GU, GJ and EU Analysis Thread

Great to see IbKA back, look forward to reading your thoughts.

My thoughts are rather mundane and conservative at this point, a break of 1.5720 might provide good longs (replacing a higher long criteria of 1.6), otherwise still mostly short-term neutral long-term bearish at this particular price and time on cable, which would mean sell stops 1.5365 and 1.5385.

Lots of traders will be starting to roll over their September expiring futures contracts tomorrow and Wednesday is my guess. Friday appears to have been a rather weak interest in the GBP front-end futs so the run doesn't appear to have started quite yet.

The other likely outcome is that Stocky was the buyer at 1.537 and we will be at 1.700 by Friday.

The following article is a good indication of what I have been saturating this thread with recently:

http://www.telegraph.co.uk/finance/c...evolution.html

In summation, those products that the developed nations currently covet are already mass produced in China. Couple this with a vast pool of well educated, cheaply employed, and biting at the bit to bring ideas to the table engineers, and one can see why technologically leading brands – be it from the automotive, audio-visual or plain old white goods sectors – are increasingly basing themselves in Asia in order to capitalize upon this boon. Admittedly, China seems to be taking a pause for breath, and I do not want to consign developed nations to the bin of being non-producing, mass-consuming ‘units’ on an accountant’s income band forecast ; however, one can argue that what we now witness is an increasing production of basic goods for the developed nations being conducted in developing nations, and with fresh ideas being born in developing nations that, really, are basically the same as what everybody wants the world over. Cars, televisions, high-fidelity equipment, fridges, ‘bag-less’ vacuum cleaners, anything with an i- before it… the list goes on. Point being, new ideas are pouring out of Asia at a probably greater rate than in developed nations. I hate to agree with the following statements from elsewhere, but the graduates of developed nations are accused of expecting to have handed to them fortune, whilst developing nation graduates expect to have to fight for fortune, and so work harder to find the offer. I’m not sure of this, but what I am sure of is that graduates, or just workers, in developing nations are prepared to work that much harder, as they have no financial security net that will catch their fall should income release them from its hold; social security, affluent parents etcetera.

Many argue that a rising price that the companies of the developed world have to pay for access to what is available in China is intellectual property. It is contended that China sees nothing wrong with demanding access to intellectual property, in return for access to cheap labour. However, there are increasing examples of how once the knowledge is attained, those forced to submit this knowledge, are then dispensed with.

The relevance of the mores and practices of the developed nations is becoming irrelevant to the developing nations as they recognize the aforementioned reliance on the supply of the latter. A good barometer of this can be found in the flowing article regarding the Germany-China relationship, and gives some revealing statistics about GDP per capita, graduate pool and skills sets etcetera.

http://www.spiegel.de/international/...713478,00.html

I was rather interested in the focus upon battery technology, and to a lesser degree, solar power. I then stumbled across two articles this evening. One discussing Thorium, and the other, Chinese reduction in rare earth metal exports. The latter being of crucial importance for technological products. Truth is, this retention of commodities crucial to technology has been occurring for quite some time. I work in a sector that is reliant upon such commodities, and it is becoming increasing expensive to secure products that are dependent upon such commodities. It is also interesting to see what China is up to South Africa, and other commodity-rich nations within Africa. Anybody noticed the entourage of executives that followed Jacob Zuma to Beijing recently? Nearly 400, and a dozen or so cabinet members… nothing like the gravy train whilst the greater South Africa earn less than a Dollar a day – but this is not a social justice diatribe, just current observations.

Thorium: http://www.telegraph.co.uk/finance/c...r-thorium.html

China holding back on metals: http://www.telegraph.co.uk/finance/n...l-exports.html

As commented upon before, (http://www.forexfactory.com/showpost...&postcount=358) Germany’s good numbers so far seem to be based, to some degree, by the exports to China. Leading economists have been speculating upon the repercussions of the Renminbi achieving a ‘non-pegged to the dollar ‘, freely floating currency. Hmm, not sure that party-HQ in Beijing will allow that to happen anytime soon – especially with the Dollar reserves held. But it will be interesting if, as many postulate, the Renminbi achieves ‘safe-haven’ currency status. This consideration then lends itself to considering what the Chinese are up to with Gold hoarding, and buying of debt within Europe.

A small thought whilst focusing upon Asia. Maybe Japan should borrow like crazy from Beijing – perhaps in Dollars - thus showing the world that the Yen is not a safe haven currency, obtaining cash to inject into industry, and, surely, forcing the Yen to drop against the Dollar, and in turn, making Japan’s exports cheaper. Will the Chinese and Americans allow this? I’m not sure, as this may interfere with current ‘arrangements’ in place. However, appreciation in the Dollar may appease the Chinese.

The Euro – pff, I have little confidence in its current form. Recently read research suggesting that only Germany and France inside the union, and the UK outside the Union, help to keep this afloat. As France depends upon Germany for good figures, and the UK is, for the moment, obliged to contribute, the Euro is able to keep breathing. The repercussions to follow should the UK say enough is enough, and Germany loses more market share outside of EuroLand, and a substantial shift seems inevitable.

Good news for Sterling – I think so, but I need to shake my head free of the many thoughts currently circulating. One being French GDP, a topic I hope to concentrate upon shortly, after I stop looking at a photograph of Christine Largarde with a scarf around her neck that I cannot help wanting to constrict in order to quell the garbage currently flowing from her gob.

Finally, and staying with photographs. Take a look at the body language between Angela Merkel and Wen Jiabao in the link to Spiegel posted above. Angela, trying to look angelically abashed just don’t cut it. And don’t think that the hand gesture from Wen is a wave of recognition to your contribution to his ascendency. It is the motion of the annexation of previous relationships with your shop, as China takes the recipes of your country, and adds to it in order to produce its own products.

Hi SN, Great to see you on this thread too!

I'm thinking if we break 1.5720 this week, I'd still be a bit hesitant to go long from that high up; I'd rather keep my long triggered earlier today, which is barely in profit, but with SL moved to b/e already due to the rather mundane day so far.

If we close tomorrow at 1.5680 or as a monthly doji at 1.572, then we might barely test 1.575 on Wednesday and start the slide to 1.535 so anyone buying from, say 1.5750, thinking we've 'broken' 1.5720 might be in for a huge shock if we take a huge drop from the monthly open, specially with all the expiring contracts you make mention of here.
I'm still looking at a monthly close above where we're at now, unless they're going to take us to create a new August monthly low, today or tomorrow, i.e. the last day of the month (monthly low so far is 1.537, so if we hit there today or tomorrow I'd be quite surprised - though absolutely nothing's impossible).

If we do, however, make a new August monthly low today or tomorrow i.e. at or around 1.536 you mentioned, then I'd be standing aside and reassessing things. I'd also be loathe to place a sell stop at 1.538/36 just in case we get there, and then just touch 1.5350 on Wednesday before making a sudden dash back up north.

Looking back over the past 3 years', the 3rd week in September has been when we've started a big slide, though that might mean nothing for this year of course. & it wouldn't surprise me to see September's monthly candle close as a doji also, with a similar monthly range to this months' before the spending review in October finally provides the impetus for a strong move in either direction.

Whichever way it goes, hopefully we'll all be trading in the right direction.

i

You certainly are an endless font of information .. I shall have to book an extra hour or two each day for more reading time!
Thanks ... saves everyone else a lot of research

For reference, the September "U0" for FX contracts expires 13th of this month, just so there is no misunderstanding. But traders will generally try and balance their futures contracts in advance of their monthly statement, or roll it over into the next contract before expiry to avoid any possibility of delivery of the underlying instrument. The third week in September is a very large options expiry week with quarterly, monthly and weekly options expiring. As huge amounts of hedging becomes unwound, the market can become prone to volatility.

I can see you like the buy low and sell high type of position, fair enough when there is a trend going on, until then I am watching a very wide range to see if the market will give some clues as to where she is going over the longer term.

Thanks for this info on the contracts, I'll go and try and read this through now to understand it, and also understand what it means for FX in general.

Just returned from a shopping 'jolly', expecting to see some green pips...

Been stopped out at break even, with a 1.5720 close being a definite 'no-no' now. Will stand aside now and watch to see whether they now intend to take us to create a monthly low tomorrow, the last day of the month, afterall.


i

Hi, 45Condor. I am always amazed at the quality of your 'musing'/editorial. Regarding the attitudes of graduates in developed nations, I can say, as an academic in one of the 'top' universities, that many of the stereotypes (or speculations) is true. In addition, students in developing countries, be it former Soviet ones or those in the Far East, have a much better foundation in science and logical reasoning, and they are willing to put their mind and efforts to solving difficult problems. British students, I hate to say, mostly expect to be given the answer or the short-cut. Otherwise they will be 'unhappy' or 'unsatisfied', and then they would give poor ratings to their institutions and now all universities worry about their place in whatever ranking or league tables touted in the press. Far Eastern students mostly just knuckle down to work, and work hard in order to do well. They have traditionally and culturally instilled respect to teachers and aspiration to education in itself that British students would never have. I heard that education has also gone downhill and become much less rigorous for the most recent generation in the East, but the inherent cultural inclination might still give them some advantages.

As for China's attitudes toward IPR, export curb etc., I think a major problem here is that many in those developed countries tend to think that the whole world would have to or would like to play by their own rules. Unfortunately that is certainly not true. China (and Russia and a few other potentially powerful ones) will play by the rules of the West, or pretend to be doing so, for as much as it is only necessary. They have their own rule book. It is to the West's own peril if they think the world rotates to their order.

Still waiting to see if we hit a new low for August tomorrow, & I've now deleted my buy limit order at 1.535, having waited from the 1st of August for us to touch there!

Don't want to get caught out tomorrow with whatever they plan to do, but whatever it is, I've kissed my aim of seeing 1.5720 by tomorrow night a firm goodbye, probably put 'paid' to that when I went ashopping dreaming of 'green pips' for today's efforts.

Good luck all tomorrow, being the last day of the month and trade safe.

i

The question was, why did we stall? I think 1.5535 holds the answer as the "line in the sand" on this one. Price tried to gain traction at this level during August and failed, those who did the buying bailed out over the last week and now the market is a bit headless chook (slightly bearish as it remains below 1.5535) until it hears news of USD strength or GBP weakness, or vice versa. Still favoring sell stops at 1.5365-85 mentioned yesterday as the "trendy" move, and the firm establishment of a new down-trend. Perhaps we can even sell an intraday break of 1.5440 now. Otherwise the 200EMA and 200SMA are both providing support around the lower bound of this zone and I am viewing yesterdays action merely as a correlation to the broader market with maybe a few "in the knows" preparing for whatever is going down today/tomorrow.

The arrows are included to highlight the touches of that price, rather than indicate a directional bias.


I think there is nothing wrong with mentioning the craziness in CHF and CAD, especially CHF recently has seen rediculous flows, completely destroying its standard correlation to EUR, my guess is correlation/stat arb hedge funds are getting carted out feet first as they keep betting on the spread to converge and it keeps wiping them out. Without a doubt the Central Banks are watching intently, and we should be too. I think it shows quite plainly though, that whatever is happening right now, it is not a case of specific USD strength: USD/CHF closed down yesterday too, and printing 1.0230 (20 lower than its close) as I write.

Agreed, the Euro totally lost it's correlation to the CHF in the month of August, and that threw me a bit for a while. We've also had both dropping this month which is weird, but your explanation here kindof explains things.

The JPY strength also has a part to play in this too I take it?

i

Hello IBK,

I hope things are well with you and your lovely wife.

How is the trading going ? It's good to see you here.

We will have to chat soon. I will tell you about anew system I am using
combining the "Bossilator" and Pivot Points.

Chris

Yes.

Over the weekend I wrote a piece of software to scan the market looking for accumulation over the last week. Not just the majors, but many many crosses and exotics.

On Sunday as I ran it, the top 5 to come up in this order were: USD/MXN, USD/ZAR, USD/HUF, GBP/DKK, CHF/JPY. Understanding the software, I had no problem understanding how it picked the first 4 (John Taylor of FX Concepts having just the week before called for a 50% decline in the value of the MXN). But it was saying, that CHF was in the top 5 out of 50 pairs with accumulation parameters, and not just that, but going to gain against the JPY!

So I can honestly say IbKA, that weird/abnormal going on with the CHF, and the JPY. Without a doubt this can be attributed to weird/abnormal market participation. Possibly in the case of JPY very long term carry-trades based in USD/JPY are being unwound (USD/JPY can be the funding basis for a lot of trades) and CHF seems to be to do with the huge flows from Eastern Europe as bad/nonperforming loans are continuously unwound and as the CHF gains strength just causes more of these loans to go sour because people are trying to pay them in HUF or PLN or CZK. These are the sort of flows that kill speculators and cause the market to overshoot. Which means patience or low leverage is required. Seems like you can't go wrong buying CHF so far this week though, and the other software predictions have been good too.

Yesterdays Bank Hol PA got GU back below 5471....Given we are between 5471 and 5318 a buying area in my eyes I would expect us to range and accumulate before reversing...It will not be easy and thats for sure as it has already proven. Only 2 areas im looking to set medium term long is 5471 and 5318 zone. Stops are moved to b/e soon as trade is +40/50. Given we are back below 5471 I will wait for 4hrly and daily close above 5471 before going long Or price to trade down to 5318 May monthly high. In the mean time there are plenty of intraday levels being formed to buy and sell off.

Monthly, weekly and daily charts attached.

Last weekly candle has formed a high vol doji at 5471 support area. I would expect us to retest last weeks low 5372 before attempting to break its high.

Stocky

Great stuff sinner

Yeah! What digger said! I just have to find what it all means now you've done the work for us.

So you been partying the weekend away...good man..hope Rappongi provided much fun and laughter..lol

You should pay a visit to the 'lost in Translation Bar' in the business district....on the 70th floor of a hotel I think...let me know if you want the address..lol

EDIT: ok its 52nd floor of the Park Hyatt Tokyo.....and it called New York Bar...(bsically where they filmed Lost in translation)

Stocky

Just a simple quant, pairs showing X, Y,Z parameters for the weekly bar have a N% tendency to move P% up on the next weekly open. N is statistically significant across many markets not just forex, otherwise I wouldn't have bothered.

Not really sure if this is a valid technical analysis. Last month we crossed over the 12 monthly average. Very similar pattern to August 2009, we crossed this average June, everyone got bullish, then strong monthly reversal bar in August, where we open and break higher but trade much much lower by months end.

Somehow it looks bullish this time though?

Hi Mystic

I've got a lovely 'husband'; rather than a wife I'm pleased to let you know.

Also, thanks for the offer of a chat over your new system, but if you can be kind enough to post the details on this thread so everyone here can contribute to the debates of the merits or otherwise of it, I'd appreciate this. There's some good enough mentors on this thread here for me to learn from so you're welcome to join them in contributing to my continued development by posting on this thread.

Stocky, good to be back and thanks for having me on this thread; & Sinner thanks also for the stuff I've learned from reading your post of yesterday (over and over again!).

Stayed out of the cable market today, just took a sell on the loonie at 1.063 as I thought we'd hit the high for this at that point (and we rallied strong on this pair for some reason today), but SL in place to take care of any further upward move tomorrow if this happens with no correction.

Cable's monthly candle is now terribly bearish, rather than the monthly doji I thought we were heading for on Sunday night, so looking to wait till Monday, post NFP before taking any position on this.

i

I am not sure how valid the things I look at are at times either sinner . On the monthly chart the average band is just the averages from the good ole macd , the 12 and the 26 when the averages cross the macd goes above the 0 line , The monthly chart is not my normal trading chart lol, but for longer term bullish ness would like to see price get thru the average band retest and stay above. A breakout of the triangle and retest would also give me a direction . The monthly chart is way to long for me to trade but if you figure a month is 30- 31 days and then put the same set up on a 30 minute chart it usually produces some nice entry spots or at least entry areas to try . This is not the only thing I look at but it is one of the simpler approaches I have in the tool box as I am mostly a day trader , may hold a trade for a day or two until a short term direction is played out . We did have a triangle break in the gbpusd in the asian session over nite which has got pretty much to its 1st projected target any how cheers all