Risk Rally Pushing Through Technical Levels - Looking for reversals
02/08/10 23:39
It is a one way street against the USD. Other than CAD
and JPY, the USD has lost about 10% against the majors.
What is driving this? It is a combination of a series
of weak U.S. Economic data which has pushed the U.S.
treasury yields lower against Bunds, Gilts, JGB's and
other equivalents, as well as softening concerns about
Eurozone risk (which still exists, by the way). The
trends are simply driven broad based USD weakness and
lower yields.
The majors are approaching key technical levels, as discussed in Pro Traders Club, and we could see a slowing of these trends following this weeks barrage of important data. We are looking for technical patterns to give us indication to sell into the current rally and are easing off our longs into the major resistance faced by EURUSD, GBPUSD, AUDUSD and support for USD Index. Watch bond prices closely as the market seeks yield outside of USD's. As bond prices fall, the USD will likely stage a rally.
We are likely to see continued USD weakness into Friday's NFP as risk rallies in a scene of good or bad data. When data is good, risk rallies with equities. When data is bad, risk rallies on yield support favoring high yielding currencies. Read More...
The majors are approaching key technical levels, as discussed in Pro Traders Club, and we could see a slowing of these trends following this weeks barrage of important data. We are looking for technical patterns to give us indication to sell into the current rally and are easing off our longs into the major resistance faced by EURUSD, GBPUSD, AUDUSD and support for USD Index. Watch bond prices closely as the market seeks yield outside of USD's. As bond prices fall, the USD will likely stage a rally.
We are likely to see continued USD weakness into Friday's NFP as risk rallies in a scene of good or bad data. When data is good, risk rallies with equities. When data is bad, risk rallies on yield support favoring high yielding currencies. Read More...
AUDJPY Most Vulnerable - we are sellers
20/07/10 11:31
Our view is that recent highs in indices, ES, AUDUSD,
AUDJPY are likely to remain in place as risk aversion
sets in. The July 16 and 20 failures of AUDUSD at .8800
are marked as significant, in our view. We target
AUDUSD .8500 and AUDJPY 73.00 near term, looking for
lower levels in 3 months.
With AUD most vulnerable to move the most during bouts of risk aversion while the JPY is primary safe haven currency, the AUDJPY will fall most aggressively should equities weaken, as we expect. JPY has outperformed USD as JGB's rate advantage over US Treasuries sustains.
The RBA minutes and RBA Governor Stevens' speech helped boost AUD temporarily. But then the dollar clawed its way back largely due to stops and lower equities. The latest stress test results also tempered investor enthusiasm. Dow futures are about -82 and looking for a lower open of NY session following a mixed Asian session. Q2 earnings season picks up with over 20 S&P 500 constituents reporting, with several financial institutions in the mix. We get the latest housing starts and building permits data. The expiration of the homebuyer tax credit will likely result in mixed data at best. Sentiment will remain choppy ahead of stress test results but US data on expectations could help the dollar benefit on pullbacks in risk sentiment.
Read More...
With AUD most vulnerable to move the most during bouts of risk aversion while the JPY is primary safe haven currency, the AUDJPY will fall most aggressively should equities weaken, as we expect. JPY has outperformed USD as JGB's rate advantage over US Treasuries sustains.
The RBA minutes and RBA Governor Stevens' speech helped boost AUD temporarily. But then the dollar clawed its way back largely due to stops and lower equities. The latest stress test results also tempered investor enthusiasm. Dow futures are about -82 and looking for a lower open of NY session following a mixed Asian session. Q2 earnings season picks up with over 20 S&P 500 constituents reporting, with several financial institutions in the mix. We get the latest housing starts and building permits data. The expiration of the homebuyer tax credit will likely result in mixed data at best. Sentiment will remain choppy ahead of stress test results but US data on expectations could help the dollar benefit on pullbacks in risk sentiment.
Read More...
Risk Sentiment Has Limitations
07/07/10 22:37
Chris
Lori Free Webinar
July 8 9pm EST - Click here
Workshops
Chris Lori & Steve Winiarski, CTA's
Sydney, AUS
July 23-25
Chris Lori, CTA
Singapore
Aug 27-29
Risk Sentiment has Limitations - We will go short soon!
For in-depth analysis and price levels, fundamental shifts and trades we're taking - Join Pro Traders Club.
AUD/USD has hit a significant resistance level at .8660 and NZD/USD has hit resistance into the same fractal. We see upside on risk as limited from current highs. Although we could see higher levels, we see current levels and higher as opportunities to sell.
Even as US equities closed 3% higher, long-term oriented investors appear to be steering clear of equities, particularly with the risk of further rising risk aversion with the approaching earnings season. Q2 earnings could disappoint lofty investor expectations and keep risk-seeking at bay, which could dampen the recent support for the euro. UBS FX flow data also suggests that structural outflows from the Eurozone continue and we hold the view that euro rallies should be sold, particularly versus the dollar and the yen. Looking at 1.2700- 1.3000 area for selling depending on how technicals unfold.
Read More...
July 8 9pm EST - Click here
Workshops
Chris Lori & Steve Winiarski, CTA's
Sydney, AUS
July 23-25
Chris Lori, CTA
Singapore
Aug 27-29
Risk Sentiment has Limitations - We will go short soon!
For in-depth analysis and price levels, fundamental shifts and trades we're taking - Join Pro Traders Club.
AUD/USD has hit a significant resistance level at .8660 and NZD/USD has hit resistance into the same fractal. We see upside on risk as limited from current highs. Although we could see higher levels, we see current levels and higher as opportunities to sell.
Even as US equities closed 3% higher, long-term oriented investors appear to be steering clear of equities, particularly with the risk of further rising risk aversion with the approaching earnings season. Q2 earnings could disappoint lofty investor expectations and keep risk-seeking at bay, which could dampen the recent support for the euro. UBS FX flow data also suggests that structural outflows from the Eurozone continue and we hold the view that euro rallies should be sold, particularly versus the dollar and the yen. Looking at 1.2700- 1.3000 area for selling depending on how technicals unfold.
Read More...
Risk Recovery - Short Term
05/07/10 06:43
Risk Aversion - We Called It! Risk Recovery - Short
Term.
We have accurately anticipated the decline in risk that has taken place the past several weeks, as proven in previous issues of Forex Notes. We were far more specific in the accuracy of the price levels and turning points discussed in Pro Traders Club and had the opportunity to capitalize on the movements. We anticipate modest risk recovery before another round of selling in the coming weeks. On the institutional side, we saw short EUR holders get caught in a short squeeze during thin holiday trading. Another leg up on EUR is likely before buying eases off.
On April 1, the yen looked poised to weaken significantly. Policy rates in Japan and the rest of the G10 were beginning to diverge, led by an aggressive RBA tightening campaign which eventually saw the cash rate hiked six times in seven meetings. Furthermore, and more significantly, the market anticipated a wave of yen selling as Japanese life insurers looked set to begin their annual overseas investment program.
Yet since then, USDJPY has fallen steadily from 93.44 to close at 87.75 on Friday. The decline was interrupted only by a brief episode of political uncertainty surrounding the resignation of former Prime Minister Hatoyama. Market participants could legitimately wonder if life insurers have switched tactics this year, preferring instead to invest closer to home? No!
Japan's life insurance companies have been just as keen to invest overseas this year, and their foreign bond holdings have increased by approximately ¥1 trn during the months of April and May.
Read More...
We have accurately anticipated the decline in risk that has taken place the past several weeks, as proven in previous issues of Forex Notes. We were far more specific in the accuracy of the price levels and turning points discussed in Pro Traders Club and had the opportunity to capitalize on the movements. We anticipate modest risk recovery before another round of selling in the coming weeks. On the institutional side, we saw short EUR holders get caught in a short squeeze during thin holiday trading. Another leg up on EUR is likely before buying eases off.
On April 1, the yen looked poised to weaken significantly. Policy rates in Japan and the rest of the G10 were beginning to diverge, led by an aggressive RBA tightening campaign which eventually saw the cash rate hiked six times in seven meetings. Furthermore, and more significantly, the market anticipated a wave of yen selling as Japanese life insurers looked set to begin their annual overseas investment program.
Yet since then, USDJPY has fallen steadily from 93.44 to close at 87.75 on Friday. The decline was interrupted only by a brief episode of political uncertainty surrounding the resignation of former Prime Minister Hatoyama. Market participants could legitimately wonder if life insurers have switched tactics this year, preferring instead to invest closer to home? No!
Japan's life insurance companies have been just as keen to invest overseas this year, and their foreign bond holdings have increased by approximately ¥1 trn during the months of April and May.
Read More...
Yuan will be de-pegged from USD
22/06/10 11:14
Workshops
Chris Lori & Steve Winiarski, CTA's
Sydney, AUS
July 23-25
Chris Lori, CTA
Singapore
Aug 27-29
The People's Bank of China announcement that the yuan will be de-pegged from the US dollar has supported risk assets at the start of the week. In our weekly Sunday evening (North America) Live Pro Traders Club, I had stated that there was effectively no change in what the market already expected out of China, so the "euphoria" would be short lived once the market came to terms with the fact that there would be uncertainty over the timing of the Yuan movement. I had also suggested that although DJIA futures were 100+ higher during Asia and Europe sessions, US equities would likely open higher followed by a sell-off, which is exactly what happened. It's important to note investor sentiment has been bolstered by the reduction of tensions between America and China over currency policy, and by the accompanying bullish statement from China's authorities that the 'upturn of the Chinese economy has become more solid with the enhanced economic stability'.
As a result, the currencies of those economies with the largest share of exports to China - Australia, Japan, Taiwan, Korea, Brazil and Indonesia -had initially benefited. I suspect that we may have even achieved a near term top in risk currencies and to look for some downside from here. Moreover, as the People's Bank of China now will have to buy fewer dollars, somewhat slower reserve accumulation will lead to slower accumulation of US Treasuries.
Read More...
Chris Lori & Steve Winiarski, CTA's
Sydney, AUS
July 23-25
Chris Lori, CTA
Singapore
Aug 27-29
The People's Bank of China announcement that the yuan will be de-pegged from the US dollar has supported risk assets at the start of the week. In our weekly Sunday evening (North America) Live Pro Traders Club, I had stated that there was effectively no change in what the market already expected out of China, so the "euphoria" would be short lived once the market came to terms with the fact that there would be uncertainty over the timing of the Yuan movement. I had also suggested that although DJIA futures were 100+ higher during Asia and Europe sessions, US equities would likely open higher followed by a sell-off, which is exactly what happened. It's important to note investor sentiment has been bolstered by the reduction of tensions between America and China over currency policy, and by the accompanying bullish statement from China's authorities that the 'upturn of the Chinese economy has become more solid with the enhanced economic stability'.
As a result, the currencies of those economies with the largest share of exports to China - Australia, Japan, Taiwan, Korea, Brazil and Indonesia -had initially benefited. I suspect that we may have even achieved a near term top in risk currencies and to look for some downside from here. Moreover, as the People's Bank of China now will have to buy fewer dollars, somewhat slower reserve accumulation will lead to slower accumulation of US Treasuries.
Read More...
FX Market Overview
17/06/10 10:47
Chris Lori FX Market Overview - June 16, 2010
Chris Lori is a CTA registered with the NFA and CFTC and manages foreign exchange portfolios for private and institutional clients worldwide. Chris began specializing in FX trading cash/spot, forwards and options in 1998 after a highly successful career in bobsledding. As a side note, Chris competed in four Olympic Winter Games, Won the Overall World Cup, including nine crystal globes for top three in Overall World Cup final standings, and twenty two individual World Cup medals, a remarkable career.
Chris Lori will try to bring you regular updates on Chris' market reviews, strategies and positions they are running and managing, as time permits.
Foreign exchange trading and the use of leverage involve a high degree of risk. That's why we trade our portfolios generally unleveraged, which will be discussed in some of our posts.
General Overview
At present, our primary focus is trading AUDJPY and AUDUSD. We work with a range of clients taking advantage of low interest rates in JPY and USD to employ strategies in AUD's, including real estate development and other projects. In FX, money seeks yield in the longer term, as fx flows have proven over time. We also trade the other majors, but we have excellent trading and risk models for the AUD crosses in the current environment that are working well.
Our current view (June 16) on "risk" (when equities and risk currencies rally) is that we anticipate another round of "risk aversion" (Equities, AUD spot ref .8650 and other risk currencies will fall) in the coming months. We have trimmed down our AUD long positions against both USD and JPY and hope to see lower levels to trade and accumulate positions. We may see AUDUSD as high as .8800. A breach of AUDUSD .8800 would slow our short term trading while re-evaluating the environment. In the event of a double dip contraction, which we view as highly possible, and RBA interest rate cut is not out of the question, but rates will remain in AUD favor over the long haul. We will keep you informed of our general medium and longer term views as the environment changes and discuss our position adjustments. Our methods are quite simply rooted on the back-drop of interest rates and interest rate spreads as we follow monetary policy changes closely.
Near term... risk news is likely to be fueled by Spanish Banks stress tests. There has been some argument over the transparency of the results, but we know what that means. The negative elements of the stress test will be non transparent, while the positive will be ingeniously scripted to elicit a positive view of the downtrodden region of the Eurozone, thus sparking a feel good rally in EUR and equities, on the heels of which, will cause further upside potential for AUD and other risk currencies, although we hope this is not the case.
Read More...
Chris Lori is a CTA registered with the NFA and CFTC and manages foreign exchange portfolios for private and institutional clients worldwide. Chris began specializing in FX trading cash/spot, forwards and options in 1998 after a highly successful career in bobsledding. As a side note, Chris competed in four Olympic Winter Games, Won the Overall World Cup, including nine crystal globes for top three in Overall World Cup final standings, and twenty two individual World Cup medals, a remarkable career.
Chris Lori will try to bring you regular updates on Chris' market reviews, strategies and positions they are running and managing, as time permits.
Foreign exchange trading and the use of leverage involve a high degree of risk. That's why we trade our portfolios generally unleveraged, which will be discussed in some of our posts.
General Overview
At present, our primary focus is trading AUDJPY and AUDUSD. We work with a range of clients taking advantage of low interest rates in JPY and USD to employ strategies in AUD's, including real estate development and other projects. In FX, money seeks yield in the longer term, as fx flows have proven over time. We also trade the other majors, but we have excellent trading and risk models for the AUD crosses in the current environment that are working well.
Our current view (June 16) on "risk" (when equities and risk currencies rally) is that we anticipate another round of "risk aversion" (Equities, AUD spot ref .8650 and other risk currencies will fall) in the coming months. We have trimmed down our AUD long positions against both USD and JPY and hope to see lower levels to trade and accumulate positions. We may see AUDUSD as high as .8800. A breach of AUDUSD .8800 would slow our short term trading while re-evaluating the environment. In the event of a double dip contraction, which we view as highly possible, and RBA interest rate cut is not out of the question, but rates will remain in AUD favor over the long haul. We will keep you informed of our general medium and longer term views as the environment changes and discuss our position adjustments. Our methods are quite simply rooted on the back-drop of interest rates and interest rate spreads as we follow monetary policy changes closely.
Near term... risk news is likely to be fueled by Spanish Banks stress tests. There has been some argument over the transparency of the results, but we know what that means. The negative elements of the stress test will be non transparent, while the positive will be ingeniously scripted to elicit a positive view of the downtrodden region of the Eurozone, thus sparking a feel good rally in EUR and equities, on the heels of which, will cause further upside potential for AUD and other risk currencies, although we hope this is not the case.
Read More...
Risk Aversion Likely to Re-emerge, Soon!
15/06/10 22:58
Following a strong week (no oxymoron intended) and
positive risk tone, the market is potentially setting
up for another round of risk aversion. Greece has been
downgraded to JUNK status and will continue to act as a
proxy for non producing regions within the EMU. We move
out of long risk - AUD and NZD against USD and JPY and
wait for pullback to reenter. Notice the characteristic
of risk rallies.
We will be announcing a Live Trading Workshop soon.
Much attention has been paid in recent months to the diverging bond yields of Eurozone sovereign issuers. Germany has seen bund yields fall to historic lows on safe haven demand, while yields on short-dated Greek debt had, until recently, been amongst the highest in the world.
The activation of the EU/IMF financial rescue package for Greece led to some tightening of the yield spreads between peripheral and core economies. Furthermore, the creation of the Eurozone stabilization fund, combined with aggressive outright bond purchases by the ECB, also had a stabilizing effect. However, little attention during this time has been paid to the flow of deposits between the banking systems of different Eurozone economies, driven presumably by changing investor opinion about the relative stability of regional banking systems. Read More...
We will be announcing a Live Trading Workshop soon.
Much attention has been paid in recent months to the diverging bond yields of Eurozone sovereign issuers. Germany has seen bund yields fall to historic lows on safe haven demand, while yields on short-dated Greek debt had, until recently, been amongst the highest in the world.
The activation of the EU/IMF financial rescue package for Greece led to some tightening of the yield spreads between peripheral and core economies. Furthermore, the creation of the Eurozone stabilization fund, combined with aggressive outright bond purchases by the ECB, also had a stabilizing effect. However, little attention during this time has been paid to the flow of deposits between the banking systems of different Eurozone economies, driven presumably by changing investor opinion about the relative stability of regional banking systems. Read More...
Potential Risk Aversion
10/06/10 22:09
Hello Traders
Last weekend I issued to Pro Traders Club members a warning of the potential onset of risk aversion through the summer months. For your continuing education, I strongly recommend viewing this Bloomberg video address by George Soros, the worlds most notable currency speculator.
Video Link
Written Article
Last weekend I issued to Pro Traders Club members a warning of the potential onset of risk aversion through the summer months. For your continuing education, I strongly recommend viewing this Bloomberg video address by George Soros, the worlds most notable currency speculator.
Video Link
Written Article
We continue to look to sell risk rallies
30/05/10 23:03
Hello Traders;
Leading into Fridays trading, we saw a host of institutional orders stacked on AUDUSD .8540 and above. Efforts to move above .8540 were weak showing limited buy flows. We expect more sellers, as we are, at levels above .8500 on AUDUSD and the corresponding levels for AUDJPY. Running tight correlations, we are watching equities patterns for signs of withdrawal.
After the turmoil across markets in May, the week ahead is a good test to see if fundamentals come back into focus. But it still might be premature for backward-looking data to help the Eurozone. US labour data is expected to remain strong and though the RBA will likely remain on pause, the BoC decision will be much closer. G20 finance ministers and central bank governors meet in Korea and we think financial sector regulation will dominate the conversations, with Eurozone worries and Korean Peninsula tensions serving as the backdrop.
Read More...
Leading into Fridays trading, we saw a host of institutional orders stacked on AUDUSD .8540 and above. Efforts to move above .8540 were weak showing limited buy flows. We expect more sellers, as we are, at levels above .8500 on AUDUSD and the corresponding levels for AUDJPY. Running tight correlations, we are watching equities patterns for signs of withdrawal.
After the turmoil across markets in May, the week ahead is a good test to see if fundamentals come back into focus. But it still might be premature for backward-looking data to help the Eurozone. US labour data is expected to remain strong and though the RBA will likely remain on pause, the BoC decision will be much closer. G20 finance ministers and central bank governors meet in Korea and we think financial sector regulation will dominate the conversations, with Eurozone worries and Korean Peninsula tensions serving as the backdrop.
Read More...
We Remain Risk Negative
26/05/10 08:29
We remain risk negative and continue to recommend to
sell on risk rallies. We become buyers of risk at key
levels discussed in Pro Traders Club and accumulate
using our volatility measure. Todays target sell levels
on GBPUSD and EURUSD discussed in PTC reviews were hit
within 20 pips. As well, AUDUSD and AUDJPY order flow
continues at high vol shifting from BF levels. We have
not seen a convincing flow back into risk and view
upside potential to be limited.
With much investor focus still centered on the euro, we occasionally get questions as to what can reverse the recent decline. It is a difficult question as it is much easier in the current environment to identify what policymakers can do to exacerbate, rather than improve, the situation, and we still think the euro remains a sell on rallies.
In a recent UBS Multi-Strategy Asset conference call, chief UBS economist and strategist, Larry Hatheway, said there are two opposing forces to the macro backdrop. There are negative concerns emanating from insolvency issues and growth worries while on the positive side, the global economic backdrop is still somewhat robust. Another positive factor he identified was that the recent decline of the euro should confer trade benefits to the Eurozone. Data of Euro Area 16 exports to the rest of the world does show a marked pick up in export volume amid the euro's recent decline. Though we do not have a dollar or euro figure on how much of an effect the weaker euro is having on trade, the improving trade should mitigate some of the negative concerns on the Eurozone.
Read More...
With much investor focus still centered on the euro, we occasionally get questions as to what can reverse the recent decline. It is a difficult question as it is much easier in the current environment to identify what policymakers can do to exacerbate, rather than improve, the situation, and we still think the euro remains a sell on rallies.
In a recent UBS Multi-Strategy Asset conference call, chief UBS economist and strategist, Larry Hatheway, said there are two opposing forces to the macro backdrop. There are negative concerns emanating from insolvency issues and growth worries while on the positive side, the global economic backdrop is still somewhat robust. Another positive factor he identified was that the recent decline of the euro should confer trade benefits to the Eurozone. Data of Euro Area 16 exports to the rest of the world does show a marked pick up in export volume amid the euro's recent decline. Though we do not have a dollar or euro figure on how much of an effect the weaker euro is having on trade, the improving trade should mitigate some of the negative concerns on the Eurozone.
Read More...
Risk Aversion Takes Root
20/05/10 17:48
PTC Members Warned and Aware of Impending
Correction
It is no surprise to Pro Traders Club members that full scale risk aversion has taken root, as the negative outlook for risk has been shared well in advance by its host. We are choosing our trades carefully on AUDJPY strategies as we wait for market's to re balance. I anticipate that this may take a few months. In the meantime, we will adjust our models to accommodate the increased vol. The overall market pullback is a welcome event we have been waiting for and I believe some very good opportunities will result in the risk class. This correction is a result of the weak foundation and deflated life preservers thrown at the market following the 2008 crisis. We have said in countless PTC episodes that risk on such weak footing is not sustainable. Our job as traders is to trade based on how we anticipate the market will perceive information flow.
I love this market because everyone has the ability to find their niche. We have outperformed PHD economists and are proud of it. I have to say that the views shared in PTC have been quite accurate over the years. We miss a few trends, but we can't see everything. The EURUSD for example; post crisis, the pair was trading at 1.2500 to 1.3000 and we were bearish because we felt the EMU and it's constituents were beginning to disintegrate with weak and non producing regions being weighed down by the impact of the crisis. It never made any sense to us. We missed the EURUSD rally to 1.5000+ and the fundamentals we anticipated finally set in and have taken us to where we are today, so we were right on our fundamental view, but wrong on timing. We can live with it, since we we called a long AUD against a basket when AUDUSD was at .6500.
Read More...
It is no surprise to Pro Traders Club members that full scale risk aversion has taken root, as the negative outlook for risk has been shared well in advance by its host. We are choosing our trades carefully on AUDJPY strategies as we wait for market's to re balance. I anticipate that this may take a few months. In the meantime, we will adjust our models to accommodate the increased vol. The overall market pullback is a welcome event we have been waiting for and I believe some very good opportunities will result in the risk class. This correction is a result of the weak foundation and deflated life preservers thrown at the market following the 2008 crisis. We have said in countless PTC episodes that risk on such weak footing is not sustainable. Our job as traders is to trade based on how we anticipate the market will perceive information flow.
I love this market because everyone has the ability to find their niche. We have outperformed PHD economists and are proud of it. I have to say that the views shared in PTC have been quite accurate over the years. We miss a few trends, but we can't see everything. The EURUSD for example; post crisis, the pair was trading at 1.2500 to 1.3000 and we were bearish because we felt the EMU and it's constituents were beginning to disintegrate with weak and non producing regions being weighed down by the impact of the crisis. It never made any sense to us. We missed the EURUSD rally to 1.5000+ and the fundamentals we anticipated finally set in and have taken us to where we are today, so we were right on our fundamental view, but wrong on timing. We can live with it, since we we called a long AUD against a basket when AUDUSD was at .6500.
Read More...