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abob's fundies journal

  • Post #1
  • Quote
  • First Post: Nov 28, 2005 7:25pm Nov 28, 2005 7:25pm
What to do, oh what to do ?

I'm agnostic on the USD right now. Imagine that. FX trading with no view on the USD. It happens. Here is an excerpt of my blog, with a quadrant style outcome scenario that may be useful to help frame your thinking over the coming sessions.

I believe a great deal hangs in the balance over the next few weeks, as market participants struggle to form a core view on the interest rate outlook. As such, sentiment may continue to flip to and fro. Here are the possibilities for how market perceptions on monetary policy may shape up:
1) ECB confirms its upcoming hike is a one-off. Fed signals no end is in sight.
2) ECB suggests more hikes to come Fed signals no end is in sight.
3) ECB confirms its upcoming hike is a one-off. Fed signals it is nearing the end of the tightening cycle.
4) ECB suggests more hikes to follow. Fed signals it is nearing the end of the tightening cycle.

I believe the market is in a very jittery state right now, and we can expect to see elevated volatility, and increased sensitivity to each additional piece of news or data that shifts the balance to either of these possibilities. Here's how I see these outcomes relating to EUR/USD: the most USD positive outcome is (1), the most USD negative is (4). Both (2) and (3) would likely leave EUR/USD in a state of flux, with no clear direction for the interest rate differential.

For the time being, I will be watching from the sidelines.
: )
"Always bet on black"
there are so many other factors at play in the mkt but I think if you can crack this you are more than half way thererespect to all who trade the USD with conviction (I am no longer in this group)
"Always bet on black"
Quoting abobtrader
What to do, oh what to do ?

I'm agnostic on the USD right now. Imagine that. FX trading with no view on the USD. It happens. Here is an excerpt of my blog, with a quadrant style outcome scenario that may be useful to help frame your thinking over the coming sessions.

I believe a great deal hangs in the balance over the next few weeks, as market participants struggle to form a core view on the interest rate outlook. As such, sentiment may continue to flip to and fro. Here are the possibilities for how market perceptions on monetary policy may shape up:
1) ECB confirms its upcoming hike is a one-off. Fed signals no end is in sight.
2) ECB suggests more hikes to come Fed signals no end is in sight.
3) ECB confirms its upcoming hike is a one-off. Fed signals it is nearing the end of the tightening cycle.
4) ECB suggests more hikes to follow. Fed signals it is nearing the end of the tightening cycle.

I believe the market is in a very jittery state right now, and we can expect to see elevated volatility, and increased sensitivity to each additional piece of news or data that shifts the balance to either of these possibilities. Here's how I see these outcomes relating to EUR/USD: the most USD positive outcome is (1), the most USD negative is (4). Both (2) and (3) would likely leave EUR/USD in a state of flux, with no clear direction for the interest rate differential.

For the time being, I will be watching from the sidelines.
: )
I guess you trade fundamentals. Allow me to through this out there.

2 things happen "almost" always.

1: retrace- always
2: retest- almost always

USD:

We just saw a retrace so there is a "possible" retest on the horison.
When and where who knows.

And wouldn't consumer spending durring the holliday season show the economys good or bad? I don't know. Mabe wach that too.

Dave
I examine in one of the news-letter lately, according to that, three large currency
houses trying to start the new 'wave' . The RBC, HSBC, tried to start new wave
and stopped. Now they have chosen Morgan Stanely, and it will be seen how faraway
the new wave can go at this point of time. Will it stop again, or they need
to get some people to get into the impression.
Regards,
Kay
Resource pooling is the only solution. I love positive pips.
Hey bob welcome to the fundies club!

Nice to see another heavyweight here - I was beginning to think Merlin & Nader had the place all to themselves!

I don't spend as much time as you guys chewing the fundies but I do like to follow what you guys make of all this data that they keep on spewing out.

Quoting abobtrader
What to do, oh what to do ?

I'm agnostic on the USD right now. Imagine that. FX trading with no view on the USD. It happens. Here is an excerpt of my blog, with a quadrant style outcome scenario that may be useful to help frame your thinking over the coming sessions.

I believe a great deal hangs in the balance over the next few weeks, as market participants struggle to form a core view on the interest rate outlook. As such, sentiment may continue to flip to and fro. Here are the possibilities for how market perceptions on monetary policy may shape up:
1) ECB confirms its upcoming hike is a one-off. Fed signals no end is in sight.
2) ECB suggests more hikes to come Fed signals no end is in sight.
3) ECB confirms its upcoming hike is a one-off. Fed signals it is nearing the end of the tightening cycle.
4) ECB suggests more hikes to follow. Fed signals it is nearing the end of the tightening cycle.

I believe the market is in a very jittery state right now, and we can expect to see elevated volatility, and increased sensitivity to each additional piece of news or data that shifts the balance to either of these possibilities. Here's how I see these outcomes relating to EUR/USD: the most USD positive outcome is (1), the most USD negative is (4). Both (2) and (3) would likely leave EUR/USD in a state of flux, with no clear direction for the interest rate differential.

For the time being, I will be watching from the sidelines.
: )
  • Post #6
  • Quote
  • Edited Dec 7, 2005 3:39pm Nov 29, 2005 7:20am | Edited Dec 7, 2005 3:39pm
http://photos1.blogger.com/blogger/5...0/quadrant.jpg

Hi isotonic, thanks...the fundies seem to be a real minority on the chat boards ! In my previous post I discussed the possibilities for the market's perception on relative mon.policy and what this might mean for the USD. I don't want to paste all my text from my blog because I would otherwise drown Merlin's journal(!) but the idea is that you can use the above quadrant to help frame your thinking. Bear in mind, both the arrows and boxes are not black or white but represent gradients of hawkishness/dovishness and relative USD bullishness/bearishness. For me, I landed where the red circle is, which is why I am out of the mkt right now.

: S
"Always bet on black"
Quoting xxDavidxSxx
I guess you trade fundamentals. Allow me to through this out there.

2 things happen "almost" always.

1: retrace- always
2: retest- almost always

USD:

We just saw a retrace so there is a "possible" retest on the horison.
When and where who knows.

And wouldn't consumer spending durring the holliday season show the economys good or bad? I don't know. Mabe wach that too.

Dave
Retest on consumer spending data(10:00am est) made it back to 119.70

Dave
nice work
"Always bet on black"
oops I hadn't finished...what's the difference between a retest and a retrace?

Its happy days all round as I too read the data and followed the eur down. Then, after it settled, I played what I call a 'retrace', where I set a stop just below the trough of the post-data price move and try and run the price back to the pre-data release level. Worked a treat this time around, but how reliable this strategy is over the long haul I do not know. For me it was only small money, but its nice when it goes right.

The fact that the consumer confidence response was durable in the fixed income mkt, with 10 yr yields up some 7 bps, but disappeared from the fx market (complete retracement in EUR/USD) tells me the fx market is almost as confused as I am on forming a hypothesis. Strings are being pushed and pulled in many directions.

: )
"Always bet on black"
I don't think Merlin minds at all - I've been posting on his journal for ages!

Yes most forums are populated with more technicans than fundies (I'm much more of a techie than a fundie as well I'm afraid) but you can't complete ly ignore them.

Hey have you checked out the macro matrix here? It bears similarities to your chart and it might need updating if Greenie has indeed dropped the "measured pace" rhetoric now.

Quoting abobtrader
Hi isotonic, thanks...the fundies seem to be a real minority on the chat boards ! In my previous post I discussed the possibilities for the market's perception on relative mon.policy and what this might mean for the USD. I don't want to paste all my text from my blog because I would otherwise drown Merlin's journal(!) but the idea is that you can use the above quadrant to help frame your thinking. Bear in mind, both the arrows and boxes are not black or white but represent gradients of hawkishness/dovishness and relative USD bullishness/bearishness. For me, I landed where the red circle is, which is why I am out of the mkt right now.

: S
Quoting abobtrader
oops I hadn't finished...what's the difference between a retest and a retrace?

: )
Lets say the trend is up. A new high is reached, and a pull back happens. That pull back is a retrtace. When the price tries to reach back up to that new high that is a retest.

A retrace always happens at some point. If it didn't the price would never stop moving in one direction. Thats what I base my system on for the most part.

I don't know alot about fundies but I don't ignore them either.

Dave
thx for the link iso,

I like Merlin's cross-market matrix of possibilities. To highlight the level of uncertainty right now, think that that Matrix is just for the Fed whereas right now the question is over both the Fed and the ECB, so you have two of these matrixes going on, and they don't operate independently neither ... all very confusing indeed.

The world has changed so much in the past year. Previously the removal of measured pace language would have been a signal that the Fed is going to tighten more aggressively but the market would now interpret the removal of the MP phrase to signal that we may be near the end of the tightening cycle.

---

Dave, ah yes, retrace, pullback etc...all essentially the same. I suppose a re-test is a test of a previous level, maybe of technical importance? For a second there I thought the techies may have a totally different definition of these terms ... good to see we are all singing from the same hym sheet....but oh what a cacophony !

: )
"Always bet on black"
Quoting abobtrader
I'm agnostic on the USD right now.
LOL! yes, its a hard thing to admit as a currency trader, but im with ya man
Relax and be happy.
Quoting abobtrader
http://static.flickr.com/18/68266987_154e61b6aa.jpgHi isotonic, thanks...the fundies seem to be a real minority on the chat boards ! In my previous post I discussed the possibilities for the market's perception on relative mon.policy and what this might mean for the USD. I don't want to paste all my text from my blog because I would otherwise drown Merlin's journal(!) but the idea is that you can use the above quadrant to help frame your thinking. Bear in mind, both the arrows and boxes are not black or white but represent gradients of hawkishness/dovishness and relative USD bullishness/bearishness. For me, I landed where the red circle is, which is why I am out of the mkt right now.

: S
sweet graphic man! i love how you have the ECB and the Fed on different axies..the "red dot" is ingenius...it all works...

its always easier to make judgements when you have a framework to work within, huh? i actually like yours better than my "macro matrix" cause yours is much more simple. btw, do you trade options? you seem to be putting a lot of emphisis on volatility so im just wondering.

heres a quesiton....

does action by the fed affect the action taken by the ECB?
Relax and be happy.
Bob

Does your chart mean your neutral on the ECB but more hawkish on the Fed right now (since its above the centre line)?

Also do you follow GBP, CHF or JPY fundies? I'm also based in the UK and would love to get your opinion on stuff like employment, housing market, inflation etc?

Finally why not start a blog here? Just copy and paste the recent or best bits from your existing blog to get started!

Just a suggestion buddy!

Quoting abobtrader
http://static.flickr.com/18/68266987_154e61b6aa.jpgHi isotonic, thanks...the fundies seem to be a real minority on the chat boards ! In my previous post I discussed the possibilities for the market's perception on relative mon.policy and what this might mean for the USD. I don't want to paste all my text from my blog because I would otherwise drown Merlin's journal(!) but the idea is that you can use the above quadrant to help frame your thinking. Bear in mind, both the arrows and boxes are not black or white but represent gradients of hawkishness/dovishness and relative USD bullishness/bearishness. For me, I landed where the red circle is, which is why I am out of the mkt right now.

: S
Hi Merlin, I definitely agree with you. A framework for thinking re the fundamentals can be very useful. There are so many factors at play - both positives and negatives - at any given time, and they more often than not inter-relate. It can get very complicated for me if I don't write things down, which at least helps me put things in context.

Also, I'm sure many economists suffer from a behavioural bias where they have an inbuilt view, and are subconsciously selective in picking the facts that support their case, or the arguments which they agree with. This reinforces their case, or so they think. Its hard letting go.

Iso, my focus is on GBP and EUR/USD right now. I used to look at all the G7 but I've narrowed my game recently. I'll branch out when ready I suppose. (Japan is always interesting). Good comment on the blog idea...I really like this community forum that Merlin has created. I do post a lot of non-fx stuff on my blog so I could just paste the relevant stuff here ... hopefully start doing this in the near future.

PS - Just a thought but have you seen the price action in the Tokyo session...dead as a doornail. Literally a flat line on cable, euro, and yen. What exactly do fx traders in Japan do again ???

: )
"Always bet on black"
Quoting Isotonic
Bob

Does your chart mean your neutral on the ECB but more hawkish on the Fed right now (since its above the centre line)?

Also do you follow GBP, CHF or JPY fundies? I'm also based in the UK and would love to get your opinion on stuff like employment, housing market, inflation etc?

Finally why not start a blog here? Just copy and paste the recent or best bits from your existing blog to get started!

Just a suggestion buddy!
sorry, forgot to answer q1. You are bang on. Relative to the mkt I am fairly neutral on ECB but slightly more hawkish on fed. The problem is that I am close to the cross-hair i.e. I am not confident of the future.
"Always bet on black"
today should be interesting. will the markets focus on greenie instead of nfp?

the nfp forecast is roughly four times last months figure and if it comes near target then you will probably see a retest of recent lows. whether it will break i don't know...the dollar has moved around 1000 pips against the euro and around 1500 pips against cable over the past 2 months.

i think on the euro we might be in a similar situation to the first 10 days of feb 05 where you got a number of days making matching lows with a huge reversal on the trade report.

anyway thats my thinking...whether greenie hints at a pause after nfp could mute the report.

so i'm gonna stick to my guns from last night and place a few orders...
Quoting Isotonic
today should be interesting. will the markets focus on greenie instead of nfp?

the nfp forecast is roughly four times last months figure and if it comes near target then you will probably see a retest of recent lows. whether it will break i don't know...the dollar has moved around 1000 pips against the euro and around 1500 pips against cable over the past 2 months.

i think on the euro we might be in a similar situation to the first 10 days of feb 05 where you got a number of days making matching lows with a huge reversal on the trade report.

anyway thats my thinking...whether greenie hints at a pause after nfp could mute the report.

so i'm gonna stick to my guns from last night and place a few orders...
Hi iso, I think both will be very important. NFP for sure, and Greenspan, if he gives the mkt a new steer on policy. I too, may get a piece of the action after the event, depending on outcomes.

At the moment the euro is 1.1706. If we get a weak nfp number I think its more of the same in terms of price action, but if NFP comes in strong, the euro could print fresh lows for recent months, and momentum could take it lower.

I'm 55/45 in favour of a lower euro, but as you said, the mkt is looking for a pretty healthy nfp so a lot of good news is already in the price.

: S

PS - My schedule says Fed's Yellen also speaks on mon.policy and the economy at 19:00 (UK time), and Santomero speaks at 20:45.
"Always bet on black"
He he, that was fun, fading the extremes in EUR/USD on the back of the data. NFP was bang in line with expectations.

For the macro picture, I feel a little bit more USD bullish, but thats a bias stemming from the price action. We (or at least me, anyway) are easily influenced, eh!

Going forward, and to be a little different from the pack I would keep an eye on the fwd looking indicators of Europe such as ZEW and IFO. CPI is important, but I don't think numbers like GDP or other dated data will have an impact. The eurozone is a slow moving beast and if we want to get a steer on the steepness of the tightening trajectory, fwd looking indicators may be what it is all about.

Note - Cable looks like a poor surrogate for the EUR/USD these days. The correlation has broken down a bit as the mkt has chosen to buy cable on EUR/USD rallies, but to sell EUR/GBP on the dips...ie its trading with a GBP +ive bias.
"Always bet on black"
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