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June 23rd, 2010-Giant#2 FX Market Overview

Discussion in 'Giant #2' started by Giant #2, Jun 23, 2010.

  1. musandpix

    musandpix Recruit

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    Thanks G2

    Thanks for your candor and insight. The "battle of the double-dippers" seems to be leaning more and more towards a double-dip, and sign on the street support it.

    THANK YOU FOR GIVING US ALL SOMETHING TO THINK ABOUT

    Gilgamesh: Your interpretation of "risk aversion" is close, and it's important to understand that when "risk aversion" occurs, how it impacts various pairs and other financial instruments!! An obvious example of a "risk event" was the closing of Lehman Bros. doors, which in turn spurred "risk aversion", where money is taken OUT of riskier positions (stocks, etc.) and typically is moved into "safe havens" like the U.S. dollar (G-d only knows why this is considered a safe haven!), Gold, Treasuries. So it's important for FOREX traders to recognize "risk events"! You will want to respond to them in order to keep your investments safe, as well as to maximize profits. The issues you mentioned, "discipline, control of emotion, etc." are definitely important - but DO NOT UNDERESTIMATE the importance of recognizing and responding to, risk aversion!

    AGAIN, THANKS G2 FOR SHARING YOUR INSIGHT. I hold and trade AUD as well, so I was especially interested in your views on that. Thanks FPA for finding another great source of solid data!!!!
     
  2. kamuta

    kamuta MQL45 Representative

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    Welcome

    Thank You for sharp and clear market outlook!
    I completly agree with you... very interesting - are you using any technical analysis methods?
    How you avoid "emotional" trading? As for me - I often start trading trend reversal too early... :)
    One more important thing about Forex - now even big brokers like dbFX, MBT plays "Retail Forex" - this mean they can't guarantee stop orders execution because "only when the price reaches your stop and order is sent to our liquidity providers where it will be executed at the best possible bid or offer at the time."
    Result is big gaps on fast movements and especially on weekends... :unhappy:
    They even use this as "advertisement": "Anonymous Trading: Banks Cannot See Your Orders"
    So as you using institutional service - can you recommend broker which guarantee stop orders and have free API for autotrading?
    I use Oanda for Forex trading, they guarantee stop orders even on weekends, but API costs very much for me - 600$/month...
    Thanks again
     
    #12 kamuta, Jun 24, 2010
    Last edited: Jun 24, 2010
  3. Simonr

    Simonr Recruit

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    I am staggered you say you'll be selling JPY and buying "risky" currencies (AUD) in bouts of risk aversion.

    Surely you have this the wrong way around? JPY is still the dominant funding currency for carry trade, note how even USDJPY weakens during risk off periods, despite the Japanese economy's very weak fundamentals (even relative to the US).

    AUDJPY is the purest carry trade pair amongst the developed market currencies and is thus an excellent barometer of risk sentiment. It has shared a very close correlation with SPX over the past 12 or so months.

    JPY is to be BOUGHT in risk off and SOLD on risk on, and it will remain so until the last carry trader has been carried out on a stretcher.

    Watch for SPX to break below 1030 (AUDUSD < 0.83, ASX200 < 4400, Oil < $72, 10yr UST yields < 3%). If these inflection points are broken, markets will be implying that global reflation efforts have failed, thus pricing in a very deflationary outcome for the world.

    If these points are broken expect 1) dramatic risk-off 2) double-dip recession 3) flight to safety. USD and JPY will both rally strongly in this environment but JPY will outperform USD at least for the first few weeks as Yen loans are repaid in rapid fashion.

    Cheers
    Simon
     
  4. Mandrake

    Mandrake Corporal

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    Hi Simonr,

    I don't agree with you on JPY. The 'risk off' 'risk on' is just what people think it should be, and how it should be. But if you look at the daily chart it is more of an up trend since Nov 2009, not fast though but it is going up.

    Infact I am waiting to buy USD/JPY as it is about to reach 89.00 I am hoping for a buy signal soon. I think long term it should be running up really high. I was just waiting for someone to confirm what I wanna do.
     
    #14 Mandrake, Jun 24, 2010
    Last edited: Jun 25, 2010
  5. robert1

    robert1 Recruit

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    Fall off a cliff

    It's nice to have another giant on board. Thank you #2. A couple of things have me worried with currencies. 1. The amount of debt that the different countries are taking on their books. My view is countries that heavily borrow, compete with the private sector for that same money. Thus not enough investment in the private sector for job growth leading to no tax payers. Lots of money going out but not enough coming in to pay for services or interest on their debt. As you can clearly see in the USA. This massive debt in these countries is leading to default. First was Iceland, then Greece, now Spain, then Portugal, then Not So Great Britain. It sounds like Japan hasn't figured out how to dig themselves out of a hole dispite the IMF dictating to them years ago how to do it. And last on the list of debt based currencies is the USA. Which leads to my Question. At what point does the WORLD fall of a cliff. If this happens we can all say the world isn't round it it square. And this leads to my #2 issue. If all the credit default swaps and derivatives written on the planet are worth 514 trillion dollars. But the most the world currencies have put together equals say 10 trillion. I'd say we have an O SH*T moment. What happens when the worlds debt exceeds it combined currencies. What do you use as currency? How do we restart are economies with no investment? What happens to interest rates? Do countries collapse into civil war or total chaos? There's only two ways I know to exspand an economy. 1. increase the speed that money is transferred from person to person. As in issue currency cards that have time limits on the money on that card which will expire an forfeit to the goverment unless it is spent. Or 2. increase the number of people that have currency to spend. In other words get more currency into the hands of as many people as possible. The UNITED STATES had a perfect oppurtunity to do this with the tarp funds. Instead of giving the money to the banks, they should of gave it to tax payers. Tax payers would of paid off credit cards, or mortgages. Or would of saved for a college fund. Regardless the banks would of got the money. Some would of bought new cars. Which would of saved the car industry. Some would of bought houses which would of saved the housing market. BUT NO! ALL WE GOT WAS THE BILL. Well, don't take my word for it. Lets watch what happens.
     
    #15 robert1, Jun 24, 2010
    Last edited: Jun 24, 2010
  6. digital_soul

    digital_soul Private, 1st Class

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    Warm welcome to Giant #2 to our forums!!

    :)
     
  7. drexyl

    drexyl Recruit

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    hi G2..great view on fundamentals..

    i also hope to read some more on GBPUSD by the next time you post.

    i will follow everything you wrote above, i hope to read more on your news.

    thanks a lot!
     
  8. rpaco

    rpaco Sergeant

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    Interesting, we are insignificant, no mention of the UK emergency budget and the fiscal tightening which we hope will let us retain our AAA rating.
     
  9. Eleoura

    Eleoura Recruit

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    Thanks G2 - From Harcourt Central Victoria

    Hello G2,

    Thanks for the analysis, it was really interesting and intelligible.
    I am in Australia and was surprised that we (as a commodity produce) were going to be included in the basket of currencies making up SDR's.

    Hope you will consider doing more analysis and posting it here
     
  10. Singlemalt

    Singlemalt Private

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    Thank you G-2. This expands my knowledge as to long-term trading. Any new knowledge is always helpful.
     

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