Understand The Trading Arena

"It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle." Sun Tzu

Global Macro Analysis

Every markets are linked and should be analyse as a whole to understand what is really happening in the world

Forex Trading

The foreign exchange market is the market of choice for the retail prop shop to capitalize on macro themes.

Liquidity And Market Micro-Structure

Welcome market inefficiencies and learn to profit from them.

Trading Professionaly

Plan your trade and trade your plan.

vendredi 30 août 2013

CREDIT AGRICOLE: GBP Next Week: A Buy Or A Sell


We continue to expect the GBP to remain well supported, against both the EUR and the USD.

According to BoE Governor Carney there could be additional stimulus in terms of further quantitative easing if necessary. He also stressed that the BoE was ready to ease rates further should higher rates start to impact the economy.
Nevertheless, he similarly stressed that there are signs that the recent recovery is broad based and set to continue. This in turn suggests little scope for any near-term action.

As we share a view of further improving growth prospects, it cannot be excluded that medium- and long term rates continue to gradually rise. This is especially true should inflation risk increase on the back of further rising business activity.

Investors Are Dumping Emerging Markets At An Accelerating Pace

The brutal financial asset sell-off in the Emerging Markets picked up this week.
And it's all reflected in the fund flows reports.

"Emerging Markets debt-dedicated funds recorded net outflows of $2,013MM (0.84% AUM) for the week ending on August 28, 2013, reports EPFR," said Morgan Stanley's Robert Habib. "Outflows increased for the third consecutive week and were the highest since they peaked late in June at nearly $6bn (2.2% of AUM). The total outflows since these commenced late in May now amount to $22.4bn. In line with the large outflows, prices of EM-dedicated funds extended their negative trend and fell 0.72% during the week."

"On a regional basis, investors decreased exposure from all EM regions, particularly from Asia-dedicated funds once more," added Habib.

Here's a geographic breakdown of the bond market bleeding:
 
em fund flows
Morgan Stanley

And here's a historical look:
 
fund flows

jeudi 29 août 2013

Five Takeaways from GDP Revisions

(This story has been posted on The Wall Street Journal Online's Real Time Economics blog at http://blogs.wsj.com/economics)
 
By Ben Casselman
The U.S. economy grew at a 2.5% annual rate in the second quarter of the year, the Commerce Department said Thursday, an upgrade from the 1.7% rate the government initially estimated. Economists are still digesting today's report, but here are five initial takeaways.

Old news, but good news: Thursday's upgrade was largely expected--economists have known a big revision was coming since the first week of August, when the government released better-than-expected trade data from June. But it's worth stepping back to look at the bigger picture: Back in July, before the preliminary figures were released, economists predicted a growth rate of below 1% in the second quarter, which would have represented a slowdown from the already-weak start of the year. Instead, the economy has accelerated for two quarters in a row, and posted its first reading above 2% since the middle of last year. A 2.5% growth rate still isn't particularly impressive--it remains below the U.S.'s long-term growth rate, and will do little to help the economy make up the ground lost in the recession--but it suggests the recovery is on much firmer footing than it first looked

Good news for jobs: One of the recent mysteries of the economy has been the apparent disconnect between the job market--which has been recovering steadily--and overall economic growth, which seemed to be sputtering. That kind of disparity can't continue indefinitely, and economists have been trying to figure out which set of numbers were telling the true story. Thursday's revisions suggest the jobs figures had it right. That's good news both for next week's jobs report and for the pace of hiring in the longer term. A separate decline in new jobless claims on Thursday is further evidence that the job market continues to heal.

Government drag worsens: The preliminary report issued last month offered a glimmer of hope from state and local governments, which increased spending for just the second time since 2009. Not anymore. The revisions indicate state and local governments actually cut spending at a 0.5% rate, although that still represents a modest improvement from earlier in the year. Meanwhile, federal spending fell even faster than initially thought. All told, the public sector shaved nearly two tenths of a percentage point off the second quarter growth rate.
New measure shows some volatility: Last month's preliminary figures got extra attention because they were the first to incorporate the Commerce Department's new methodology for calculating gross domestic product. Most notably, the government now counts intellectual property as a component of GDP. Thursday's report suggests government economists are still working out how to track the new measure in real time; they now say "intellectual property products" shrank at a 0.9% rate in the second quarter, down from an initial estimate of a 3.8% gain.

Don't expect a repeat in the third quarter: The faster-than-expected growth rate in the second quarter puts the economy on firmer footing heading into the second half of the year. But most economists now expect slower growth in the third quarter, and Thursday's report gives little reason to think they're wrong. Businesses built up inventories more than expected--which could mean they expect more sales later in the year, but also means they won't need to produce as much to restock shelves. Corporate profits were up, but so were dividend payments, meaning net cash flows actually declined--which forecasting firm Capital Economics noted was "not an encouraging sign for the investment outlook."

Dollar Rises on Data, But Strong Payrolls Needed

Jobless claims fell as expected and 2Q GDP got revised up, and with QE tapering on everybody's mind, that seems to be enough to make the dollar rally against just about everything, from the yen and euro to the Scandies. How long those dollar gains will last, however, is up for debate. On its own, the jobless claims number isn't impressive enough to herald a strong August payrolls number next week, which is the key piece of data investors are now waiting for. Also, traders seem ready to sell the greenback on any hint of Syria action. USD/JPY at Y98.37, from Y98.24 before the data. Euro down 0.7% to $1.3241.

mercredi 28 août 2013

SOCGEN: The Syria Conflict Could Spill Over Into Iraq, And Brent Oil Could Surge To $150


Oil has been rising lately, as the prospects for some kind of strike in Syria seem like almost a sure thing.

But why does Syria really matter to oil?

Michael Wittner at SocGen has produced a special 3-page note for clients on the matter of what a strike would mean for the oil market.
He notes that Syria itself is not a real player in the oil market, so that's not the issue.

The concern is "spillover." And he's got his eye on Iraq, where violence is getting worse, and where the fighting in Syria has a parallel.
Wittner writes:

Our big worry is Iraq. The Sunni vs. Shiite conflict in Syria has a direct parallel in Iraq, and the violence in Iraq has reached levels not seen since 2008. For oil, the northern pipeline carrying Kirkuk grade to Ceyhan, Turkey in the Med has been repeatedly attacked for the last 2-3 months, reducing exports from 350 kb/d to under 200 kb/d (on average). Our concern is that the oil-directed attacks move south and potentially disrupt the 2 Mb/d of Basrah grade exported through the Basrah port complex on the Persian Gulf. There are signs that the non-oil violence (bombings, etc) may be moving south, and oil-directed attacks may follow. Iran, who is Syria’s only state ally in the region (Hezbollah and Russia are Syria’s other allies), may choose to stir up such attacks, in order to hurt the economies of the Western countries by causing an oil price spike.
Base case scenario: $125 for Brent We believe that in the coming days, Brent could gain another $5-10, surging to $120-$125, either in anticipation of the attack or in reaction to the headlines that an attack had started. In our base case, we assume an attack begins in the next week. If it takes longer, and there are no signals that an attack is imminent, the oil price uplift from the entire Syrian situation will start to fade. Our base case scenario does not include any actual supply disruptions resulting from the US-led attack on Syria.

Upside scenario: $150 for Brent If the regional spill over results in a significant supply disruption in Iraq or elsewhere (from 0.5 – 2.0 Mb/d), Brent could spike briefly to $150.

Oil is up again this morning, although modestly.

mardi 27 août 2013

Here's What This Debt Ceiling Debate Of 2013 Means For Thre US Credit Rating

Yesterday afternoon, Treasury Secretary Jack Lew told Congress that the U.S. would hit the debt ceiling in mid-October.

So, what does this due to the credibility of the U.S. in the eyes of its creditors.

Well, in the wake of the 2011 debt ceiling debate, the U.S. saw its AAA credit rating stripped by S&P.  It's worth noting, however, that interest rates actually trended lower for two years.

In a note to clients on August 16, Goldman Sachs' Alec Phillips discussed what's going on at the credit rating agencies:

Standard & Poor’s and Moody’s revised their outlook on the US rating from negative to stable earlier this summer, with AA+ and AAA ratings respectively.3 Given this, it seems unlikely that the debt limit debate would trigger negative ratings action from either agency unless Congress actually missed the deadline.

Fitch has indicated that the projected level of US debt is slightly below the level it views as inconsistent, so a downgrade from them on fiscal fundamentals appears unlikely.4 However, for now Fitch maintains a negative outlook on the rating, and noted in June that “failure to raise the federal debt ceiling in a timely manner (ie. several days prior to when the Treasury will have exhausted extraordinary measures and cash reserves) will prompt a formal review of the U.S. sovereign ratings and likely lead to a downgrade.” Fitch’s review looks likely to be completed before year end, probably after the upcoming fiscal deadlines have passed.

Here's a look at what rates did before and after the 2011 debt ceiling deadline.
debt ceiling
Goldman Sachs Global Investment Research
Not All Fiscal Deadlines Are Created Equal

BARCLAYS - Outlooks & Strategies For EUR/USD, GBP/USD, USD/JPY, & AUD/USD

The following are the latest technical outlooks and strategies for EUR/USD, GBP/USD, USD/JPY and AUD/USD as provided by the technical strategy team at Barclays Capital.

EUR/USD:An Inside day posted yesterday keeps our view unchanged. We maintain a bearish view targeting 1.3300/10 initially, and then the 1.3200/20 area. Sell rallies while 1.3420 caps on a closing basis.

USD/JPY: Having failed to move above trendline resistance at 99.15, we now expect a deeper pullback within range, towards 97.00/05. However, thereafter, a 97 to 99.20 range is likely to persist into Sep and we would look to buy near the range low. Bigger picture, targets are to 103.80 and the 108 area.

GBP/USD: We are bearish, looking for a return to 1.5420 and potentially 1.5350. A move back above 1.5670 would turn us neutral instead while wider range highs near 1.5750/75 act as medium-term caps.

AUD/USD: Near term, support at 0.8930 is under pressure. A break below this level would warn of a move to the 2013 low near 0.8850 which should hold firm on initial attempts. Bearish pressure remains in the absence of a move above 0.9040.

Treasurys Rise on Renewed Haven Allure

US government bonds extend Monday's gains, driven by the unfamiliar sight of flight-to-safety bids. The conflict in Syria is hitting investors' nerves, setting up the classic haven flows that are lifting gold and the yen and weighing on equities globally. To be sure, gains in Treasurys are still capped by the looming prospect of Fed tapering in 3 weeks. But should US data continue to disappoint--consumer confidence and home prices are out today--the mix of geopolitical fears and reduced tapering concerns could drive a comeback in Treasurys. Ten-year notes are up 6/32, yielding 2.765%.

(cynthia.lin@wsj.com; cynthialin_dj)

Barack Obama’s Iraq Syndrome



The arab street hates Barack Obama. Many angry Egyptians accuse him of secretly supporting the Islamists who ran the country until July. Many others (equally angry) accuse him of backing the generals who overthrew the Islamists. Both charges cannot be right. Indeed, neither is. Yet loathing of Mr Obama runs wide and deep in the Muslim world, though he came to office vowing to mend relations with it, after the hubris and blunders of his predecessor.

When you are the commander-in-chief of a superpower, people often assume you are more powerful than you really are. To many Islamists the Egyptian army’s ousting of their leader, ex-President Muhammad Morsi, simply has to be America’s handiwork. Islamist posters in Cairo depict Mr Obama as a wicked pharaoh, leading Egypt’s military strongman, General Abdel Fattah al-Sisi, by a dog-leash. To such folk, evidence of American perfidy is all around: from comments by John Kerry, the secretary of state, that the army was merely “restoring democracy”, to Mr Obama’s reluctance to suspend military aid.

In contrast, to many Egyptians who back the generals, events have unmasked Mr Obama’s warm words about Arab democracy as a plot to empower Islamists, with an eye to dividing and weakening their homeland. Pro-army posters depict Mr Obama as a terrorist sympathiser with a bin-Laden-style beard.

Back home in America, too, Mr Obama is denounced in stereo. How feckless this president is, thunders a cross-party chorus of congressmen and pundits, urging him to suspend military aid to Egypt, lest America be complicit in a moral disaster. But oh, how reckless this president is, counters a camp that favours Realpolitik. The realists, both Republican and Democrat, want Mr Obama to hold his nose and back Egypt’s generals, to ensure stability on Israel’s borders and help contain radical Islam.

Syria inspires similar cacophony in Washington. Foreign-policy grandees call Mr Obama rash for saying that Bashar Assad had to go without first figuring out who might replace him, and for vowing to act should the regime use chemical weapons: a “red line” tested afresh on August 21st by allegations of horrific gas attacks on civilians near Damascus (prompting cautious White House calls for a UN investigation). A rival, bipartisan camp calls Mr Obama weak and timorous for failing to arm Syria’s rebels.

As noted earlier, these duelling critics cannot all be right. Lexington would go further. Anyone who accuses Mr Obama of picking winners in the Middle East, or urges him to do so, misunderstands the president. Mr Obama is not in the business of taking sides in foreign conflicts. He is profoundly cautious about wielding American power, and even about defending values that—when the going was easier—he hailed as universal.

In 2011, as the Arab spring reached Cairo, Mr Obama heaped praise on Egyptians for seeking “nothing less than genuine democracy”. He quoted Martin Luther King and praised largely peaceful protests for “putting the lie” to the idea that justice is best gained through violence. He lauded the Egyptian army for refusing to fire on civilians. Two-and-a-half years later, events leave less room for presidential lyricism. On August 15th Mr Obama rebuked the same army for its brutishness, saying that Egyptians deserve better. Then he chided Egyptians for their conspiracy theories about him, such as his supposed support for both Mr Morsi and his foes. Blaming America will “do nothing” to build a peaceful, democratic, prosperous Egypt, he scolded.

Such chilly rationality will not placate Arabs whose blood is boiling. From Syria to Egypt and beyond, partisans yearn to crush old rivals or sectarian foes once and for all. Mr Obama’s response is to dispatch envoys to preach the merits of negotiation and inclusion. On August 19th the defence secretary, Chuck Hagel, declared America’s influence in Egypt “limited”. General Martin Dempsey, chairman of the joint chiefs, has warned against picking “one among many sides” in a Syrian war whose underlying causes cannot be resolved by American military force.
Not every crisis is a quagmire

Such coolness matches the mood of many Americans. Fewer than one in four claims to be following events in Egypt very closely. According to a new Economist/YouGov poll, only 12% think Mr Obama has a clear strategy for Egypt, but that will not cost his party many votes. Television images of Arabs slaughtering Arabs—even of children convulsing after alleged chemical attacks in Syria—have not stirred American viewers very much.

During the Balkan wars of the 1990s several mid-ranking officials resigned in protest at American inaction, notes Robert Satloff of the Washington Institute for Near East Policy, a think-tank. Mr Obama’s hands-off approach to Syria, Egypt and elsewhere has not led to a similar walk-out. At the same time the president has bought himself credit in Congress and in Washington by embracing Israel more closely in his second term, and by letting Mr Kerry work on restarting Israeli-Palestinian peace talks. As a result, Mr Obama is shielded from grumbling about Syria.

Memories of overreach in Iraq and Afghanistan also help explain the national mood of coolness towards the Muslim world. But lessons from history can be over-learned. Frederic Hof, a former Syria point-man at the State Department, now at the Atlantic Council, sees an “Iraq syndrome” within government, and a prevailing view that America will botch any intervention it tries. Yet air strikes might slow or halt some Syrian massacres.

Contrary to the wild accusations against him, Mr Obama is not the hidden hand behind the Middle East’s tumult. In truth, he hates to take sides, fearing that any fresh entanglements may prove as bloody and costly as George W. Bush’s. But sometimes sides should be taken. Detachment can also be a sin.

lundi 26 août 2013

Plan Your Trade, Trade Your Plan. An Orderflow Trader's Day Trading Plan.



I have written an article for the great educational website on orderflow trading www.orderflowtrading.com.

The subject aim at helping new traders to write their own trading plan. As an example of what an orderflow day trading plan can look like, I am sharing my own which I am trading profitably for a number of months now.

You can find the artile here: http://t.co/UbLhp46Lxi

dimanche 25 août 2013

FX Macro And Sentiment Analysis - Week 35 - 2013



US Dollar : Neutral

Though we have yet to see the wave of deleveraging wash over US equities – the stronghold of moral hazard – we have nonetheless seen a significant market adjustment to the September Fed Taper. If the dollar is to extend its climb, Taper concern needs to evolve into a full blown ‘risk aversion’ trend for the global financial markets.

Over the past weeks and months, we have seen early speculation turn to consensus for the FOMC to make the first reduction in the $85 billion-per-month QE3 stimulus program at its September 18-19 policy gathering. We can see the progress of this pricing effort starting back in early May when the US 10-year Treasury yield began its incredible 70 percent rally. Given industrious investors bought US government bonds to ‘front run’ the Fed’s purchases, it makes sense that these would be the first to be sold off on the first sign of an end to the regime.

Data and Fed member speeches have further solidified the September meeting (where there will also be updated forecasts and another press conference to explain difficult changes) leading Bloomberg’s economist forecast placing next month’s meeting as a 65 percent probability for the cut. The latest corroboration comes from the Primary Dealers survey from the NY Fed. The banks charged with dealing in Treasuries not only set September as the first taper, the survey projected an aggressive pace beyond the first move.

Though not official, the Primary Dealers expectations often precede (encourage?) policy changes as it is seen as the market’s acceptance. Yet, if this particular survey - or the data or the FOMC minutes or a number of milestones – has proven the tipping point to speculation on the Taper, why has the USDollar not extended its bull trend 11,000 and EURUSD reversed back below 1.3000? This is likely a sign of saturation. The impact of the first move to moderate stimulus has been incorporated. Further easing steps will certainly carry more weight, but the first moves are accounted for…that is unless there is a meaningful deleveraging of risky positioning.


Euro : Bullish  

The euro have been much more resilient that many forecasted at the beginning of the month. The pick-up in Euro Area growth in Q2 is unambiguously welcome news, particularly in view of the positive mix of contributions from Core domestic demand and Peripheral net export.  Event risks continues to surprise to the upside and the emergence of the euro recovery theme is more and more pronounced.

What is really interesting is that the rally did not bring out a bullish consensus among pundits and forecasters yet, as was the case this year in the January and June highs. This makes me believe that with not much news releases in the way this week to change current sentiment apart from German IFO the rally is still not completed and will continue.

Moreover Euro continue to be supported by important fundamentals like rates differentials as well as central banks balance sheets differentials.


Yen: Bearish

With Chinese manufacturing data calming fears – even on the private sector gauge which has been much more bearish than the official government reading – it’s possible that Asian-Australasian-borne concerns abate soon; and this could spur some risk taking to weaken the Yen. The same can be said about Europe and North America – with growth pointed higher, the Yen serves little purpose as a safe haven beyond the speculative role against QE3 at the moment. 

So then what will be the issue to derail the Yen out of Japan? It could be two-fold – both monetary and fiscal. On the fiscal side, the Japanese debt burden just passed ¥1 quadrillion. As such, Prime Minister Shinzo Abe’s government is readying to announce a sales tax hike of 3%, from 5% to 8% (which rings the memory of the Asian crisis, when Japanese fiscal tightening alongside American monetary tightening exacerbated credit issues). If a sales tax is indeed on the way to help shrink the growing debt burden, we’ll learn more this week as government officials are holding meetings all week on the very issues. Recall that a few weeks ago the possibility that there would be no sales tax boosted the Yen; now the situation is reversed. 

Likewise, if there’s a sales tax hike, then the Bank of Japan might have to introduce further easing measures to help fight a downturn in inflation. If consumption is squeezed, demand falls, and price pressures are reduced. With growth already underperforming expectations, it’s possible that inflation begins to follow. We’ll get insight into that picture this Thursday when the July National Consumer Price Index is released (+0.7% expected from +0.2% (y/y)). Growth has indeed lagged, with the 2Q’13 GDP print in at +2.6% versus +3.6% expected, and the prior revised lower from +4.1% to +3.8%. Japanese data on the whole has been disappointing since mid-July, and we thus suspect that a miss on the July CPI reading could occur. 

As such, in light of some weaker data expected and the exogenous issues surrounding the Yen abating, I find that Japanese domestic concerns will prevail and pressure the Yen over the coming five trading days.



Pound : 










































Bullish 














The British Pound fell back from a fresh monthly high of 1.5716 even as the preliminary 2Q GDP report showed an upward revision in the U.K. growth rate. But the economic docket is expected to show a further improvement in U.K. consumer confidence along with a pickup in private sector credit



With BoE Governor Mark Carney scheduled to speak next week, the fresh batch of central bank rhetoric may heavily impact the British Pound ahead of the September 5 meeting, and the sterling may face a larger correction should the central bank head show a greater willingness to expand the balance sheet further. Indeed, Mr. Carney may continue to strike a rather dovish tone for monetary policy amid the persistent slack in the real economy, and the sterling may trade within a broad range over the near to medium-term as the policy outlook remains clouded with high uncertainty. 

However, as the MPC anticipates a more broad-based recovery in the second-half of the year, prospects for stronger growth may keep inflation above the 2% target for an extended period of time, and the ‘knock out’ for forward guidance may shore up the sterling on a longer-term scale as it raises the scope of seeing the BoE implement its exit strategy ahead of schedule. 


Australian Dollar: Bearish

Stabilization in Chinese economic news-flow has helped drive moderation in the RBA interest rate cut outlook. 

Traders are now pricing in a mere 6 percent probability of another rate cut at the September policy meeting (according to data from Credit Suisse). More noteworthy still, a dramatic improvement in the 1-year outlook over recent weeks shows investors to no longer expect any further easing over the next 12 months.

My concern is that on the back drop of those good sentiment readings, the australian dollar did not profit. So the question I am asking is when/if data deteriorate what will happen in the case of a dovish shift?

BAML: You’re Reading The FOMC Minutes Wrong, ’Twas Dovish!



Ethan Harris and the Bank of America Merrill Lynch US Economics team go out on a limb in saying the market may be misinterpreting yesterday's Fed minutes...
Caution from the Committee 
While Fed officials seemed to be overall confident in the recovery, some cracks
appeared relative to their June meeting. For example, they acknowledged
uncertainty in the outlook from the sequester. They noted the disconnect between
the unemployment rate and “other measures of labor utilization.” And while “a
few” participants still thought that low inflation was transitory, “a number” worried
that it was a sign of persistently low demand and thus warranted continuing with
accommodation. These do not suggest an eagerness to taper soon, in our view.
Guiding toward a guidance change 
The Committee debated guidance on two fronts: asset purchases and interest
rates. On the former, they decided not to say anything, judging it “might prompt
an unwarranted shift in market expectations regarding asset purchases.”
Participants seemed content that markets understood the data-dependent nature
of QE, although “a few” warned against putting too much attention on the
“illustrative” 7% unemployment rate Bernanke mentioned in his press conference.
As for rates, “several” said they were “willing to contemplate lowering the
unemployment rate threshold,” and “one” wanted formal lower bounds on
inflation. While we don’t anticipate either of these changes occurring soon, the
Committee clearly is grappling with communication challenges.
Josh here, also keep in mind we've seen yields spike higher of their own volition since this congregation in late July and mortgage re-fis are now dropping precipitously. Perhaps the Fed lays off in September after all - but how will the markets take that? I'd guess that no taper in September would mean an initial rally followed by massive pessimism and even more selling.
We shall see...
Read More: http://www.thereformedbroker.com/2013/08/22/baml-youre-reading-the-fomc-minutes-wrong-twas-dovish/

mercredi 21 août 2013

Is 'Chaos' Ahead? Some Truths About Fed Policy



Investors focusing on the tapering question probably are missing the bigger picture about Federal Reserve policy and how it will continue to shape financial markets.

The central bank itself has been insistent recently that the $85 billion a month in bond purchases surrounding the tapering question are the less relevant of the two main prongs—the other being the near-zero funds rate—of the historically easy monetary policy since the financial crisis.

Still, investors continue to focus on Long-Scale Asset Purchases—known formally as quantitative easing and less so as money-printing—while not paying enough attention to the more important question of forward guidance and how that affects the interest rate picture.

Read More: http://www.cnbc.com/id/100975385