPY ATM volatility, sold off significantly with 1wks losing 3.55 to 12.45 - lower vol in UJ supports buying. *Any questions on why i think FOMC will be neutral-Hawkish or why BOJ will be dovish-easing please ask in the comments*
by QuantumLogicTrading
PRICE ACTION ANALYSIS - GBPUSD: SCOTTISH UK VS UK EU REFERENDUMThis article compares the price and technical analysis of GBPUSD in the 10-weeks leading into the two events in order to gain an execution-able advantage going into the UK EU Referendum taking place on the 23rd June 2016. Price Action and Trends Scottish UK REF - 10 weeks = 14.July.14 to 18.Sep.14 - The first 8 of the 10 weeks GU traded extremely bid, selling off 1000pips from 1.7000 to 1.6000 . GU failed to make any significant recoveries during this period - signifying an extremely strong down-trend. - at the end of the down trend and coming into the REF, GU recovered 40% from 1.6000 on the 9th Sep, to 1.64000 on the 18th Sep (event vol highs at 1.6580). The sell off the proceeded to continue after the event, selling off back to 1.5900 by week 12/13. - Price action remained significantly below the 50 & 20 VWMA throughout the 10-week period and after the event - confirming the strong down-trend. UK EU REF - 10 weeks = 18.April.16 to 23.June.15 - Since the bottom formed on 29th Feb at 1.3850, GU has been trading in an up trend, forming marginally higher highs and higher lows. However, the uptrend has turned into sideways action in the last 3-4 weeks as GU has failed to make new highs of any significance and is failing to make higher lows - and the high-low range is tightening. in the last 10 weeks GU has risen 330 pips from 1.4270 to 1.4500 close-close and has had a range of 600 pips - 1.4170 to 1.4770. In the last 5 Weeks however GU traded flat closed to close at 1.4500, with a range of 400pips 1.4340 to 1.4730 illustrating the tightening range, sideways movement and end to the trend - the market is sleeping and is waiting for a stimulus to break in a direction. - At the start of the 10 week period, Price bullishly crossed the 50 & 20 VWMA and has stayed above since, confirming an up trend. The 20 period, however, has been trading choppy, illustrating the low trend/ direction and the significant pull-backs. Comparisons 1. The Scot REF priced GU over 1000 pips lower in the 10 week period, in a decisive downward move - however, this UK EU event has failed to do anything similar and has actually done the opposite by rising in the last 10 weeks, currently trading up 300 pips. - Why? imo there is only 2 reasons why there has been such a big difference in the price action. 1. The reason GU isnt pricing downward is because GU already priced/ factored in Brexit uncertainty into the downside we saw between december 18th.15 to March 2nd.16, which took us from 1.5300 to 1.3800 which is a whopping 1500+pips lower - this was likely FOMC hike driven but given the extent of the move, it is highly likely that brexit was included in the price lower - hence why we are not seeing a move now - the UK REF is already in the price. 2. The less likely reason is that GU isnt pricing the move because 1). the market has been scared stiff by the uncertainty, and people simple arent willing to take risk either way thus explaining why price is trading flat/sideways. or 2) GU is planning on making a significant run to the downside in the next two weeks where it could shed 1000 pips if it falls back to 1.3800; or even 700 pips if it moves to 1.4000 which isnt that far off of the 1000pip Scot Ref move. The technical indicators are just mirror a function of price thus I will not read into the technicals much - obviously the Scot Ref indicators spent much of the time depressed since the price was falling rapidly, whilst the UK EU Ref has been mixed - since the price is trading sideways. *Look out for my upcoming article where i will discus what the above differences mean and what they imply price action will do in the next two weeks going into the UK EU Ref and FOMC.
by QuantumLogicTrading
PRICE ACTION ANALYSIS - GBPUSD: SCOTTISH UK V UK EU REFERENDUM 2This article compares the price and technical analysis of GBPUSD in the 10-weeks leading into the two events in order to gain an execution-able advantage going into the UK EU Referendum taking place on the 23rd June 2016. Ranges Scottish UK REF - 10 weeks = 14.July.14 to 18.Sep.14 - GU started the period at 1.7000 and closed the period at 1.64000, with highs at 1.7150 and lows at 1.6000 with a range of 1150pips. - In the last 5 weeks (Aug.18th-Sep 18th) GU opened at 1.6730, closed at 1.6400 with highs at 1.6730 and lows at 1.6000 and a range of 730 pips - Close to open of 330pips - In the last 5 weeks (Aug.1st-Sep5th 5wk comparison) GU opened at 1.6877, closed at 1.6300 with highs at 1.6877 and lows at 1.6277 and a range of 600pips. - from week 10-13 GU shed the the Recovery/ No vote volatility gains, and traded from 1.6400 to 1.5900 with a range of 500 pips. UK EU REF - 10 weeks = 18.April.16 to 23.June.15 - GU started the period at 1.4270 and closed at 1.4500 - range of 600 pips - 1.4170 to 1.4770. -In the last 5 Weeks (5wk comparison) however GU traded flat open to close at 1.4500-10, but with a range of 400pips 1.4340 to 1.4730. Comparisons In general, the Scot Ref traded/closed much closer to its ranges than the UK EU Ref has to date e.g. in the "comparative" last 5wks, Scot Ref opened at 1.6877 (which was its high also) and closed at 1.6300 (only 30 pips from its range low at 1.6270) so GU ate 570/600pips of its range - illustrating that the Scot Ref had much more directional bias since it traded and held its extreme levels. Where as the UK EU Ref comparative 5wk period, opened at 1.4500 and closed at 1.4510, but with a range of 1.4340 to 1.4730, so GU only managed to eat/commit to 10/400pips that it ranged - illustrating that the UK EU Ref has lot direction commitment and 0 trend, it is a sideways ranging market. Technicals Scottish UK REF - 10 weeks = 14.July.14 to 18.Sep.14 - RSI, STOCH and RVI sold off in the first weeks of the 10wk period, then remained severly under pressure for the remainder of the 8wk sell off - all of which failing to break 40 and posting lows of 13 with several <20s. The event driven recovery between the 9th sep to 18th sep however helped the technicals recover to 50 levels. - Historical vol, traded in an uptrend during the first 8wk selloff from 2 to 11, before falling slightly during the recovery and spiking again to 10-12 around the REF date due to event volatility. UK EU REF - 10 weeks = 18.April.16 to 23.June.15 - RSI and RVI have been bullish, trading in the upper 60% all of the time, with several "overbrought" conditions arising at 70. - Historical vol has traded relatively flat, ranging between 6-12 with it ticking up in recent times to trade above 10 on most days now. - Stoch oscillated throughout the period, with a bias to the downside, showing two oversold conditions of <20, illustrating the bullish trend as it was the little pullbacks that caused these conditions. * See the first article in this series (linked to this article) *Look out for my upcoming article where i will discus what the above differences mean and what they imply price action will do in the next two weeks going into the UK EU Ref and FOMC .
by QuantumLogicTrading
5
GBPUSD: FED and Polls dependedThis pair has been a headache over the past few days. However, I think I have finally figured what this pair has been up to: - The market underestimated the possibility of a rate hike in June until the last FOMC Meeting Minutes on May 18th. This explains the lack of real sustainable rallies since the one that took place on the 3rd of May. - The FED has stated that a June hike is still on the table. However, skepticism around a real FED hike prior to the UK referendum has got the pair on hold. - The latest poll on the BREXIT conducted by IG/SURVATION has show a 44% pro REMAIN against a 38% for the BREXIT supported. The pair gained positive territory after this release which has become the catalyst for this pair during the London Session. So the question is, where is this pair going? The GBPUSD is on a bullish channel towards a re-test of the latest FED hike level. The market has decided to prepare for this scenario of FED hiking rates. However, the idea of hiking rates few days prior a major referendum in the UK, that have direct and significant consequences in the financial markets, seems to be highly unlikely. Markets are positioning for this event in order to retest the latest FED rate hike levels during the next Federal Funds Rate on June 15th. On a personal note: I believe the FED will be hiking rates on June the 15th if the data matches the committee expectations. A part from the fact that if they fail to do so with a positive data, markets will loose any remaining trust on the FED regarding a gradual interest rate hiking cycle.
by acertijofws
USD Devaluation driving Oil Price Rallly and Gold StrengthThe recent devaluation of the USD is serving purpose to make way for future rate hikes by the FED without causing EM volatility and issue with China's currency peg. As the USD devalues it also pushes up Oil prices which provides relief for entities with Oil based junk bond exposure (Aka US banks). I see the devaluation as a short / medium term trend as a relief valve for policy normalisation. It should also stoke up some inflation to further give strength to the 'recovery' dialogue.
NYMEX:CL1!Short
by MarcusWilliamson
VVIX cheap, long volatility ahead of FEDVVIX represents the volatility of the VIX indicator, more precisely its the 30 day expectation of the VIX index which is the expectation of implied volatility in the SPX in 30 days time. Read more on this on CBOE's website. VVIX is mean reverting in nature, as it is as index and non-tradable it represents this mean reversion without market expectation building this into its price directly, some expectation will be implied from VIX futures market - and that whole "tail wags the dog" argument. I believe the VVIX is unusually low as can be eyeballed by the chart I have created. Despite the SPX coming off its all time highs and global discussions on NIRP, economic slowdown, migrant crisis, Oil crisis etc... For me this implicitly represents an under pricing of volatility risk protection, I can backup this confidence with looking at market Junk bond demands and Puts & Calls Open interest on the S&P500, relatively low put volume especially around the current market price. I am expecting a pickup in volatility as we approach the FED March 16th rate decision and this presents an opportunity to purchase exposure to volatility then profit from its explosive nature if the future looks a little less clear cut.
VLong
by MarcusWilliamson
Cable Finishes Week Below 2015 LowsThe Cable was killed last week as markets rattled on China fears and US Non Farm Payrolls trumped expectations. Pair finished the week below a descending triangle bottom marked by the 2015 lows and looks set to continue lower over the coming weeks. Initial target is the 1.236 extension of April - June 2015 around 1.4240, this extension coincides with the 2011 lows above 1.4220, where pair will likely find interim support. Alternatively, a reversal above the 2016 open (1.4732), would spell false break and encourage bulls to look for trend-line resistance below 1.5250.
Short
by FXTechs
Aussie Sees Biggest Weekly Decline Since Sep 2011The Aussie had a rough start to the year, declining more than 4.8% against the US Dollar. This was the largest weekly decline in % terms since September 2011, when the pair declined over 6%. We are currently descending towards a triangle bottom marked by the 2015 lows - a break lower would initially target the 68 handle, marked by the 1.236 ext at .6794. Expect any short term rallies to remain capped below .7030, though a break above there would target .7165.
Short
by FXTechs
Monthly Close Above 61.8 Targets 78.6 @ 1.4660USDCAD is on the warparth: December's close above the 61.8 Fib opens up the 78.6 Fib just below 1.4660. Pair has displayed incredible strength compared to other USD majors and shows no sign of stopping - momentum appears to have actually picked up in the first week of 2016. Expect a test of 1.4660 by the end of the month. The unlikely alternative, a reversal below the 2016 open (1.3815), would likely find support at former resistance, the 61.8 fib (1.3455).
Long
by FXTechs
My Idea on FOMC USD rate hike decision for EURUSDSo the time is coming, this is the last chance for the FED to demonstrate that the US economy is strong enough to withhold an interest rate hike and continue to show improvements. there are many political and idealogical factors behind this decision and this is a worry to investors and speculators that think this rate hike should not go ahead and that is only happening because of NON economical influences. lets see first, prior to the 16th meeting >>> the pair could well continue its bullish momentum, revisiting the high of 1090 and even penetrating all the way to the 1200 area where the down trend of this year has been established. also prior to the result and news release, some big brokers and desks will take positions to ensure they have enough liquidity to provide dollars to those who will buy it, so this will produce a few big EUR orders. Take a look at the CME options expiring at the NY cut, this will give you a good idea of what level is the market expecting. WITHIN THE MEETING/DECISION the key word here is VOLATILITY, while traders and brokers decide whether the statement is hawkish or dovish, you will probably see some spikes up and down as they hedge/cover and close their positions currently open. no one will open brand new positions during the event unless is to cover their large contracts to prevent losses here is when you need to be careful with your SL, if this is hit during the event then stay out until you can clearly asses the decision. bear in mind that experts analysts have great tools that electronically analyse the statement and is capable to identify different words and highlight this for the banks so their capacity of response is going to be pretty big nevertheless unlimited. AFTER THE DECISION here is when new positions will be opened, as liquidity returns and new players enter the market, big banks will look to find out how the decision affects their long term outcome and new positions could be undertaken over the next few days. looking at where the initial spike ends up you can get an idea if the outcome was scenario A B or C but still.. this may not probe to be the case and the pair may reverses within a few days of the initial euphoric move. SO IN SUMMARy - Prior to the event, keep an eye on positioning - during the event, volatility could kill your positions, ensure you are covered - after the event, reach the same conclusion than the big traders is essential, load yourself up with good news provider - if you are not sure, or you have no capital, or you feel insecure about trading in historic events, please do not trade this event. HAPPY TRADING HAPPY XMAS! any questions, please ask below :)
by SolidSnake
1
AUD/USD NEWS SETUP FED HIKE *VERY RISKY*I BELIEVE THE FED RATE HIKE WILL GIVE USD STRENGTH THERFORE IVE SET UP TP'S WHERE I BELIEVE PRICE WILL COME TOO I WONT BE PLACING STOP LOSSES ON MY TRADES BUT IF YOU WANT TO MAYBE HERES SOME ZONES FOR YOU TO PUT STOPLOSSES IN I WILL ENTER NOW AND 30 MINUTES BEFORE THE EVENT ! (7PM GMT TIME ZONE) PLEASE TRADE WITH CAUTION AS NEWS TRADING IS VERY RISK AND CAN BLOW PEOPLES ACCOUNTS I WILL ONLY BE RISKING 0.5% TO 1% ON EVERYTRADE SETUP HAPPY TRADING
Short
by OldAccount4
GBPUSD Short on account of Dovish Bank of EnglandTechnical Analysis: Technicals are on the chart, the Fibonacci Retracement, S/R Levels and Measures of Trend. The pair is trading below the 200 Day MA and the Long Term Pivot at 1.56600. Typically, short positions are sought with this in mind. If today's daily candle close is bearish, then the candlestick formation becomes an Evening Star at 52400 Resistance. Fundamentals and Market Conditions: GBP: Last week's dovish turn from the BoE makes sense in light of upcoming headwinds facing the UK. First, significant front-loaded fiscal consolidation is likely to weigh on growth. Second, the Brexit debate will heat up soon and potentially deter foreign portfolio and direct investment flows into the country. This is particularly problematic given the UK's large current account deficit. Finally, underlying sources of labour market health, such as hours worked and weekly earnings, are turning. The main risk to this trade is a resurgence in UK economic data. USD: Regardless of last week's downtick in economic data, King Dollar has held strong, resorting to a range rather than a severe correction in the majors. The Fed is currently more hawkish than the BoE and as we all know Central Banks and their Fiscal/Monetary Policy are King when it comes to driving currencies. Federal Funds Futures currently imply a 70% probability of a rate hike in December. See here .
Short
by JeffMzee
MACRO VIEW: IRX REFLECTS RATE HIKE EXPECTATIONSIRX, the 13-Week Treasury Bill yield has spiked above its relevant highs of 0.05 after the recent FOMC announcement, which hinted of a potential review of the Fed's Target Range for the Federal Funds Rate (now at 0-0.25%) This spike in prices indicates that at the moment the expectations for the rate range hike are present, as IRX is closely correlated to Federal Funds market (see Daily Effective Federal Funds rate at NY Fed website) Thus if IRX doesn't roll back below 0.05, until l the next Fed meeting, the rate range hike could be in the cards!
ILong
by Killy_Mel
USDCAD Short off Technical Top prior to expected rebound.On a larger time frame the USDCAD is a Long Trade. This is because of divergent monetary expectations with regard to the BoC and the Fed with the latter having recently cut rates for the CAD and a rate hike being priced in for the USD. This is a technical short off the 1.300 Handle that confluences with the 261.8 Fib extension of the Bearish corrective wave from 1.25160 to 1.22180, visible on the Daily Chart to the right. On the same D1 TF, Stochastic Oscillator (12,3,3) is indicative of overbought conditions as candlesticks are getting smaller by the day, a sign of slowed momentum. A rebound off the 38.2 Fib Retracement is expected as a minor corrective wave attempts to find support. A correction of more than 50% of the current Bull Wave is unlikely. Long positions will later be taken as soon as PA is favorable. Patience pays . Other important technical levels have been demarcated on the charts. Risks: No correction takes place, technical breakout occurs past 1.300. Influx of Buy Stops hit at that region will cause more Bulls to check in. Calling tops, especially against established momentum is a dangerous thing to do. You can never be really sure.
Short
by JeffMzee
2