U.S. Fiscal Cliff Update
Moments ago the Republicans canceled the "Plan B" vote and decided to recess until after Christmas. The U.S. Dollar immediately strengthened across the board with the major commodity currencies (The Aussie, Kiwi, & Cad) weakening substantially. The failure to bring Plan B to a vote was a failure for Boehner, and now the question has been raised whether or not any agreement between Obama and Boehner will be passed by House Republicans.
If the stock market continues falling, the high yielding major currency pairs (AUD/USD & NZD/USD) should fall the fastest.
 |
 |
Thursday, December 20, 2012
Wednesday, December 19, 2012
Forex Trading - Market Update
Market Update
The U.S. stock market dropped slowly throughout the day as the fiscal cliff situation caused an increase in uncertainty among investors. What was particularly interesting was the dump that occured in the U.S. equity indices that began roughly 5 minutes before the close. (look at a 1 min chart of the S&P). If we start to see a broad sell-off across the board, the Aussie and the Kiwi should fall the fastest, as they share a higher degree of positive correlation with the S&P 500. We favor shorting them against the U.S. dollar as long as the fiscal cliff remains unresolved and the stock market is falling.
As the year comes to an end it's very important to note that liquidity should continue to dry up the closer that we get to 2013. This means that price has the potential to get aggressively pushed in either direction. Support and Resistance levels can be easily blown through. The key to trading in illiquid markets is not to get on the wrong side of momentum - it can get ugly fast.
EUR/NZD Update
The trade worked out better than expected. The U.S. stock market continued to rally on Tuesday, but the Euro was ripping while the Aussie and Kiwi were slowly heading down. We bought into it on the way up hit both of our targets. To my surprise, it continued ripping past 1.5900 - over 100 pips past our 2nd target! We got over 200 pips out of the trade though, so we can hardly complain.
The original chart. The original post is here.
And the price inefficiency is filled. Shocking.
The U.S. stock market dropped slowly throughout the day as the fiscal cliff situation caused an increase in uncertainty among investors. What was particularly interesting was the dump that occured in the U.S. equity indices that began roughly 5 minutes before the close. (look at a 1 min chart of the S&P). If we start to see a broad sell-off across the board, the Aussie and the Kiwi should fall the fastest, as they share a higher degree of positive correlation with the S&P 500. We favor shorting them against the U.S. dollar as long as the fiscal cliff remains unresolved and the stock market is falling.
As the year comes to an end it's very important to note that liquidity should continue to dry up the closer that we get to 2013. This means that price has the potential to get aggressively pushed in either direction. Support and Resistance levels can be easily blown through. The key to trading in illiquid markets is not to get on the wrong side of momentum - it can get ugly fast.
EUR/NZD Update
The trade worked out better than expected. The U.S. stock market continued to rally on Tuesday, but the Euro was ripping while the Aussie and Kiwi were slowly heading down. We bought into it on the way up hit both of our targets. To my surprise, it continued ripping past 1.5900 - over 100 pips past our 2nd target! We got over 200 pips out of the trade though, so we can hardly complain.
The original chart. The original post is here.
And the price inefficiency is filled. Shocking.
Tuesday, December 18, 2012
BeamFX's Special Holiday Promotion
BeamFX is a Forex Broker located in New York. We offer tight spreads (1.4 on EUR/USD during normal market conditions.) Unlike some forex brokers with tight spreads, we charge no commissions. BeamFX is compensated through the bid-offer spread.
We are pleased to announce a limited time Special Holiday Promotion: Anyone who signs up for a live account and funds with a minimum of $10,000 before January 31st 2013 can receive our ultra tight spread of 0.9 on EUR/USD during normal market conditions. Again, as we are compensated through the bid-offer spread, we charge no commissions on this feed!
We invite you to thoroughly research all of the other forex brokers in the United States and try to find a better deal. Remember, it's the combination of spreads, commissions, and slippage that makes up the overall cost of trading. When it comes to slippage, ILQ's automated dealing desk provides quality executions that we invite everyone to test. If you're running an EA, we can open a free demo account here and compare the executions you get with us to those of other brokers. Let's face it, trading costs affect your bottom line and can make the difference between whether you're profitable or not. You can click here to see the profitability of ILQ's clients in Q2 compared to the profitability of other U.S. Broker's clients.
In an attempt to gain market share we are making this very limited time offer that you can lock in today. There are no gimmicks. Simply open a live account, fund with a minimum of $10,000, and then send us an email mentioning this Holiday Special before January 31st 2013.
Again, we encourage all of our potential clients to research the FX industry and topic of trading costs. We want you to be comfortable and satisfied in your decision to choose BeamFX.
Best Holiday Wishes to Everyone,
The Team at BeamFX
We are pleased to announce a limited time Special Holiday Promotion: Anyone who signs up for a live account and funds with a minimum of $10,000 before January 31st 2013 can receive our ultra tight spread of 0.9 on EUR/USD during normal market conditions. Again, as we are compensated through the bid-offer spread, we charge no commissions on this feed!
We invite you to thoroughly research all of the other forex brokers in the United States and try to find a better deal. Remember, it's the combination of spreads, commissions, and slippage that makes up the overall cost of trading. When it comes to slippage, ILQ's automated dealing desk provides quality executions that we invite everyone to test. If you're running an EA, we can open a free demo account here and compare the executions you get with us to those of other brokers. Let's face it, trading costs affect your bottom line and can make the difference between whether you're profitable or not. You can click here to see the profitability of ILQ's clients in Q2 compared to the profitability of other U.S. Broker's clients.
In an attempt to gain market share we are making this very limited time offer that you can lock in today. There are no gimmicks. Simply open a live account, fund with a minimum of $10,000, and then send us an email mentioning this Holiday Special before January 31st 2013.
Again, we encourage all of our potential clients to research the FX industry and topic of trading costs. We want you to be comfortable and satisfied in your decision to choose BeamFX.
Best Holiday Wishes to Everyone,
The Team at BeamFX
Forex Trading - Market Update
As the markets continues to rally based off of the latest development in the fiscal cliff talks, whether good or bad, the risk "on" trades are easy to find, while finding good places to short risk remains difficult. AUD/USD and NZD/USD which are my typical barometers of risk have gone sideways to up. I can't comfortably short a yen pair at this point given that any comment out of Abe could send the yen pairs a hundred pips higher.
So where have I found a possible opportunity to short risk? EUR/NZD. This pair offers opportunity since the Euro has been recently trending upwards and the New Zealand Dollar is much more sensitive to risk appetite. Which is to say, if the U.S. stock market starts selling off over fiscal cliff concerns, the Kiwi and the Aussie should depreciate faster than the Euro. The Kiwi in particular has been very well bid as of the last 2 weeks, so I think it has a little room to unwind even if we don't see significant risk off sentiment.
Below is a 4 Hour chart of EUR/NZD. I've outlined the levels that I'll be trading intra-day if shorting risk looks attractive going into the European or U.S. session. We are beginning to fill what we have termed a "price inefficiency." (A zone where price has moved relatively quickly through, without previous price history in close proximity behind it.) The first intra-day target would be 1.2700 and the second target would be 1.2825 which would fill the price inefficiency, signaling an exit.
So where have I found a possible opportunity to short risk? EUR/NZD. This pair offers opportunity since the Euro has been recently trending upwards and the New Zealand Dollar is much more sensitive to risk appetite. Which is to say, if the U.S. stock market starts selling off over fiscal cliff concerns, the Kiwi and the Aussie should depreciate faster than the Euro. The Kiwi in particular has been very well bid as of the last 2 weeks, so I think it has a little room to unwind even if we don't see significant risk off sentiment.
Below is a 4 Hour chart of EUR/NZD. I've outlined the levels that I'll be trading intra-day if shorting risk looks attractive going into the European or U.S. session. We are beginning to fill what we have termed a "price inefficiency." (A zone where price has moved relatively quickly through, without previous price history in close proximity behind it.) The first intra-day target would be 1.2700 and the second target would be 1.2825 which would fill the price inefficiency, signaling an exit.
Saturday, December 15, 2012
This Could Be The Week The Market Loses Patience
This could be the week when markets lose patience with politicians and the "fiscal cliff."
Despite lots of comments about willingness to compromise, the markets will look for hard proof from Congress and the White House that some progress is being made as the year-end deadline on the fiscal cliff approaches. There have been talks between the White House and Republicans, but there were no visible signs by Friday of a deal that would bring about a compromise on taxes or spending.
Stocks in the past week were flattish and slightly lower, with the S&P 500 down 0.3 percent for the week to 1413 and the Dow down 0.2 percent at 13,135. The S&P 500 is still up more than 4 percent since its mid-November low and more than 12 percent higher for the year.
"You get to two weeks before the end of the year, and it's go time," said Gina Martin Adams, institutional equity strategist at Wells Fargo Securities. "Either they're doing something now or not, and you're going to see the market reflect that."
Traders work on the floor of the New York Stock Exchange on December 10, 2012 in New York City.
Some market participants believe there will be no deal by year end, but many expect it to be resolved early in the new year if that is the case. Forty-six percent of the economists and market participants surveyed by CNBC's Steve Liesman recently said they do not expect the U.S. to go over the cliff, but 41 percent do, and another 13 percent said they were unsure.
Deutsche Bank Chief U.S. Equities Strategist David Bianco said one scenario is that all changes in taxes are temporarily held off while agreement is reached on which tax breaks to extend.
"Our base-case scenario is that if we don't have something that's going to the CBO (Congressional Budget Office) to be scored by late next week, I think the market starts losing patience, and we go under 1400," on the S&P, he said. Bianco doesn't see it sliding below 1350 unless Washington keeps "botching this thing up."
"If it goes into next year and a lot of taxes go into effect, then we watch to see if we go into recession, and if we do, then the S&P could fall to 1200, even if it's a mild one," he said.
Adams said it's tough to say how the market will react in the next couple of weeks, since it has been trading surprisingly well. "The week between Christmas and New Year's is anyone's guess. There will be five people trading stocks, no one in the office, but they could be dumping entire positions," she said. "I have no visibility into year end. I think the market is holding up better than anticipated because no one wants to trade on policy alone."
The fiscal cliff is the more than $500 billion slam to the economy that would come after Jan. 1 when dozens of tax breaks expire and automatic spending cuts begin. Some of the expected taxes subject to change include the capital-gains tax, which could revert to 20 percent and 23.8 percent for the wealthiest Americans, and the dividend tax, which could go from 15 percent to 3.8 percent above the highest tax rates for the wealthiest investors.
"I have a 1500 12-month target, and if there's no deal by December 31, that will be our year-end target. The details of the deal determines where our target is. If we have a dividend tax rate of 25 percent or less we'll go to 1600," Bianco said.
"If the tax drag is more than 1.25 percent of GDP which means almost everything is put back on. If that occurs we'll just stay at 1500," he said.
Besides the cliff talks, there is a relatively heavy calendar of December data, including the Empire state survey and Philadelphia Fed survey, as well as jobless claims, which will all be watched to see if the effects of Sandy are beginning to fade. There is also housing data, with the homebuilders survey, housing starts and existing home sales, all expected to point to the trend of improving housing.
Bianco said industry may begin to contribute to the economy again, joining the consumer, which has been the stronger factor in recent months. "We think business spending and U.S. exports are going to be the first thing to start recovering," he said.
If the economy does not fall off the "cliff," monetary policy could be supportive of commodities prices. "We think technology spending will improve next year," he said, adding Europe should stabilize and China appears to be turning.
"I think the best reward for the risk we're up against here are in technology and industrial," he said. "We do expect a (cliff) deal, but there's going to be some tax drag next year both on lower income households and higher income households because we think the payroll tax is going to be, or partially going to be, returned."
Adams is not as optimistic for stocks, and she has a target of just 1390 for the S&P next year.
"Investors are just kind of sitting on their hands. You can take both sides. Why would you want to sell stocks right now if you don't know where we're going based on policy? And why would you want to buy stocks either," she said. "I think there's a pretty high risk that we get higher capital gains taxes, and we get clarity, or don't get clarity, and there could be selling into the end of the year. The market seems to think this is not an issue, and that policy makers will kick the can, and fair enough because that's what they did last time."
She said she expects the earnings story to be a negative in the beginning of the year and not show improvement until the second quarter. She also expects the fiscal situation to be a drag on private-sector activity.
"I think the private sector would like to find some growth prospects and is more willing to seek out opportunities…but the public sector weight is pretty tremendous, and there is a link between public sector debt and private sector activity," Adams said. "If that impediment is removed, you could possibility see much better private-sector growth. That impediment alone is clearly restraining confidence."
The week ahead also brings the quadruple expiration of futures and options, and for the bond market, there are 2-, 3- and 7-year auctions, as well as a 5-year TIPs auction Thursday.
Even with the auctions, focus will be on Washington. "It's the make or break week for the fiscal cliff negotiations as far as the market is concerned," said Ian Lyngen, senior Treasury strategist at CRT Capital.
"The Christmas week will be a challenging week for Washington if they don't have a workable deal in place by the 21st," said Lyngen. "People will be nervous about what the first quarter growth will look like."
http://www.cnbc.com/id/100316793
Despite lots of comments about willingness to compromise, the markets will look for hard proof from Congress and the White House that some progress is being made as the year-end deadline on the fiscal cliff approaches. There have been talks between the White House and Republicans, but there were no visible signs by Friday of a deal that would bring about a compromise on taxes or spending.
Stocks in the past week were flattish and slightly lower, with the S&P 500 down 0.3 percent for the week to 1413 and the Dow down 0.2 percent at 13,135. The S&P 500 is still up more than 4 percent since its mid-November low and more than 12 percent higher for the year.
"You get to two weeks before the end of the year, and it's go time," said Gina Martin Adams, institutional equity strategist at Wells Fargo Securities. "Either they're doing something now or not, and you're going to see the market reflect that."
Traders work on the floor of the New York Stock Exchange on December 10, 2012 in New York City.
Some market participants believe there will be no deal by year end, but many expect it to be resolved early in the new year if that is the case. Forty-six percent of the economists and market participants surveyed by CNBC's Steve Liesman recently said they do not expect the U.S. to go over the cliff, but 41 percent do, and another 13 percent said they were unsure.
Deutsche Bank Chief U.S. Equities Strategist David Bianco said one scenario is that all changes in taxes are temporarily held off while agreement is reached on which tax breaks to extend.
"Our base-case scenario is that if we don't have something that's going to the CBO (Congressional Budget Office) to be scored by late next week, I think the market starts losing patience, and we go under 1400," on the S&P, he said. Bianco doesn't see it sliding below 1350 unless Washington keeps "botching this thing up."
"If it goes into next year and a lot of taxes go into effect, then we watch to see if we go into recession, and if we do, then the S&P could fall to 1200, even if it's a mild one," he said.
Adams said it's tough to say how the market will react in the next couple of weeks, since it has been trading surprisingly well. "The week between Christmas and New Year's is anyone's guess. There will be five people trading stocks, no one in the office, but they could be dumping entire positions," she said. "I have no visibility into year end. I think the market is holding up better than anticipated because no one wants to trade on policy alone."
The fiscal cliff is the more than $500 billion slam to the economy that would come after Jan. 1 when dozens of tax breaks expire and automatic spending cuts begin. Some of the expected taxes subject to change include the capital-gains tax, which could revert to 20 percent and 23.8 percent for the wealthiest Americans, and the dividend tax, which could go from 15 percent to 3.8 percent above the highest tax rates for the wealthiest investors.
"I have a 1500 12-month target, and if there's no deal by December 31, that will be our year-end target. The details of the deal determines where our target is. If we have a dividend tax rate of 25 percent or less we'll go to 1600," Bianco said.
"If the tax drag is more than 1.25 percent of GDP which means almost everything is put back on. If that occurs we'll just stay at 1500," he said.
Besides the cliff talks, there is a relatively heavy calendar of December data, including the Empire state survey and Philadelphia Fed survey, as well as jobless claims, which will all be watched to see if the effects of Sandy are beginning to fade. There is also housing data, with the homebuilders survey, housing starts and existing home sales, all expected to point to the trend of improving housing.
Bianco said industry may begin to contribute to the economy again, joining the consumer, which has been the stronger factor in recent months. "We think business spending and U.S. exports are going to be the first thing to start recovering," he said.
If the economy does not fall off the "cliff," monetary policy could be supportive of commodities prices. "We think technology spending will improve next year," he said, adding Europe should stabilize and China appears to be turning.
"I think the best reward for the risk we're up against here are in technology and industrial," he said. "We do expect a (cliff) deal, but there's going to be some tax drag next year both on lower income households and higher income households because we think the payroll tax is going to be, or partially going to be, returned."
Adams is not as optimistic for stocks, and she has a target of just 1390 for the S&P next year.
"Investors are just kind of sitting on their hands. You can take both sides. Why would you want to sell stocks right now if you don't know where we're going based on policy? And why would you want to buy stocks either," she said. "I think there's a pretty high risk that we get higher capital gains taxes, and we get clarity, or don't get clarity, and there could be selling into the end of the year. The market seems to think this is not an issue, and that policy makers will kick the can, and fair enough because that's what they did last time."
She said she expects the earnings story to be a negative in the beginning of the year and not show improvement until the second quarter. She also expects the fiscal situation to be a drag on private-sector activity.
"I think the private sector would like to find some growth prospects and is more willing to seek out opportunities…but the public sector weight is pretty tremendous, and there is a link between public sector debt and private sector activity," Adams said. "If that impediment is removed, you could possibility see much better private-sector growth. That impediment alone is clearly restraining confidence."
The week ahead also brings the quadruple expiration of futures and options, and for the bond market, there are 2-, 3- and 7-year auctions, as well as a 5-year TIPs auction Thursday.
Even with the auctions, focus will be on Washington. "It's the make or break week for the fiscal cliff negotiations as far as the market is concerned," said Ian Lyngen, senior Treasury strategist at CRT Capital.
"The Christmas week will be a challenging week for Washington if they don't have a workable deal in place by the 21st," said Lyngen. "People will be nervous about what the first quarter growth will look like."
http://www.cnbc.com/id/100316793
Wednesday, December 12, 2012
Tuesday, December 11, 2012
Forex Trading - Market Update
Markets shrugged off bad economic data out of China and Australia and risk was rampantly bought leading up to tomorrow's FOMC statement and Ben Bernanke's press conference. The markets seem to be pricing in a resolution of the fiscal cliff as is evidenced by the broad gains in equity markets and US Dollar weakness.
My opinion on the resolution of the fiscal cliff remains the same: I think we'll get a last minute resolution and markets will drop rapidly leading up to it. That said, after today's run-up and the way the markets shrugged off highly negative comments from political leaders in Washington, I believe it's dangerous to sell into strength. I would much rather wait for concerns over the fiscal cliff to spark a downward movement and sell into the weakness so I'm able to put a stop loss in front of my entry then to try and pick the top. I have to assume this rampant buying could continue all the way to the end of the year into a resolution of the fiscal cliff - because that's a possibility
I was recently stopped out of my AUD/USD short at 1.0515 at a small loss. I'll look to sell either AUD/USD or NZD/USD again, but I'll wait until I see substantial signs of weakness in equity markets due to fiscal cliff concerns. I'll be keeping an eye on USD/JPY as a bellwether for fiscal cliff concerns.
My opinion on the resolution of the fiscal cliff remains the same: I think we'll get a last minute resolution and markets will drop rapidly leading up to it. That said, after today's run-up and the way the markets shrugged off highly negative comments from political leaders in Washington, I believe it's dangerous to sell into strength. I would much rather wait for concerns over the fiscal cliff to spark a downward movement and sell into the weakness so I'm able to put a stop loss in front of my entry then to try and pick the top. I have to assume this rampant buying could continue all the way to the end of the year into a resolution of the fiscal cliff - because that's a possibility
I was recently stopped out of my AUD/USD short at 1.0515 at a small loss. I'll look to sell either AUD/USD or NZD/USD again, but I'll wait until I see substantial signs of weakness in equity markets due to fiscal cliff concerns. I'll be keeping an eye on USD/JPY as a bellwether for fiscal cliff concerns.
Monday, December 10, 2012
Q3 2012 US Forex Traders Profitability Report
As a Guaranteed Introducing Broker for ILQ (we introduce exclusively to them because we believe they offer a top tier combination of tight spreads and quality executions) we are always excited when ILQ receives positive recognition from the Media.
Courtesy of Forex Magnates, we present you with a copy of the Q3 2012 US Forex Traders Profitability Report:
"Despite the less than volatile Q3 2012 the number of accounts didn’t grow as expected and neither did the traders’ profitability. Apparently low volatility doesn’t necessarily mean improved traders survival.
Not only did one more US broker depart the market today but the total number of US forex traders dropped by over 2,500 while profitability almost didn’t change (+0.3% on average and -0.6% when calculating weighted average). There are still over 100,000 active US forex traders left however this number may go below the 100k mark if the trend continues into the next quarter.
CitiFX Pro is now the number one US forex broker in terms of clients’ profitability with Interactive Brokers and ILQ only slightly behind it. ILQ showed the biggest increase of the quarter when its clients’ profitability jumped by almost 10% placing it third.
Interesting to note is that with the exception of FXCM, the brokers with most profitable clients were the only ones able to grow in terms of accounts."
In terms of new accounts, ILQ grew by 19.6% - almost double that of the nearest competitor.
Courtesy of Forex Magnates, we present you with a copy of the Q3 2012 US Forex Traders Profitability Report:
"Despite the less than volatile Q3 2012 the number of accounts didn’t grow as expected and neither did the traders’ profitability. Apparently low volatility doesn’t necessarily mean improved traders survival.
Not only did one more US broker depart the market today but the total number of US forex traders dropped by over 2,500 while profitability almost didn’t change (+0.3% on average and -0.6% when calculating weighted average). There are still over 100,000 active US forex traders left however this number may go below the 100k mark if the trend continues into the next quarter.
CitiFX Pro is now the number one US forex broker in terms of clients’ profitability with Interactive Brokers and ILQ only slightly behind it. ILQ showed the biggest increase of the quarter when its clients’ profitability jumped by almost 10% placing it third.
Interesting to note is that with the exception of FXCM, the brokers with most profitable clients were the only ones able to grow in terms of accounts."
In terms of new accounts, ILQ grew by 19.6% - almost double that of the nearest competitor.
Subscribe to:
Posts (Atom)