Today’s Trades 12.06.2018 EURUSD, EURCHF, NZDJPY

Swing

Good morning/afternoon everyone!

Currencies and equities are trading sharply lower this morning as a convergence of negative news sends risk assets tumbling. The U.S.’ arrest of Huawei’s executive sourS US-China relations and raise concerns about the seriousness of President Trump’s desire to improve the relationship with China. Oil prices are also down more than 2% ahead of the OPEC meeting on talk from Saudi Arabia that no agreement has been made yet to cut production. 10 year Treasury yields are trading below 2.9% and this persistent decline is exacerbating the pressure on USD/JPY. Dow futures are pointing to a sharply lower (-400 point) open and unless today’s economic reports cause a V shaped recovery, risk off will the theme of the day. ADP, Challenger layoffs, jobless claims, non-manufacturing ISM, durable goods and factory orders are scheduled for release. Keep an eye on the headlines too because aside from OPEC, BoJ Governor Kuroda, BoC Governor Poloz, Fed members Quarles, Bostic and Williams are due to speak along with BoE members Broadbent. Given how much the Canadian dollar has fallen and the aggressive reaction to BoC, Governor Poloz’s Economic Progress report at 8:35am will be exceptionally important.s The worst performing currency today is the Australian dollar which was hit hard by Huawei’s developments. Recent data hasn’t been great as a softer than expected trade surplus follows disappointing GDP. AUD also a risk currency that suffers greatly on risk off days. The strongest is the Japanese Yen which should be no surprise but the losses for EUR and GBP are small which tells us that there’s either significant support at 1.13 for EURUSD and 1.27 for GBPUSD or investors are looking at this as an Asia-Pac / US story.

The MAIN THEMES I see today are

+JPY
-AUD
-CAD
-NZD

Trading Biases

+JPY, +USD (except vs. JPY)
-EUR, -CAD, -AUD, -NZD
mildly -GBP, +CHF

Today’s Ideas

1. Sell EURCHF at 1.1309, stop at 1.1337, Target 1.1281
2. Sell NZDJPY at 77.36, Stop at 77.64, Target 77.08
3. Sell EURUSD at 1.1341, Stop at 1.1369, Target 1.1313

Close ALL open day trades by 10:20AM NY / 15:20 GMT

Today’s Trades 03.23.2018 – EURUSD, EURCHF, EURAUD, EURNZD

Swing

*Good morning/afternoon everyone!*

Overnight we saw continued weakness in Asian and European equities but not currencies. USD/JPY is trading back above 105 as stock futures bounce off their lows and 10 year Treasury yields turn positive. Whether this level holds remains to be seen but the for the time being, there’s no signs of an ugly open that could send the dollar to fresh lows. China announced its own tariffs overnight and now that both countries have taken these antagonistic steps, there’s no doubt trade war tensions will worsen before they improve. The Canadian dollar is in focus today with CPI and retail sales scheduled for release. The U.S. has durable goods and new home sales which are far less market moving. Commodity currencies in general are outperforming European currencies with the New Zealand dollar leading the gains.

*The MAIN THEMES I see today are*

+EUR
+AUD
+NZD
-CHF

*Trading Biases*

+EUR, +AUD, +NZD, +GBP
-CHF
neutral JPY, USD, CAD

*Today’s Initial Trades*

Here’s the summary --

1. Buy EURCHF at 1.1683, Stop at 1.1655, Target 1.1711
2. Sell EURAUD at 1.5978, Stop at 1.6006, Target 1.5950
3. Bought EURUSD at 1.2334, Stop at 1.2306, Target 1.2362
4. Sell EURNZD at 1.7031, Stop at 1.7059, Target 1.7003

Close ALL open day trades by 10:20AM NY / 15:20 GMT

EURCHF – 1.1400 in View?

EURCHF – 1.1400 in View?

Chart Of The Day

The equity sell-off is clearly washing over into FX as all risk off trades gained ground. Amongst them is EURCHF which is now trading at the 1.1400 figure for the first time in weeks. The 700 point sell-off in the Dow has sent flows into the Swissie and if the risk-off trades continue into the Asia session trade they will likely push the pair towards the 1.1400 level.

Although stock may be due for a bounce, the ugly selloff one day before the weekend could create panic amongst investors and could push the risk-off trades even further into the money. With no support until 113.50 EURCHF still has a way to fall.

Kathy’s NY Trading Calls 08.29.2017 – USDJPY, GBPUSD, EURCHF

Swing

*Good morning/afternoon everyone!*

The U.S. dollar is trading sharply lower this morning after North Korea fired a few missiles over Japan. The U.S. and Japan have called an emergency U.N. meeting to address the issue but we have not seen any fresh tweets from President Trump over the past 24 hours. But with South Korea responding by dropping test bombs near the DMZ, we can only imagine how much worse the situation can get. Nomura puts the odds of a North Korea war at 35%. Pressure and sanctions haven’t been working and the U.S.-South Korea’s decision to move forward with their annual games only further inflamed NK who showed a modicum of restraint earlier this month hoping for the same. This is the biggest story of the day and one that will dominate North American trade. The market is viewing this as a dollar issue and not a risk aversion issue but its really one in the same as NK poses a serious threat to Japan, South Korea, and the rest of the region. It may also be difficult for China to stay neutral with their close ties to NK. EUR/USD is above 1.20 and GBP has its eye on 1.30.

*The MAIN THEMES I see today are*

-USD
+EUR
+GBP
+AUD
+NZD

*Trading Biases*

-USD
+EUR, +CHF, +GBP, +AUD, +CHF, +JPY

*Today’s Ideas*

1. Sell EURCHF at market now 1.1365, Stop at 1.1405, Target 1.1345
2. Buy GBPUSD at market now 1.2954, Stop 1.2914, Target 1.2974
3. Sell USDJPY at 108.51, Stop 108.91, Target 108.31

Cancel ALL pending orders by 3:30PM NY / 19:30 GMT / 5:30AM AEST
Close ALL open day trades by 4PM NY / 20 GMT / 6AM AEST

Today’s Trading Plan 08.22.2017 – EURCHF, GBPUSD, NZDUSD

Swing

*Good morning/afternoon everyone!*

The U.S. dollar is trading higher against all of the major currencies this morning. We’re getting closer to Fed Summit at Jackson Hole and traders are unwinding their short positions. At the same time dollar bulls are encouraged by the lack of fresh antagonism from North Korea and inflammatory comments from President Trump during his rally last night. U.S. rates are up, providing further support to the greenback. The weaker than expected German ZEW survey pressured the euro lower and sterling is following suit, dropping below 1.2850. The worst performer is the New Zealand dollar, but outside of the RBNZ’s outlook, there’s no specific catalyst for the move. Canadian retail sales are scheduled for release this evening -- we believe the data will be weaker given the drop in wholesale sales and if thats true, it could extend the recovery for USD/CAD.

*The MAIN THEMES I see today are*

+USD
-EUR
-GBP
-AUD
-NZD

*Trading Biases*

+USD, +JPY
-EUR, -GBP -AUD, -NZD
neutral CAD, CHF

*Today’s Ideas*

1. Sell EURCHF at market now 1.1350, Stop 1.1390, Target 1.1330
2. Sell GBPUSD at market now 1.2830, Stop 1.2879, Target 1.2810
3. Sell NZDUSD at market now 0.7284, Stop at .7324, Target 0.7264

Cancel ALL pending orders by 3:30PM NY / 19:30 GMT / 5:30AM AEST
Close ALL open day trades by 4PM NY / 20 GMT / 6AM AEST

Monday -39
Tues +40
Wed -18
Thurs -4
Friday +45

Total +22

Forget EUR/CHF – Here is How Everyone Really Loses Money in FX

Boris Schlossberg

One week after “Black Thursday”, the EUR/CHF debacle of course invites a huge amount of Monday morning quarterbacking with many experts only too happy to tell you what you should have done AFTER the fact. Still a few common sense ideas like having at least two or ideally three separate brokerage accounts, keeping your deposits small and periodically taking money out of the account are all good ideas.

Kathy and I wanted to go much further than that and actually explore new ways that we should be trading now. I think we came up with some very interesting ideas of how to adapt and we’ll be holding a free webinar this Tuesday January 27th both at 8AM and 8PM NY Time ( register here https://attendee.gotowebinar.com/register/3293104759417724930 ) to discuss them.

But this week I actually wanted to step away from the chaos of current events and take a look at the most common way that many of us blow up our money. The EUR/CHF trade was more like an Act of God clause common in most insurance contracts that recognize that it is impossible to indemnify against every risk. You can lead a very clean life and still get hit by a cab at a busy intersection.

But there are many risks in our business that are self made and perhaps none so pernicious as the allure of the martingale. There is no trader that ever lived who has not averaged down into a bad position multiple times. After all in a bounded market like FX -- the asset has got to rebound sometime, right? In this column, I’ve chronicled numerous examples of my own disastrous attempts to martingale myself back to even -- only to blow up the account again and again. In fact I would say that the first step to becoming a winning trader is to stop martingaling. I mean really stop. Ever. The traders who make money consistently learn to do that. Others remain inveterate gamblers, no different and no less pathetic than junkies.

However here is the best reason to never, ever martingale. I came across this comment on forexfactory forums and thought it was worth a share. (I am reproducing it as written)

“The thing is, if you never loose its ok, but when you do, the amount you loose double each time, and with only 0.01 (1cents) lots size you get pretty big amount, in short period of time…

In 15 trade you get 1966$ in loosing trade, just by using 1cents lots size…
Because you must add you loosing trade together…”

So in betting just one penny a pip after 15 losers in a row you will be down nearly 2000 bucks. How many trades at a penny a pip do you think you will need to make to recover that amount?

Think about that next time you want to double down endlessly. As Paul Tudor Jones once said, “Losers average losers.”

EUR/CHF – Where Now?

EUR/CHF – Where Now?

Chart Of The Day

The action in EUR/CHF today was unprecedented as the SNB simply walked away from the peg and allowed the franc to appreciate by nearly 20% in an instant. The cross is now trading at parity and the key question is where now given the massive adjustment that has already occurred. Although it is tempting to believe that the pair will slide further, the most likely scenario is consolidation and some short covering rally as the event of today have grossly exaggerated the balance between the two pairs. First and foremost the sharply negative rate on the Swiss bank deposits means that investors will now lose 75bp to carry alone. Few investors will be willing to accept the slow depletion of their capital for a long period of time. Secondly the ECB may surprise the market by not doing full QE at its meeting next week. Any “positive shock” on the euro could trigger a pretty vicious short covering rally in the pair. That is why short trades at this point should be considered with care.

Technically there is simply no credible support points, but the parity level seems to be a psychological magnet and will be support for now.

Hot Chart Key Levels for EUR/CHF

Hot Chart Key Levels for EUR/CHF

Chart Of The Day

From a fundamental perspective we like buying EUR/CHF because we think that the Swiss National Bank will maintain the 1.20 EUR/CHF peg. However when it comes to looking at the technicals for EUR/CHF, the outlook is murky because the peg distorts the charts. 1.20 is obviously the main support level for the currency and if that is broken, the next technical support should be 1.1675, the 23.6% Fibonacci retracement of the 2007 to 2011 decline. If 1.20 holds, the second chart below indicates that 1.2050 should be near term resistance. Of course if the Swiss National Bank suddenly intervenes, we’ll see EUR/CHF on the 1.21 handle.

EUR/CHF Big Trade – Stopped at 1.1908 for -100 (THATS WHY WE USE STOPS!!)

Swing

BK EUR/CHF Big Trade -- FYI Stopped at 1.1908 for -100 (THATS WHY WE USE STOPS!!)

EUR/CHF Big Trade – Betting Against SNB Will Get You a Bloody Nose

The Trade:

Buy EUR/CHF

Buy 2 lots EUR/CHF at market (now 1.2009)

Stop on the entire position at 1.1920

Risk on our BIG TRADES is large, so make sure your position is small.

We will manage the take profit dynamically and send out alerts on when to take profit and/or move your stop.

—--

Central banks have deep pockets and a lot of money to throw around but when they are fighting against market forces, they face an uphill battle that they end up losing more than winning. However there is one central bank that exemplifies the success that all central banks hope to achieve when they try to weaken their currencies and that is the Swiss National Bank (SNB).

If there is one thing that the Swiss are known for it is their accuracy and precision. Since 2011, the Swiss National Bank has effectively maintained a 1.20 EUR/CHF floor. When they introduced the peg 3 years ago, they pledged to buy an “unlimited” amount of EUR/CHF and they came in again and again to show the market to illustrate their utmost commitment.

However over the last year, they have allowed EUR/CHF to trade near 1.20 and even touch it on a few occasions, leading many traders to wonder if they will continue to defend the peg. We believe that fighting the SNB will get you nothing but a bloody nose. 1.20 may break and EUR/CHF could drop to 1.1980 but we expect the SNB to sweep in quickly and aggressively if that happens.

The Swiss Have Already Been Intervening

In fact, they have already been intervening. According to a report released last month, the SNB intervened in size to defend the 1.20 floor with their reserves rising to CHF495.1 bln (~$490.2 bln) from CHF462.7 bln in November. The only difference is that they have been scaling in rather than flooding the market at one time that led to some of the sharp spikes we saw in 2012. To illustrate their commitment to making the Franc less attractive, they also dropped interest rates to negative levels. If they let 1.20 break in a meaningful way without intervention, they are risking the credibility of their currency and monetary policy. Also with commodity prices putting downside pressure on inflation, the SNB desperately needs to strengthen their currency.

Switzerland’s Strength is Also Their Greatest Weakness

Nonetheless it is important to understand why the SNB has chosen a more passive and quiet route. Switzerland’s strength as a safe haven is also their greatest weakness. Money flooded into Switzerland during the Russian and Greek economic and political crisis and remains parked there amidst the risk of ECB Quantitative Easing.

However the SNB’s plans to start negative rates on the same day as the next ECB meeting is NOT a coincidence. The move is clearly intended to act as a buffer against EUR/CHF selling if the ECB announces QE. In fact we would not rule out a one-two punch by the SNB if the ECB starts buying sovereign bonds. It all boils down to timing.

The SNB could be holding off on overt intervention until the ECB announces QE because they know how eagerly investors are anticipating this move. The Swiss can print as many francs as they like to defend the 1.20 EUR/CHF floor.

Buying EUR/CHF is a Low Risk Trade

Given how close EUR/CHF is to 1.20, buying EUR/CHF at current levels is also a low risk big trade.

Buy EUR/CHF

Buy 2 lots EUR/CHF at market (now 1.2009)

Stop on the entire position at 1.1920

Risk on our BIG TRADES is large, so make sure your position is small.

We will manage the take profit dynamically and send out alerts on when to take profit and/or move your stop.

EUR/CHF – Good Time to Buy?

EUR/CHF – Good Time to Buy?

Chart Of The Day

EUR/CHF – Good Time to Buy?


Fundamentals

After sitting on their hands for the past 2 months watching EUR/CHF test their floor of 1.20, the Swiss National Bank finally took action this morning by adopting a negative interest rate. Their announcement sent EUR/CHF to a high of 1.2097 but as we have seen in today’s price action fighting the market can be difficult. The rally fizzled by the end of the North American session with the currency pair trading back within its month long range. Strong fundamental factors have driven investors into the Swiss Franc including euro weakness (driven by ECB policy), Russian inflows (from the currency crisis) and a general demand for safe haven assets. Unfortunately for the SNB, the problems that have caused pressure on EUR/CHF are not expected to improve anytime soon. However central banks have deep pockets and the SNB understands the consequences of letting the EUR/CHF peg break. The whole credibility of their currency and monetary policy would come into question if they allowed EUR/CHF to drop below 1.20 by more than a few pips so a lot is at stake. We believe that the SNB will overtly intervene in EUR/CHF if the rate cut does not work which is why we feel it is a good time to buy EUR/CHF between 1.2020 and 1.2040 for a move back towards 1.21.

Technicals

When it comes to EUR/CHF, the 1.20 peg distorts the effectiveness of technicals. Nonetheless, there are certain levels within the EUR/CHF breakout that is important. EUR/CHF needs to be trading above the December 2nd 1.2047 high to have any chance of extending its gains without intervention. If it drops back towards 1.2020, the 1.20 peg could be tested once again but we do not expect EUR/CHF to drop below 1.1990.

EUR/CHF – Is Intervention Coming?

EUR/CHF – Is Intervention Coming?

Chart Of The Day

Fundamentals

EUR/CHF hit a 2 year low today as investors fear that a yes vote on the Swiss gold referendum at the end of the month will force the Swiss National Bank to choose between adhering to the vote or defending the EUR/CHF 1.20 peg. The vote asks whether the SNB should raise the share of gold in its asset to 20% from 8%. The reason why this could affect the currency is because if the referendum passes, it would require the central bank to sell its foreign reserves, much of them in euros to buy gold. This is a dangerous predicament because it would restrict the SNB’s ability to defend its currency. The vote will be a close one that gold bugs and EUR/CHF traders will watch carefully. However while it poses a serious risk to EUR/CHF, the vote is more than 2 weeks away and the SNB could still verbally and possibly even physically intervene in the currency to keep it from breaking the 1.20 peg before that time.

Technicals

In a pair like EUR/CHF that is distorted by central bank intervention, technicals are not very reliable. However as shown in the daily chart, 1.20 is an obvious support level for the currency pair. In the last 2 years, the “low” for EUR/CHF was 1.1996, a level that we believe will hold before November 30th. While there appears to be resistance at 1.21, verbal and/or physical intervention could drive EUR/CHF up 100 to 300 pips in a matter of days depending the strength of the central bank’s actions.