Seems a few other traders had those lines - today offered a 60 pip range, I reduced my own target to 25 of those, the narrower the range then the greater the risk, so exited today early.
I’ve been targeting longs all last week and also yesterday and today, but when I see this type of price behaviour I reduce the pip target and increase exposure.
All long term trades start off short term, so after Friday there is a possibility of starting something, in the meantime I’ll be flat.
Crosses like GBP/CAD or GBP/NZD could well resume their trend.
Update to above - in the length of time it took me to screen capture and post GBP has fallen almost back to where it opened - confirming the need to exit early in this type of price behaviour
Philip, interesting, we did not talk about the falling CHF in the COT Report. Do you think there is a reversal in all CHF pairs? GBP and USD are ahead of the pack but it seems like that even commodity currencies are slowly turning the longer-term trends. (oh, we are again at the expression “trend” which can cause some problems)
Well I don’t have CHF near extremes at all so it would be interesting to share your findings on that.
As for Comm Currencies (NZD, CAD and AUD) we were discussing how they are close to giving buy signals based on the COT report. Of those three, I think AUD has definitely signaled a fundamental shift at least. The Central Bank has hinted that it will not cut rates any longer and that its satisfied with the price of AUD. After that there was a consistent buying of AUD against all currencies, I am looking to buy either AUDCHF or AUDJPY. I’m keeping an eye on GBPAUD but I prefer to buy the previous two pairs.
But may be now we can expect something similar from NZD in coming months. An end to rate cuts that is.
It is a really tough market to judge at the moment, and I remember Peterma discussing being at an inflection point. For example the GBP yesterday, we had one member calling for a rate hike. But Mr. Market decided he was disappointed with that and down went the GBP. Today we get NFP numbers that are in line with expectations which brings a rate hike closer, but down goes the USD anyways.
I feel we have seen the low in those two currencies, as well as in gold. But every time I remember we still have a US rate hike, I feel that we can go down even further. That’s why I feel like I don’t want to trade until December.
With all that confusion in the markets, I think we will probably end up getting a dovish rate hike.
Yeah, sometimes we trade with hope, other times with expectation.
Today’s nfp I was trading with the latter, that there would be a clear signpost - an end to the change.
The bad news for a long term traders is that the sign post remains blurred, the numbers point in one direction, to keep the status quo, the signmaker, on the other hand, seems to want to point in another.
This is a major problem for decision makers in business, do they print in an increase or not, clear guidance is sadly lacking from the Fed, if ever there was a need for strong leadership then …
Anyways, the days of strong leadership in central banking are gone, now rule is by committee - long time ago I remember being taught that a successful business is seldom managed by committee.
So I have been doing some research which eventually led me to a conclusion I learned when I first entered forex (but have forgot for some reason).
That conclusion is: The value of NZD and AUD reflects the economic performance of China rather than their own.
Now we all know China’s Renminbi is artificially undervalued. It seems that as a result of that and the fact that China is the biggest trading partner for Australia and New Zealand (its the second biggest of NZD after Australia), it seems that the performance of NZD and AUD is more affected by developments in China than anywhere else (including the dollar).
Secondly, and I think this could be important. The exports of New Zealand to China increase when the financial position of people in China increase. This is because almost all the exports of New Zealand to China are things like meat and especially milk (this is actually why we give such a high importance to milk prices and its effect of NZD). [B]So when the spending and wages of Chinese people increase, NZD exports normally would increase. [/B]
Now Australia, in addition to primary products like meat, sell commodities like iron and natural gas to China. [B]So when investment spending in China increases, so does Australian exports. [/B]
A paragraph in Ross Kendall’s study at the RNBZ sums up what happened to both currencies and confirms the relationship to China.
“Since 2000, investment (in China) has increased significantly as a share of GDP, from about
35 percent to over 45 percent in 2013 (figure 2). The largest shift in the composition of GDP
was during the global financial crisis (GFC) in 2008-2009. The government implemented a
large stimulus package to offset collapsing export demand.”
If you look at a monthly chart of NZDUSD or AUDUSD. You will see that it bottomed in 2009 and went in a sharp upward that surpassed the 2008 high and peaked in 2011.
Now other currencies such as EURUSD and GBPUSD also found a bottom in 2009. But they never made new highs. In fact EURUSD made new lows and GBPUSD is in a monthly range. [B]So something happened in NZD and AUD that did not happen in EUR and GBP[/B]
In New Zealand, “a surge in dairy, forestry, and meat exports since 2008 has seen the share of primary exports grow to over 80 percent,” Kendall says.
In Australia, it is a similar scenario. A surge in iron and gas exports technically rescued the Australian economy.
[B]China[/B]
But now China, after 30 years of an average GDP growth of 10%, is struggling to match its downgraded growth target of 7%. For a number of reasons that some have to do with the global economy and others for structural issues in China. [B]It is this slowdown that forced a downward pressure on AUD and NZD. Rather than the strong dollar.[/B] The low prices in commodities is a byproduct of China’s economic slowdown as well.
Well, the answer is we shouldn’t. In fact we should be rather bearish on AUD and NZD in the future.
However,
There is a trick.
There are talks of China kick starting another stimulus package. Now if that stimulus helps China fix its growth problems (unlikely in my opinion), then we will start to see rallies in AUD and NZD. Big rallies. If it doesn’t, then the trend could continue for some time.
Having said that there is one thing I will be keeping my eyes on. How the AUD and NZD react to bad Chinese data. If there is buying, [B]Then we could have a case for buy the rumor sell the fact.[/B] Every bad number prompts buying AUD and NZD in anticipation of China’s announcement of a stimulus package.
If we see that happen, then we probably have a fundamental reason to buy.
Here, highest level of buying iron ore by China this year.
Remember that the rumored stimulus package is for infra-structure projects like building roads, homes and so on. Let’s see how AUD acts. But its very possible guys that we are on the verge of catching a nice move.
Thanks for that.
I’m keeping an eye on the Comm trend also. At first, I was thinking that due to Friday’s results, the Comms have turned the bend, going up. But, I’m not gonna be too quick on that juuuuuuussst yet. We need about one more week of results. Let’s see what happens this week.
And remember what I said last week, about the AUD/JPY monthly chart? That’s the Comm/Major chart. And yep…it did bounce on up. Meaning the Comms are possibly starting to turn.
We need a little bit more data though.
But, good stuff on that Philip!
You gave us a fundamental reason behind the Comms actions. And I gave a technical reason.
Coincidentally business confidence and condition for Australia sank down to 4,6 from 10 and 11. AUD and NZD are correlated
I’m not trying to debunk your theory I’m just saying. And before you start yes I am aware that China has “somewhat” attributed to low business confidence readings.
Would you short AUDJPY now ? On daily there’s a strong resistance.
No I’m still looking to buy AUD in particular, especially against JPY. But not yet.
EDIT: Rookie I was not trying to explain the down move The selling of AUD happened immediately with the Chinese announcement. You can check out forexlive to check.
I was on forex live since early morning.
I see, whoops.
You really like to go against the stream don’t you ?
What convinced you that AUD and NZD is going to rally any time soon now that the confidence figures sank from 11 to 4 ?
I’m not saying I’m right or sure by any means (in fact I’d like more confirmation in terms of seasonals for NZD, its there however for AUD.)
I’m just saying its worth a try since I have a defined risk.
when we talked about correlations, stocks and commodities were a big topic. Stocks might be on the top. Then you think we should be looking for a bottom in commodities in some weeks or months?
I think it’s very interesting also. Comms/Majors. So, I’ll try to put it into perspective. TA wise.
Well, let’s look from the top down.
Monthly chart. AUD/JPY = (Comms/Majors)
Look at the swing lows. That tells me the trend is climbing higher. And the one swing high, at the end of last year, was higher. Sure, there’s much ranging, but over the big picture it does seem to be moreso on the rise.
And I have drawn one support line. That is 90.70 I have that on all of the 3 charts here.
That line has just been tested the second time now.
Weekly chart.
The 90.70 line has just been tested the 3rd time now. And look at every time it has been tested, there has been a big candle going up every time. (Mr. Market doesn’t seem to like dipping down below it, even though there has been downward pressure leading to it)
Daily chart.
This only tells me that something is gonna crack. There has been a lot more time spent around (and under) that support line. Will it be broken and turn to a resistance line? Or are we just waiting for the right time for it to really take the turn higher?
And you have to think of this chart as of the Comm/Major relationship (AUD/JPY).
Talk to me guys.
I’m surely not the expert on TA.
But, it has to be common sense.
That’s exactly what’s driving me crazy FE. Technically, Commodities look like they have or are near a bottom. But how can that be with the Fed announcing they will hike rates this year.
The waiting is killing me and I can’t wait to see how this will workout.
