All square, now waiting on the 'inevitable' dips
I have been probing AUD/JPY shorts since yesterday as the recent move higher felt overdone. That said, I'm only jumping in and out for quick wins and keeping my ammunition dry for further cable and AUD/USD longs.
Cable is still my preferred play and I'm hoping to get back on the long trade somewhere on the 1.24 handle (with a bit of luck and wishful thinking!). One point in my favour is that the bears at 1.22 have turned bulls at 1.27, a sure sign of an interim high! If I told you where I think it might go in the next few weeks you'd probably have me committed so suffice it to say I'm expecting some over-extensions if/when the over-hedged GBP shorts get scared.
AUD/USD should be more sedate, having unwound much of its over-sold properties on the crosses (AUD/JPY, EUR/AUD etc). I'm expecting this market to slip back into more traditional Aussie trading patterns and plenty of sideways stuff should be the order of the next few months.
USD: Bearish momentum starting to accelerate
The AUD/USD is leading the way again as a new trading week gets underway and those who have missed out on the move might get some more joy by focusing elsewhere. Cable is underdone in my biased view and has some catching up to do. There is always the risk of some Brexit headlines knocking the GBP on the crosses but it is a risky business after all.
I'm trying to trade the upswings in cable and any 50 pip dips are buying opportunities whilst this bearish USD momentum holds sway. I'm expecting this 1.2410/20 level to provide some short-term resistance and dips towards 1.2360/70 are now buying zones. I feel that we will see levels near 1.28 before too long.
AUD/USD is headed to .73c in my view but this may take some time. Patience required.
EUR/USD has the potential to really hurt some of the big shorts out there but personally I feel a bit nervous about being overly long and I prefer to look elsewhere. Similarly with USD/JPY; it will head towards 100 eventually but the market might already be too short the JPY crosses.
Market signals becoming clearer
At risk of repeating myself once too often, I think the market's reasoning behind buying the USD is deeply flawed and I am looking for opportunities to build medium-term USD shorts against one of the other majors.
The move back above 1.10 in EUR/USD is pivotal in my view and I expect to see further unwinding of speculative short EUR positions across the board. EUR/USD should now consolidate above 1.0950 and start making fresh highs for 2020.
AUD/USD is showing no signs of making any significant dips and it keeps grinding higher in the face of ostensibly negative headlines out of China. I still think we will see .73/.74 on this run.
USD/JPY is a bit trickier with significant short positioning still in play but the big institutional Japanese investors are very long of US assets and will need to start bailing out of these at some stage. Timing will be the key in this pair.
The pair with the biggest potential is cable in my opinion. The GBP is being pushed lower on the crosses with more Brexit-related negativity but once this is priced back into the market., then I feel that cable could start a nose-bleed short-covering rally. I'm looking to build an aggressive position and am hoping to get lucky on the timing (as no one likes sitting for weeks on a big position in sideways markets!). Short-term sentiment is still fragile so I'm thinking we may see levels back around 1.2100 first before the rocket gets launched :) Call me mad but I see a 20 big figure rally in cables' future.
In the grip of the Algos but sticking with the plan
I've been getting chopped around a bit over the last couple of weeks with the big Algos seemingly back in charge and tying the market into their beloved ranges. That said, I am seeing nothing to dissuade me from my view that the USD will be taking some big falls in coming months and I am still trading this view in AUD/USD, cable and gold.
I know I said last time that I was going to stay away from cable until I had more information but I got impatient and I have a small long position, a little out of the money. The latest Brexit stoushes between Brussels and London have put the "no deal" words back on the front pages and that has driven EUR/GBP back up towards .90. I'm keeping a close eye on the cross and will have to decide this week whether to add or exit my cable long position. Let's hope that we get some clear market signals.
AUD/USD is trading like a pair that wants to go higher imho. ALL of the news out of China should be very AUD negative and yet any dips are very limited. What can't go down will do up!! I still target .73c on this pair. Any dips to the low .64s are buying opportunities imho.
Gold is also giving me no reason to sell so I'm just going to sit on that until things get silly.
Have a great week++
Careful Now! Equity markets have me a bit worried
I was very bullish cable to start the week and I've obviously been totally wrong on that one. This may be just another stop-loss squeeze but the daily close below 1.2250 has the overall picture looking potentially bearish. I'm stepping aside on cable for now and will await further signals.
The AUD/USD has held up well but if global stock markets hit the skids again, the Aussie is likely to come in for some short-term punishment. I'm square here as well but am a convinced dip-buyer and will look for good risk-reward opportunities.
I'm still comfortable holding onto my long bullion trades and see no reason to exit these at the moment.
JPY crosses providing direction for now
EUR/JPY is back at levels last seen over 3 years ago and this is putting the other JPY crosses under pressure as well. USD/JPY has been relatively liquid over the last few months, bar a few nasty spikes down and up, which suggests to me that positioning is not at extreme levels and we are not seeing any panic runs either way.
I'm still in total disagreement with the majority of analysts out there who have been expecting a strong USD rally. Any structural liquidity issues, especially in emerging markets, which might be USD bullish will be more than outweighed by the fact that the collapse in global trade has led to a huge drop in demand for USD. Add in all sorts of uncertainties surrounding US Treasuries and I could not feel at all comfortable in holding USD for any length of time.
So what to trade?
USD/JPY: For now, be short and stay short for a test of 100.
AUD/USD: Any dips driven by AUD/JPY selling will be short-lived imho and I'm in dip-buying mode. The levels I'm watching are .6325/50 to begin with then .6260-80. Once the USD really turns, I'm expecting a 15% move higher in the AUD/USD.
Cable: Similar to AUD/USD, any dips will be driven by GBP/JPY selling and I feel that levels around 1.2250 will provide good value entry levels. That said, with cable we always need to be particularly vigilant as 300 pip over-shoots are almost the order of the day! I'm not leaving any orders, preferring to trade it on a day-by-day basis.
EUR/USD: The EUR looks pretty ordinary on most of the major crosses so I'm leaving it alone for now. Speculative positioning in some of the EUR pairs is getting towards 'painful' levels so no doubt we will get a very nasty stop-loss driven rally one of these days.
AUD/USD: Looking to buy dips to .6365
Last week's AUD trade worked out nicely but let's not get too carried away with the bear trade; the AUD/USD is still primed for a move to .73/.74 over the next few months and I am hoping to ride the waves on the way there.
I have exited my short AUD/JPY trade and am looking for dips to reinstate my long AUD/USD trade. I am expecting some short-term consolidation between .6350/.6475 over the next few days and will trade this view with a neutral bias. Ideally I would like to be building longs for the next run higher on the .62 handle but we will have to be patient and see how long this temporary AUD bearish momentum holds for.
Easing off long AUD play
I've been playing the AUD from the long side for the last 5-6 weeks but the little Aussie battler is starting to feel quite overbought especially on the crosses. I have exited my AUD/USD longs and am dipping my toes into some short AUD plays, albeit with very tight stops.
AUD/JPY is my preferred play and the 'gap-closers' amongst you will no doubt have recognised the fact that the move back to .6995 has closed a gap from 4 weeks ago. I'm edging into shorts ahead of .7000 with stops above .7050 for now.
EUR/AUD also feels seriously oversold as indeed do most of the EUR pairs. There have been plenty jumping on the 'end-of-EUR-as-we-know-it' bandwagon yet again but this trade is heavily overdone in my view. Not so sure on the levels in EUR/AUD but I'm looking for some basing formations on the short-term charts.
Sticking with buy-dip strategy in AUD/USD, Gold and Cable
I don't see anything to change my medium-term macro view that the USD will come under increasing pressure in the months ahead. The market has had another look at the "Euro demise" trade but this got very overcrowded and is starting to unwind after the EZ fiscal stimulus package announcement.
AUD/USD is still my favourite play, as it was chronically oversold, and I favour a test of 65 cents before we get another decent dip-buying opportunity. Cable has weathered a few storms and should test levels near 1.2850 from here (currently 1.2450). That said I feel that the GBP will, sooner rather than later, start to under-perform on the crosses as the BoE measures start to take effect. Not sure on levels yet, so its a matter of waiting for the right time on the short-GBP trades I feel.
We certainly can't complain about the volatility and with speculative positioning at mature levels, we can expect more of the same for the next 2-3 months.
Based on the data I am receiving on the strategy side, the discretionary traders are still lording it over the systematics who are still struggling to get to grips with the changed environment. Swings and roundabouts.
Stay safe out there.
Who's doing best in these markets? Definitely the discretionary traders!
Well that is an exceedingly easy question to answer! Experience is showing it's value with the ex-institutional traders showing (in general) quite exceptional returns over the last 8 weeks. After adjusting for leverage, we are seeing the following average results:
- Discretionary ex-institutional traders: Average unleveraged returns of 5.6% pm over the last 2 months. We have seen no traders reporting losses in this period and best unleveraged returns of 27% for the last 8 weeks. These traders LOVE volatility.
- Systematic ex-institutional traders: Pretty flat across the board, but what we have noticed is that most of these would seem to have some discretionary input as they turned off their models and exited the market once conditions reached extreme levels.
- Systematic retail traders: APPALLING. All those with variations on the Martingale approach got obliterated. Most blew their accounts up and showed an unwillingness to change their risk-levels and strategic approach in the face of changing market conditions.
- Discretionary retail traders: Mixed. A few quite extraordinary results (on leveraged accounts) and of course it's hard to know whether that was good luck or good trading. Overall the discretionary traders have worked out better than the systematic as they managed to change their approach when required. Over-leverage still the retail traders biggest enemy.
Getting back to normal in a Brave New World
I've started getting back into the swing of the market and it can be advantageous sometimes to spend some time away and become less emotional about levels and directions. What has surprised me is the large number of bank analysts who are very USD bullish in the shortish term. I understand their reasoning, basically they are looking at other 'crises' over the last 50 years and using the same logic in today's markets.
But times have changed and I don't think you can expect markets to react in the same way now that they did post GFC bail-out.
For me the most important factor is that we will go from globalisation to localisation almost overnight. I have no idea how long this phenomenon will last for, but I do know that if global trade ties up, the demand for the greenback will follow suit.
Then we need to figure out what to trade? I can't buy GBP with any confidence (especially after an 800 pip rally!) so I will be looking for buying opportunities in EUR/USD, AUD/USD and Gold to a lesser degree.
Wishing you all the best of luck, stay safe, and do the right thing always.
Gold: Core long, buy dips
Like many long-term financial market professionals, my confidence in the fiat system is so strong that I always have a core long position in Gold and Silver bullion!! It's a matter of time before the day of reckoning comes.
Technically speaking, the daily chart has now formed a very strong base near $1350-$1375 and looks to be preparing itself for a powerful bull rally. Any dips should now be seen as buying opportunities.
Intermediate resistance around $1560 will be defended but I believe this will only be a temporary slowdown. The price is severely undervalued in my biased opinion and as tensions in the Gulf continue to ratchet up, I'm expecting some impulsive moves higher towards $1800.
On the currency side I am expecting to see EUR/USD start a strong rally which should see us testing 1.20 in Q1 2020. I have started with a small long position already but I feel the timing might be a fraction early on this one so I'm trading cautiously and waiting for the 'unexplained momentum' which is usually the harbinger of something much bigger.
FXWW Membership- additional information
Thank you very much to all those who have applied.
......
We will only accept candidates who we believe have the attributes to make the transition from self-funded trader to risk-manager in the funds management industry. These attributes include;
- managing an explainable core strategy and implementing it consistently
- having a USP (unique selling proposition)
- having the adaptability to move from self-funded trader with a 'profit' goal to a manager with a 'risk-management' mandate
..........
- The basic industry rule of thumb is that you will need a minimum 2-year audited track record. As an FXWW member, your previous track record will be taken into account and will be validated by your on-going performance.
- Typically the industry will expect that you have some institutional trading experience or at the very least, some strong industry references. FXWW has earned the industry's trust and as a member you benefit from this relationship. We can vouch for our members credibility.
- The standard industry remuneration is known as 2&20, or 2% management fee and 20% of profits. Those starting out in the funds management industry need to be realistic about the management fee that they can charge and starting out with a 0.5%-1.0% management fee might be appropriate in many cases.
- Assets under Management (AUM) is the name of the game. The first target for every manager is $10 million after which you should be trading full-time. The main target is $100 million, after which the raising-of-capital becomes significantly easier.
- Quants are Kings! Those managers with systematic processes will have a significant edge over the purely discretionary trader when it comes to raising funds from the really big investors. Like it or not, it's simply a fact of life.
...................
Membership is not cheap. This is only for those who are really serious about their trading careers.
Rather than putting your money at risk with retail brokers and suffering the inevitable high fees and spiked stop-outs, you can now trade our account with an institutional broker safe in the knowledge that we will do whatever we can to ensure that you make as much money as possible. You will be paid a fair percentage-of-profit compensation and you will earn management fees once your competency has been proven.
Members that reach the prescribed proficiency will receive increased allocations which are calculated using the profiling and performance algorithm.
The top performers will be added to the FXWW Select platform where they can attract institutional and wholesale investors.
There are a number of levels of membership with each attracting a partially refundable deposit and an annual retention fee.
FXWW services include news & data services, institutional research, data analytics, regulatory cover, and marketing material.
An additional advantage for traders is that they can anonymously build a funds management profile whilst still managing their current careers.
FREE: Bank Trade Strategy video
Whilst you have some spare time over the holidays, do yourself a favour and set some aside to listen to a professional bank trader laying out his views on what you really should be looking out for and where the 'easy' money is.
REGISTER HERE for free access.
As with most things, the 'easy' option also involves a lot of hard work and attention but at least you will get an invaluable insight into what some professional traders look for in the market.
FXWW Membership for Institutional Traders
Current institutional traders who wish to build a track record alongside their current careers can now do so as part of the exclusive FXWW Membership plan.
The obvious benefit of trading our account is that you can create an anonymous profile which is nonetheless verifiable and audit-able and can be used to attract investment funds once you decide to leave the institutional space.
Other benefits include comprehensive data analytics, bespoke marketing material, and CapIntro services.
For more information, contact us directly and in complete confidence via the FXWW support page or alternatively fill in the Premier Trader Form and we will get in touch.
FXWW Select available to institutional and wholesale investors
All traders and managers have been interviewed and reference-checked
......
Qualifying traders have been filtered according to profitability, consistency, correlation, and capacity.
Qualifying managers have been filtered on their ability to consistently deliver their mandate.
......
Professional investors can build their own products using a mix of any available traders or managers.
......
Allocations can occur via give-up agreements, managed accounts, or bespoke contractual arrangements.
......
Contact us for more information on 'professional-investor-qualifications' and we can then provide you with more qualitative and quantitative analysis on individual traders and managers
FX positioning reports latest updates
The start of the week brings lots of interesting research from the major banks (which I'm sure you all love reading in the FXWW chatroom on Eikon Messenger!).
There have been some short term changes over the last 3 weeks with AUD positioning back to neutral, CAD longs reduced and GBP longs starting to build. CHF and JPY shorts are also building albeit slowly and from neutral levels. The markets core positions of long USD and very short NZD still remain intact.
There are no major discernible changes underway and it looks as if the market is fairly comfortable and looking for the next impetus.
STRATEGIES:
NZD/USD: Range trade with a bullish bias.
GBP/USD: Range trade with a neutral bias.
Careers: Senior Technical Analyst- Sydney based
Network member is offering a very nice opportunity for a Senior Technical Analyst with a decent base salary + super + bonus.
You will need to have significant experience as a trader or analyst and be able to write interesting and technically proficient reports.
I would describe this role as mid-level and could suit someone who is early in their career-path or someone slowing down after a pressurised institutional career.
Contact me directly via the website or via Linked-in if you are interested in finding out more details.