Electric Fennec Fox Journals

Hello and welcome.

I would like to say a few words before start.

I made this thread to share my personal views, setups,my understanding of FX market.
I hope that you will find here some useful things (learn something new) or even better to derive your own unique views.

Since I don't have a lot of free time I will post from time to time .

My approach is totally fundamental. So you won't see technical things here. BUT don't be disappointed that fast. THIS IS NOT A NEWS TRADING .

The name of the thread is random , so don't be confused . I hope that you like fennec foxes as I do

I invite you all to follow this thread ,especially new traders .
I have a 6 years of trading experience and I plan to spend (although spend is stupid word) some time here to explain some things that could completely transform your views.

There is a lot of theory behind this approach (whole economy hehe) but I will try to use direct currency analysis so it will be a bit easier to follow for everybody.Also I won't use economic terms , even though I'm big fan of it (that is a classic disease of every economist).

Once again , welcome and I hope that you will enjoy.

I will starting by analysing USD/JPY.

Next month is very very very important.

Here I'm trying to give you insight into so called "PRICING" !

Pricing is very important in FX market.

On the long run interest rates are the major drivers for FX market. (But there will be more words about that by the time).

Next month we have BOJ meeting and I'm posting now how previous one was.



You can see green and red circles. Green shows price moves before BOJ meeting and red after meeting (post meeting).

Price moved upward straight (JPY goes down) in the expectation that BOJ will announce easing (there will be more words about that later,but you should know that in the easing cycles, when central bank print money , currency tend to lose value).
During the meeting there was no any kind of easing announcement so price collapsed 400 pips downward (later even more) .JPY gain strenght,

That is pricing.

There will be more and more about that but for now ,think about this .
We will be able to see next meeting for 20 days and in follow the developments in real time.

Cheers

Well , tomorrow we have a very important data.

So check your economic calendar for PCE (Personal Consumption Expenditures).
PCE is inflation indicator and it is a part of GDP (Gross Domestic Product) report.

PCE is significant not only because of inflation but also because it is FED favourite inflation indicator (quite favorably over classical CPI, Consumer Price Index).

After previous FOMC , it is clear that June increase in interest rates is possible and because of that you can see a strong USD, market is pricing possible hike.

Since we won't get enough data about inflation , CPI report comes later after June FED meeting and interest rate decision,this one will be very well monitored.

Also GDP per se is also important but inflation is crucial missing puzzle for FED.

You have probably watched Janet Yellen speech or NOT , doesn't matter.

The main line for markets is what she said about interest rates .Increase in interest rates would be probably appropriate in the coming moths.

So now we have again confirmation that interest rate hike is close.

We are waiting for data to confirm this.

One thing that I like you to pay attention is us treasury bond yields.
It is great tool for tracking market sentiment,market expectations.

From picture below you can see rise in both short term and longer term bond yields.

Don't ever forget that markets are today more connected than ever.

ALL IN GREEN

Again rush in bond yields!

Market is pricing June interest rate hike .



Today we have last round of inflation data before June meeting.


Oil is on the way to $50.

Today is ECB meeting .

This is quartal meeting (meeting every 3 months , december - march - june - september )


The major ECB concern is INFLATION.

Inflation March 2015 and March 2016



Inflation today comparing to March .
March -0.2% ,today -0.1%.



Inflation was somehow better , but still below neutral 0%,which is bad.

EURO was higher comparing to previous meetings ,which is bad for exports and inflation.
EUR/USD


And EURO INDEX shows really strong EUR comparing with other currencies.


So currency is keeping pressure on whole economy and EUR on this levels is undesirable for ECB.

The major cause for lower inflation are energy prices , especially oil , so lets take a look on oil prices.



We can see a strong rise in oil. Good $15 rise! Which is good both for Europe and global economy.
But not just prices are important ,the volatility is important as well .

Volatility decreased in the last couple of months,also a good thing.


Bloomberg Commodity Index also shows recovery ,comparing from prev. meetings.



To sum up.

Draghi (ECB) have EUR at higher,undesirable levels.They certainly don't want EURO at this levels ,certainly not under this fundamental background.
But they have one thing that go in ECB favor now and that is FED. That would bring EURO lower in the mid-long term.
Also energy prices are in recovery run.

So this could cause ECB to not lower economic projections today .

By not lowering economic projections, EUR will face bullish momentum in the short run.

Watching ...

Market is disappointed by todays NFP data.

Just 35K job are added,which is the level last time seen in 2011.

We can see from picture below that market erased interest rate hike completely.






Have a nice weekend.

It is now easy-noticeable that risk-aversion is increased due to Brexit vote next week.

That is the major driver of JPY (as safe haven currency) rally.



Last night BOJ didn't take action ,so JPY rose 200 pips on most pairs. That was great JPY long.

Whole this week was great opportunity for gold - LONG and that will be still great for next week .

Especially if in any case Britain leave EU , GOLD will surge so hard on fear.

No actions from FED as well , same rethoric , this time they could thanks Brexit for having an argument for keeping policy easing for sometime.
Market write-off option for July interest rate hike (for that check bond market).
But that could change if inflation improved or enourmously NFP numbers flash out .

Salute

Hello folks,

Now we are in the very interesting situation.
The post Brexit era will be very dynamic with a great trading oppotunities.

Now all central banks will be involved in actions .
Especially BOE and ECB. FED is not excluded.

But the main focus will be on BOJ ,since YEN is very strong at this moment and it will drag inflation even lower and emphasize non-competitive exchange rates (strong yen).

So in the upcoming period I will be focused on JPY.

Personally I don't like what I see at this moment.




Gold is up to 28 month high today.
I mean, I'm bullish on gold but this is not a good economic picture.
Tonight we have FOMC and I'm curious to see at this point what is FED attitude.
Most likely they will stay "data dependent" and Friday NFP will be monitored carefully.

Hi folks ,

I get some time to make this graph about yield curve.
This is one tool that economist , bankers and market participants like.



What is the most important about this picture is curve , weather it tend to be horizontal (x axis) or it tend to be vertical (y axis).

From this picture it is easy visible that curve yield is flattening .
This flattening curve reflects market sentiment , that market is more suitable for low interest rates at this moment.

This "tool" is very usefull both for economic analysis and trading,it is so "colorful" , that you can benefit on various fields and markets.

And here is one basic for starters , the more the curve is flat , the more it weigh on banks revenues,bank margins ( net interest margins ) .
So it will affect US banking sector for example. So there you go..

But to stay there , use this tools more widely . Be creative

I hope that you will enjoy in using this tool and implement it into your analysis.

I used 3 periods , january to march , march to july. Combined these to makes 1H , or 2 quarters.

Salute

Speaking about JPY beat-down today , I will write one post tomorrow.

I hope that this "trade of the year" would be possible this month.

Today we have BOE *Bank of England) meeting .

Very important event, good opportunity to short GBP.
It is high probability that BOE will cut rates 25 bps.
50 bps cut would make aggressive selloff.

Later USD/JPY analysis.

At this moment what cought my eye is overvalued AUD.
RBA next meeting is for 18 days , it will be interesting to see what they will do.

Here is USD/JPY (JPY analysis).



We can see that JPY is very strong , mostly because of higher risk sentiment that affects markets , last couple of months.
Strong currency is very unwanted for economy that suffers from low inflation and economic stagnation.
Uncompetitive exchange rates , weigh on inflation , exports ... etz etz

There are 3 significant levels at USD/JPY , 111,105 ,100/99.

Following Japanese Prime Minister Abe hints about upcoming easing this month USD/JPY gained 570 pips in just 4 days.Which is really nice rally.

BOJ meeting is for 13 days and now I'm looking if there will be some correction , to buy USD/JPY cheaper .
Next week we will monitor developments and I will mark some levels for good buy.

In the week of BOJ decision , starting from 25th july , I will start buying and building position for BOJ easing and JPY sell.

Next time we will look to buy even earlier.