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  • #138,881
  • Jan 27, 2016 4:19am Jan 27, 2016 4:19am
@sisse

Everybody expecting dovish fed today, is it because the equity fall perhaps and bad numbers coming from the states?

With inflation falling (target 2%) and unemployment rising (next hike), is that why the dovish statement is expected...

But after all the hike should longer term push the euro down so the play could be this week or even the next sell the highs.... with 920 940 and my favorite 970 as a sell chance.

Am i on the right track with this thinking?
  • #138,882
  • Jan 27, 2016 4:49am Jan 27, 2016 4:49am
Quoting Vladimir1987
@sisse Everybody expecting dovish fed today, is it because the equity fall perhaps and bad numbers coming from the states? With inflation falling (target 2%) and unemployment rising (next hike), is that why the dovish statement is expected...
Well a dovish FED play is not really related to the current US numbers (they are very solid in all fronts) but about 2 things:

  1. is about the jitters in the world economy with China unable to find a decent floor and the collapse in OIL
  2. and more importantly about EXPECTATIONS for the next hike.

Quote
..But after all the hike should longer term push the euro down so the play could be this week or even the next sell the highs.... with 920 940 and my favourite 970 as a sell chance. Am i on the right track with this thinking?

Well is a bit more important than a simple knee jerk reaction news leg flow. What is in play with a 'dovish' FED is killing next hikes March and confirming expectations for the next hike early in the summer. Which will be pretty much be neutral/ slightly bullish DOLLAR and in the case of the EUR/USD you are mentioning, it will settle the map until MARCH when the ECB (the Euro side) will deliver (or not) QE.

Basically it wont be a quick in and out with a dovish FED but rather a choppy and bumpy ride up once we clear the highs of the 1.09xx handle to the 1.11xx ...

I hope it helps ...

sisse

PS: Thanks to bullionman for the edit on the correlation post
Pending conversations? PM for a chat...I am mainly in OTM now
  • #138,883
  • Jan 27, 2016 5:06am Jan 27, 2016 5:06am
Quoting Vladimir1987
@sisse Everybody expecting dovish fed today, is it because the equity fall perhaps and bad numbers coming from the states? With inflation falling (target 2%) and unemployment rising (next hike), is that why the dovish statement is expected... But after all the hike should longer term push the euro down so the play could be this week or even the next sell the highs.... with 920 940 and my favorite 970 as a sell chance. Am i on the right track with this thinking?
Its interesting as DXY technical compression (chart) is gonna explode one way or the other = E/U is gonna break the range (compression, as sisse mentioned the crazy small size of the Month1 candle). FED seems to be the natural fundamental trigger to shoot up this mid term rocket - hope for hawkish FED (would say that no change to the statement is still hawkish as the market expects more likely a dovish move) X strongly dovish FED may kill the mid term leg for at least February X interesting case would be neutral FED - some slight expected dovish change (e.g. international developments) to the statement with letting the doors widely open for March hike - would not be supprised if we stayed in the compression (on DXY and E/U) till the NFP. On DXY we can see that about five other daily candles can fit into the triangle

Other question is what the statement is actually gonna be like on ground of macro/financial stuff - If I was FED I would make no change to the statement, lol.... They legitimized the start of the hike cycle by labor market conditions and those are still intact - no wage growth in DEC but great NFP number. Inflation also on track mostly. And the equities madness is something I bet they counted with - as yellen knew that "stock valuations generally are quite high"

P.S. sisse´s account is much more qualified
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  • #138,884
  • Jan 27, 2016 5:18am Jan 27, 2016 5:18am
Quoting sisse
{quote} Well a dovish FED play is not really related to the current US numbers (they are very solid in all fronts) but about 2 things: is about the jitters in the world economy with China unable to find a decent floor and the collapse in OIL and more importantly about EXPECTATIONS for the next hike. {quote} Well is a bit more important than a simple knee jerk reaction news leg flow. What is in play with a 'dovish' FED is killing next hikes March and confirming expectations for the next hike early in the summer. Which will be pretty much be neutral/...
I would respectfully disagree about all US numbers being solid - though most certainly are. But if you look at Industrial Production, which accounts for 20% of the US economy, there is a noticeable deterioration (in large part, no doubt, due to investment cuts in oil production), which look set to translate into weak Q4 GDP numbers. The weaker numbers in Q4 Industrial Production - showing a contracting sector - have also fed into a lower Industrial Capacity number, implying the economy has further room to grow before inflation pressures are stoked. There is hope that an increase in retail sales will be witnessed in the coming months (this didn't materialise in December when sales actually fell), as consumers feeling more confident that lower oil prices are here for the foreseeable future, start to spend more.

There is a great disparity in the markets right now, with no one really believing the Fed's prediction (as shown in their dot plot from December's minutes) of 4 hikes in 2016. Federal Funds futures are currently implying a single hike in 2016. I would be very surprised if the Fed wasn't dovish laster today, making soothing noises about being aware of the challenging economic backdrop. Will we see a kneejerk move higher on EURUSD from a dovish statement, clearing out weaker shorts, setting up some nice levels to sell further up? I am closely watching.
  • #138,885
  • Jan 27, 2016 5:22am Jan 27, 2016 5:22am
Quoting chester123
... If I was FED I would make no change to the statement, lol.... They legitimized the start of the hike cycle by labor market conditions and those are still intact - no wage growth in DEC but great NFP number. Inflation also on track mostly}
I agree with you but the bastards with their own specialised media outlets have flood us with the 'end is coming' stories and negative rates again and bla bla the usual noise but particularly noisier with election year in the US where Republicans will love US equities and employment derailing before November....

In any case we are going to have 2 or 3 major movers and shakers this year from the CB rates front. The sooner we clear the first one, the smoother for trading. For now dove or not dove we are pretty much set to wait till March.

sisse
Pending conversations? PM for a chat...I am mainly in OTM now
  • #138,886
  • Jan 27, 2016 5:34am Jan 27, 2016 5:34am
Quoting gammase1
I would respectfully disagree about all US numbers being solid - though most certainly are. But if you look at Industrial Production, which accounts for 20% of the US economy, there is a noticeable deterioration (in large part, no doubt, due to investment cuts in oil production), which look set to translate into weak Q4 GDP numbers.
Very valid argument.

Yes, indeed industrial production and manufacturing have slow down no doubt about it. In my books, it's more about the backlog of the collapse in OIL and the impact of China hard landing since last summer. Definitively something to keep a close eye but Employment, Inflation, Consumer Confidence, Retail and more importantly GDP in general are in very stable conditions (the most they have been in the last 8 years).

A slightly dovish FED with OIL finding foot (and an extra ECB QE as collateral push for the cream on top) and you will see most of the bastards riding the PIG to the highs without thinking twice. Point being, for now industrial production is one to keep a close eye on but is far from threatening a US collapse...

The FED should sit tight and avoid getting hijacked again by bastards that scream easy money and negative rates ...as I mentioned many times here, the sooner the FED finish the first stage in normalisation, the faster, stronger and more sustainable the long term recovery will be....

sisse
Pending conversations? PM for a chat...I am mainly in OTM now
  • #138,887
  • Edited 5:58am Jan 27, 2016 5:43am | Edited 5:58am
Quoting gammase1
{quote} I would respectfully disagree about all US numbers being solid - though most certainly are. But if you look at Industrial Production, which accounts for 20% of the US economy, there is a noticeable deterioration (in large part, no doubt, due to investment cuts in oil production), which look set to translate into weak Q4 GDP numbers. The weaker numbers in Q4 Industrial Production - showing a contracting sector - have also fed into a lower Industrial Capacity number, implying the economy has further room to grow before inflation pressures...
Actually concerning the federal funds futures. As far as I recall at the beginning of DEC they expressed pretty low probability of DEC hike (or simply the argument: the probability of DEC hike was extremelly low for very long time and incresed almost exponentionally very shortly prior to DEC 2015 hike) - so I would say that it does not really matter right now what the federal funds futures have already not/"priced in" in January as we have the whole year for potentional 4 hikes. The "depracing" seems to be the consequence of this whole crazy "zero-hedge like end of world" media mental massage, which sisse mentions. Question is if FED eats it up. Kind of wonder if this unified mainstream media line is just a coincidence or if there are any elites capable of forming it to reach their interests

But agree on the somehow dovish statement - something I expect but would not recommend to do - guess for them its a question of strategy - so they can have all options open in future

Quoting sisse
{quote} I agree with you but the bastards with their own specialised media outlets have flood us with the 'end is coming' stories and negative rates again and bla bla the usual noise but particularly noisier with election year in the US where Republicans will love US equities and employment derailing before November.... In any case we are going to have 2 or 3 major movers and shakers this year from the CB rates front. The sooner we clear the first one, the smoother for trading. For now dove or not dove we are pretty much set to wait till March....
hmmm, this is interesting part (ehm, everyting is interesting )! maybe ill wait for your "pre-FED post" and ask later so we do not duplicate things
  • #138,888
  • Jan 27, 2016 5:53am Jan 27, 2016 5:53am
Quoting chester123
{quote} Actually concerning the federal funds futures. As far as I recall at the beginning of DEC they expressed pretty low probability of DEC hike (or simply the argument: the probability of DEC hike was extremelly low for very long time and incresed almost exponentionally very shortly prior to DEC 2015 hike) - so I would say that it does not really matter right now what the federal funds futures have already not/"priced in" in January as we have the whole year for potentional 4 hikes. But agree on the somehow dovish statement - just a question...
The pricing of Fed Fund futures, and the direction in which it and, commensurately, the US yield curve moves do matter a lot when it comes to trading FX, as moves in the former are a big contributory factor to the value of the dollar. Hence why it would obviously be extremely bullish for USD if the statement tonight reiterated the previous base case of 4 hikes in 2016, as this would impact Fed Fund futures and the yield curve - particularly the front end - bringing them more into line with the Fed's dot plot chart. That is not to say that Fed Fund futures are often wrong in their outlook, as are the Fed or any predictive tool.
  • #138,889
  • Jan 27, 2016 6:15am Jan 27, 2016 6:15am
Quoting gammase1
{quote} The pricing of Fed Fund futures, and the direction in which it and, commensurately, the US yield curve moves do matter a lot when it comes to trading FX, as moves in the former are a big contributory factor to the value of the dollar. Hence why it would obviously be extremely bullish for USD if the statement tonight reiterated the previous base case of 4 hikes in 2016, as this would impact Fed Fund futures and the yield curve - particularly the front end - bringing them more into line with the Fed's dot plot chart. That is not to say that...
Yes, I dont at all doubt the mechanism on which it works and is connected with yield curve and FX.

"There is a great disparity in the markets right now, with no one really believing the Fed's prediction (as shown in their dot plot from December's minutes) of 4 hikes in 2016. Federal Funds futures are currently implying a single hike in 2016. I would be very surprised if the Fed wasn't dovish laster today...."

from your post it just seemed that you made the statement that there is disparity between the FED projection and market expectation as observed from the fuderal funds futures and this fact can be used as an argument/incentive for FED to accept a dovish statement - with which I would not agree as argumented before. But... I agree on everything else
  • #138,890
  • Jan 27, 2016 6:24am Jan 27, 2016 6:24am
Quoting sisse
...For the European morning eyes in DAX losing 974x.x [check] as it could give the heads up for the rest of the day unlocking a quick test (very tradable) to the lows of the year with a very strong intermediate stop 946x.x before.

...and that was it for the European session with key heads up for the FED later. European equities held 974x.x unlocking the super tradable leg to 1002x.x and beyond for the FED play.

Euro starting to look very heavy at the intraday highs but still teasing with a breach 1.086x for NY. In my books is 'choose your poison time' for those not already in and willing to position before the FED. Cheap tickets available with NY open with a play with US equities.

But like usual with macro news (FED) , if you don't know exactly what you are doing, today is not the time to fck around. For the rest trading or planing to trade today, the week starts today with the last short term play of the month.

sisse
Pending conversations? PM for a chat...I am mainly in OTM now
  • #138,891
  • Jan 27, 2016 6:46am Jan 27, 2016 6:46am
Quoting chester123
{quote} Yes, I dont at all doubt the mechanism on which it works and is connected with yield curve and FX. "There is a great disparity in the markets right now, with no one really believing the Fed's prediction (as shown in their dot plot from December's minutes) of 4 hikes in 2016. Federal Funds futures are currently implying a single hike in 2016. I would be very surprised if the Fed wasn't dovish laster today...." from your post it just seemed that you made the statement that there is disparity between the FED projection and market expectation...
I think there are plenty of arguments, in relation to the economic outlook, for the Fed adopting a more dovish tone tonight - one that is at least a little closer to the current pricing in the markets. The disparity between Fed Funds futures and the Fed's own predictions are merely highlighting these arguments - possibly in an overly negative fashion given how beaten up sentiment is right now. It is a deterioration in the fundamental outlook that is an argument/incentive for the Fed to issue a dovish statement, not the price of the Fed Funds futures taken in isolation.
  • #138,892
  • Jan 27, 2016 7:51am Jan 27, 2016 7:51am
...and here we go of NY. Maps crystal clear in equities and Euro for the news flows. Euro running soft stops @ 1.086x right on time for the open which made things a lot easier trading wise and also is setting 1.088x as fresh micro flip level for the FED today.

Trading time in the Euro with the test 1.091x and the NY opening range to right after put markets to deep sleep until the FED.

Not much to do here until then so same levels, same trades same all....

sisse
Pending conversations? PM for a chat...I am mainly in OTM now
  • #138,893
  • Jan 27, 2016 12:27pm Jan 27, 2016 12:27pm
...and we go for another FED day.

--> As expected since the heads up in the European morning. Equities in the way up (buy the rumour sell the fact) and both sides of the Atlantic look set to main targets (DAX 1001x, S&P 1940.x) without much fuss bar the FED killing the party obviously.

--> Euro also as widely expected since the morning seating in 1.088x for the announcement. More importantly OIL in another +5% day but with alarms triggered in $32.2x as failure to take it (rally on gossip and profit taking but not in facts and inventories) can leave the test of lows ($25.9x) NAKED with the slightest wind.

--> GOLD with a fresh break up 1080.xx since last week clearly already digesting a DOVISH FED but the rally has very limited scope with 1140.xx naked with an extension 1179.xx

Only a very aggressive/hawkish FED will create a short-circuit across the board but for the rest the news play extend as late as the Monthly close but the actual impact will pretty much set the tone across the board for the rest of the Quarter ...

sisse
Pending conversations? PM for a chat...I am mainly in OTM now
  • #138,894
  • Jan 27, 2016 12:53pm Jan 27, 2016 12:53pm
.... For the FED....The odds of a rate change are zero to none. Any surprise move up or down will just create an earthquake so not point in going over those scenarios

--> On the Fundamental side

  1. Markets are widely expecting a dovish FED to guarantee no rates till early in the summer. Only thing to track are small hints on the statement especially those related to GLOBAL RISK and to lesser extend inflation impact of OIL and commodities.
  2. A dovish FED will establish a hard floor in the mid term in Equities while allowing DOLLAR to have a breather in the rally delaying the breakout prolly till the end of the Quarter. Gold will also benefit with the rally setting a very very strong base for a mid and long term bottom leaving the last exhaustion leg below $1000 to the ECB QE and the OIL short term bottom....

--> On the Technical side

  1. A clear dovish FED will set a very hard floor on 1810.xx leaving a few points marginally open to 1789.xx for a double bottom with a risk leg (china + OIL) while unlocking a healthy rally to set the HIGHS of this Quarter (+/-1995.x)in the next couple of week.
  2. A dovish FED unlocks DXY 96.5x in a rather quick move while a hawkish (not expected) will trigger the mid term break out on Dollar and it will have huge consequences across the FX board). More importantly it will trigger decoupling (break correlation short term) from Dollar with Equities...

--> For the actual flows (only Euro for the rest check back posts)

As usual in these plays ...ALL micro LEVELS RAISED ...

 

  1. Map is pretty much cleared since the morning. 1,088x is the flip level for the play.
  2. Expecting zig zag that extends for the M roll play. Inline / FED not very vocal 1.091x -> 1.088x -> 1.073x with extension as low as 1.063x to set the LOW of the Quarter.
  3. To the other side, with a extreme dovish FED simple flows 1.088x -> 1.099x -> 1.114x, tradable directly and or with the mini break out...

Key moves expected with the M combo that will set the currency board for the REST of the Quarter.... GL ALL trading today ...

sisse

Pending conversations? PM for a chat...I am mainly in OTM now
  • #138,895
  • Jan 27, 2016 1:01pm Jan 27, 2016 1:01pm
Dovish (some minor technicalities in employment and inflation) and Global RISK as expected !!! .... thats was pretty much it ...

sisse
Pending conversations? PM for a chat...I am mainly in OTM now
  • #138,896
  • Jan 27, 2016 1:06pm Jan 27, 2016 1:06pm
hope you guys are well
  • #138,897
  • Jan 27, 2016 1:10pm Jan 27, 2016 1:10pm
sadly had a delayed announcment from bloomberg tv and as i heard the dovishnes i thought of a buy but it did jump probably because of that couple seconds earlier from the supply... though bought a retrace for 10 points... overall ok.

maybe we get some retrace for better buy
  • #138,898
  • Jan 27, 2016 1:20pm Jan 27, 2016 1:20pm
Quoting Pharm0r
hope you guys are well
Thought you went mia .
Here west of Rich we got 18 in of the white stuff . Hope you fared better than that .
peace
Peace
  • #138,899
  • Jan 27, 2016 1:21pm Jan 27, 2016 1:21pm
Quoting Pharm0r
hope you guys are well
Close to death... think, I got a cold.
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  • #138,900
  • Jan 27, 2016 1:29pm Jan 27, 2016 1:29pm
Quoting build11
{quote} Thought you went mia . Here west of Rich we got 18 in of the white stuff . Hope you fared better than that . peace
Nope- just took a few days. Still posting in another thread, not much to update really.

Only a dusting here, cold rain sucks. Usually Feb is when we get the ugly stuff- but you know that
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