WEEK 46 INTENTIONS
Hi,
was off during family vacations. Spent all the week end and Yesterday reading and analyzing to re-sync with the market. The picture is quite clear, UNCERTAINTY is everywhere.
1: US economy is improving but the dollar is strengthening. The fears of a fiscal cliff gridlock to which you add the fear of the end of QE are building a market sentiment prone to quickly cover or move to safety. This market is going to be highly sensitive to bearish influences until the congress and white house accept a compromise on the fiscal cliff. Meanwhile it would barely move on good news. The agreement on a compromise might not be reached before the end limit of time, that is first January. On the QE front I expect Bernie to be very dovish at the next presser to stabilize the market.
2: Eurozone crisis is the other pole of uncertainty. Greece, Spain and now France are covering the headlines. Despite the impossible risk of a default due to Draghi's OMT the market is factoring on the downside the Euro leaders complacency. The lack of clear decisions on the Greek debt is putting at risk the already fragile current coalition. Rajoy is still not wanting a bailout to trigger ECB OMTs. France is questioned on its capacity to implement anti-crisis policy. Also, after France, Germany is now hit on its fundamentals and the austerity policies are now openly questioned.
Point 1 and 2 are the pure cocktail of uncertainty. For us traders, this is seen on the YEN strengthening despite that everybody knows that Japan is going to implement open-ended easing. The second matter for traders, seeing the US fundamentals, is the question whether or not the USD is still a funding currency in terms of anticipation (fundamentally it is the case, but market always price anticipations). This question is important and we will have the answer if the USD continue to strengthen even during "risk on" sentiment. But the market will need a substitute, we will know which if the Euro take the other direction during "risk on" . This latter question is trickier because the Euro can be pushed south just by its specific problems. Nevertheless in terms of monetary policy and macro economics the Euro is gathering all the ingredients to become a funding currency soon. As said above, after France, Germany is also hit on the fundamentals this means less austerity, more pro-growth policies and probably new QEs and the mandatory need for a weaker Euro. This is going to come quickly because of the german elections in 10 months or so.
During these uncertain markets, on the spot I am sitting on my hands and will probably play some news releases. But we must keep in mind that the global macro analysis is above the sentiments and short term reactions. The thing is to avoid frenzy and madness both sides. The use of options strategies is better suited to these moments of uncertainties.
USDJPY: I stay bearish on the Yen, though I closed the core from 77.45 near 80.00 and all the add ons. Did this because of the fiscal cliff weighting heavily on the pair and there is no need to see a retrace on a winner of 30% or more. But being fundamentally bearish on the yen (bullish UsdJpy) and anticipating a ranging behavior in the medium term I am now positioned with a butterfly slightly bullish DEC21 80-82-84. I am not very content with the choice of the expiry, something after the 1st january would have been better, since the fiscal cliff would've been factored out at this moment.
GbpUsd bearish: A call Jan 16 BPX 64 (BPX: USDGBP). The pound is losing his fake safe haven status since the OMT, and is now seeing outflows growing. His correlation with the Euro is not going to help. Furthermore on the econ front UK is not improving despite the massive printing machines and now the BOE policy is openly questioned. Not selling the spot but using a straight option is to avoid the uncertainty prone to madness mainly with a pair lacking liquidity.
Conclusion: this fiscal cliff is weighing heavily on risk. But these are the best moments to get positioned, hence I am looking at cheaper price on Aud pairs and Oil. Concerning the intraday tactical trades on news, barriers etc.. because of the speed of the decision making i am twitting them @neoflytox real time but not on my blog or forums.
Hi,
was off during family vacations. Spent all the week end and Yesterday reading and analyzing to re-sync with the market. The picture is quite clear, UNCERTAINTY is everywhere.
1: US economy is improving but the dollar is strengthening. The fears of a fiscal cliff gridlock to which you add the fear of the end of QE are building a market sentiment prone to quickly cover or move to safety. This market is going to be highly sensitive to bearish influences until the congress and white house accept a compromise on the fiscal cliff. Meanwhile it would barely move on good news. The agreement on a compromise might not be reached before the end limit of time, that is first January. On the QE front I expect Bernie to be very dovish at the next presser to stabilize the market.
2: Eurozone crisis is the other pole of uncertainty. Greece, Spain and now France are covering the headlines. Despite the impossible risk of a default due to Draghi's OMT the market is factoring on the downside the Euro leaders complacency. The lack of clear decisions on the Greek debt is putting at risk the already fragile current coalition. Rajoy is still not wanting a bailout to trigger ECB OMTs. France is questioned on its capacity to implement anti-crisis policy. Also, after France, Germany is now hit on its fundamentals and the austerity policies are now openly questioned.
Point 1 and 2 are the pure cocktail of uncertainty. For us traders, this is seen on the YEN strengthening despite that everybody knows that Japan is going to implement open-ended easing. The second matter for traders, seeing the US fundamentals, is the question whether or not the USD is still a funding currency in terms of anticipation (fundamentally it is the case, but market always price anticipations). This question is important and we will have the answer if the USD continue to strengthen even during "risk on" sentiment. But the market will need a substitute, we will know which if the Euro take the other direction during "risk on" . This latter question is trickier because the Euro can be pushed south just by its specific problems. Nevertheless in terms of monetary policy and macro economics the Euro is gathering all the ingredients to become a funding currency soon. As said above, after France, Germany is also hit on the fundamentals this means less austerity, more pro-growth policies and probably new QEs and the mandatory need for a weaker Euro. This is going to come quickly because of the german elections in 10 months or so.
During these uncertain markets, on the spot I am sitting on my hands and will probably play some news releases. But we must keep in mind that the global macro analysis is above the sentiments and short term reactions. The thing is to avoid frenzy and madness both sides. The use of options strategies is better suited to these moments of uncertainties.
USDJPY: I stay bearish on the Yen, though I closed the core from 77.45 near 80.00 and all the add ons. Did this because of the fiscal cliff weighting heavily on the pair and there is no need to see a retrace on a winner of 30% or more. But being fundamentally bearish on the yen (bullish UsdJpy) and anticipating a ranging behavior in the medium term I am now positioned with a butterfly slightly bullish DEC21 80-82-84. I am not very content with the choice of the expiry, something after the 1st january would have been better, since the fiscal cliff would've been factored out at this moment.
GbpUsd bearish: A call Jan 16 BPX 64 (BPX: USDGBP). The pound is losing his fake safe haven status since the OMT, and is now seeing outflows growing. His correlation with the Euro is not going to help. Furthermore on the econ front UK is not improving despite the massive printing machines and now the BOE policy is openly questioned. Not selling the spot but using a straight option is to avoid the uncertainty prone to madness mainly with a pair lacking liquidity.
Conclusion: this fiscal cliff is weighing heavily on risk. But these are the best moments to get positioned, hence I am looking at cheaper price on Aud pairs and Oil. Concerning the intraday tactical trades on news, barriers etc.. because of the speed of the decision making i am twitting them @neoflytox real time but not on my blog or forums.
Rien ne sert de courir il faut partir à point.