Posted by at 2:37 PM  FX Market, Global Equities
Jul 082020

We have seen a good rally in equities since last week. Monday was a huge run up that was met with an equal amount selling yesterday. As of press time, Dow futures has broken yesterday’s low. We might be seeing some sort of bearishness near term. The best entry for an intraday short was about 2 hours ago.

Given the late entry for a short opportunity, there might just be another opportunity on the flip side.

Sterling has been strong lately. Market is looking forward to fiscal stimulus announcement today. This would be around 8PM (GMT+8).

Market is now moving in unison. USD and JPY are strong against risky currencies AUD, NZD, and GBP. This fiscal stimulus announcement by the UK government may provide some ground for GBP and a unilateral move may just pop up.


Entry 134.60-134.00, TP 136.20

GBPJPY Long by traderh on

May 292020

Tonight (no specific time), President Trump will be holding a presser specifically to address China issues. He will most likely show a hard stance on China especially now that US elections is just around the corner. The American people and even the whole world is looking at how he will treat China on Covid-19. A hard stance is the only way to prove how serious he is.

The market will most likely react negatively on this. If safe havens rise and close high, we might see a continuation to next week. Nevertheless any rise in safe haven will be a chance to get on risky assets at good bargain levels.

May 292020

FED Chairman Powell will be speaking tonight in a panel discussion at 11PM (GMT+8). Three things can happen.

1. Nothing will happen – market being immuned to what the FED chairman’s tone for the past week might not react to anything he’ll say.

2. He can say how bad the state of the economy will be without stressing the support of the FED through stimulus packages. This could just provide a breather to the market’s ascent. USD and JPY might gain out of this.

3. He steps on the risk accelerator pedal by stressing the unlimited support of the FED. This could drive the market to break recent resistance levels and push the markets higher. Risky currencies AUD and NZD will move up as well as Gold.

Among the 3 different scenarios, #2 would be the ideal outcome because this will give opportunity to go long in the market. The market is overall risk-on scenario because of the stimulus packages. A little bit of fear can cause dips for the bulls to get in. I’d go long AUD or NZD.

If market breaks out further (scenario #3), shorting AUD or NZD may be very risky. Perhaps a more neutral currency like EUR or GBP might just be a good compromise.

May 122020

The market right now is running out of leads as to where it wants to go. All fundamental reasons has more or less come out and it’s a matter of time that these reasons gel up to be a strong catalyst for the next move.

The prospects of a risk-off scenario would be:
1. US-China Trade War tensions, which has started to form shape. China hasn’t been able to able to purchase the agreed amount of goods from US. While US says that they are not interested to renegotiate the deal. Further escalation of this and we might see a risk-off scenario in the market.
2. COVID-19 Source blame game started with US pointing the finger at China’s inability to secure the virus in their lab. While China points at the US for bringing the virus to Wuhan last October through the Military World Games.
3. Wave 2 COVID-19 pandemic.

On the flip-side, the market is waiting for 1 key event this week. FED Chairman Powell will be speaking tomorrow night 9PM (GMT+8). The tone of his language will most likely trigger the next move in the markets. He will most likely address the impact of COVID-19 which is already digested by the market and would most likely add that the FED will always be ready to inject stimulus when it needed be. The injection of stimulus would most likely be the trigger for a risk-on scenario.

In a risk-on scenario, here are the possibilities:
1. Equities will move up. DJIA might just revisit 25,200ish level where a gap remains to be closed. It is also the 61.8% retracement from the low.
Screen Shot 2020-05-12 at 23.52.25

2. Gold will move up. Any prospects of flooding the market with liquidity tends to depreciate currency value that will cause gold to be the choice of investment.
Screen Shot 2020-05-12 at 23.52.59

3. USD will be stronger than Yen because Yen is a not favourable risk-off currency.
Screen Shot 2020-05-12 at 23.53.26

4. AUD, NZD and CAD will have a grand day moving up.

Remember, the market has its own divine way of creating a trap for buyers. This could just be it as the prospects for fear may begin to tilt to its favour.

May 092020

It’s been quite a few months since all this roller coaster ride started. And while we try to apply experience and logic into our trading, we sometimes find ourselves wondering why our expectations aren’t met.

Is the market bullish or bearish? Are we really in a recession?

The answers to those questions are not really important. What is important is to know why the market is now behaving the way it is and how we can take advantage of it. More so if we understand how it’s behaving now, we can forecast better.

First, the popular equities market.

For the past few weeks to a month, I have been expecting another round of sell off to revisit the lows last March. That, I can right now say is getting far from possible as each passes. Only WW3 would bring us to those lows or perhaps a back-to-back pandemic scenario. It’s about time we expect and say that the equities market is now well supported.

With the concerted action by all central bankers world wide as well as liquidity injection by fiscal planners, the market is awash with cash. This is the reason why the correction of the market has been more shallow than deep.

Accept it.

Next, in the currency and commodities market, we are seeing Gold as the clear winner here. During risk-off scenarios, it climbs. During risk-on scenarios, it corrects but easily gets supported. $2000/oz. is the target.

When gold moves, CHF and AUD moves in correlation with it. While we would normally tie AUD to China’s economy, it’s actually not the case this time. If you observe the chart below, AUD was decoupled from gold for a long time. Then on the beginning of March 2020, it seems that Gold and AUD went to church and had their marriage vows. They are now inseparable.

Screen Shot 2020-05-08 at 23.40.29

AUD and NZD are correlated. AUD is stronger than NZD.

AUD, NZD and CAD are all commodity currencies. CAD gets a sympathy play with AUD and NZD. With the possible bottoming out of crude oil, CAD’s correlation to the other two commodity gets more traction.

Screen Shot 2020-05-08 at 23.48.17

EUR is just moving sideways with USD. Check again below.

Screen Shot 2020-05-08 at 23.46.58

GBP is just slightly stronger than EUR but both are just moving sideways.

JPY is still a safe haven but here comes the strange part. JPY is evidently strong against EUR, GBP and USD but can’t seem to beat AUD, NZD and CAD. It’s strange because during times of uncertainty, JPY should be acting as a leader especially against risky commodity currencies.

How about KING Dollar? He’s asleep. USD is weak and will remain weak because US is badly hit by COVID19. The reliability of USD will remain to be seen.

As a summary, here are the key take away points:
1. As far as uncertainty is concerned, Gold is the leader as a safe haven.
2. AUD is following Gold. AUD, NZD and CAD are correlated as commodity currencies.
3. AUD and NZD could be leading not only because of Gold but these two countries have done a better job in the COVID19 crisis.
4. JPY is only strong against EUR, GBP and USD but not the commodity currencies.
5. Equities will go through shallow corrections because liquidity has been guaranteed.

Moving forward, knowing the current scenario of our market, what is there for us to expect?

I believe the impact of COVID19 has been priced in the market. There’s no point of wishing the worse just because we have our shorts or we have positions on safe haven assets. The status quo of the market is clear: Gold, AUD, JPY.

In the event when fear strikes again – the revival of US-China Trade War or a second wave of COVID19 pandemic, I am most certain status quo remains – Gold, AUD, JPY.

As many would put it, our society will have to adjust to the new norm because of COVID19. The same with the market. The new norm is – Gold, AUD, JPY as the safe haven.

On a speculative note, here are some questions to ponder:
1. Will Trump reignite US-China Trade War in exchange of his election bid?
2. Will Trump get reelected given the mishandling of COVID19 pandemic?
3. Will there be some sort of aggressiveness from both US and China after COVID19 is resolved?

Mar 072020

I was wrong. That technical rally on oil didn’t materialize as I forecasted. Putin is as hard as a rock on his position against deeper supply cuts. This is why oil fizzled out as early as 54.00.

However, the turn of events yesterday has given us more conviction on our short trades on oil. With OPEC+ not reaching any agreements on deeper and extended supply cuts, they will resume additional production after March 31 – when their previous agreement expires. Each country will now be free to decide how much oil they will produce. This is like oil on unlimited QE (quantitative easing).

Where does leads us to now?

What we know for now (BEARISH CASE):
– no OPEC+ agreement
– COVID-19 impact
– global economic slowdown
– US continues to produce with no limits – Trump likes cheap oil

What could possibly happen – speculation (BEARISH CASE):
– OPEC members (predominantly, Saudi Arabia) will pump more oil to push BRENT below 42 where Putin said is Russia’s operational cost. Since there will be no agreements, they pump until Russia feels the pain as well.
– Libya resolves their conflict. Far fetched to a lot of analysts but what if Libya gets infected with COVID-19 and weakens the standoff that eventually causes one of the warring party to capitulate? Maybe far fetched as well.
– More flights get banned

What we know for now (BULLISH CASE):
– US Sanctions on Venezuela
– Libyan conflict that reduced supply

What could possibly happen – speculation (BULLISH CASE):
– Oil producing countries (including US) voluntarily cuts supply because of bad business
– Oil fields get hit with COVID-19 and decides to stop producing oil
– OPEC+ kiss and make up and agrees on a cut on June 5th of earlier
– COVID-19 dies away due to seasonal change or when a possible vaccine/cure is found
– Flights resume
– Everything goes back to normalcy – factories open, consumer appetite revives
– Increased Middle East tensions

What we know is already priced in. It’s better to focus on the possible events forthcoming. Which event will happen next is everyone’s guess. Which event is of highest probability is the best basis for your current trade bias.

Personally, I am seeing BRENT to hit 40 easily next week. 30’s is a possibility.