€/$ Fundamental-Macro Trading

High-leverage €/$ Fundamental-Macro Trading

I will only trade EUR/USD.
I will only share macro charts with my fundamental views on €/$ exchange rate.

€/$ charts will only be posted with forecasting models of "fair value".

Not all trade entrys will be shared due to my rapid trading style, only levels where my buying or selling activity take place will be shared.

Trading entrys based on raw price action and spoting vulnerability/strenghts of macro strategies deployed by other market participants, no indicators.
Time-frame for entry is 15-min chart, while trying to maximaize trade duration (daily time-frame).

Model will be constantly updated as new information comes in. (This is a alpha version)

Short-Selling. Long term trade.
Market is 150 pips above fair value.

Next week trading, zoom in on the model, we should be 170 pips lower. High reward short opportunity.
This up-move is not yet the start of the rally we should see later in the year.

Week 1 July - 5 July

1. Model catched up to price. € is fair-valued
2. Tendency to trend lower
3. Preference for short-term short positions .

Daily chart
Model will be constantly updated as new information comes in. (This is a alpha version)

Long-term we should be building long positions for a rally in the € this summer.

With better data coming out of the US lately, it will be hard to justify a round of rate cuts starting in July by the FED.
Therefore €/$ rally will be postpone, but doesn't mean we shouldnt be building long positions for a eventual rally.

Model will be updated soon. with new buying and selling areas.

Week 1 July - 5 July (updated)

Projection for rest of the month July and August
Long-term buying areas will be 1.11 and 1.10

Raw unfit model for the month from July 5th through August 21

Model will be constantly updated as new information comes in. (This is a alpha version)

Updated and corrected version of the projection for the month of July.

Building short-term longs this week.

I expect a surge in volatility in this pair as it re-aligns with its long-term fair-value of around 1.20 to 1.30
There will be 5 forces at play and to watch out for:

1. US economic contraction
2. FED reaction to 1.
3. ECB Draghi will be replaced, potentially with a member who is less market interventionist.
4. US President Trump wants a weaker $ and we may not even have to wait for 2020 election before he pushes for this with all his strenght.
5. China is struggling with the trade wars and this disruption is not priced in yet.

US is showing signs of a economic contraction and the FED is hyper-reactive to US data, more so than the ECB, this is the basis for the model I use to forecast fair-value.

President Trump will be aggressive with the FED for their actions to result in QE, "social-QE". negative rates, or mix of these.

I can speculate a lot about either options, but a round of "social-QE" has the most interesting outcomes, like high-inflation depending on how it will be designed. I let the discussion of this to another post as its still a far-fetched idea.

Either way, one thing we must prepare again for is rate cuts from the FED, potentially going negative, more QE, with the FED acting first than the ECB.
Draghi stepping down from the ECB will also be a major contributor for a stronger €, as there are only 1 or 2 members as market interventionists as Draghi.
The dynamics of president Trump control over the FED, the ECB strategically weaker will result in a stronger €.

At the moment the market is starting to price in a scenario of rate cuts from the FED. This speculation will always be present and support the €, keeping it above 1.10. This is why almost all simulations of the model rarely goes below 1.10 and they are all buying opportunities.
I am preparing for this new Trump-FED-ECB dynamic, by loading up on €s if it drops below 1.10.

Nice analysis!

Buying at these levels near 1.1200 on €/$ for a long-term trade. Position is good for going into the FED meeting later this month.

Will try to build longs around these very low prices without getting stop-out.
Longs are long-term and expected to go into the FED meeting.

Example of a fundamental trade:

The € is in the early stages of a bull market.

Todays ECB meeting telegraphed more QE and negative rates, but the FED next meeting will cut rates, therefor the FED is acting first than the ECB which was my base case.

The theme of central-bank divergence that drove the pair from 1.40 to 1.04 is officially over. Convergence is now happening.

I believe the market thinks a recession will be avoided, which will keep equities going higher and US yields stable. The biggest trade here is there is shake in confidence in the markets. € will rise a lot, while US treasury yields plumb.

Europe japafication is priced in, while in the US it is still not. If the FED goes into negative rates we will see € go very high. Next FED meeting will give some clues of what is going to happen besides rate cuts. Usually the FED is more original on their plans to "revive the economy", and that is worth to keep in mind.