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The Federal Reserve's mandate leads or lags?

  • #41
  • Feb 19, 2018 9:03am Feb 19, 2018 9:03am
Quoting aaven
{quote} COGSx86, You mention that we have seen the same in Canada, Can we apply the analysis for other countries? and if so how do we go about it? b. From one of your posts, {image} Is there a minimum duration Does the 3 month yield needs to stay above the Fed fund rate to warrant a hike? Looking forward to your insights... Thanks

Hey Aaven


Here is an exercise which can help you learn, go here: https://www.investing.com/rates-bond...treaming-chart and add USDCAD .
Attached Image (click to enlarge)
Click to Enlarge Name: USDCAD4.jpg Size: 137 KB




You will be very interested to see the inverse correlation between USDCAD and Treasury yields.

Attached Image (click to enlarge)
Click to Enlarge Name: USDCAD5.jpg Size: 212 KB




To take it further, you can go here: for the ECB https://www.ecb.europa.eu/stats/fina.../index.en.html

Its alittle different, I wasn't able to find ECB treasury yields in chart formation.

Quote
Is there a minimum duration Does the 3 month yield needs to stay above the Fed fund rate to warrant a hike?

Historical 3 month yields have been the leading factor. Have you noticed the past 3 days? Treasury yields have stalled. (attached chart is for Thursday last week) https://fred.stlouisfed.org/series/DGS3MO#0
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  • #42
  • Feb 20, 2018 10:51pm Feb 20, 2018 10:51pm
Over the past 12 hours we have the seen Treasuries GAP up 5 points, a sign of whats to come.


In the next 15 hours we will have the FEDERAL RESERVE MEETING minutes. From these meeting minutes we will see that the FED has discussed increasing the Federal funds rate. As the USD has gotten stronger this week from the sell off the past 2 weeks, the trend down wards for the USD will continue. By tomorrow.
Attached Image(s) (click to enlarge)
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  • #43
  • Feb 21, 2018 12:29am Feb 21, 2018 12:29am
Thanks you COGSx86 for the post, you think that the rate hike in March is already priced into this dollar strength? so that when the minutes of the FOMC is hawkish it will have a negative effect on the dollar?

or what is the rationale for your weak dollar thesis?

Thank you and hope to read from you.
D labour of a fool wearieth him cos he doesn't know how to enta d city
  • #44
  • Feb 21, 2018 8:07am Feb 21, 2018 8:07am
As we know the market doesnt move in straight lines, nor is the market logical at times, hence why it is important to trade the setups the market gives us with a bias towards the topic of this thread.

The USD strength over the past 3 days has come from exactly that, the imperfection of the market and the irrational exuberance which resulted in a correction.

The USD was oversold, there is no other way to say it. But as the market takes a breath, the trend will continue. The USD will continue to get weaker as the Yields continue to go up. Yields took a break over the past few days, then last night continued their trend with the 5 point jump. That trend just isn't going to stop.

Yes as of right now within a percentage band, the market has priced in the a March increase but by how much? As we just stated the market isn't perfect and the sell off in treasury yields will continue so why would the USD continue its downward trend?

Especially as Trump's tax cuts and Trump infrastructure spending ramp up.

Just look at the acceleration of Treasury yields over the past 2-3 years.
Attached Image (click to enlarge)
Click to Enlarge Name: USD.png Size: 143 KB
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  • #45
  • Feb 24, 2018 12:17pm Feb 24, 2018 12:17pm
Quoting COGSx86
{quote} Hey Aaven Here is an exercise which can help you learn, go here: https://www.investing.com/rates-bond...treaming-chart and add USDCAD . {image} You will be very interested to see the inverse correlation between USDCAD and Treasury yields. {image} To take it further, you can go here: for the ECB https://www.ecb.europa.eu/stats/fina.../index.en.html Its alittle different, I wasn't able to find ECB treasury yields in chart formation. {quote}...
Thanks COGSx86 for the wonderful guidance...

I was comparing the charts of USDCAD and Canadian 3 -Month Bond, but was having problems with regards to the scale of the graph.

In this snapshot, i have USDCAD in blue line and Canadian 3 Month Yield on the red line on a percentage scale.

Attached Image (click to enlarge)
Click to Enlarge Name: 1.PNG Size: 171 KB


The Canadian 3 Month yield seems to have crossed over the USDCAD on this percentage scale, so we could expect USDCAD to go down?

Kindly Let me know if my analysis is correct and please give your take...

Thanks
  • #46
  • Feb 24, 2018 1:34pm Feb 24, 2018 1:34pm
right click on the one you add and change to Screen (No Scale), then its puts them into percentages vs each other
Attached Image (click to enlarge)
Click to Enlarge Name: usdcad.png Size: 85 KB
Learn, a forex trader must, unlearn and relearn he will.
  • #47
  • Feb 24, 2018 2:10pm Feb 24, 2018 2:10pm
Quoting COGSx86
right click on the one you add and change to Screen (No Scale), then its puts them into percentages vs each other {image}
Much appreciated COGS, works now...
  • #48
  • Feb 25, 2018 12:41am Feb 25, 2018 12:41am
Quoting COGSx86
{quote} a. What could be the reason for FED trying to maintain the upper hand over 3 Month Treasury Yields? This is a really good question...
Nice analysis! It is always great to read other traders POV on the markets.

On your point of higher interest rates are signalling money flowing out of a country. I would actually argue that it is not neccessarily so. The money could have simply flowed towards other assets such as stocks or commodities.

I would also agree with you that the USD is oversold. IMO markets are too worried about the fiscal and political side of US.
I look for value wherever it can be found
  • #49
  • Feb 25, 2018 1:30pm Feb 25, 2018 1:30pm
Quoting synicz
{quote} Nice analysis! It is always great to read other traders POV on the markets. On your point of higher interest rates are signalling money flowing out of a country. I would actually argue that it is not neccessarily so. The money could have simply flowed towards other assets such as stocks or commodities. I would also agree with you that the USD is oversold. IMO markets are too worried about the fiscal and political side of US.
Dont have to argue, I would say hmmmm. Agree with your statement, I do "money has simply flowed towards other assets". Money is getting diverted away from Government bonds. Into foreign currency, stocks, GOLD, etc etc. See that with the Dollar Index, DOW, and GOLD, we do.

Highlight the FOREX pairs the most, on the FOREX website, we are! haha.
Attached Image(s) (click to enlarge)
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  • #50
  • Feb 28, 2018 10:16am Feb 28, 2018 10:16am
It seems many traders have not learned the power and bias the market gives towards the USD's short term Treasury yields. I have noticed as well they prefer long term yields of 10-30 year years to be considered but we as retail traders don't hold positions for long term (anything longer then 10 days give or take). But let us not forget those yields represent the future, not today. The closest picture we can get is what the market will pay you today, or in bank terms overnight lending.

The Federal Funds rate, which derives its power from the 3-month treasury yields, is the overnight lending rate.

Look to the past we must, as the market continues to repeat itself. Traders must see the bias the market gives towards the USD, as it continues to be held as the World Reserve currency. Many refuse to accept this or believe this status will not remain as we move into the future, due to the accumulation of debt the United States continues to pile on. However today that isn't so and the banks stay with what other banks will exchange between each other. For we mustn't forget, as retail traders, we make up roughly 5% (260 Billion) of the 5 trillion dollar a day market.

The chart below is the DXY and 3 month Treasury's starting in 1973. 1973 is chosen to represent when the Nixon administration, removed the US GOLD standard, cancelling the Bretton Woods system. However prior to this date the Smithsonian Agreement was put into place in 1971 by a group of 10 nations (Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, United Kingdom and the United States). This new system was created for a currency standard whereby the major currencies of the industrialized world pegged their currency to the US dollar. As we can see in the chart below the market was beginning to sort itself out to follow the lead of the US Treasury yields.
Attached Image (click to enlarge)
Click to Enlarge Name: Long Term FED.jpg Size: 105 KB
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  • #51
  • Feb 28, 2018 11:37am Feb 28, 2018 11:37am
Quoting COGSx86
It seems many traders have not learned the power and bias the market gives towards the USD's short term Treasury yields. I have noticed as well they prefer long term yields of 10-30 year years to be considered but we as retail traders don't hold positions for long term (anything longer then 10 days give or take). But let us not forget those yields represent the future, not today. The closest picture we can get is what the market will pay you today, or in bank terms overnight lending. The Federal Funds rate, which derives its power from the 3-month...
Thank You COGSx86 for imparting such great wisdom...
  • #52
  • Feb 28, 2018 11:53am Feb 28, 2018 11:53am
Loving this thread COGSx86. Keep up the great analysis.
  • #53
  • Mar 5, 2018 2:22am Mar 5, 2018 2:22am
Quoting COGSx86
"Permit me to issue and control the money of a nation, and I care not who makes its laws!" Who CONTROLS the market ? The small group of monopoly economists, who conspire together in a small room at Jackson hole ? Or the market ? Dating back to the creation of the federal reserve, to today we see the correlation and who LEADs the market. Go figure its the "market". 3 month US treasury bonds lead the Federal Reserves decisions. What does this mean ? This allows for individuals, such as forexfactory members, to capitalize on sound trading decisions...
COGSX86,

Your bio states the following:

"The market moves because of volume, following the volume is the key or so I thought. Then realize Government TREASURIES LEAD the FOREX MARKET, US GOVERNMENT BONDS!"

How did this change in perspective manifest? In addition to focusing on Volume, Were you proactively researching/testing bonds and make the shift or did you find something amiss in volume analysis or a sudden discovery or insight that lead to focus on short term bonds?

I mean, what was the thought process that lead you keeping the 3 month bonds as the central component of your trading?

Thanks
  • #54
  • Mar 6, 2018 6:31pm Mar 6, 2018 6:31pm
My ally is the force and a powerful ally it is. The market creates it, makes it grow. Its energy surrounds us and binds us.
Attached Image (click to enlarge)
Click to Enlarge Name: USDJPY-3 Month.jpg Size: 232 KB
Learn, a forex trader must, unlearn and relearn he will.
  • #55
  • Mar 7, 2018 1:58am Mar 7, 2018 1:58am
Quoting COGSx86
My ally is the force and a powerful ally it is. The market creates it, makes it grow. Its energy surrounds us and binds us. {image}
COGSx86,

Thanks for the guidance...

In the chart,

the time frame for bond yield is 60 mins. Is the time frame for USD/JPY 60 mins as well?
  • #56
  • Mar 7, 2018 11:35am Mar 7, 2018 11:35am
Quoting aaven
{quote} COGSX86, Your bio states the following: "The market moves because of volume, following the volume is the key or so I thought. Then realize Government TREASURIES LEAD the FOREX MARKET, US GOVERNMENT BONDS!" How did this change in perspective manifest? In addition to focusing on Volume, Were you proactively researching/testing bonds and make the shift or did you find something amiss in volume analysis or a sudden discovery or insight that lead to focus on short term bonds? I mean, what was the thought process that lead you keeping the 3 month...

Aaven

When I first began trading, I followed volume, using OBV at first, then moving into using Cumulative Volume Index. My reasoning was that these indicators show weakness or strength in price. Which they do and I still believe that concept. However determining the markets bias, is the key. Bonds give us that BIAS.

Its actually also funny 3 years ago, I made this trade (attached below) based on volume. At the time I was a scalper, having no understanding of the markets true direction. Hahaha Having no concept of banks, and bonds. Just looking for divergence/convergence at key supply and demand points.

As for how I became aware of bonds influence on the markets, I learned this concept from Elliott Wave International, and Im actualy surprised fellow traders have been so reluctant to accept this. I suppose thats why 95+% of traders fail.
Attached Image(s) (click to enlarge)
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  • #57
  • Mar 8, 2018 4:12am Mar 8, 2018 4:12am
Quoting COGSx86
{quote} Aaven When I first began trading, I followed volume, using OBV at first, then moving into using Cumulative Volume Index. My reasoning was that these indicators show weakness or strength in price. Which they do and I still believe that concept. However determining the markets bias, is the key. Bonds give us that BIAS. Its actually also funny 3 years ago, I made this trade (attached below) based on volume. At the time I was a scalper, having no understanding of the markets true direction. Hahaha Having no concept of banks, and bonds. Just...
Thank you so much COGSx86 for sharing your experience. You brought much value...
  • #58
  • Mar 8, 2018 4:15am Mar 8, 2018 4:15am
Quoting COGSx86
{quote} Aaven When I first began trading, I followed volume, using OBV at first, then moving into using Cumulative Volume Index. My reasoning was that these indicators show weakness or strength in price. Which they do and I still believe that concept. However determining the markets bias, is the key. Bonds give us that BIAS. Its actually also funny 3 years ago, I made this trade (attached below) based on volume. At the time I was a scalper, having no understanding of the markets true direction. Hahaha Having no concept of banks, and bonds. Just...
COGSx86,

After your inputs, i was browsing and found one article which states the same phenomenon happening with AUD, GBP and EUR...

https://www.socionomics.net/2016/11/...europe-either/

What has been experience regarding this?

Thanks
  • #59
  • Mar 8, 2018 7:53am Mar 8, 2018 7:53am
Quoting COGSx86
{quote} Aaven When I first began trading, I followed volume, using OBV at first, then moving into using Cumulative Volume Index. My reasoning was that these indicators show weakness or strength in price. Which they do and I still believe that concept. However determining the markets bias, is the key. Bonds give us that BIAS. Its actually also funny 3 years ago, I made this trade (attached below) based on volume. At the time I was a scalper, having no understanding of the markets true direction. Hahaha Having no concept of banks, and bonds. Just...
Many thanks COGx86 for your useful posts. My understanding is that higher yield in the bond market will attract flows into the bond denominated currency. I have also read about the predictive power the spread between bond tenures can have on currencies. I will like to ask if you could expanciate on your statement "Bonds give us that BIAS"

Thank you
D labour of a fool wearieth him cos he doesn't know how to enta d city
  • #60
  • Mar 8, 2018 8:13pm Mar 8, 2018 8:13pm
Quoting aaven
{quote} COGSx86, After your inputs, i was browsing and found one article which states the same phenomenon happening with AUD, GBP and EUR... https://www.socionomics.net/2016/11/...europe-either/ What has been experience regarding this? Thanks
Look at the chart you should, and find your answer you will. Socionomics is part of Elliott Wave International. Alan Hall the author is a Senior Market analysis for them, since 1995.

https://www.socionomics.net/2011/04/...oom-alan-hall/

See the bias in the chart you will. Overnight currency flows away from high yield bonds, for the cost incurred by the banks. Remember the USD is the world reserve currency, that is banks will search for cheap assets to hold other then the USD, overnight.
Attached Image(s) (click to enlarge)
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