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Posts Tagged ‘usd’

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It has been a year since the last post, and before that time, I’ve worked at a trading firm, learned, and left to start the new stage of my career. I have also passed all 3 levels of my CMT exams, and even though I certainly like the novelty of Point and Figure’s boxes, catapults and more, its obscurity (especially in FX) goes against an important tenet of the markets: it may be a self-fulfilling prophecy (if enough people are looking at the same thing).

So what have I learned? Follow the trend, Digested in these few simple points, which has simplified my charting.

1. Trade breakouts. Follow quiet markets, and get in when it breaks

2. There is no too high of a price to buy, or too low of a price to sell (that’s from Livermore). Especially true with all these extremes in FX and indices.

3. Use simple indicators, especially the ones that everyone is following. Hence my use of only 10-200 MAs, and now on hourly charts because that creates more opportunities.

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Follow this trade on TradingView!

To the best of good buys.

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But this first, from BAML… While everyone was expecting a yield rally this summer, it seems like that hasn’t been the case. Even with food prices jumping due to the winter this year (due partly to higher natural gas to keep everything from cattle to corn warm), core CPI is relatively subdued. There also seems to be a shortage of 30Ys, which naturally means bond prices should go up and yields come down. Talk about a contrarian move.

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We are currently entering wave c for 10 Yrs. This pattern, quite dangerously, is also an HS pattern. Though the resistance is quite strong at the neckline with two former tops in 2011 and 2012, a break could spell a lot of danger for the dollar. Even if we don’t break the 2.400% line, the path of least resistance is still down, and we have some room to go. Thus, anything long USDxxx would not be constructive.

For the USDCNH which has thrown out more than a few traders, there might be a good opportunity for those who want to trade the dollar weakness without going USDJPY. The USDJPY is less intervened against, but this post is to see where we can enter a comfortable long term USDCNH trade. Though with the way USDCNH trends, it is entire acceptable to enter with more confirmation.

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Watch that there has been a false break once before early April, which was denied by a morning star. But, there are other signs of confirmation for this break:

1.  It is marked with a shooting star on 4/30 (which can be combined into several other reversal indicators with adjacent candles).

2. Negative divergence on RSI, which has also passed below 70 again. Negative CMF too, which indicates less momentum upwards, as well as a cross into 0.

3. Heiken Ashi reflecting that shooting star (though blue), and trend downwards. 

So technically, I feel comfortable enough with a short trade. Probably put in 20k short at 6.2323 (current price), stop at 6.3000 and targeting 5.xxxxx or something. Risk reward back to 6.0000 (not impossible) is 3:1. Will be gaining rolls too.

Also, did you see that descending triangle breakout on gold?

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Also, I passed my CMT Level II. However to get my Series 86 exempt, I would need to have a current CRD… (though I can apply for it within two years). Someone hire me?

To the best of good buys.

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Amazing how the two fibs fit so well together.

This is a reference to where the bleeding might stop. As noted here by Morgan Stanley, the rebalancing is continuing, and per DB, the assumed breakeven point for the products built on top of USDCNH is at 6.25. Now that we have passed it, there are two simple resistances. Only after conclusive reversal signals (possibly over the span of a month) would I look at selling the pair. Note the rounding top from 3/27 to 4/9 which was invalidated with another run higher.

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Studying for CMT Level II… test this Saturday. Wish me luck!

To the best of good buys.

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SGD at first support

Currently at a confluence of a 3 time tested rising support, as well as the 50 MA (I realize it is open MA – oops). SGD based on the SNEER basket is heavily influenced by trading partner currencies in Asia (AUD, MYR, PHP, CNY, etc). Though US yields can go both ways, the pair is heavily influenced by the AUDUSD rate. The AUD has broken above its recent October-February channel and its 50MA quite significantly, and is currently in the cloud, showing there is still possible upside in the near month or so.

 

USDSGD tecnicals confirms this assumption, with RSI not yet at oversold (which has been reached sparingly before) and CMF showing a deaccumulation of the pair. A more reasonable target might be to buy at the longer term May 2013-October 2013 support line, which might be reached early March at 1.24200. Who knows, maybe the September 16 gap might happen again (I believe that was due to a PBOC cash injection).

Also, because of the crop problems all over the country due to the freeze, lower production, propane to warm chickens, etc, will that lead to cost-push inflation this summer? That will mean higher US yields/interest rate expectations correct?

 

To the best of good buys.

 

 

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By the Way…

uh… I closed out the USDMXN position at break even after the most recent bearish engulfing. It’s currently below the coil, and with FOMC on tap, I’ll wait out.

Will they taper or not? I thought we will only taper when unemployment gets to 6.5%, right?

To the best of good buys.

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USDMXN, Buy, 10k @ 13.0945

I moved up the upper boundary a bit, and prepared an entry on pullback at 13.1000. Entered at 13.0945 when the ECB cut rates. This was the first post watching the triangle on 10/22.

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Target for symmetric triangles is measured by the height of the triangle at the widest part (13.3800-12.5900 = .7900) plus the breakout line (13.1000) which yields a final target of 13.9000 to keep it round. If it closes below the bottom of the cloud at 13.0000, monitoring is warranted, and a break below the midpoint of the triangle at 12.9000 stops the trade.

NFPs tomorrow, expected an October change of + 125k. Even with the government shutdown, I think it’s still quite likely for the jobs market to beat that. To the best of good buys.

 

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A Symmetrical Triangle (Coil) on USDMXN

So, I have passed my CMT Level 1. Hooray! First milestone on my new journey reached again. I didn’t know what Diffusion Indicators were, but appears to be something similar to an AD measure. This can also be used for economic indicators, which reminds me of the heatmap on Zerohedge of global PMIs a few months ago.

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An excellent pattern is forming in the USDMXN chart. The few days of volatility in late October (during the government shutdown and the debt ceiling crisis) have further cemented the two support and resistances binding this 3-month old pattern. The lookout is for a break on either side.

Other indicators are certainly helpful. Right now, the CMF is slowly creeping above the zero line, which indicates there is an increasing volume of buyers (though for FX, it is calculated without volume but with momentum).

Post-break, if it is downwards, then the Ichimoku indicator certainly gives quite excellent signals. For the break lower, instead of opening a sell position right at the break, I would wait for the lagging span to at least close below the base of the cloud support, marked out as position 3. Target price for this would be 60% at 12.500 and the rest at 12.275.

For an upside break, there is a quite hard resistance region at 12.950, the flat line (4) for most of the cloud supports and resistances. The upper line of the triangle will intersect it on 10/28, giving a break upwards on days near that more importance. The two birds one stone move (break of 12.950 Ichimoku resistance and trendline resistance) will also place the pair above the thin cloud region, giving a bullish signal. To prevent whipsaws, a close above the fib of 13.023 will be more preferred, which was also the start of the gap a month or so back. Target would be the (new triple) top of 13.360.

On a fundamental view, even though Cal Professor Janet Yellen is in the Chairman seat at the Fed, the dollar is still expected to gradually strengthen as yields recover. Though there might not be any announcements about the taper given the volatility from July to September, the market itself might slowly adjust to more expensive credit. With the S&P also at all time highs, buying dollars shouldn’t be a problem if there is a move towards risk aversion. Hence my bias is towards a stronger dollar (and a break to the upside), though I shall be waiting on this chart.

To the best of good buys.

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