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beHappy - FX analysis

Discussion in 'BeHappy by Tautvydas Marciulaitis' started by TMarciulaitis, Nov 23, 2012.

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  1. TMarciulaitis

    TMarciulaitis Macro Analyst at EFEForex

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    In this topic I will submit my shorter FX analysis. Some of FX analysis may be found in beHappy - Fundamentals. Those articles will be longer and consist not only of one currency pair. Here I will give my shorter thoughts about markets.
     
  2. TMarciulaitis

    TMarciulaitis Macro Analyst at EFEForex

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    Last week we've all witnessed depreciation of yen. In all pairs. Most speculate that this was due to Bank of Japan (BoJ) and Japan's gov actions. And I support this point of view. I am saying that because of:
    1) BoJ keeps saying that JPY costs too much for what ? 2-3 years ? And they intervene from time to time. Thats a common practice, not some kind of rare occasion.
    2) Before elections, gov and candidates not once mentioned that even more aggressive easy-money policy is needed.
    3) Bond markets only merely reacted to these currency movements
    So well adding everything together, it sounds plaussible that BoJ and J gov are trying their best to lower the relative cost of JPY. And in fact, I would expect further actions from them. But not just now. You see the problem is that investors are in risk-on mood for the last couple of months. They are going back to USD, comods, high-yield comod currencies and such. And well, JPY is usually among those of the safest currencies and J bonds are also considered to be very reliable and safe. So given risk-on, it would be strange for BoJ to do more interventions.
    Logic is as follows: risk-on->inflows to JPY and Japan->JPY up. If BoJ tries to decrease value of JPY, they need to fight those, who are buying it. While in risk off situation: risk-off->outflows from JPY to EUR/exotics->JPY down. And so BoJ does not need to fight anyone, but simply to ensure more liquidity than needed.
    What is more, in second scenario it is easier to force investors out of J bonds, while they may find more risky bonds with higher yields more attractive, given expectations of decreasing systematic risk.
    So for now, I would not go short JPY. Neither I would long it ATM. But still, I have my longs open, do not consider to close them. It seems that BoJ will adopt (if has not yet) long-term target to devalue JPY. And I almost never trade against central banks. Thats not a viable tactics. Thus I will rather wait a bit till JPY dips and buy some more. But this does not mean im buying after 50p dip. Rather 500.
    Good luck, good trading guys :)
     

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  3. TMarciulaitis

    TMarciulaitis Macro Analyst at EFEForex

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    Care guys with EUR pairs. It looks like someone is trying to form an order cluster at EUR/USD near 1.3. And i dont think this level will be defended strongly. Sales from somewhere around ~1.3 do not look that heavy. And also bottom boundaries of current channel are being defended, but not too many actual look at this as most of the eyes are on 1.3 currently. I do not like to guess whats gonna happen, but in a bet would say- up. Anyways, better get prepared for everything and enter the market for a longer trade only after we get out if the channel.

    ChanEURUSD26Nov.

    1 and 3 denote order cluster zones, where someone is defending price range. Wait till one of those gets broken with good momentum. If movement is without momentum, reserve your judegment.
    2 is the zone where most of the retail orders stand. From my experience and from empirical analysis, most of the retailers open their orders in the middle of range and tend to put stops/profits somewhere around 1 and 3rd zones. Guess who gets wiped out.
     
    #3 TMarciulaitis, Nov 26, 2012
    Last edited: Nov 26, 2012
  4. TMarciulaitis

    TMarciulaitis Macro Analyst at EFEForex

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    From previous post about eur/usd, we saw break downwards. But well after falling for a bit, price went back up. Hard to say why, its only intraweek movements. So hard to give economics explanations. But well we are once again at the psycho 130. Maybe it was greek deal, maybe something else. Looking from daily/weekly perspective, price moved nowhere. But for you intraday traders, there were some moves. So ok, what happens next.

    EURUSD29Nov12.

    As you see in the picture, we have order and liquidity cluster at 130. If we get through it, there may only be sharks trying to stop movement. Delibaretely. Defending their options, stocks, hedges etc. But given no big kids want to sell, there should be not to much stopping the price. And it may fly.
    I olso noticed that my indicator, which shows returns, made two spikes above. It is not very uncommon, but given such an important (for retailers) level, i would expect move down. It might not be very large or long lasting, but price should move down so that mean(return) would come back to zero. So look for down movement.
    On the same notice, option max pain ATM is @ 128. Take this into account. Nevertheless, we still have more than 3 weeks for that, so things might change. But if market breaks 130, i would say, try to go long. With tight stop. And ride the movement for as long as you can. It might be false breakout and price may come back in couple of days, it might be real breakout and we may see up till the next year. But there shall be move, when we break through 130. Thats for sure.
     
  5. TMarciulaitis

    TMarciulaitis Macro Analyst at EFEForex

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    Seems I really underestimated the power of sellers above 130. Had a small false breakout on LDN opening and going down now. LDN buying USD and selling EUR suppose. But its the end of the month, so might be profit fixing. Lets wait for the next week. Situation may become clearer. And focus on the bottom line of the channel for support. Just try to watch how buyers will handle sellers and whether they will be able to stop price going down. That might indicate if its a profit fixing or something different.
     
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