Chart of Interest – USD/JPY
2013 May 6 by Graham Parlane
All
The USD/JPY has been consolidating its mammoth gains of recent months tracing out a ‘bull pennant’ between 96.00/100.00 over the last 4 weeks.
USDJPY – Click here to view chart
Friday’s jump higher on the U.S. payrolls data occurred perfectly out of my model.
USDJPY Model – Click here to view chart
The reason I believe USD/JPY is set to resume its uptrend after the month of sideways is, apart from Japan’s incredible monetary policy program, is that USD/JPY moves are highly correlated to U.S interest rate yields and as in my earlier chart of interest documenting the U.S. 10 year bond those yields look likely to go higher in coming weeks. Thus I believe we have a more fundamental support for USD/JPY again now.
Market talk has it that massive stop loss buy orders have accumulated above 100.00 so any move through there may well see an acceleration of the uptrend.
Regards G
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Chart of interest – EUR/JPY
2013 March 27 by Graham Parlane
Hi
After a mammoth rally from 94.00 to nearly 128 since mid-2012 the EURJPY cross is showing signs of fatigue.
Breaking down the component legs, the JPY has weakened massively (USD/JPY 78 to 97) over the same period, firstly on expectations that new PM Abe would gain power and bring with him super easy monetary policy ideas and then a secondary rally on expectations that Abe would install the like-minded Kuroda as his BOJ Governor. Since the inception of Kuroda the same sounds bites regarding easy policy have been forthcoming but the JPY has actually strengthened. Is this the biggest ever example of the old adage ‘buy the rumour, sell the fact’?
Looking at the EUR leg, the EUR simply looks awful. The Cyprus ‘precedent’ hangs heavily, manufacturing indexes remain mired in heavily negative territory and constant growth downgrades have been forthcoming. Indeed ratings agency S&P today lowered the Eurozone growth forecast to -0.5%, increasing the recessionary outlook.
Moving to the charts, the brief rally on the Cyprus resolution Monday was quickly reversed, the price action tracing out the bearish engulfing day which augurs strongly for more losses ahead. Supporting the bearish stance the 10/20 day moving average are crossing over to a negative alignment. On the shorter timeframes my ‘model’ has done a stellar job of capping gains and is currently pushing down suggesting strong resistance lies at 122.70/123.20 and falling.
EURJPY – click here to view chart
Cheers G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
NZD/GBP – Are we justified up here?
2013 March 13 by Graham Parlane
Hi
The NZD/GBP has been trading around multi –decadal highs of late. With the drought and the spectre of what I think will potentially be a more dovish than expected RBNZ tomorrow is the NZD really justified up here?
I’m a trend trader at heart and I don’t really like to pick tops but…
The market is chatting about the 8.1% annualised rise in NZ house prices (data released yesterday) and how upset the RBNZ will be about that. But the central bank is clearly working to the introduction of ‘macro prudential tools’ as they call it, to restrain house prices without using the ‘blunt’ instrument which is the official cash rate. You see, the RBNZ hate hitting housing with a rise in the cash rate because that usually comes with a higher currency which hurts the tradeable sector. They’re forever between the rock and the hard place so to speak.
The moderate knowledge I have about these new tools can quickly be summed up here in the NBR article http://www.nbr.co.nz/article/downside-risk-use-macro-prudential-tools-warns-rbnz-bd-136767
Simply put, the introduction of these tools will to some degree limit the need for rate hikes surely?
This impending change and the drought make me very wary of NZD strength at the moment. On the other side of the equation the U.K economy has its own problems for sure but the fact that GBP/USD has fallen 16 big figures in 10 weeks suggest to me the NZD/USD could easily play catch up resulting in a lower cross. Indeed, currently I think the GBP/USD is actually due a bounce from last night’s price action.
Looking at the chart of the NZD/GBP cross yesterday was the beautifully, and emotively named ‘hanging man’……..you don’t need to think too hard about whether that’s a good sign or a bad sign huh? Downside follow through is beginning immediately after in today’s trade. I have high expectations for a move lower as a result
NZDGBP – click here to view chart
Cheers G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Chart of Interest – AUD/EUR (the sleeper trade of 2013?)
2013 March 8 by Graham Parlane
Hi all
This is one of my dead set favourite trades.
Since the onset of the GFC the Australian dollar has appreciated against the EUR, almost doubling in value as the market sought refuge from the beleaguered EuroZone and finding haven in the high yield, proxy to China growth, AAA rated Australian dollar. What an incredible run.
AUDEUR – click here to view chart
However late last year things began to change with the Troika providing enough funds, and therefore time, for the EuroZone politicians to make the required fiscal changes i.e. labour market, pension reform etc. Meanwhile the RBA forecast an earlier peak in mining investment and resumed cutting rates.
It is my belief that the NZD and AUD currencies are vulnerable to their own success of the last few years (the cure for a high currency is a high currency – eventually it’ll hurt). I think too that Eurozone data will surprise to the topside in as much as it surely can’t get worse.
Technically the picture looks intriguing. We had the ‘head and shoulders’ break down below the neckline and then, as so often happens the retest. Now we look likely to resume the move that should head towards 0.7000
AUDEUR a closer look – click here to view chart
Cheers G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Chart of Interest – Kiwi about to explode north?
2013 February 13 by Graham Parlane
All
The 1 month range of 0.8300 to 0.8450 has bought the Bollinger Bands in to a ‘trend ready’ state. The bout of USD weakness (my primary, and long held expectation, on U.S. QE activities) has seen the NZD/USD respect the 9 month uptrend (yet again) after breaking over the nearly 2 year trend line resistance back in December.
1) Big picture
NZDUSD – click here to view chart
2) A closer look – Held the 9 month uptrend, Bollinger’s are trend ready.
NZDUSD Closer Look – click here to view chart
Cheers G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Chart of interest – NZD/AUD
2013 January 31 by Graham Parlane
All
I’ve been watching the multi month consolidation triangle form in NZD/AUD since September, as the NZD has underperformed my expectations, hit by lower than expected inflation and weaker than expected employment in the last quarter of 2012.
However the RBNZ have again today made it abundantly clear today that inflation and growth in NZ are set to rise and that the next move in NZ interest rates is up. This is in direct contrast to the RBA who are in the midst of a rate cutting program.
After a nasty sell off in NZDAUD last night to 0.7965 (dovish expectations of RBNZ?) the cross has viciously reversed as the central bank reaffirmed their expectations. In the process the pairing has traced out a significant ‘key day reversal’. To further enhance the technical set up the jump was right out of the upwards trending 10/20 moving average band.
NZDAUD – click here to view chart
My previous target of 0.85/0.88 remains.
Regards G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
Japan stocks and Mr Abe – an opportunity?
2013 January 16 by Graham Parlane
All
I have profiled (ad nauseam) the potential for JPY weakness over the last 6 months of last year with good effect as the USD/JPY rose from 77.00 to 90.00 and the NZD/JPY from 58.00 to 75.00 in the same period.
What I haven’t done is document the opportunity for very large rises in Japanese stocks.
The real speed of the JPY move has come as the market came to understand that former PM Abe would once again hold power, pledging to learn from his previous mistakes as PM and essentially do the opposite (monetary policy wise) to his last tenure. Mr Abe says that in 2006 he mistakenly backed the BOJ when they raised interest rates. Following that decision the Nikkei stock index fell by half and the JPY appreciated by 40% against the USD.
Now Mr Abe is back at the helm and with his pledge to enforce a 2.0% inflation target on the BOJ, and the measures they’ll need to implement to achieve that will have to be nothing short of extraordinary. Indeed, one analyst I have come to respect, says Abe’s program will be like Bernanke’s but ‘on steroids’ !
Now to understand the potential for Japanese stocks we need to look back a bit in history. In 1989 the Nikkei Index was close to 40,000 and only this month the Nikkei was languishing below 10,000…………………incredible that the valuation of Japan’s corporate sector is currently worth ¼ of what it was more the 20 years ago. Now that’s a bear market huh? Here is a chart back to 1963 (great year that by the way!)
Japan.IZ – Click here to view chart
Now the other chart that screams that Japanese stocks are absurdly cheap is the Price to Book ratio that shows that in 2011 (I couldn’t find a more up to date chart but I understand that ratio hasn’t changed much) the index as a whole was trading BELOW is net asset backing at 0.9 !
Japan’s Market Index – click here to view chart
So here’s the nib. Japan has a stock market that is super cheap (ridiculously so?) and now they have a government hell bent on cutting interest rates and printing money forcing investors back into stocks. That and the weakening JPY, which significantly helps the blue chip exporters, should see Japanese stocks much higher this year.
I’ll be spending the rest of this week looking for the best vehicles (financial instruments) to express this trade and will revert. For now I’ll buy a small amount of Nikkei and look to add a bigger amount on any dip.
Cheers G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
The USD super cycle
2012 December 13 by Graham Parlane
All
The USD Index has fallen from 121 in 2001 to currently sit at 80 (has been as low as 71 at the height of the GFC 2008).
Essentially the FED’s policies since the GFC have been aimed at devaluing their way to prosperity. Remember when they had a ‘strong dollar policy’ that was quoted by officials at every chance ? That’s right, we haven’t heard that one for a very long time!
I have long maintained that this super cycle won’t end until the rest of the world cries out “Hey, you can’t devalue your way to prosperity at the expense of the rest of us”.
That will likely require an accord of some sort like we’ve seen in the past, see ‘Louvre Accord’ 1987 – halting the decline of the USD http://en.wikipedia.org/wiki/Louvre_Accord and the ‘Plaza Accord’ also 1987 – http://en.wikipedia.org/wiki/Plaza_Accord .
Already we have heard increasingly strained complaints from the likes of the outgoing RBNZ Gov. Bollard, the RBA and the BoE. This I’d suspect is only the beginning and the howls of anguish are only likely to get louder before this super cycle is finished. Unfortunately for our little export orientated economy that probably means coping with a much higher NZD/USD, and worryingly a higher NZD/AUD which recently has served as a bit of a circuit breaker for us.
Looking at the USD Index, the price action since the onset of the GFC simply looks like a consolidation and today’s FED announcement has every chance of propelling the USD down and out of the multi-year triangle consolidation.
NZD/USD at 0.9500 anyone ?
G.
IMPORTANT THEME – Loving that EUR v the rest
2012 December 4 by Graham Parlane
All
There is definitely a building of EUR positive sentiment among the ‘professional’ part of the market.
Understand that when Italian and Spanish debt interest rates fall is that because parties are buying the bonds and if those parties reside out of the Eurozone then they have to buy the currency.
To that end more stressed EZ debt buying was seen last night after the generous Greek bond buyback (mentioned in my OPI’s this morning). Risk-seeking hedge funds are hoovering these things up because a) they have great yields in a world starved of decent interest rate returns and b) they feel the biggest default risks have passed.
Now add to that all the short covering EUR buying that will be forced upon the EUR perma–bears (short and caught!). You know I could count on my hand the number of EUR longs we have on our books. Our client base just will not buy EUR…………………..which says it all to me.
G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities
EUR/USD – The break higher is underway
2012 December 3 by Graham Parlane
All
As I warned in my output of Thursday (Charts of Interest – perfect night for ‘risk on’) the EUR/USD today appears to be confirming the attempted break higher of Friday.
The ‘Inverse Head and Shoulders’ pattern documented in the chart below should now come into effect suggesting a rise as high as 1.4300 can unfold in the weeks/months ahead.
Understand this ! – that the previous Eurozone ‘Crisis Indicators’ …the outright cost of borrowing for Spain and Italy (and the cost relative to safe haven Germany) are now at their lowest levels in 7 months. The so called troika (ECB, IMF and the European Commission) has done its job and created cheap enough funding now so that Greece and other stressed countries can safely battle through for the next 2 years, time for their governments to implement the necessary fundamental reforms.
1) The 18 month trend line is now broken
EURUSD – Click here to view chart
2) A closer looks shows that Friday’s failed attempt has been overcome paving the way for the new move.
EURUSD a closer look – Click here to view chart
Cheers G.
Edge Capital Markets Limited, a specialist advisor in Futures – FX – CFD – Options – Shares – Gold – Silver – Commodities