Wow so much to talk about today and little of it is about specific currency moves because…
THE MARKETS ARE IN A STATE OF MAJOR FLUX:
There are new currency stories emerging while others are fading into the distance. Take the GBP strength story and even the EUR strength. The former has not seen clarity despite three major releases last week that offered a mixed bag. Is the BOE hawkish? Yes. Will there be a rate hike in early 2015? Very likely yes. But only if the GBP does not continues to appreciate at the current rate of 10% as it has over the past 12 months. The BOE has made it clear, it’s does not like that and will “punish” hawkish traders with no rate cut…or so they say. Yes, GBP bulls you are being admonished.
THE LOONIE IS NO LONGER A CLEAR TOMATO CAN:
The Canadian dollar continues to shed its “tomato can” status and while the *deja vu* of this Friday’s employment data out of Canada may have a familiar ring to it (Think back to the 7th of March where the loonie was close to done as far as being a tomato can we got another few weeks of productive loonie shorts!) THIS IS NOT the same market environment. The CAD has transitioned on the EUR/CAD, GBP/CAD, and USD/CAD leaving only the AUD/CAD (my current favorite) and the NZD/CAD as viable TREND FOLLOWING loonie shorts.
COMM-DOLLS ARE THE POPULAR KIDS AGAIN:
Since it seems that it is two comm-dolls that have garnered much favor throughout March – THE AUD and NZD – it is these two currencies that have actually emerged as individual strength stories on both central banks have become either less dovish (RBA) or more hawkish (RBNZ) and there’s NOTHING like having a central bank as the driver for a trend. The AUD/CAD is still my favorite trend follow with excellent directional bias and with some help from not only the loonie hot zones this week, but also the RBA tonight and aussie data throughout the week, we’ll wait patiently for this trend to correct lower. I will have a specific Chart ‘o the Day once this pair has proximity to a daily swing buy.
DOW AND NIKKEI CROSS THEIR RESPECTIVE “LINE IN THE SAND”:
The Nikkei and Dow are both above those two lines in the sand I was watching closely. It is the end of the first quarter and the year has been good to equities bulls who either added to or built long positions into the January sell-off (test of the 200DMA) in the Dow. Nikkei traders are only now starting to see the market retrace to January highs but the support along 14,000 is reflective of the JPY shorts and equities buys that kicked off 2014 even if the Nikkei is still chopping sideways in a w-i-d-e distribution range. The lack of an organized trend has been frustrating for JPY bears but the organized RISK ON will not commence until the Dow can find momentum through 16,550 and therefore the JPY is just waiting…
YELLEN THE DOVE RETURNS:
Fed Chair Yellen did a very orderly walk-back of her “October plus six” gaff and delivered what many traders and analysts perceive as her most dovish speech ever–maybe one of the most dovish speeches ever? Well, let’s not get carried away. Yellen did a GREAT job of reminding the market of who she was and that any aggressive taper to hike discounting was presumptuous and YET…the Dow is still up well over 100 points.
…and finally a few points about last night’s 60 Minutes show, Michael Lewis, and HFT.
1. Michael Lewis is an author (a very good one at that!) who makes money from selling his books and then selling the rights to his books so movies can be made that bare little resemblance to the facts in his books. (e.g Moneyball and The Blind Side)
2. 60-Minutes gave Michael Lewis’ book “Flash Boys” a nice prime time infomercial. Michael Lewis does not find little-known stories and reveal them to the public. He takes established stories and finds a protagonist to tell an excellent yarn. He’s not ahead of the curve, he just tells the story better than most. (That’s his job and talent.) He’s GREAT at this. But make no mistake HFT is easily a three year old story and well-known to anyone that may already effected by it. INVESTORS are not effected by HFT. Case in point: When’s the last time you hear Warren Buffett complain about it… (although he DID convince Business Wire to stop working with HFT firms.) By the way, HFT is COMING TO CURRENCIES. It’s just a matter of time. And I will be as concerned about it then as I am now…which is ZERO.
3. HFT is about pennies. Do YOU trade for pennies? If the answer is no, don’t lose any sleep. It’s – in most ways – no different than what SOES Bandits did with direct access order execution, what NYSE Specialists have been able to do for years, and what Knight Trimark did when stocks traded in “teenies” (1/16th) I’m not saying any of that is “wrong” it’s just that they worked an angle of a system that is legally in place but for the most part no one was up-in-arms about it. In many cases provided a service to their customer can be perceived as providing a “disservice” to some.
4. By the way, “the machines” and “the algorithms” of HFT are the new bad guys. It seems traders need something to blame for their oftentimes bad trading! Before this? Do you remember when systems were the “enemy”? Before that “floor trader ran stops”. Yeah. There will always be someone to blame. Over 25 years I have seen it all.
By the way, I will likely be as flat as I have been in six months as April rolls around. I am excited to find new currency stories and build new positions.
By the way, speaking of Flux. I highly recommend everyone download and use Fl.ux which is a program that works with PC and Mac: “f.lux makes your computer screen look like the room you’re in, all the time. When the sun sets, it makes your computer look like your indoor lights. In the morning, it makes things look like sunlight again.
Tell f.lux what kind of lighting you have, and where you live. Then forget about it. f.lux will do the rest, automatically”
It’s free and will help with “blue light” insomnia which is – seriously – something that can severely affect your circadian rhythm and prevent healthy sleeping patterns.
As always I welcome comments and questions and will be doing a FREE webinar this month to detail more about what I discussed in this week’s BabyPips.com update. (Be sure to join my free newsletter – the link it below – for information on when I will be holding this webinar.)
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