Hey guys.
I forgot something. Been wanting to put it out there. Interesting.
You remember the CHF bombing. And I sort of remember looking at HOW much each currency lost against them. I ranked them, to show the strong/weak. (I should dig that up)
But anyway, we know that lately everyone’s been appreciating against them. But week after week if you look at it, some are going up much stronger than the others. So therefore we can see who’s stronger down to the weakest. I have done this. And this way. By the fib. (I’m not an expert on that, but have plotted the 38/50/61/100 . This is what I got. From the open to the close, on the weekly chart, this is how much of a retracement each one has done since then.
[B]GBP[/B]More than 61.8%. Like around 70 something. The most retracement than anybody else.Strongest.
[B]USD[/B]Right at 61.8%.
[B]JPY [/B]More than 50% but less than 61.8%.
[B]NZD[/B]Right at about the 38.7%.
[B]EUR[/B]Only about 68 pips under the 38.7%.
[B]AUD & CAD[/B] Both at the same. Under the 38.7%, by about 100 pips or so.
So, what does that tell us? Well, of course it’s all about the strength against the CHF. But, since it’s been a pile on in the last few weeks, I think it is a judge of strength across the board. TO SOME EXTENT, not completely.
I see more Majors at the top.
Interesting how the 2 Comms at the bottom. Worse than the EUR. Is kind of close though.
Does this tell us that the big money prefers a Major against THE Major? More than a Comm against THE Major?
How is the NZD down on the scale so far? Been very strong lately.
This was a very useful post. It would be even better if you make an edit and post your chart with all currencies vs. CHF from Jan. 15.
This really tells the story of currency strength. I used to do something similar after a large report. Like NFP comes out and analyse the reactions after a couple of days to see which currencies could take longer term advantage and which couldn´t etc. Your CHF example is a lot better of course than a high influence report because the reactions were worldwide huge. We shouldn´t forget though that normally we do not have such an indicator to analyse the markets. Couple of thousand pips moves are not normal.
The reason why NZD I guess is down because you are looking at a 45 days old data and not the last couple of weeks. Maybe it makes sense to analyse it once from 15. Jan. and maybe once only for the last couple of weeks.
I am not into bottom picking but I made the decision not to short the EUR more. At least for the upcoming weeks. Actually the last reports are not as bad - including the readings from today - and the ECB played out all its´ cards already to weaken the currency. The current very low levels have to help exports, very expensive Switzerland also helps the Eurozone and the QE has to kick in sometime.
Just thought this is of interest, I often mention Willspread, below is current h1 of AUDUSD.
I just chose this one at random, the two indicators below price are Willspread at my usual settings, set on the USDX and RSI(10) with only a 50 line - (a not uncommon setting).
some intermarket homework. The EU data came out positive once more. So if it is going like this in the future then we will not need to have QEs in the long term. Most likely a strong EU economy would spread out in the world and other nations would also not need QE.
Now the question is what will be a reaction on stocks? On one side no QE is bad for stocks, on the other side only because everything looks better, it is still a low inflation situation which is good for stocks. So which of those factors would be the winner and how is the longer term future seems to occur for stocks?
I suppose when you think deeper, from a business point of view there lies an answer.
I was delighted to at last see QE in EZ, it was needed a long time ago. The reason that business (stocks) react favourably to QE is that it is perceived by companies as a ‘stimulus’ for business, it’s a remedy for an existing malaise, the remedy is needed because business is stifled, held back.
The holding back, whether by deflation or large unemployment, consequent low consumer spending, or whatever is bad for business and thus bad for stocks.
If a central bank concludes that QE is no longer needed then that in itself is testament to positive business outlook.
Aside from a negative knee jerk by traders ,investors would have long recognized the need for QE had diminished, therefore they would be bullish stocks.
There is a recent model for all of this - the current bull market on the S&P started just after the introduction of QE by the Fed, it has continued through the tapering of QE.
So I was reading yet another interview for former PIMCO’s Mohammed el Erian and he said something that caught my attention. I wanted to convey that here because I couldn’t quite grasp it fully.
He said the Fed will hike rates (gradually) in 2015. He added that the Fed is wary of keeping interest rates at 0 for a long time. His main reason for that is that keeping interest rates at 0 encourages investors to take on more risks in the short-medium term.
Does that mean that hiking rates would have a negative impact on stocks? Isn’t that incorrect?
I think rate hike will have both positive and negative impact on US stocks. For one lower interest rate is always a desirable option for any businesses they’d have more cash floating around for whatever purposes that they may have reinvestment, expansion or simply to keep things from going under water. With Fed looking to increase rate, money won’t be as easy to get hold onto as it did prior the rate hike. It will become expensive, therefore certain businesses or sectors might face some challenges. In that aspect I’m guessing it will be negative for stock market.
However if you really think about it, indexes like S&P especially large cap companies should have enough capital, and cash flow in and out therefore rate hike shouldn’t have a dramatic effect on them, in a way Fed hiking rates means that Fed must think the economy is back to the healthy zone , target inflation checked, labor market checked, pay increase checked. Shouldn’t this encourage investors to invest in stocks ? But S&P might be in an overbought area, I’m not sure if it will keep going higher , a good deal might be FTSE 100 or DAX with QE coming along.
you already got the answer from mrquickbuy. That is why stocks always made a gain when Central Banks announced pushing their rate hike expectations further and further behind.
FE
PS: just see that Rookie discussed the issue already in detail
When thinking about the FED and whether they will raise in mid 2015 there is one thing to remember. No CB likes to KEEP rates to near zero.
From a business perspective interest is just another cost item on the P&L, if a CB comes along and lowers a cost item then happy days for business. Good for business - good for stocks.
The longer that rates stay at near zero then there are two negative effects. First as, Philips post mentions, there is the effect on Savers and Investors. Unlike business, interest is on the other side of their P&L, the longer the poorer returns then the more likely they will seek improvement.
The second effect is probably more important from the FED viewpoint. The longer that you have a reduced cost on the P&L then the more likely that companies will curve fit or tailor their prices to reflect that reduced cost. In a competitive market a company will always seek an edge in pricing, if it does that instead of using the reduced interest costs for expansion then the whole exercise can become bad for economic growth.
This is probably the reason that Mr Carney was speaking of the likelihood of interest rate increase back in mid June 2014, however economic numbers overtook him.
There is a pressure on the Fed to raise rates, the longer they do not then the more negative the eventual rate raise impact will be.
although you and Rookie use it very often, I would like to ask 100th time to tell me which site to use for the 15min volume analysis. I did everything what we discuss for S&P except volume. If the setting is difficult then please also share where I have to click.
First is SPX which is the S&P index, being an ‘index’ and thus a summary of share value it doesn’t have a ‘volume’ in itself, although the quantity of shares exchanged has a volume number.
Most sites don’t show a volume for spx, although yahoo have something, I’ve never used it.
Next is ‘Tick’ Volume on Oanda by choosing ‘volume’ in mt4:
And lastly is the SPY
Here is the yahoo chart, just quick glanced it, not sure how good it is:
