EUR/USD scanning

Commerzbank 3 June - spot @ 3025

Please note we have no additional sell signals and currently we suspect we will see further ranging. Current position: Short at 1.3171. Recommended trade: Stop 3075, target at 2750, 2680, 2400.

Citi 3 June

• Market still aggressively long USD
• Citi argues that USD gains maybe less pronounced if exceeding expectations, while data disappointments could lead to unwinding of stretched USD-longs
• "According to Citi economists, it would take several NFP gains in the vicinity of 200K to make the Fed seriously consider tapering in coming months. Such an outcome (not Citi central scenario) could see the dollar bouncing across the board on the back of higher US yields," Citi adds. 

• Euro held up reasonably well recently as investors paring back bets on more aggressive ECB easing on June 6.
• Even if the ECB refrains from any additional easing measures at this meeting, the EUR could still come under renewed selling pressure if the June macro staff projections signal growing concerns about further disinflation in the Eurozone.
• "In particular, midpoint forecasts showing headline inflation heading much lower than the previous projections of 1.6% YoY for 2013 and 1.3%YoY for 2014 could fuel speculations of more aggressive easing down the road. This should make the euro more attractive funding currency and could send it lower across the board," Citi clarifies.

Credit Agricole 3 June

• EUR supported recently by higher than expected German inflation in May and some more muted US labour data. 
• Any EUR/USD levels near to 1.30 should prove unsustainable and that rallies are still a sell.
• Expect the ECB to keep the same dovish monetary policy stance compared to the last meeting. This means that ECB President Draghi will likely continue to leave all options open, including the possibility of cutting the deposit rate to negative territory. This is especially true as the central bank already has a view of balanced inflation risk. Hence the most recent data is unlikely to change their monetary policy stance.
• At the same time growth prospects remain muted and a higher trade weighted EUR may increase concerns about the currency’s impact on prices and export competitiveness again. Accordingly we expect no positive surprises from the ECB. On the contrary they will likely continue to ensure that monetary conditions are not tightening.
• Remain of the view that US growth prospects will continue to improve, which should be especially reflected in further improving consumer strength. Hence, expectations for the Fed to become less dovish on monetary policy should remain in tact, putting a floor below US rates and the USD

Morgan Stanley 31 May - spot @ 3030

Short 3050 as the bank looks for the USD to soon resume its broader recovery, and so sees limited upside for EUR/USD. The bank has a downside target of the November 2012 low at 1.2665, with a protective stop up at 1.3150. Now at 1.3029.

Danske 30 May

Danske fades EURUSD recovery, sells at 2973 looking for a slide to the May 28 low of 1.2852, with a stop up at 1.3035. EUR/USD now at 1.2981 within the day's 1.2986-1.2934 range.

Barclays 30 May

Looks for E/U to keep climbing but says through the 1.3090 trendline daily momentum is likely to become overbought, making further gains more difficult. Now at 1.3019, the bank will look to buy dips against support at 1.2975, looking for a pullback ahead of 1.3150. 

BNP Paribas, Goldman, Citi, Deutshe, Nomura, ANZ, CBA, Westpac, UBS, RBS, Credit Suisse, HSBC, BBH, Scotiabank, Societe Generale

So what went wrong last night?

I went to bed spewing for at least the next 2 hours.  Woke up this morning feeling 70% better, with residue shittyness still there. Why? What went wrong and how to fix this?

Simple answer is that I lacked the confidence (to perform) that comes with proper preparation.

My attention was half focused during the trade (and the whole day leading into it), and I should have put in at least a few hours of proper thinking & research and played out the potential scenarios and my responses to them.

My money management was fine. My trade logic was OK but could have done with more homework. My entry levels were (in retrospect) fine. If I did my homework, I would have had the confidence to increase size when ECB said they were open to further cuts, instead of getting scared out.

Note to self to do some trader psychology reading in Samoa: http://www.traderslog.com/trading-psychology/

Terrible trading through the ECB rate announcement

Well the day started off alright, but ended very badly tonight.

The rate decision was an expected cut, but Euro zoomed up instead (after rising from a recent low of 2960 six trading sessions ago to a high ECB announcement high of 3220.

I sold on the first hesitation in price action, my thinking was that the initial spike was done and logic would reassert itself as traders saw the opportunity to sell the EURUSD at a good price around 3200. This in fact turned out to be a great decision.  But, I failed to capitalise because I got scared out of it as I was getting smashed by the EURJPY trade and I wanted to take risk off in EURUSD around breakeven. As things stand, EURUSD now trades 3070 so I absolutely dropped the ball on this one.

In EURJPY, things went sour when it exploded north after my entry. When it hit -135 pips all I could think about was survival. The market was moving fast, and moving against logic. The incredible reversal came after Draghi announced the ECB would be open to further cuts (implying negative rates)...but by now I've tilted so hard that I was incapable of thinking straight, let alone executing properly.

The below chart shows the carnage.

Trade update

Gotta admit I don't have a very strong handle on the market at the moment. The core short EURUSD position I'm running has been met with very significant headwind over the past 2 weeks. As I understand it, EURUSD has been dominated by cross flows particularly from major yen selling, and bearish news that would normally drive the pair 30, 40, 70 pips have had very little, if any, effect.

When a pair is not acting in an expected manner (i.e. trade lower on a combination of news & data that is clearly EURUSD bearish) despite having the kitchen sink being thrown at it, then this is a clear warning that its very likely to head the other way. My suspicions were later confirmed when the market took EURUSD up to the 3200 handle on Tuesday night.

Admittedly, this was a moment that was starting to get me hot under the collar. From a technical perspective this is where the weekly kijun resides along with a number of confluence factors. Unable to convincingly crack it, the pair reversed in early Europe yesterday, and was given a second wind triggered by ECB's Weidmann who signalled ECB preparedness to adjust interest rates further.

Now, I don't think there is much to be read from the reversal at 3200 (apart from being an attractive place for long term shorts) or that there are any significant long-term implications from Weidmann's comments. What has happened is that a whole bunch of short-term bears have been cleared out by the rush up to 3200, and now bullish breakout traders will be under the pump given that EURUSD currently trades 3050. From an orderflow perspective the bullish stops underneath the range will be getting huge, and now that we are not that far off from them, they are the obvious next target.

Position wise, my average EURUSD entry sits around the 3100 handle. I'm also trapped in a light gold position at $1480 and will forget about it because it looks like staying this way for a very long time.

And so, to another day of trading...

EDIT: I've let go of the short at breakeven during the Friday night session. This trade has had 2 weeks to breath and the most its done is around 70 pips. Think I have to wait for better levels, and when sentiment really turns...  Maybe better to look elsewhere for the time being.

Thursday EURUSD news

Sean at FWXX is thinking USDJPY macro:

Based on present fundamentals and historic levels, EUR/JPY at 140 is too high in my opinion, as indeed is AUD/JPY at 110+, purely on basis of historic levels. On the other hand, from a very long term perspective, seeing USD/JPY back at 110/115 is not a stretch of the imagination at all.

In other words, I think at some stage very soon there will be excellent bearish trading opportunities in EUR/USD or AUD/USD: EUR/JPY at 130 and USD/JPY at 110 would mean EUR/USD back below 120; whilst AUD/JPY at 105 and USD/JPY at 110 would imply AUD/USD trading back near 95 cents. This is what I expect to happen over coming months.

My preferred way to play this strong USD trade is through USD/CHF and I’m hoping to get the timing right to build a long position for a move to 1.10.

EURUSD is basically in a giant shitfight between EZ woes vs QE driven sentiment from USD & JPY.

EURUSD was rejected from the 3110 level last night (a strong confluence level), currently trades 3050-60.

Commerzbank:

CommerzBank $EURUSD Current position: Longs from 1.2908 exited 1.3110 Recommended trade: Sell at market, add 1.3120, 1.3145and place the stop for now at 1.3225. Shorter term (1-3 weeks): Targets the 1.2679/61 zone. Medium term (1-3 months): Targets 1.2400 en route to the 1.2042 2012 low

EURUSD and other market thoughts

EURUSD had an outstanding Thursday (propelled by comments from Draghi indicating ECB was not about to cut interest rates) and Friday last (due to underwhelming NFP results for America), that saw 3 big figures traded. Personally, I was still kinda shellshocked to do anything about it on Thursday by the BOJ announcement, during which EURUSD lay comatose for hours, and was unable to get a grip on it leading into the whipsaw created by Draghi's speech.

Right now, its Monday and the US session is about to come into full effect. EURUSD is trading around 3020-30. From a technical perspective the bulls have taken control at least in the short term. Having already done so for a number of week BNP Paribas continues to talk up their position, suggesting that

EUR/USD to track peripheral spreads, which themselves suggest the spot should be trading closer to the top end of a 1.30-1.32 range.

Fundamentally, nothing has changed. I think upside is limited given that there is still no real solution to a fragile Eurozone, for example:

• Italian elections;
• Portugal budget woes coming back to the front?
• some building concern over Slovenia
• the Cyprus precedent of railroading depositors...fuckin fatal
• Cyprus to get a 2nd bailout, by year end?

On the other hand, the market think the Fed will NOT scale back QE, and this is supporting the EURUSD. Wow, just as Im typing this, comments from the Fed's Painalto indicate otherwise.

From an intraday perspective, I reckon profit takers will be wanting to get out after Thursday & Friday's efforts...and the price action above the 3000 handle has not been particularly explosive throughout Monday. There is some talk of large 3000 option expiries which should dampen the market for a while. Still hearing plentiful offers above:

RT @orderflowforex: #EURUSD offers @ 3040, 3080 & 3100 - buy stops above 3050 #fx #forex 

@orderflowforex: #EURUSD - An Asian central bank noted seller above 1.30 #fx #forex  

I do have to consider that the positioning must be a bit stretched now. We have had 2 months of decline, and   long term shorts must be at least thinking about taking some profits off the table.

Sentiment studies have noted a climax in S&P, and thinks that the macro environment is changing for the worse, and that the smart money are thinking of getting out of the rally.

Overall, I remain  a seller of Euro at present, and will be looking to build shorts between 3000 and 3100 over the coming sessions, for a move down to 2750 if I'm lucky.

And so, to another day of trading...

Thursday update: All about the BOJ

Had been building EURUSD shorts since the start of the week (post Easter break) banking on continuing bearish sentiment over Eurozone difficulties. At the time of writing, the EURUSD is now starting to sell off on dovish comments from Draghi regarding the EZ, particularly:

• extended weak economic activity;
• growth subject to downside risk;
• risk of inflation;
• lack of banking capital and lack of action on structural reforms.
• See here and here.

Wow what a fucking party pooper that man. Anyway, I was building shorts in anticipation of further bearish moves but the playbook went out the window when I got out due to (what I thought were strong bullish) headlines related to Cyprus getting the bailout cheque. The chart below shows what happened.

Around the same time I flipped long, I went long EURJPY. Now in retrospect that first entry was not really a smart one because I was simply trying a correlation move without much further justification. I was eventually punished as the market moved 100 pips against me. Fortunately it stablized  in Asia as the market await for BOJ news. Forexlive and FXWW kept me up to date, announcement was expected around 0330GMT (around mid afternoon Melbourne time).

The chart below shows what eventually happened.  But what is not clear is the sudden 40 pip selloff by trigger happy EURJPY bears around 0320GMT? I was shitting myself at that point because I was already 30-40 pips down from my averaged entry. I wont lie, I felt rising panic to close off the trade early, but I held because I was (a) desperate and (b) unconvinced by that move because of:

1. how broadly the EURJPY was supported evident in the basing price action over NY & Asia, and
2. how quickly the market immediately bought up the currency back to median levels...I estimate probably over the next 5-10 minutes.

Week to date

Big week so far, the whole Eurozone debacle reached a new low point with Greece unable to form government after recent elections due to a collective inability to agree over a national approach to ECB/Germany demands for austerity.

Greece is headed back for the polls (June 17?). In latest developments on Wednesday, the ECB has locked out 4 spanakopita banks which caused some 50p range volatility. I would have expected another 100p drop on this news, but am surprised by the sideways price action. The market has been going down for 11 or 12 days now, perhaps it needs a solid retracement to keep the overall bearish trend healthy.

In terms of trade execution I had a couple of hits and misses. Missed a solid gold chance to sell €/$ on Monday. Pushed too hard on Tuesday by selling too soon in Asia, down -6%. Recovered to +12% by EOD. Stood aside on Wednesday which was good as I didn't feel the need to trade, and there were no signals anyway - it was pretty choppy. Sellers are waiting for better levels to sell at, but there's no big reason for open shorts to bail out of the trade.

Thursday afternoon

Huge 3 figure move last night -- the trigger was the increased margin requirements relating to Italy, whose borrowing costs in the bond markets hit 7.5% overnight -- a figure that many commentators are saying is mathematically beyond the point of return.  I partook in a couple of limit order stop hunts on the way down netting 60pips (can't remember the levels exactly but they were all done within the first 2 hours of the London open).

Very dramatic price action overnight, probably the most we've seen in the last 2 weeks.  Spot has been consolidating in the 3530-50 area throughout today's Asian session.  With a low seen around 3520, focus is likely to turn to the reported 3500 barrier below at some stage today.

Last week

...was a decent week, going:

0/1 Monday
2/2 Tuesday
2/2 Wednesday
0/0 Thursday
0/0 Friday

Mondays are often my worst days in hindsight, because I always seem to be a bit slow off the starting block most of the time because nothing done on the weekend reading or thinking about the markets, and always too keen to jump into a trade.

No trades Thursday or Friday last week, this was smart because I "felt funky" waking up on Thursday morning, and could not really get a handle on market sentiment at that stage.  It felt particularly dangerous because I was able to trade with confidence only 24/48 hrs before, and I dunno....it seemed by Thursday midday like there was too much 2-way interest in terms of the news & technical picture.  As it played out, Thursday was choppy as hell, and Friday was less volatile but not much better.

Cant say I'm really feeling the vibe today either, as expected EU did not come up with a solution over the weekend.  Asia session edging up all day towards the 3900 handle, which should prove attractive sooner or later...but I'm on the side lines for now.

Update

Yes, I blew yet another account since the last update, all that +$13,000 went up in smoke over 2 days which is what happens when you trade without stop losses...!  Basically I haven't been updating this blog for the past 2 months as there's nothing good to report -- I've been stuck in neutral gear since then, it's like I've completely lost my touch of the markets and lost my trading mojo for the next 6 weeks.

Presently I've recapitalised the account with another $2,000 and obviously still in a fragile state I'm not wanting to lose that in a hurry.  My experience so far has shown it is possible to turn $2,000 into $13,000 quite quickly, but you really have to be selective in your trades.

At the moment, I'm doing more reading than trading, which can only be a good thing after going on such a wide ride.  Thinking more broadly about market sentiment and orderboard updates through news outlets like Forexlive.com, FXMA, MNI, Ransquawk....seeing how news &/or rumour filtering out throughout the day affect the market, thinking a bit more about trader expectations in relation to these events, thinking about orderflow and liquidity issues and basically trying to get into what is described as the orderflow mindset -- an ever elusive concept.

For example, today I took a simple 30 pips gunning the stops beyond the well-reported option barrier at 3700, which was due for expiry on Friday in 3 days.  I'd lost 30 pips yesterday making this play by the way, so the results netted off.  But the difference is that, once the barrier broke, thin markets resulted in a rush upwards to 3800, and offers eventuated near 3840-50.  Could have held on perhaps? But it's still a new experience to me.

Friday

Monster move overnight with EURUSD hitting 3 big figures.  A lot of money left on the table, but I should be thankful for getting over $2,000.  Quiet Asian session with some whipsaw in Frankfurt, we now stand at London between periods 3 and 5.

IFR has gone long at 4406, SL at 4300 targeting 4580.

Barclays says:

BarCap favors buying EUR/USD dips to 1.43-1.4280, or alternatively a break above 1.4460, looking for a test of the 1.4580 trendline. A break, and weekly close above here would target 1.47, possibly 1.4950. This bullish view is only damaged on a break back below 1.4180 says the bank. EUR/USD now at 1.4396.

Vive Le Tour

All set for tonight's epic showdown on the slopes of the Col du Galibier - Stage 18 of the 2011 Tour de France.  Go Cadel!!!

Word on the street this morning is that Germany's finally agreed with France to come to the Greek rescue package table, although no exact details reported yet.  Fresh orders caused a 60pip spike just past 9am Melbourne time (you gotta wonder about the "interesting" timing of this news release in low-liquidity conditions in Asia...) and presently holding at 4257 (high 4274, low 4210 so far).  Sentiment is has been turning bullish over the past 1.5 days, and we now await the EU conference in 6 or 8 hrs time.

My computer and its new SSD/RAM is still causing me grief with random crashes, and so restricting my ability to remote desktop.  Need to get it sorted out this weekend.

And so to another day of trading...

UPDATE 1

EURUSD down on Trichet comment re: being open to Greek default.  Very sharp selloff by a very nervous market.  I got caught out big time here, absolutely packing my pants and ready for a $2,500 loss.  Right at the very bottom, news came out about ECB talking options for "selective default" for Greece, which unexpectedly did not drop the EU like I expected.  Right away I know there was potential for a reversal but with price action being at its daily low you can never take it for granted...

News then leaked out of the ECB meeting creating the rush up, where I exited.

After falling back to the Open, its driven up again to 1.4300!! (off chart).  Although I can say I was lucky today, the European session driven down was clearly a stop-hunt designed to shake out the market to prepare for this latest NY move up.  This is because the market was already overly long to begin with, from the build up over the last 3 days.

Thurs +$2230

Mid week update

Wed +$760
Tue +$530
Mon +$690

Net P&L = +$1980

Wednesday

Tuesday

Monday

Thurs

Gosh this week has been more stressful than usual.  Just for laughs Gerry from Forexlive writes:

I vote we forget about Friday’s trading session and just start the weekend now.  Personally I’ve had more than enough for this week!! Another volatile session and my head’s going to explode.

Mon...BE
Tue...+$1000
Wed...+$600
Thu... -$100

Net +$1,500
Total $7,500 (from a start of $2,300)

Too much stress this week, need to stop trading today and ease out those emotions before I fall off the tightrope again.  Trading EURUSD on the spot FX market truly is the trading equivalent of Formula 1.  So many things need to be polished to perfection in preperation, and you're constantly pushing to be faster at the edge.  One little mistake and you're into the barriers.

Fri +31

started off badly, recovered, could have taken more but didnt capitalise.

Thurs -21 (or how not to trade)

I dont even know how I got out of this one alive...  ECB Trichet said the words 'strong vigilence' implying interest rate rise (or risk on) but we have those bastard leverage funds selling on this news 10 pips outside the band...  Go Markets froze, and there I was like a royal dipshit thinking the price was doing nothing BOUGHT, and got filled at the very top...suddenly the P&L was telling me I was -38 down? WTF? Thus began a panicked session of corrosive emotional trading, something I haven't really felt over the past 2-3 weeks.  Fucking lucky to come out alive with -21 on the top considering I was looking at -600 or so at one stage.  I will not trade for the rest of this week as punishment.

Wed +45

Tues -12

A little bit unlucky today to be fair.

Mon BE

Didnt really feel the vibe of today's price action.... one trade in NY got tapped out at breakeven.