Let me tell u a secret about USD

Before I am going to share a secret with you about USD….let me ask you a question.

Have you ever wonder on recently, why USD seem able to rally and seem strengthen after a series of weakening and before that USD seem like heading to a new low?

Some of you who have look into economic data of US so far should be thinking the odd for September of rate hike seem diminishing since the positive NFP data, others data seem quite bearish on US economic outlook for August. Especially, this week data release.

So you might be thinking, if the chances of US Fed rate hike is smaller, the US dollar strength should be weakening yet the US dollar seem able to support at its old level, some currency pair able to trade slightly higher than their old time low. Do you ever ponder, why is it so? Who are those who willing to buy and support at those level despite the rate hike odd has decreased. What is the reasoning behind?

So let’s talk about basic fundamental of Forex. Not sure how many of the readers care about fundamental of a currency but I heard before from a Barclay trader who claim he is No.2 in his Forex fund management circle where he is able to generate close to 800% return a year. You might be thinking now..Wu ya Boh (really or not/ Too good to be true) but after i traded myself with his concept, I can tell you with his understanding on Forex and their strategy, making 800% return a year for full time trader is really possible (Still relative new to Forex but i am already achieve close to 1/8 of his performance).

What make them in the higher odd of winning is this. For all full time traders in his financial institution, despite they use technical analysis most of the time, all of them able to memorize all the currency pairs that they traded, their currency pair interest rate. What do I mean by currency pair interest rate?

For example,

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If they traded EUR/USD, they will know that US dollar central bank interest rate is at 0.5% while EURO central bank interest rate is at 0%. In a bigger picture and long term, they will want to buy a currency that has a higher interest rate. Why? Let me put into lay man term and show you some example, let say there is Bank A and Bank B, if you deposit your money at Bank A and they give you 1% interest rate every year compare with Bank B who offer you 2% interest annualy, which bank you will prefer to park your money, if both bank has almost the same level of  reputation, security and the list goes on, what is their difference mainly are their interest rate. I believe you will choose…Bank B right! It is direct, of course we want to deposit our money in a bank that give us a…Better rate! That’s right!

So when come to Forex trading, come to currency pair it is obvious we want to bullish on those currency pair that has higher interest rate. This is the fundamental 101.

So, you might be thinking now. Ok, then what is it going to do with US dollar. Rate Hike odd for Sep is like 10 to 12% chances and don’t tell me you are going to tell me US dollar is strengthen and rally is due to Sep Fed rate hike odd.

My answer to your question is nope. In fact, I am going to tell you something totally different.

The reason is simple as this, even no further rate hike this year, USD still attractive. You might be confuse now and wonder what is this guy talking about but let me hold you on for  a second, please be patience…let me just show you few things by doing the elaboration below,

On 2nd August, RBA (Reserve Bank of Australia) cut their rate from 1.75% to 1.5%

On 4th August, BOE (Bank of England) cut their rate from 0.5% to 0.25%.

On  11th August, RBNZ (Reserve Bank of New Zealand) cut their rate from 2.25% to 2%

What does all these mean? The global outlook is going to ultra low interest rate environment, every country is looking into more stimulus instead of recover their interest rate to their old time high.

This is contrary compare with US where they are in track to rate hike although the odd to increase their rate on this year is very difficult and challenging but if others peer are decreasing their rate while US Fed has the odd to increase..it will be looking so attractive now on US dollar. Please take a second to imagine and think about this, if during September US Fed did hike the rate, what will happen then? Can you imagine that?

This is why despite the rate hike odd is diminishing, the support of USD is still there, fundamentally it look attractive now. Remember the bank example?

Of course, this is just basic 101 intro to the currency, there is much more to it to justify the buying and that is the beauty of Forex.

Of course the bank example is a simple way to convey the concept of interest rate of a currency. The truth to it is much more due to its currency pair country’s domestic outlook and  economic(like in a more professional way and more close to reality of saying : central bank of a certain country if raising interest rate will cause cause monetary tightening, reduce money supply, reduce inflation and so on…so that currency will be attractive and appreciate, yup i know it might be information overflow to you so let me just stop at here)

If this is new to you then you might want to explore more on this as it will surely help in your Forex trading. There are a lot of “secret” in Forex trading..the more you explore it, the less risk you will be exposed. Most of the people around me always think that Forex is just a gamble. Let me tell you, it is definitely not a gamble, it is the ignorance of people that don’t understand the risk make it look like gamble.

The truth to the Forex is we all have been trading Forex, either you buying something from oversea or you went for a vacation for oversea, we did the money exchange trading too right? So why is it when it come solely on trading the currency pair or Forex it become a gamble? That’s an interesting question for you to ponder about.

Before I end this sharing, let me share with you Warren Buffet quote to end this beautiful Friday night.

Risk comes from not knowing what you’re doing.” – Warren Buffet

Have a great weekend ahead and safe trading and investing pals!

 

 

September Fed Rate Hike is in play again!

So 2 hours ago, the US key data like Nonfarm Payrolls has continue its strong positive data outlook since July, maintain the US strong economic data trend. This increase the odd for Fed Rate Hike in September.

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One key thing that worth mention is, chances of rate hike for this year has increase from single digit percentage to almost 90% chances.

The US dollar strength rally since the data release and I benefit from currency pairs like USD/JPY and USD/SGD which technical chart has shown triple bottom with forming triple connection point uptrend support (and it fall to low level on past few days and my counter trend strategy work beautifully). On top of that, EUR/USD has plunge drastically from its new high and is one of my favorite and best performing currency pair that help me earn close to 200 pips just only this week through shorting it.

There are much more exciting currency pair price action happen this week from my side but let’s just keep the brag and focus what is coming next.

US Fed Rate Hike. Yes, I have been supporting Fed Rate hike since June and I hope in this upcoming September the rate hike will be coming to play. Last month the FOMC council and Yellen has been hawkish on rate hike outlook, with current strong economic data, upcoming September meetup will definitely interesting to watch.

Singapore stock market has already in a downtrend and with the probability of rate hike increase, I believe the downward trend shall continue after a certain pull back to the higher point due to rally from the US market. Currently US market is rally but not sure on what extent it will undergo pullback and eliminate all the gain. This is interesting to watch to see whether the big players like the hedge funds are stacking their short position for the Rate hike play. Will S&p 500 able to break 2177 and rally to its next resistance at 2200? It shall be an interesting Friday.

Happy investing and trading Pals and stay safe! 🙂

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Penguin Parade – The bull and bear market fight

Today at Penguin Parade I witness something interesting, where at the beach the skuas are waiting the penguins squad to alight from the ocean.

For two hours, there are only few penguins alight to the beach while normally more than 30,000 of them should alight at once to the beach. The skuas are creating a formation and wandering around the beach and anticipate the penguins.

This make me thought of recently what happened in the stock market. Where S&P 500 plunge to 2000 area (future to 1989 area) and undergo rapid recovery which most traders believe are the intervention artwork from the central banks. Those big players and hedge funds are like the penguins while the central banks are the skuas. This era the stock market is not as simple like the past as the authorities know the trick of those big players.

How can the penguins alight the beach then. The spectator places are full of people who would like to witness the arrival of penguins. Unfortunately, after two hours with cold atmosphere, people are starting to leave. The spectators are like the traders who want to join the short selling but disappointing by the outcome of the market where such condition didn’t happen.

So guess what is the ending? When we on our way back home, we saw the penguins already at their cave. 🙂

Macroeconomy 2016 H2

**H1 means first half of the year (1 January to 30 June) H2 means second half of the year (1 July to 31 December).

As an independent trader, I make full use of fundamental analysis and technical analysis. Also, the market sentiment factor, which mainly key factor that make the market move. So I really like to read financial news and do some macro-economy analysis aside from looking only chart, not that they really so useful for my short term trading but in long term of horizon, there are surely things that I can make use of those information to create edges in my trading.

So normally I like to do top-down analysis every quarter or bi-monthly. So let’s go straight to the points. As an equities, forex, indices and commodities traders I will be cover few topics with some of the relevant analysis.


Indices:

When I talk about indices, there are three indices that normally top my watch-list. As i trade mainly on Singapore and US market.

Those three indices that top my watch-list, US S&p 500 index, STI (Straits Times Index) and also our very emotional friend, Shanghai index.

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**Candlesticks represent S&P 500, orange line represent shanghai index

The key players that can affect all other indices are S&P 500 and Shanghai Indices, if they are going down, there are barely any indices can withstand the downward pressure. (same case if they rally strongly)

Currently china market is quite stable, not much volatility after plunging like diarrhea since last year July. But this year July is coming soon. will the history repeat again? Let the time tell the story.

S&P 500 after a consistent uptrend follow by a short squeeze and create a high then it reverse with weakening when near FOMC announcement and brexit referendum. Currently under a slight correction where the bear want to test 2048, then 2020 and break 2000 key support. The incident of  killing of Labour MP Jo Cox halt the progress of the bears and invite the bull speculator that think bre-stay (british stay in eurozone)mostly will happen, also  some bears are taking early profit.

**bull = long position trader/investor
**bear = short position trader/investor

I will say, next few weeks will be  great to watch as there are market movements when near Brexit referendum which is happening on 23th June. After that follow by FOMC meeting on 26th July and 27th July.


 

Forex:

So let’s talk about currencies. When we talk about currencies, we will always relate with the countries. So let’s connect them together.

Singapore

singapore-stopover-holiday.jpg

To be honest, although USD/SGD my homeground currencies, but not much of movement in the past few week. it just ranging between 1.35 to 1.358 area, there are moments that are trying to go toward to 1.34 but the attempt has  failed which I manage to grab little of the position when near 1.345 area. With zero appreciation and government intervention last April, the bears are conscious in advancing. Let’s see how it goes for another week. Long run wise sing dollar is subjected to further weakening as the government has taken firm stand with their zero appreciation movement. So now what is variable is depend on the US currencies (and other currencies that you trade against sing).

AUD/SGD might be pair that good to watch as Aussie start to gain their strength.

 

Japan

japan_header.jpg

Yen so far rally strongly and keep creating new high. Despite they are in negative interest rate zone and fundamentally so weak. All the bull that trade against yen always wonder when will BOJ intervention coming? Some say 100…some say 101….some say 102…(USD against Yen) well, no one know except this guy,

96508990_Bank_of_Japan_BOJ_Governor_Haruhiko_Kuroda_speaks_during_a_press_conference_at_a_two-da-large_trans++oey2YVs_BaoIFEAZjihhdiBzMLPtdXzDByVIO0JFSas.jpg

His name is Haruhiko Kuroda. Current BOJ governor.

Haruhiko Kuroda (黒田 東彦Kuroda Haruhiko, born 25 October 1944), is the 31st and current Governor of the Bank of Japan (BOJ). He was formerly the President of the Asian Development Bank from 1 February 2005 to 18 March 2013.

–Wikipedia

BOJ once give a stand that they feel 108 (against usd) is a healthy level, but well..see where there are now..heading to 104 and testing 103. Obviously it is falling knife but as a counter trend player, i favorite this kind of movement . Don’t ask me why, let the time tell you why when you look at the chart again in the future.

Japan, undergo low-inflation pressure, keep trying to increase their money stimulus. It has been half a year, how is their economy doing?

FotorCreated

Japan, is in a big trouble. (my 2 cents)

 

United States of America

 

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They are the main leader in currencies pair. I believe all forex traders trade at least once USD currencies not matter against which currencies. They are also know as world reserve currency.

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and when we talk about US, we should know this person now, she is like wife to all traders where we have to sometime check what she say and listen to her,

Her name is Janet Yellen.

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Janet Louise Yellen (born August 13, 1946) is an American economist. She is the Chair of the Board of Governors of the Federal Reserve System, previously serving as Vice Chair from 2010 to 2014. Previously, she was President and Chief Executive Officer of the Federal Reserve Bank of San Francisco; Chair of the White House Council of Economic Advisers under President Bill Clinton; and business professor at the University of California, Berkeley, Haas School of Business.

–Wikipedia

Everyone look at her and want to know when federal reserve is going to raise the next interest rate since Dec 2015 where the rate is now at 0.5%.

The recent FOMC announcement and decision to maintain interest rate come with no surprise to all traders and investors. Now the market players are looking into July with she quite neutral stand with two interest rates are subjected to raise this year where make July or Sep consist the probability to raise interest rate. Their current goal is to raise the rate to 0.9%  by end of this year.

Now we are looking into Brexit referendum factor whether it will be affecting her and her committees decision in raising the interest rate.

I am very positive with US dollar strength and their economy data is going toward healthy, despite recent NFP result is quite disappointing (contrary to the US stock market) but like every good investment come with uncertainty risk.

Which for US is this guy, Donald Trump.

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I don’t want to go deep into it. You can do your own research on his policy. If he is becoming next US president, well, like market, we can’t exclude any possibilities right (like who will think that lehman brothers will go bankruptcy). First thing I will do with my US equities portfolio, I will exit all my position. That’s it for me.

And let’s talk about her, Hillary Clinton.

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Well, I am not judging who is better to become US president. But she is quite consistent and her policy is predictable. And market, like consistency and predictability.

So let cut the politic short and go to next country. British and Eurozone.

British and Eurozone

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Brexit referendum will be on 23th June. Which is coming Thursday.

Will it be Brexit or Brestay. Let the time tell but I am more toward Brexit.

I would like to explain my stand but it is going to be another 1000 words article so let’s just skip this and talk about currencies pair.

Currently EUR/USD  is one of my favorite trading pair which give me close to 10R for this past week with rapid intra day swing trading.

When talk about Europe Central Bank, we will have to talk about this guy.

draghi-no-plans-to-cut-rates-further.jpg

Mario Draghi

Mario Draghi OMRI (Italian pronunciation: [ˈmaːrjo ˈdraːɡi]; born 3 September 1947) is an Italian economist, manager and banker who succeeded Jean-Claude Trichet as the President of the European Central Bank on 1 November 2011.

–Wikipedia

He and his committees are  the one who decide Euro Area Interest Rate. Who also decide to adjust the interest rate to flat 0%.

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What is the impact if Brexit to Europe, if British decide to exit. Who are going to be the next country to exit too? Let’s time tell us.

But I will say that for every crisis, there are opportunity.

While talk about Bre-xit referendum let’s recall back what happen on Swiss Franc crisis and lead to Alpari Forex broker collapse.

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On 18 December 2014, the Swiss central bank introduced a negative interest rate on bank deposits to support its CHF ceiling. However, with the euro declining in value over the following weeks, in a move dubbed Francogeddon for its effect on markets, the Swiss National Bank abandoned the ceiling on 15 January 2015, and the franc promptly increased in value compared with the euro by 30%, although this only lasted a few minutes before part of the increase was reversed.The move was not announced in advance and resulted in “turmoil” in stock and currency markets.By the close of trading that day, the franc was up 23% against the euro and 21% against the US dollar.[34] The full daily range of franc was equal to $31,000 per single futures contract (to the positive if long, to the negative if short), and is more than the market moved collectively in the previous thousand days. The key interest rate was also lowered from −0.25% to −0.75%, meaning investors would be paying an increased fee to keep their funds in a Swiss account. This devaluation of the euro against the franc is expected to hurt Switzerland’s large export industry. The Swatch Group, for example, saw its shares drop 15% (in Swiss franc terms) with the announcements so that the share price may have increased on that day in terms of other major currencies.

 

–Wikipedia, Click here to Read more 

 

It is an unfortunate incident happen that time that lead all account burn out, not just burn out but those who are in highly leverage long position has to fork out extra cash to cover the losses.  Which also due to this incident, all the brokers now has this statement,

Trading FX and/or CFDs on margin is high risk and not suitable for everyone. Losses can exceed investment.

For this coming week, let’s trade with care shall we.


 

Commodities

Crude Oil

Let’s look on crude oil, my favorite trade. I took a lot of short position above 48 and realise when it goes near to 46 and below 46, overall a good trade. Currently there are retracements especially after dollar weakening with killing of Labour MP Jo Cox news release. But crude oil fundamental data is not as positive as before we might see a new round of short coming in to push the price hopefully to the demand zone and see whether the support will eventually come. And a long bull run should be beginning soon.

Capture.PNG

Gold

It has been a strong rally that almost all investors and traders are buying it to hedge their portfolio. Even George Soros too. Above 1300 seem like a strong resistance where it is hard to  let gold stay for a week. Again, killing of Labour MP Jo Cox news make a lot of bull taking early profit and see what the market will be heading soon.


 

Conclusion

So that’s pretty much with my macro analysis for 2016 H2, hope you enjoy reading it and before I stop writing. Let’s talk about risk.

Some people thinking investment and trading is a money making business. Or a forecast…or analysis and the list goes on.

But I got a good point from a trader and my favorite fundamental analyst. She quote this and I can’t agree more.

We as a trader or investor, is actually in a business of risk.

There are 5 types of risks that we will need to face:

  1. Market Risk
  2. Event Risk
  3. Leverage Risk
  4. Technology Risk
  5. Counter-Party Risk

So, let us manage our risk properly and happy trading and investing pals! Have a great week ahead.

 

P/S: In case you wonder this article is written by someone who is an analyst in some financial instituition or have finance/economic background, I am so sorry to disappoint you, I am just an engineering guy who graduated with Electrical and Electronic Engineering Degree from NTU, then in IT industry for 2 years before I became an independent trader. 

 

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