Historic Dollar Rally's beginning? EU shortFundamentally there is a rush into dollars because of new swap lines to other countries and government handouts.
Another supply issue imminent?
Powell
ridethepig | TRY Market Commentary 2020.04.29All eyes on risk markets and the recent rebound reaching its final stages of exhaustion. USDTRY not giving any gains back, continuing to attack the 7.00 important psychological resistance. Buyers calmly finishing their preparations for an appropriate welcome of the next risk headline, while local banks try everything they can to defend.
Happy to sit long USDTRY, if we do not see concrete measures around the Fed swap line then expect macro players to stick the knife into Turkey once more. There is little to see to the downside, I will actively look to add longs on any dips should we see them towards 6.90xx otherwise to the topside we have very very soft resistance at 7.00. A break above will open 7.235x and 7.80x main targets.
The move played is a demonstration of a winning macro one, the main line comes down to the pursuit of safety; capital is forced to flee a dictatorship, but the flight itself can be beset with difficulties as more and varied restrictions are conjured. Tread extremely carefully for those invested in Turkey.
Thanks as usual for keeping the support coming with likes, comments, charts, and etc!
US30/DOW LONGThis week is full of news and speeches by Powell.
Last week, he said: "With interest rates at ZLB and no desire to use negative interest rates, the Fed will rely heavily on existing tools such as forward guidance and balance sheet policies."
It will be interesting to see what happens this week.
Technically the DOW bounced back from 22800 and now we expect a rise to 24029 and 24242.
DXY BULLISH OUTLOOKBased on what we can see either on technical and fundamental perspective, the DXY is set to rise breaking the consolidation that it has been hold for a while.
Yesterday's comment from the FED chairman has sent the Dollar back to sessions top, via a liquidity injection that formed a tweezer bottom pattern, signalling that momentum is charging up towards the upside.
Be aware of this while trading USD pairs, as I envision a Pump for the USD.
EURUSD to 1.082 FLAT Dxy pulling in bullish divergence to 100.10-40 can bring EU down major to that loving 1.082 level.
FED spoke today further driving EU bearish.
EU bounced off my r3 at beginning of FED speaking and looks like it wants to end its journey at s1.
we are now hovering under my r1 upcoming on 11 AM EST.
ridethepig | RBNZ To Cut!All eyes on RBNZ tonight, Equities globally are running out of steam and high beta FX looks set to suffer badly... the Governor has been very vocal around negative rates and protection via debt monetisation if necessary. Markets have quite the habit of unpinning Central Bank promises of late by choosing to apply maximum pressure. RBNZ will have to satisfy the following logic with a 15bps cut to seem credible.
On the technical side, a simple breakdown in pure price can be played from the 0.610x handle. I am comfortable going into the meeting short, 0.618x is strong resistance and will keep stops protected, while to the downside 0.600x will serve a suitable initial target.
The risk to the thesis comes from the RBNZ being unable to set the dovish stage correctly at this point in the game, the process of unpinning can be seen from quite a different angle.
Good luck.
Lower rates = worse bank profitability.Hey.
I'd like to talk about the effect of lower interest rates on something called 'net interest margin'...
In other words, how banks make money.
The chart attached shows US commercial banks' net interest margin (blue) versus the target Fed Funds range (white).
Net interest margin (NIM) is a measure of the difference between the interest income generated by banks or other financial institutions and the amount of interest paid out to their lenders (for example, deposits), relative to the amount of their (interest-earning) assets.
What can we see from the chart?
As the Fed Funds target range decreases, bank net interest margin does as well.
Currently, there is talk of going negative, and just last week, Fed Funds futures priced in negative rates for the first time ever for the Dec 2020 meeting and the Jan 2021 meeting.
This is important.
See, if people are of the opinion that lower interest rates will lead to less bank profitability, then they are likely to short financial stocks.
And if people are shorting financial stocks, it can lead to a decline in lending and liquidity in the economy - which leads to dampened demand.
Over the last few years, a type of bond known as an AT1 (Co-convertible) has been used to try to sure up bank common equity tier 1 (CET1).
This gives regulators a gauge of strength of the financial institution in question.
It works like this...
The investor buys the bond, and if the share price of the bank falls to a certain level, the bond is converted into equity to prop up the CET1 of the bank.
The problem is that these investors (mainly hedgefunds and sophisticated investors), are alpha seeking...
In other words, they will hedge the delta of the decline in their bond by shorting the bank stock.
This creates a bit of a doom loop on two fronts, firstly by removing the validity of the AT1 instrument, but secondly, the decline in net interest margin leading to the shorting of bank stock and the incapability to adequately lend.
Markets and economies function on liquidity, and without it, we are in serious trouble - which explains the lengths to which governments and central banks have gone to liquify *everything*...
And why equities just keep going up...
See lower rates and more QE lead to equity risk premium compression - that is, the premium paid to take the risk of investing into higher risk assets versus simply staying invested in riskless assets (such as government bonds) - and ends up with investors piling money into equity markets.
If the perceived risk of investing into equities is a tiny bit greater than staying invested in risk-free assets, then you will get into equities.
This is exactly what has happened over the last 10 years - and it's why the market threw a fit when the Fed tried to raise back in '18.
Passive long strategies have become the norm - buying ETFs such as $SPY and simply holding - and this also affects bank profitability; less trading = less commissions paid to the dealer.
This is one reason why so many banks have moved into high frequency market making activities - Volcker prevented them from prop trading, but allows for market making (which in the high frequency trading area is largely still prop trading, although trying to prove that is tough).
Jerome Powell is expected to push back against negative rates tomorrow, and the rhetoric leading into this from Fed members has been that they do not like negative rates.
It remains to be seen, but real yields across the curve from 1y-30y are currently priced negative...
So what's the difference, really? (tongue in cheek).
SPY 400 by Labor Day (S&P 4000 this summer)We have not reached the top yet. The S&P will rise due to unprecedented liquidity and serious retail FOMO will kick in for a parabolic rise to SPY 400 (S&P 4000) by labor day 2020. This is the end of a 30+ year secular bull market. Once the fed signals slowing of quantitative easing due to rising S&P and economy showing signs of recovery, the bust will reach its second stage and kick S&P down to 800. Deflation will take control, leading to more QE and trigger inflation long term. Gold $10k by end of decade. Bitcoin will tag along the melt-up and will reach ATH this summer, then crash with the S&P but find a strong support level above $20k and reach $1MM by end of decade.
ridethepig | NZD Market Commentary 2020.04.28Across the commodity block, NZD is looking the weakest and most vulnerable with negative rates entering into the picture. This looks unavoidable now and makes NZD the more preferred short across G10 crosses. The resistance is weakly protected as we enter into FED fact territory, the market was a little too long USD and I understand the need for a healthy cleanse, however, the move looks overdone here as I am not expecting any further cuts tomorrow. Equities will hate the bad news, and high beta FX will be first out of the door... last orders at the bar!?
On the technical side, strong resistance is located here at the 0.605x - 0.607x region and is the one to track for those wanting to position for FED and a further leg lower in risk markets. The goal for sellers is in protecting these highs and defending any real seizure of the advance, an initial target at the mid point to pay for risk at 0.600x and an extension towards 0.592x is in play for a simple range clear with the CB event. A break below the 0.592x lows will call into question the macro slingshot target at 0.49xx.... INSANE!!!
From a macro perspective as soon as your CB unlocks negative rates or foreign asset purchases its game over! You have taken on a well hidden exchange sacrifice. Smart money will exploit it, a slingshot is in play later in the year but will require another sweep of the lows via Covid panic flows into USD ... For those waiting to buy the bird from a long-term perspective, not recommended till the end game in this current leg should we pay any attention towards the development arise.
Good luck all those positioning across G10 FX for FED flows, thanks as usual for keeping the support coming with likes, comment and etc!
ridethepig | India Closing the ChapterIn this positional chart, the INR is entering back into the game, whilst USD is nearer the end and thus already well-developed. That is decisive. So the more distant EM currencies like INR actually will act as a trump card and assist in diverting flows from the king, but like all trumps we must use them sparingly: do not jump the gun is the rule. The diverting exchange of Covid flows was simply the prelude to the king (USD) marching home, which will follow in the coming weeks/months.
Indian Equities were denied the advance as anticipated, the trip towards the lows was somewhat time-consuming and the travelling companion INR was too dilatory....As the currency devalued as did local stocks...
In any case, the correct procedure is getting our companion (INR) and using it as a weapon to wield influence and thank holders for their loyalty. We should make good use of the cheap currency and the move that now follows by looking to sell the highs in USDINR for a move not too late after. The trip we are planning for should be carefully prepared before pulling the trigger, if possible make use of any overshoots in USD (remember we still have the 1.05/1.06 unlocked in EURUSD for reference on G10). All that before playing the diversionary swing!
Softer oil will help Indian significantly as the deprecation pressure on INR was starting to crack through the economic defence. India will need an appetising fiscal policy and less reluctance from the CB to intervene. These are starting to enter into play and can be a major game changer for India in the coming months.
ridethepig | EUR Market Commentary 2020.04.27A healthy pullback on Friday and this morning with some USD buyers broadly taking profits. Well done all those that caught the initial target into 1.076x, a flawless selloff from the "Worm in the Apple".
There is some hope making the rounds across the continent for re-openings which has provided the relief in this bounce. More fairy-dust than substance in my books as the rebound in risk (and hence EUR) will have to come from hard facts in the data from the core and periphery performance over the coming months ahead. How quickly consumers return to business as normal will be an important one to track, as will the potential for a second leg in the virus. I'm still sitting short euro and happy to scale some more back in at these levels as risk has now been paid for in the previous round of profit taking...For those following from the technical conversations around Recycling positions to cover costs of entry (recommend digging into the chart archives for more on this one).
For the technicals invalidation of the bearish short-term view comes only with a breach of the 1.090x handle. While we remain below the 1.06 & 1.05 lows are exposed and vulnerable... Thanks as usual for keeping the likes, comments and charts coming!
ridethepig | EUR Market Notes 2020.04.22As long as risk sentiment remains negative, USD will remain with an underlying bid. We are starting to see calmer waters on the FX board as euro begins to tread carefully inside this 1.08 handle. I must say I was surprised at the lack of selling interest yesterday after the Oil crash and Equities beginning to show signs of following through, there is definitely something coming on the political side for Europe its just a matter of when rather than if, after all it is the only way to save the currency.
For now, European countries are still far apart on Eurobonds (in particular Germany) meaning it will take further pressure on the currency to force Merkel to bend the knee. Happy to add more shorts on any rallies into 1.089x loading zone and look for a main target at 1.05xx. For those wondering about how to play the momentum leg, a very tradable break of 1.076x support is still on the menu today.
ridethepig | Smoke Screens & MirrorsAfter a ruthless and cunning retrace from politicians and central bank talking heads, this piercing rally is coming to an end after reaching the full retrace target at 1250. Buyers, who would like to occupy the jurisdiction above have tried to do so in a crafty way (since the typical path looks out of the question as long as the world remains in lockdown); they have occupied the lows, driven the late sellers out of it and thus created space for this flank manoeuvre.
The RUT position arises after the typical small cap under-perofmance from the panic flows:
The analysis of this position shows us that sellers are once again ready to conduct another leg lower, but also the quick-witted buyer will know to cover on the contact of 1250. As long as this resistance holds, the advance cannot be administered and the nature of the retrace remains corrective rather than impulsive.
A fresh round of bankruptcies will be coming over the next few weeks, I am eyeballing the 16,000 lows in DOW for reference which will carry NQ, S&P, RUT, CAC, DAX, FTSE, NI and the rest of Global Equities.
Thanks as usual for keeping the support coming with likes, comments and etc!
ridethepig | OPEC, CAD and Everything In-Between...The OPEC theatre was an event for the masses, attended by unimaginable liquidity. Packed into enormous press conferences and expensive photoshoots so that the masses would be amused by the raucous discourse or moved by the collaboration. The plot seemed to contain the essence of desperation from Trump, in its concentrated and dramatic form all in attempt of saving US producers rather than saving lives... (sadly) Global Equities turning down is a faster way to get things through congress these days.
Consider the following swing, which arose after the Aramco attacks last year:
As the main battleground for which China, Russia and Saudis chose to swing in an attempt to play US shale. Remember it essentially boils down to the Gold:Oil ratio being a gauge of the health in petrodollar. A simple cheatsheet... lower gold:oil ratio = a healthy petrodollar structure. On the other side, if ratio rises it shows that the petrodollar market is under pressure (which has been the case for the last few years).
It has found a floor at +/- 15 and now moves up towards 86 !!!! ... This is sending loud loud alarm signals that something is rotten from within. Once Saudis began selling Oil in CNY this exploded, it's a buyers market and the seller (Saudis) will always do what it takes to keep the buyers (China) happy...Sure all sounds interesting @ridethepig, So what does this mean for CNY, USD and CAD?
I highly recommend digging deeper into how PBOC and CNY has responded since " The Great Lockdown "
In warfare, PBOC are playing the leading role with gusto! They are skilled horsemen and took pride in setting a hard floors across Chinese Equities, always positioning in value areas which we traded together here live 4 or 5 times since the crash. This bravery (if you can call it that) has flooded their FX reserves and combined with the composition restructuring we spoke about earlier in their biggest expense (Energy) towards the lows it effectively adds stability to their current account...meaning after all the dust settles from Covid-19, it's game, set and match for China:
After understanding the 'why' and 'how' behind the devaluation of Oil, you will notice how the OPEC meetings (or chariot races as I now like to call them) have become more and more extravagant. The renewed organising of longs in USDCAD dips is coming from a weak medium term outlook for CAD and the increased probability of USD taking charge once more of the haven flows, should we see another sell-off in stocks.
It has been a difficult chapter but one that has seen a lot of light thrown on the subject thanks to the dissections we've performed live here together. As can be seen in the long-term Oil chart, a test of $15 eventually looks organic although we are entering in the final stages of the drama so I prefer to play this in USDCAD.
You will find further considerations of the swings in the related ideas. As usual thanks for keeping the likes, comments and charts coming. Jump in with your views below!
ridethepig | GBP Observances Of The FlowsIn December of 2019 , one of the most successful cable short position was dealt in the UK election business which invited an "official" but "highly confidential" swing that we traded live here with the confirmation of Brexit via Johnson, and then the most extreme demand shock caused a nosedive in cable via Covid-19, which allowed the lows to do damage:
The difficulty in positioning on the retrace leg is that clearing 1.15xx had me bursting with curiosity. After some conversations in the right places, the flow is explained...
An urgent matter that requires a complete understanding of what happens when a Central Bank capitulates to pressure from health and society and allows the Government to take full control of the monetary supply taps. Rishi Sunak asked for the moon and it's surprising how often it's given. Politicians always make the most out of a crisis , Johnson, Sunak and everyone inbetween have left dealers in complete silence. Of course it starts off as " temporary monetary scaffolding ", although with no one at the BOE to challenge the maintenance costs of this borrowing now that Carney has been replaced (btw which will soar in the coming years) the UK is in incredibly rough shape as we enter into a monetary crisis. A Downing Street / Threadneedle Street combo in attempt to bring out the big guns, although its too little too late.
Brexit is coming in a few months, the path to pleasure for protectionism never leads to glory! The amount of intervention is unbelievable, my eyes have popped. Con artists know that the bolder they make the lie, the more convincing it becomes. From a strictly PPP perspective, all those with a background in economics will know that Sterling must devalue further in order to soften the devastating damage which is coming from lack of access to goods in the short-term. Whether you are a Brexiteer, or a remainer, one thing for sure is that access to markets will be hurt in the short-term. It takes no less than 5 more years for the UK to establish the same deals it currently has.
A page has been turned on the Johnson health front after positive updates that he has left ICU: For the first time people are seeing Johnson returning as a great emperor. Masses swallowing the story hook, line and sinker!! Just think - if 1.25xx resistance holds and buyers fail to break it will be a textbook blind to psychology retrace!
There will be headwinds to this move as the US set out on to conquer artificial USD devaluation. The issue is, if you sell Dollars where else are you going park? In the UK? ...really? You get the point. Wasting valuable time digging for opportunities, then we have a high quality item right here! Just mentally add up the cost of having UK exposure in this environment and then think of the inner zen you can find without having the pursuit of a bargain that's not really a bargain because there is still so much more economic pain to come.
On the technical side , we are sitting inside a 1.25 - 1.20 range in the immediate term. After clearing the 1.15 target is has unlocked the door towards the next barrier at 1.10. Those with an eagle eye will be tracking this highs strategically as another rush to USD via further panic on the virus front and shortages and with Brexit still to come a leg from 1.25 => 1.10 is in play over the coming weeks if things go tits up for the UK (very possible!).
Thanks as usual for keeping all the support coming with likes and comments, we are sitting at key value levels to start working the sell-side. Jump into the comments with your views, charts and questions!
Godzilla Has been slain. Return to ATHCaptain J Powell launches swiftly from the SS Fed. Undercarriage holding a multi-trillion tonne warhead he heads straight for the red snake. "QE missiles launched command." The voice echoes through central command. "The bottom is in." Commander in Chief Trump whispers under his breathe. An accumulation zone forms as QE missiles hit the beast. Clouds of uncertainty form around the lower ranges as J Powell cries "check the fib levels Goddammit." Thousands of speculators pour into the market; Shorting, longing, hedging, watching.
"A higher low commander!" Trump smirks, his hand letting go of the circuit breaker switch. "Print everything you've got Captain."
"Much obliged sir" J Powell unleashes a hailstorm of cash straight into Godzilla's maw.
"Major resistance broken sir" The technical analyst can barely maintain himself. "TradingView ideas are bullish sir, ITS WORKING!"
Godzilla rears over towards ATH with pace. Boeing shareholders cheer and cry from a distance. J Powell giving a solemn salute.
Finally, Powell pulls up on the throttle and flies directly over the wounded beast. "Unlimited QE" he whispers to himself, dropping the nuke directly onto Godzilla's head.
Yeah, so basically inflation is gonna carry this thing to higher highs. Even though unemployment is at a record high most Dow companies are top end industry that can survive massive economic hits.
Price has already broken through and retested a fib level and is likely to continue higher. I'm going to ignore the nasty head and shoulders forming on the hourly as the price is influenced by a larger rising wedge which will likely end with a fakeout to the lower areas.
With all of this being said the market is still shaken and volatile so be careful using leverage. And don't take my analysis too seriously I just wanted to draw godzilla and had to include market analysis so mods wouldn't delete it. (Mods pls)
ridethepig | When will EURUSD find a bottom?A good time to kickstart a round of chart updates here...the underlying infrastructure in Europe will be fixed, from a monetary perspective eurobonds will be the only way to save the currency and covid-19 has unlocked Germany one more time. Although we are starting to clear the top of the curve in places like Italy and NY to a lot lesser extent, there is (sadly) a lot of damage to recover in the 'fact' leg across earnings and macro numbers.
The dark clouds are still prevalent across Europe, until Germany bend the knee it will be difficult to grab euros with both hands. Instead a further flush of the lows is in play, in my books it will be enough to trigger capitulation and remain in this strategy. For those tracking the examples in DAX we traded the highs earlier in the year, there is marginal room for another leg lower via risk:
I am starting to turn neutral there and continue to monitor the situation with an ear to the ground. USD will remain in bid until we clear the risk/panic flows in Coronavirus. For those tracking the short-term technical side in EURUSD for the long-term map we have 1.07xx handle acting as strong support, I expect a breach to trigger the political capitulation which is what we are tracking on the fundamental side . Once we clear the , to the topside a breach of 1.089xx will open up the targets above. These macro swing targets will come into play at 1.18xx, 1.25xx and 1.35xx over the coming Months and Quarters.
The courage to intentionally let oneself be put under pressure for days, just on account of a remote possibility, is now rewarded. Buyers will obtain a direct attack by letting the lows go, do not rush into this move as it is one to track for the rest of the year and potentially decade. Pips are for pipsqueak’s ... this is a fundamental swing which consists of setting our opponent a difficult problem.
You can see the stakes are being raised; buyers are taking their time developing the cramped floor. And yet, sellers have not yet passed the point of no return at parity, after which it becomes impossible to level the playing field. A very difficult macro concept to understand, jump into the comments with any questions, comments and views!
ridethepig | EUR Market Commentary 2020.03.26Eyes on EURUSD this morning as we enter into M and Q end rebalancing to put the 🍒 on top (as if there is not already enough in play). A healthy pullback towards 1.097x is enough to draw sellers back in and makes me lean towards playing another leg towards the downside with next 🔑 support located at 1.05xx handle lows.
There will be fresh supply at current levels as no one wants to hold risk into month end - fear remains prevalent across the globe and on a humanist level sentiment remains awful. On a slightly more positive note, once these dark clouds clear (still on track for early April) then the path is paved for a massive rebound in risk assets. Remaining as nimble as possible is the pragmatic approach.
The idea is no less imaginative than that of the recently posted GBPUSD :
Thanks as usual for all those keeping the support coming with likes, comments and etc! Jump into the comments with any questions and charts.
ridethepig | NZD Macro UpdatesHere we go with a round of Macro chart updates, the decline is starting to run out of steam as we enter into support. The initial bounce does not nullify the decline we have seen over the past four years, however it wields influence with 2021 and beyond.
The parallel channel we will use for reference technically to define clearly the jurisdictions on both sides. To the topside, resistance can be found at 0.661x which will attract selling interest, while support is located underneath at mid-term 0.58xx. As momentum stalls across the board, it is screaming exhaustion to the downside. Like with physics we will allow the downtrend to exhaust before continuing to create a new MT/LT picture.
AUDNZD finding a floor...
To put simply, I am expecting a test of 0.58xx over the coming months which will act as a buying interest for the next decade! Highly recommend jumping into the comments with your NZD long-term maps, we can open the macro conversation and create a thread for all to benefit from.
Thanks for keeping the support coming with likes, comments and etc!
ridethepig | Macro Flow & Restraint(1) The relationship between "macro flows" and "restraint"
The former encourages plans from our opponent by enticing them into positions. What does it mean: suffering from the sad case of the last buyer? The concept of static and dynamic weaknesses. When it becomes appropriate to undo our opponents structure?
Restraint can be imagined without the traditional presence of barriers in the orderblock; but real total economic restraint, loss of market access (regardless if you are for or against Brexit this is a fact in the short-term) reigns over whole stretches of the economy and gives the currency breathing difficulties. This is an important from the advantage of trapping our opponent.
To what extent, you may ask, does an economy suffer from the said disadvantages? It is not simply enough to state that market isolation can be easily captured in the FX board and can be highly unpleasant to defend. This is because the monetary suffering is impossible to be offset by the fiscal side despite Sunak's loose budget.
Equally it would be efficient to connect the highs with the opportunity of false hope for our opponent to break higher (e.g ridethepig | UK Elections ). The main cause of the suffering is that in an election advance there is always the formation of hope, a certain tendency to paralysis is made apparent with smart money all over the 1.35xx highs and loading sell positions.
With a high of the range now located at 1.35, the formation can develop with macro sellers targeting 1.21, then 1.15 and finally 1.05 in cable via Brexit. But there is no support in the diagram, and thus the attempt to transfer the flow is absent (see brexit at the door ). What we are recognising here is the principle weakness of buyers to take 1.35 which we will dissect as dynamic weakness and make it impossible for buyers to construct the break.
Rule: when our opponent possess the opportunity to go overboard, their structure is weakened and becomes worthwhile looking to push them into advancing before a strong rejection.
With this in mind, in the UK elections after 1.35 was rejected, sellers must then attempt to provoke buyers into continuation with action - hence the chop fest in January. As long as buyers were allowed to hold onto 1.30xx/1.29xx, meanwhile smart money are loading the whole time while it is as obvious as a limp - when sitting down! The weakness only becomes visible once 1.30xx/1.29xx was broken.
As well as static weakness, there is also the concept of playing GBP dynamically around event risk. Unlike the UK elections, the Chancellor reshuffle laid out bare when you "blag" the fiscal side, that is turn the taps on full blast and flood GBP supply side:
Here the static weakness of the monetary and fiscal side is a great one: when both sides align GBP sellers gain advantage.
Rule: When GBP buyers showed static weakness over the past few months it was time to advance against them and not be afraid of doubling down with momentum. While Covid-19 has taken the spotlight, the Brexit problem only half vanished. One part of the rose may disappear into thin air, but the petals left will suffer all the more.
Now consider the position in the following diagram ( GBP Market Commentary 2020-01-14 ). Sellers encouraged with the technical break which would mean that the exploitation of the restraint at the highs may not be all that difficult.
Next came EURGBP :
And now GBP allowed itself to be tempted into an interesting attack the result of which would only be to open up the board and expose the hopeless position of those expecting a second referendum or soft exit. Reality continues to sink in....
Here the "win" for GBP sellers is coming in a no less imaginative style to the same highs we traded back in 2019 ...
GBP sellers are therefore right in their choice and direction, the waiting strategy paid. The flank on elections paid. Ending hopeless expectations of a fairy tale exit paid. However, the "advance" was also possible because of the macro flow constituting weakness in the liquidity ladder. Sellers sacrifice the late buyers, an exchange at 1.35 captured all participation...
...where we can achieve our "restraint" and then look to target the same lows as in 2019.
Another rule: Isolated event risk and compact flows should be challenged (= attacked by opposing swing). An opposing swing complex, which has not advanced but rather in development stage, should, on the other hand, first be goaded into action before being challenged, in other words let it exhaust first !!!
(a) The only true strength of Macro flows
As we have witnessed, a swing with restraint attached to it contains a specific latent weakness, which flags up only when the said swing advances. In our case it was with the break of 1.30xx/1.29xx to the downside. We will call this, as we have mentioned dynamic weakness . When on the contrary, the swing stands still (or is resting), it can be quite strong. After the squeeze towards 1.35xx cleared the board with a lot of effort to force buyers. I mean by this that GBP buyers scarcely have enough positional means to be able to force any decision since Brexit and this is because price dictates as always! On the other hand, this would be easier if we had cleared 1.21x last week.
(b) A review of the best known swing structures...
The strongest formation for swing trading comes from event risk and macro drivers; retail should hang on to the later as long as possible. After the Brexit referendum in 2016, it has been one-way traffic for GBP. Thus it is a strategic requirement for GBP sellers to force Buyers into traps. He should do this where possible and without the help of monetary policy as BOE was hijacked till the virus. Because after the monetary side bends a knee, a challenge would no longer be possible, nor would there be any chance to occupy the highs. In the diagram, you will notice how many players commit in error to the wrong side with desperation forcing them to get stuck. This goes against our principle rule (mentioned earlier!!), according to which we should first provoke into some action.
One of the most beautiful blockading and restraint swings I have ever traded, I hope it has helped...thanks as usual for keeping the support coming with likes, comments and etc!
ridethepig | Dollar FocusUntil this advanced coronavirus move was played, the flow had been relatively straight-forward, a smooth transition of the Titanic turning was more an ideal than reality. This corresponds to the process I have remarked on, that the US face a choice between a weaker USD or a weaker Equity market. The lack of restraint from Powell gives way to a mechanical swing towards the 74 handle.
So much for the strategic and theoretical manoeuvre when a full blown demand and supply shock storms into play. The practical value of the spike in USD makes things a lot easier to trade in US 2's 5's curve as you can see the recession is not a matter of if but when:
The Longer term flows here will carry us towards 50 over a 5 wave sequence, those who follow waves will know the technical target is now exposed:
Consumer Staples is showing signs of topping:
While Claims show signs of forming a floor:
Naturally it is all very well to aim for the 75 handle in DXY, driving buyers all the way back, but one must not go so far as to go overboard and intoxicate our strategic execution. As a whole, the defence is being carried out with insufficient knowledge as US virus numbers are only going to tick higher.
Now comes a breakthrough, Fed are funding the Whitehouse which logically comes from having a mandate to keep Equities higher. There is nowhere to hide, a really difficult environment to trade you will say. Excellent understanding of the macro flows and drivers in play are required.
Thanks as usual for keeping the likes and comments coming, jump into the comments with your charts and questions below!
ridethepig | TRY Capitulating...The struggle for democracy is being carried out and as long as Erdogan remains at the helm there is only one direction for TRY. Autocrats are typically sticky in nature and difficult to remove, the attack should first be aimed at the currency which will be the base of the capitulation. Attacking the 7.8 will break local bank and looks imminent as markets receive the USD via safe haven flows. Example:
After the technical break of the resistance the swing formation seems to be self fulfilling. So, according to the plan we attacked immediately and that is now clear in the outflows by...
If you wish to undermine democracy; you tend to try to blow up the foundations of capitalism. The natural restructuring of markets will always follow automatically and hence it is only a matter of time before we see 7.80 and Turkish banks capitulating. After Erdogan, the IMF bailouts will have different possibilities. Turkey's plan can be seen at its clearest now that fears of coronavirus have coupled alongside the Saudi / Russia oil action. Remember, Turkey is an importer of Oil ... so with Oil now flirting with a break towards $20 (see diagram) the logical development will be to destroy the highs in USDTRY.
Very simple. Continue to work longs on the first dip you see. Thanks as usual for keeping the likes and comments coming, jump into the discussion with your views on TRY!
ridethepig | AUD Market Commentary 2020.02.26AUD and NZD suffered another session of heavy selling and marked fresh lows - the move was mostly algo driven to run stops and help clean the map for dividend season. Happy to sit short and look to add from higher levels. The USD demand remains supported but given that it we are approaching dividend season, remember, there will be strong local AUD demand inside this 0.65xx handle. If you are not already holding shorts from above then look to sell future rallies into 0.665x.
The medium term swing we are tracking:
A rather wild week on the technical side after a significant break through the 0.670x support, this is unlocking a test of 0.645x RBA floor via rate differential. This move looks particularly vulnerable considering where we are with Copper and Iron ore:
Retail have loaded the boat on the sell side and it is beginning to look very crowded from a positioning perspective. The local AUD export demand will squeeze these soft hands to eventually capitulate with a breakout campaign before resuming the leg lower to cause maximum pain!
Thanks as usual for keeping the support coming with likes, comments, charts and etc!!
