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Strategies, analysis, and news for FX traders
September 2012 Volume 9, No. 9
Commodity currencies orbit China p. 6 September’s FX event risk p. 10
Early morning forex setup: Time is of the essence p. 14
Dissecting the Singapore dollar p. 18
Contributors .................................................4 Global Markets Commodity currency outlook hinges on China .........................................6
The Middle Kingdom’s economic path may dictate the course of the Aussie, New Zealand, and Canadian dollars. By Currency Trader Staff
Global Economic Calendar ........................ 24
Important dates for currency traders.
Currency Futures Snapshot ................. 25 Managed Money Review ....................... 25
Top-ranked managed money programs
International Markets ............................ 28
Numbers from the global forex, stock, and interest-rate markets.
On the Money The mountain of event risk ..................... 10
September is shaping up to be a key month for the FX market and the global economy. By Barbara Rockefeller
Forex Journal ...........................................29
Intraday buy triggers (and triggers again).
Trading Strategies Canadian early riser................................. 14
A pattern’s edge proves to increase when applied at a certain time of day. By Currency Trader Staff
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Click on the company name for a direct link to the ad in this month’s issue. eSignal FXCM Las Vegas Traders Expo
Advanced Concepts Singapore dollar avoids the dire straits .......................................... 18
Singapore’s dollar presents a unique case: a currency mostly immune to outside influence, marching to its own interest-rate drum and able to prosper during a long rally. By Howard L. Simons
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2 September 2012 • CURRENCY TRADER
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PO Box 487. promote or in any way imply the effectiveness of any trading system. 10 Early morning forex setup: Time is of the essence p. Volume 9. Chris Peters Editorial assistant and webmaster: Kesha Green kgreen@currencytradermag. analysis. Past performance does not guarantee future results. 2000). published in Japan in 1999. strategy or approach.com Dissecting the Singapore dollar p. Second Edition (Wiley. She has worked as a forecaster. The information in Currency Trader magazine is intended for educational purposes only. 29 Strategies.currencytradermag. Copyright © 2012 TechInfo. Marc Chandler. A book tentatively titled How to Trade FX is in the works.com) is an international economist with a focus on foreign exchange. Around the World (John Wiley & Sons. Illinois 60047. 9 For all subscriber services: www. ad sales: Bob Dorman bdorman@currencytradermag. Inc. 6 Editor-in-chief: Mark Etzkorn email@example.com Contributing editor: Howard Simons September’s FX event risk p.com Commodity currencies orbit China p. Inc. Information in this publication may not be stored or reproduced in any form without written permission from the publisher. All rights reserved. 2011). Currency Trader is published monthly by TechInfo. and How to Invest Internationally.com Managing editor: Molly Goad mgoad@currencytradermag. 24/7 Trading Around the Clock. q Barbara Rockefeller (www.CONTRIBUTORS FOREX TRADE JOURNAL: INTRADAY OPPORTUNITIES P. Issue 9. It is not meant to recommend. Traders are advised to do their own research and testing to determine the validity of a trading idea. 4 September 2012 • CURRENCY TRADER . and a strategist for Bianco Research. Lake Zurich.com Publisher. The Global Trader (John Wiley & Sons. No. He writes and speaks frequently on a wide range of economic and financial market issues.com Classified ad sales: Mark Seger seger@currencytradermag. 18 President: Phil Dorman pdorman@currencytradermag. Rockefeller is the author of Technical Analysis for Dummies. 2001). Trading and investing carry a high level of risk. and currently publishes two daily reports on foreign exchange. Rockefeller is on the board of directors of a large European hedge fund. trader. and consultant at Citibank and other financial institutions.com q Howard Simons is president of Rosewood Trading Inc. 14 Contributing writers: Barbara Rockefeller. and news for FX traders A publication of Active Trader ® September 2012 Volume 9..
Let’s take a look at country-specific fundamentals. and Canadian dollars. With its close trade ties to the U. monetary policy. dollar (Figure 2).S. the U. as all the “good news” is already priced into the market.S. forecasting a 3. the U. On top down under The Australian (top) and New Zealand dollars (bottom) both rallied smartly vs. Some analysts believe the Canadian dollar is the relatively safer play in the commodity currency group.S.S. Meanwhile. while the New Zealand dollar (NZD) jumped a little more than 10 percent (Figure 1)..S. the CAD is not as vulnerable as its Australian and New Zealand counterparts to fallout from Chinese economic weakness. dollar starting in June. New Zealand. dollar (USD) from June to mid-August.GLOBAL MARKETS Commodity currency outlook hinges on China The Middle Kingdom’s economic path may dictate the course of the Aussie.6-percent GDP rate for the year. the U. speculation the U. Federal Reserve might pull the trigger on a third round of quantitative easing (QE3) has traders thinking about the possibility of a new wave of liquidity that could ignite another rally in risk assets — commodity currencies key among them. September 2012 • CURRENCY TRADER . The Australian dollar (AUD) gained nearly 11 percent vs. Moody’s Analytics associate economist Katrina Ell says 2012 is shaping up to post above-trend economic growth. some currency FIGURE 1: COMMODITY CURRENCIES DOWN UNDER watchers say commodity-linked currencies could be hitting a wall. However. the Canadian dollar (CAD) climbed almost 6 percent during that same time vs. and key events that could impact commodity currencies in the near term. Given the healthy summer run-up. BY CURRENCY TRADER STAFF The currencies of countries with economies closely tied to the production and export of commodities have been on fire this summer. 6 Australia has been in a relatively strong position economically in recent years. managing to sidestep much of the carnage in the wake of the 2008 global financial crisis.
“The Australian economy is traveling well through 2011. especially in Asia. and we should see some concerns the Australian economy was expanding a touch gradual improvement going forward as the stimulus from below trend.” ably optimistic. “We believe the second quarter of 2012 was severe global uncertainty and weakness.” he says. particueasing mode. the European Central Bank at 0. “We expect an additional 50 basis “horrible. however. “The markets are concerned China has meetings. the Bank of Canada at 1 percent.9800.S. Greg Anderson.” inflation. most countries would kill for China’s softening economic numbers. especially. global economist at Wells Fargo.” The Reserve Bank of Australia (RBA) has been in an Ell says global demand for hard commodities. with China everything is relative. “Now that growth is generally back on track — despite “The Asian growth story is a key factor as to why the downside risks emanating from the global econAussie has underperformed the Canadian dollar and the omy — we expect the RBA is unlikely to cut rates further. senior currency strategist at Westpac over the prior year’s figure.” Beijing helps commodity demand pick up. says the Norges Bank at 1.” Nonetheless. is keeping Australia resilient. looks take a tumble. look particularly good.” points in cash rate cuts in Q4 as global growth momentum “If we get that for a few more months. its benchmark lending rate stands at 3. “The cuts were a response to she says. North percent. but the data out of Asia right now does not Others. percent. and low tion cycle.25 percent.” Ell says. “The RBA has cut rates by 125 basis points since “The Chinese economy is undergoing a soft [patch]. so there’s plenty of room for further easing. data Anderson describes as Institutional Bank. see the potential for lower rates. Of course.5 percent in 2013. “We could see GDP a tad under 8 percent. as exports increased a mere 1 percent says Sean Callow. “In recent minutes from monetary policy board August). coupled with the trough in resource demand.” says Jay Bryson. China. Australia’s rate is still much higher than However. Aussie currency is used as an Asian barometer or proxy. and Norway’s American head of FX strategy at Citi Group.” Norwegian krone over the last month (late-July to lateEll says.” November 2011. determinant of Australian economic activity and currency Fed at 0-0. and then 8. “If severe global headwinds.75 performance in the months ahead.” He warns the Aussie dollar could decline 10 percent if the August and September trade data is bad.1 billion averages.” he says. plus the recession enviable unemployment rate of just over 5 percent — conin Europe … Australia is sensitive to the industrial producsidered near-full employment — strong growth. China’s strength or weakness will be a key those of other major central bank rates.5 percent. but that’s a far cry from the double-digit growth China expeThe Canadian dollar’s spring-summer rally took the USD/CAD pair down to support around rienced even in 2010 and . “Australia has an you see much slower growth in China. including the U.” she notes.” trade surplus in July. I’m reasonrates sitting at [their current level]. the Aussie will slackens further. The ongoing discussion is not whether the Chinese economy will come back to earth — that’s already happening — but whether the landing will be hard or soft.5 larly from China. to be some months from bottoming out and the RBA’s Anderson adds the forex market is banking on “the FIGURE 2: CANADIAN DOLLAR Chinese authorities doing whatever is necessary [to support their economy] and that the July data was a blip. the bank has indicated it is comfortable with slowed down a lot more than they will admit.” “Australian lending rates are only slightly below long-term China reported a surprise narrowing to a $25. CURRENCY TRADER • September 2012 7 .
according to Ganguli. ing in expectations far below trend growth this year. “The Reserve Bank of New Zealand has kept rates at a record low since March 2011.” FX action New Zealand As most FX traders are aware.” Callow says.” he says. “There is no fiscal cliff.S. while it’s fallen to 110 percent for the U. but external risks have weighed on that outlook.2 percent.” says Michael Woolfolk.” September 2012 • CURRENCY TRADER .” However.GLOBAL MARKETS China view has been on the optimistic side — which suggests it will be disappointed by further softness. consumers have been deleveraging because of the financial crisis. is positioning Canada for slower growth. and it also has significant Chinese exposure.” he says. “AUD/USD rallied about 12 cents from Bernanke’s August 2010 Jackson Hole speech to the ultimate announcement in November 2010. the New Zealand dollar tends to trade in tandem with the Aussie dollar.12-13 FOMC meeting.S. too.” he says.” Anderson notes.” New Zealand’s central bank lending rate currently stands at 2. Jonathan Basile. External global factors have been weighing on the New Zealand economy. There are risks on the Canadian home front. citing weak domestic and external growth. Fred Gibson. Charles St-Arnaud. but the low rates have encouraged Canadians to borrow more. result8 Traders and analysts are looking for a decision regarding QE3 to emerge from the Sept. and that’s a problem for Canada. “We think it will be plodding along. managing director at BNY Mellon. associate economist at Moody’s Analytics. adding that he would rather hold it than the Australian dollar in the event of slower-than-expected growth in China. “Canada is doing better than everyone else.5 percent of kiwi exports. recovery. is an absence of fiscal uncertainty. Canada also has boasted structurally sound fundamentals.” In Canada’s favor. “Canada is much better positioned on Asia weakness because it primarily exports to the U. the recession in Europe has still made itself felt in the kiwi economy. Gibson expects more of the same. “Yet weak European demand is spilling over to weaker global and Asian growth. Domestically. Why would you want to raise interest rates when other central banks around the world are cutting rates?” Moody’s Analytics economist Bodhi Ganguli previously had a 2. and broader slowdown across China and the rest of Asia are weighing on export-facing sectors. while private consumption and government spending will grow below trend. — and if the Eurozone recession intensifies — could have a negative impact on the U. cites the currency’s relative stability: “The Canadian dollar tends to be less volatile than the Aussie. but don’t expect rate hikes anytime soon.5-percent. dollar given the huge impact of QE2. the uncertainty in global financial markets and weak global growth is weighing on consumer and business confidence.” he says. allowing policymakers to focus on growth. subdued economic activity and a weak labor market have kept demand-driven pressures at bay.” he notes. as the higher exchange rate erodes export competitiveness. steady business investment will drive the economy. while at home. While New Zealand doesn’t have major trade ties to the Eurozone. and QE3’s impact is unlikely to be as significant. however. The elevated kiwi has continued to keep a lid on imported inflation. “The recession in Europe.” Ganguli says. “They have a stable government and a very clear policy.S. “The direct impact from the European crisis isn’t so concerning. “It is not recession.S. among other factors. analysts seem to believe the Canadian currency is a better bet at this time because of its lack of exposure to Asian demand.S. but external risks coming mainly from the U. according to Moody’s Analytics. given the Euro area only accounts for 8. curbing household spending and business hiring. Moody’s Analytics forecasts the RBNZ will initiate a tightening cycle to help subdue rising inflationary pressures expected at that time. anemic U. “Both AUD/ USD and NZD/USD should lose about two cents if the Fed holds off on QE. but is on pace to grind out a 2-percent GDP reading in 2012. Business owners feel more confident to hire. Also. according to Basile. also pegs Canadian 2012 output at 2 percent. pegs 2012 GDP growth in New Zealand at 2.” he says.S.2-percent GDP forecast for Canada this year. hurting New Zealand’s exports.” Gibson says. FX strategist at Nomura. economist at Credit Suisse.S. fiscal cliff.S.S. are waiting because they aren’t sure which way policy is going to go.” Gibson says. but it’s an outlook that should keep rate hikes at bay. Another round of quantitative easing would likely extend the recent rallies for commodity currencies.” Canada Like Australia. “Large-scale QE3 could be worth about three cents on AUD/USD.” Going forward. “Domestically. Callow also points out history doesn’t tend to neatly repeat itself. while many employers in the U. “We think the Canadian dollar has a very bright future. the NZD rally has put pressure on the export side of the economy. but these gains would be vulnerable to the weight of China’s slowdown. following 2011’s 2-percent pace. “Inflation is at the lower end of the 1-3-percent target band. “U. Concerns about the U. “This will be important for Aussie/dollar and New Zealand/U.. recovery.” Overall. “The debt-to-income ratio has climbed to 150 percent for Canadian households.
head of G-10 FX strategy Americas at HSBC. especially the Aussie dollar.FIGURE 3: EUROPE VS. No QE announcement obviously inflates the downside risk for the commodity currencies. Callow sees some potential plays to watch near-term in the Aussie cross rates. “If things go south in Asia.” Lynch adds there may be a better chance for the Canadian dollar to remain strong for the remainder of the year. risk sentiment is a major factor for the commodity currencies. Targets of EUR/AUD 1.26 and GBP/AUD 1. still leaving Aussie dollar historically strong (see Figure 3). “Euro/Aussie and sterling/Aussie look to have further upside as soft commodity prices chip away at the pricey Aussie dollar. and the UK economy is showing signs of life after a dismal first half. and its sensitivity to developments in Asia is significant. the ECB will be taking strong steps to shore up Eurozone bond markets. “Meanwhile.00 (Figure 4). y The Euro/Aussie dollar and British pound/Aussie dollar rates have room to rise if commodity softness weighs on the Australian currency.” Finally. that cross was trading around 82. “There is a case to be made the Aussie dollar is more than fully valued.56 seem achievable. FIGURE 4: AUSSIE/YEN The Aussie/yen cross may signal the market’s risk appetite in the months to come. below 80. “Above 80.” says Bob Lynch. risk is off. Woolfolk advises monitoring the Aussie/yen cross as a gauge of risk appetite. In late August. the Aussie’s vulnerability would increase.9500 by year-end and the New Zealand dollar posting a 6-8-cent decline.” he says.” His firm has the Aussie/dollar pair retreating toward . AUSSIE Anderson speculates a QE3 announcement could support a 5-10-percent rally into the beginning of November and a 3-6-percent gain for the Canadian dollar.9700 for dollar/Canada.00 in Aussie/yen risk is on. In late August he had a year-end target of . 9 CURRENCY TRADER • September 2012 .” Woolfolk says.25/1.
12-13 policy meeting. but that was during the Lehman Brothers crisis. • The German Constitutional Court will rule on the legality of the European Stability Mechanism (ESM). however. (The Fed has previously cut rates in October ahead of a November presidential election. 31.) Apart from a flow of economic data pointing in the direction of a global recession. 22. Moral hazard occurs when people take on more risk than they should because they expect to be rescued by September 2012 • CURRENCY TRADER .S. BY BARBARA ROCKEFELLER The forex market has a long tradition of major events in July. occurred in February 1987. with the country expected to request another two years to meet targets. at the Oct. on the ballot in November — with Republican candidate Mitt Romney claiming he wants to replace Bernanke.” The prevailing consensus is that QE3 will be announced at the conclusion of the Sept. 23-24 meeting. which is scheduled to replace the European Financial Stability Fund (EFSF) and may be a buyer of new sovereign debt.5 percent in 2013 if the $600 billion in tax hikes and budget cuts are allowed to go forward on Jan. off the gold standard. with ongoing questions about whether the U. and possibly return to the gold standard — you might think the bank would want to sit on its hands until after the election. Congress shows no inclination to act until after the election. to a certain extent. • The troika report on Greece’s budget compliance is due this month. 1985.S. Wyo. • We will get additional data on the existing recession in Europe and the impending recession in China. (The Louvre Accord reversing dollar devaluation. Following in that line. 15. Moral hazard The minutes of the July 31-Aug. But the Fed has declared it is worried not only about contagion from the European crisis but also about the fiscal cliff the U. or the perception among market players they can avoid any unhappy consequences of risk-taking because the government will rescue them. end quantitative easing.. • The ECB holds a regular policy meeting on Sept. 12-13 and is expected to announce QE3. Aug. 1. August 2012).” Currency Trader. 6 and may cut interest rates.S. if not request additional bailout funds.) Because the Fed is. 6 elections.On THE MONEY ON the Money The mountain of event risk September is shaping up to be a key month for the FX market and the global economy. President Richard Nixon ended Bretton Woods on Aug. too (see “Recession favors the dollar. 1 Fed policy meeting affirmed that “additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery. August. Also. The Plaza Accord (an agreement to devalue the dollar) was signed Sept. A delay until October would put the decision only two weeks ahead of the Nov. nearly every one of the events entails government intervention in markets — and intervention always creates moral hazard. will avoid recession. and if not. Draghi may deliver details on ECB bond purchases in the secondary market according to some formula to cap spreads against 10 Bunds • The Federal Reserve meets Sept. 1944. • The reports of accounting firms hired to evaluate the Spanish banking sector will be used to determine the actual size and terms of the potentially €100 billion bailout that was agreed to in principle. we face a mountain of event risk this September that has been building all summer: • Both Fed chief Ben Bernanke and European Central Bank (ECB) chief Mario Draghi will speak at the annual Kansas City Fed Economic Policy Symposium in Jackson Hole. would cause a certain recession. The Bretton Woods agreement was decided July 1-22. notably in October 2008. and September. if mishandled. The Budget Office predicts GDP would contract 0. so the Fed will likely have to step into the leadership role. is approaching in January — which. 1971 by taking the U.
S. Now that Draghi has asserted leadership. but rather the establishment of a top-down joint entity with the EFSF/ESM that has true political power — the power of the purse. Spanish Prime Minister Mariano Rajoy and Italian Prime Minister Mario Monti know perfectly well what has happened. Moral hazard is taking the form of speculators feeling safe taking bigger positions in equities and commodities (including oil) than cooler heads would see as reasonable. This is not the same politics central banks escaped when they became independent. if at all. Draghi announced he would do “whatever it takes” to keep the Eurozone in place. the ECB will implement intervention.some other agent (generally a government) if events turn against their position. What does matter is saving the Eurozone. But in the bond market. The ECB is demanding a say in fiscal matters alongside the EFSF/ESM — new territory for a central bank. Spain wants to know what the conditions are before it seeks a bailout. 22. Germany is right. Critics say Draghi is making a power grab. Somebody had to. Sovereign bond market intervention is an entirely different animal from FX market intervention. which accounts for their reticence in responding to the Draghi statement. The biggest defect in the Eurozone design is the absence of a Ministry of Finance.” In a perfect world. One question the market is wrestling with is how. and a very high one. economy this autumn. This was a major policy shift that ran headlong into longstanding German opposition — in fact. a 550-point gain. But in making his announcement. It’s unclear where the International Monetary Fund (IMF) comes into things. In a way. 12). and as far as anyone knows. The new joint ECB/EFSF venture doesn’t make up for that absence.2590. We see moral hazard in a broader and deeper context in Europe.29 percent in June but fell more than 100 basis points to 6. exactly. Draghi’s credibility is proved by the Euro rising off the July 24 low at 1. And never mind that the ECB’s ability and willingness to buy a country’s sovereign paper is not yet fully established. CURRENCY TRADER • September 2012 Politicians want intervention? It comes with a price.2040 to a high of 1. Draghi has never singled out a member before. where ECB chief Draghi changed the institutional management game permanently in August. But now the “European Establishment” is the ECB and the ESFS/ESM together. but it’s a start. including having the ECB intervene in secondary government bond markets. Whereas before central banks sought independence to escape self-serving local politicians. In the case of the U. For the ESM to buy government bonds and the ECB to backstop bond-buying in the secondary market creates moral hazard on a giant scale. Draghi shifted the argument with Germany. The securities purchase program carried no strings up to now. This is a drop in the bucket compared to the Euro’s total decline from its May 2011 high. Draghi did give Germany a concession: Any country getting a bailout in the form of bond buying has to ask for it out loud and has to knuckle under to the standards of conduct it agreed to when it originally signed the various Eurozone treaties. The ECB is thought to have bought only about €200 billion in bonds before abandoning the technique in favor of its long-term refinancing operation last fall and again in February. 11 . 31 (Figure 1). whose primary focus is the core return or yield on underlying instruments. the Fed is deliberately allowing the creation of a moral hazard for what it perceives as a greater good — the welfare of the overall economy.19 percent on Aug. Draghi invented a new form of pan-European politics that now includes the central bank. The press calls it a game of chicken. if the Eurozone experiment is to thrive. the ECB has not responded with an exact list. no member can go behind his back to the IMF with cap in hand. as the Financial Times put it. where most trades are speculative in nature and FX changes are of secondary importance to fund managers. two top German officials have resigned because of disapproval of the ECB buying bonds. as of Aug. The yield on Spanish government 10-year Treasuries rose to a Euro-era high of 7. This is perfectly true — and welcome. “from an insurmountable philosophical disagreement to a negotiable difference on the proper tools for achieving a common purpose. it’s a victory for the enforceability of contracts. but it’s symbolically sizeable. At the beginning of the month. Draghi noted only one member of the ECB executive board (obviously Germany) opposed the initiative. But Draghi’s stance is it doesn’t matter whether Germany is correct about the notion that rescued governments lose their incentive to clean up their fiscal acts. The market doesn’t seem care the ESM does not yet exist and cannot launch until the German Constitutional Court issues a ruling (expected Sept. now local politicians may be seeking to escape the central bank. So far the response to the Draghi initiative has been positive.
the Bundesbank remains opposed to the ECB buying bonds.0% 61.43 remark that bond buying can be open1. The ECB doesn’t admit that its bond-buying plan will center on spread-capping.46 1. Third. we still don’t know how much money we’re talking about. the bond gang can add.2% 23.47 currency market intervention. It looks like Draghi won that one by positioning the Bundesbank as just one voter among many executive board members. too. it’s not engaging in bailouts but rather 1.29 believe that markets are inherently 1. This is the origin of the crisis and Draghi claims to be cold-hearted against a sob story. the role of intervention is sure to attract serious attention.41 1.0% 2011 February March April May June July August September November 2012 February March April May June July August September N Draghi’s credibility is proved by the Euro rising off the July 24 low at 1.0% 38.22 1. Source: Chart — Metastock. a 550-point gain. Draghi-Inpsired Euro Correction FIGURE 1: DRAGHI-INSPIRED EURO CORRECTION 100. Secondly. but his credibility with the BBK matters.48 1. Among the many factors the ECB would have to consider would be past default behavior (Spain being the worst offender. In other words.2590. but the deeper meaning is that the ECB is pretending to curb moral hazard while in fact engaging in a new form of it.49 words. as of Aug. If the market pushes too far and the ECB has to spend too much. Besides.6% (Italy). not least because bond buying that fails in any material way would promote the political forces in Germany calling for a referendum on remaining in the Eurozone. Markets always push. board member Joerg Asmussen. Just as with the Bank of Japan’s imaginary “line in the sand” for FX market intervention.35 mispricing causes a suboptimal allo1.45 this is what justifies the Asmussen 1.2040 to a high of 1. too. data — Reuters and eSignal As Europe falls into recession over the next few quarters.19 1. And 1.18 A surprise from left field 0. 1.34 1. 1.51 defending the Euro itself.25 1. it’s not clear China will avoid a hard landing. bond market intervention is 1. There are many reasons the ECB would want to keep spread-cap information a secret. And 1.e. and this time the intent may be to get the least unprofitable exit. One important ECB official. Insofar as the ECB acts to avoid a breakup of the Eurozone. or think we know.ON THE MONEY investors look to the rate of return that is commensurate with quality. what method would be used to determine a cap? The arguments would go on forever.37 1. but if it does. How much is too much? We don’t know. especially since the cap for one country (Spain) would surely differ from the cap for another Currency Trader Mag September 2012 Fig 1. September 2012 • CURRENCY TRADER 12 . that 1. just like 1.28 unstable and economists and govern1..50 1. but you can bet the ECB does. although not outright recession in the formal sense of two quarters of contracting GDP.8% 50. As the Eurozone saga evolves over the coming month. The ratings agencies are likely scratching their heads over how to rate a country like Spain once the ECB starts capping the Spanish spread against Bunds. “A currency can only be stable if its future existence is not in doubt” — a reference to convertibility risk.38 yet we know. then they are reflecting a currency risk and not just the risk of default. the market will push prices to that exact level.30 1. 31.44 1. ratings.27 1.33 cation of resources. but never goes away entirely.36 intervention causes mispricing and 1. In other 1.26 ment officials know better.31 intervention is justified only if you 1.40 currency market intervention.23 1. If a specific spread cap is named or guessed. historically) and the credibility of meeting ECB conditions. boldly said.21 1. i. First.20 1. the spread caps are sure to become the subject of intense speculation. it risks losing credibility.32 1. The German referendum idea comes and goes. the spread will be a secret not released to the public.42 ended (“unlimited in scale”).24 1. If bond yields in peripheral countries are so high they suggest reversibility of the Euro.39 1. governments can’t be allowed to think they can get away with issuing too much debt because the ECB is always there to protect them from their mistakes. And fourth.
” Exports to Asia fell 5 percent and tance is broken. too.40 There are signs of intervention everywhere. prepared for avalanches.15 7.3 percent in the first seven months of Curiously. but maybe not — market had fallen for eight months.60 drop in revenue from corporate profits 6.25 6.60 2010 during the global financial crisis. If so. and the year. we may expect to see the Euro ers saw profits plunge 96 percent year-over-year in the first test the resistance line around 1. WEEKLY (INVERTED) may not be much the government 6.50 6.25 Bottom line 8. If resishalf — a “disaster zone.players like intervention. this is not causing stress readings to rise.45 struggle in the face of a simultaneous 6. and even a local government 6. many players will be watching the level. we can expect at least a 24-percent retracefell almost 25 percent to Europe. y A Chinese hard landing has meaning beyond the obvious for commodity-exporting countries (Canada.5 percent. but more which is a form of intervention.75 6. Chinese Yuan (Weekly. Unless China Iron and Steel Association said domestic steelmaka Black Swan comes along.20 see it deployed a second time. see p.20 can do.90 6. ore declined in July to their lowest levels since 2009.But the data is frightening. 8. The ECB is about to intervene in the bond market. The global financial envilike 4 to 5 percent. Indonesia.55 6. perhaps because it gives them the ing or deferring shipments on as much as 4 million tons of illusion that someone is in charge.10 8. Chinese steel mills are default.25 7.95 the government can control — China’s 7.45 re-pegging from August 2008 to June 7. If the slowdown is Fig 2.90 7. Australia.65 6.so we must watch it.7 percent year over year in July and is down 3. And global investors have noticed: Foreign direct invest. but realistically. Inverted) structural rather than cyclical. Prices of Chinese steel and iron the Euro to be a prime beneficiary.35 spending binge on infrastructure will 6. 2011) to 1. Brazil.30 7. although more than 70 cities are initiating new in fact the Volatility Index (VIX) has been flirting with programs that might provide an offset.6 Get ready to climb the mountain of event risk.15 6. too. The data makes the world safe for the embrace of risk. The CURRENCY TRADER • September 2012 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20 The yuan has been on a rising trajectory since it was unpegged in 2005. Before recovering record lows below 14. there FIGURE 2: CHINESE YUAN. It worked 8. Land purchases for housing developronment is chock-full of moral hazard. 1. 7.40 7.70 and land sales.70 China engaged in a massive stimulus 7. we have to expect iron ore after the price fell. Magic numbers are silly.40 6.00 7.75 7.35 was unpegged in 2005.30 8.85 That pretty much leaves one thing 6.S. ment fell 8. 13 .35 8. The yuan has 7.05 7. bond market.S. ment are down 24. For information on the author. Some analysts estimate Chinese central bank may be about to repeg the yuan.4940 (May ing and transport companies reported losses for the first 4.2747 of the major down move from 1. Global investor confidenceMag Currency Trader would September 2012 be shaken.50 7. 4. and be percent in the first seven months of 2102.80 6.2642 as of Sept.15 8.10 currency (Figure 2). et al).20 been on a rising trajectory since it 7.05 before and it wouldn’t be surprising to 8. 6. growth is not the officially advertised 7. We may think that means an excess somewhat in June and July.00 8.85 7. The Fed is intervening in the U.55 7. but note the 7.95 to re-pegging the currency. half of the year. 2012). but note the re-pegging from August 2008 to June 2010 during the global financial crisis.80 program during this period in addition 7.65 7.30 6. especially if good U. housing prices in the 70 cities of unwarranted complacency.2043 (June 18. The big state-owned minment to 1.
m. dollar/Canadian dollar pair (USD/CAD) often gets short shrift in the financial press.9500 and 1. 3. and in late August 2012. perhaps because it seems to lack the transcontinental excitement of other exchange rates. Each of these bars concluded a pattern satisfying the following criteria: 1. the pair was almost exactly where it was a year earlier. As we shall see. clunky price trends rather FIGURE 1: MOVING SIDEWAYS than soaring rallies or sell-offs — the recent price action in Figure 1 providing a good example. Although such observations might lead some to quip.0005 below the immediately preceding low. analyzing intraday time frames reveals certain patterns and tendencies with the potential to provide opportunities for short-term traders. taking price back down to around . in the same time zones. Three consecutive lower lows. 14 September 2012 • CURRENCY TRADER October 2010 • CURRENCY . The downtrend reasserted itself in March 2009 (when the USD/CAD rate topped 1. Those who have traded the two North American dollars are familiar with the pair’s sometimes-stodgy.. In late-August. hovering around . “So why should I bother trading it?” other traders likely appreciate the pair’s relative calmness. and share a friendly border and (mostly) the same language. and Canada are close trade partners. if not its trend-friendliness. ET bars. and 10:30 a. BY CURRENCY TRADER STAFF The U.9400 in July 2011. though. oftenfrustrating nature: a great deal of overlap in trading ranges from day to day and congestive.0500.m. On the half-hour Figure 2 marks three 30-minute bars in the USD/CAD pair on Jan. 2012 — the 6:30 a.3000).S.. The U.m. the choppy USD/CAD pair found itself back where it was a year earlier.S. the pair has mostly wandered aimlessly in a range between . 7 a. Over the past two years.9900. The pair entered a long-term downtrend in 2002 (not shown) that reversed briefly and dramatically in late 2007.TRADING STRATEGIES Canadian early riser A pattern’s edge proves to increase when applied at a certain time of day. the last of which is lower than the previous 19 lows and at least 0.
FIGURE 2: PATTERN EXAMPLES 2.5 hours). Consecutive lower closes in the second-to-last and third-to-last bars. the criteria can be defined as: 1. two bars ago. refer to the most recent bar. one bar ago. which was followed by a much more extended rally. 3. As formulas. 2.0005 Where 0.. CURRENCY TRADER • September 2012 15 . 4. the pattern shows evidence of a bullish edge. Close<Close Close<Close Low<Min(Low:Low) Low<Low Low<Low Low-Low>=0. The chart inset in Figure 2 zooms in on the first two examples and highlights the bar numbers (except for the 19-bar low) according to the formula. FIGURE 3: PATTERN PERFORMANCE While the pair’s benchmark performance is flat to down. (The 30-minute time frame was selected somewhat arbitrarily. 2…etc. 1. 6. with one eye on identifying patterns that could form within a single trading session and another on avoiding too- The pattern culminates with a four-bar pullback that makes a 19-bar low. it is simply one way to define relatively frequent downside price thrusts or corrections on this time frame. and the consecutive lower close simply ensure there is at least three consecutive 30-minute bars of solid selling. etc. 5. the 19-bar low (8. These back-to-back signals were followed by a modest upswing and then a retreat to a slightly lower low and the final signal. There is nothing magical about the pattern definition. The low-to-low drop required between the final two bars.
as the pair’s intraday moves are typically modest). 21. 2011 and Aug.to 16-bar move in the analysis period ranged from 49. and 8 p.) These unoptimized rules were based on a few examples from late 2011 and early 2012.m. ranging from a low of 52. 22. by contrast. a period spanning more than 12. and finally turning 16 higher to meet the average gain at bar 16.m. the average percentage after the pattern was 55. Figure 3 shows how the USD/CAD pair performed after these patterns.TRADING STRATEGIES FIGURE 4: PATTERN FREQUENCY BY TIME OF DAY Most patterns concluded by 11 a.11 percent to 59. These results suggest the pair rallies slightly or trades sideways after many patterns. While the percentage of a higher close for any one. although not exceptionally consistently. this patterned formed 142 times between 6 a. again. The slight negativity of the median line emphasizes the pair’s range had a minor downside bias. ET (i. the more volatile median gain peaks at day 7 before swinging lower to bar 12. The gray and black lines are the average and median close-to-close moves for all one. obviously skews to the upside.m.to 16-bar periods in the analysis — highlighting. or a little more often than every other day.64 percent. Both lines outperform the market’s typical behavior at almost all intervals. and 8 p. The post-pattern price action. While the average close-to-close gain moves mostly higher until bar 10. while a smaller number are larger winners (larger being relative in this case. However. ET.000 thirty-minute bars. Clock watching An initial review found few clues regarding potential signal quality in the price action immediately preceding the final three bars of the pattern. short time frames that were unlikely to produce worthwhile price moves.m. the “630” bar is the 30 minutes of trading ending September 2012 • CURRENCY TRADER . Between Aug. 2012.m.e.. analyzing the time of day the patterns occurred revealed some clear tendencies. the pair’s net sideways price action over roughly the past year (the average line is almost perfectly flat and hugs the x-axis). ET. The bullish bias is evident in the odds of higher 30-minute-bar closes after the pattern. though.18 percent to 49. Figure 4 shows how frequently the pattern concluded in different 30-minute bars between 6:30 a.86 percent (the percentage was 57 percent or higher at bars 5-7). The blue lines represent the average and median price moves from the closing price of the last bar of the pattern (bar 0) to the closes of the next 16 thirtyminute bars.37 percent.
to long-term trend-followers recently.m. or earlier were. as long as you maintain realistic expectations. or earlier. shorterterm analysis shows that a seemingly lackluster market can provide opportunities. but only 48. time-of-day analysis suggested an intraday buy setup pattern with a minor bullish edge had a much more favorable outcome if applied earlier in the trading session.65 percent of the time for those that completed at 10:30 a. and there are two notable spikes with this period: 6:30-7 a. (Because there was only one pattern instance that ended on the 15:30 bar.) The percentage of gains for patterns that formed earlier in the day were higher as well: At bar 7 price was higher 67. Interestingly.m. stable during this period. That this period happens to fall in the hours preceding the New York U.FIGURE 5: BAR 7 RETURNS BY TIME OF DAY Patterns that concluded by 10 a. forex session’s open and the first hour of that session should not be surprising — volatility is usually highest at the beginning and ends of trading days — but it’s a bonus the pattern appears to be more. Taking what the market gives Although the USD/CAD pair hasn’t done much for intermediate. at 6:30 a.. Knowing when a pattern is likely to occur is one thing.45 percent). ET (“1600”) — the end of the New York day forex trading session.m. rather than less. on average. It shows the average post-pattern gain or loss at bar 7 — an interval chosen because it was the coincident early high point for both the average and median returns (refer to Figure 1) and the interval with the second-highest winning percentage (58. the results in the chart reflect the average of the four patterns from the 15:00 bar and the 15:30 bar instance. or later. while the rest of the day was mixed: Late morning through early afternoon was the most notable negative stretch. In this case.65 percent of the time for patterns occurring at 10 a. Overall. y CURRENCY TRADER • September 2012 17 . there is a slight bump in the number of instances after 4 p.m. in the black at bar 7. and 9-9:30 a.m. after a drop-off in frequency after this period.m. the stars align for the pattern in that its largest and most consistent gains tend to occur when its signals are most plentiful.m.S. knowing if that time makes any difference is another. The Trade Journal shows the outcome of two of the most recent signals triggered by this pattern. or earlier were the most consistently profitable after seven bars.m.m. Most of the patterns occurred before 11 a.). Patterns that concluded at 10 a. Figure 5 provides some insight on this point.
BY HOWARD L. Vienna in Austria. the options market tends to get nervous about the strong SGD September 2012 • CURRENCY TRADER . Even so. Singapore. two carries As has been the case for nearly every currency examined in East and South Asia. This essentially describes why the islands separated from the tip of the Malay Peninsula by the Johor Straits. Singapore had been governed separately by the British since 1819 and was home to a thriving hodgepodge of merchants and traders from the region.S. including a very large Chinese contingent that created a free-market laboratory without having the self-awareness of doing so. are an independent entity. we have to look at the Singapore dollar’s (SGD) relationship against both the U. Tokyo in Japan. under its long-time overseas Chinese ruler Lee Kwan Yew. replete with the story of the huge shore batteries pointing irretrievably out to sea when the Japanese army was rude enough to arrive by land. marching to its own interest-rate drum and able to prosper during a long rally. it went through several phases. including union in what was then known as the Federation of Malaya (see “Malaysia On The Jagged Edge. Between the end of World War II and the island’s separation as an independent republic in 1965. became an exemplar of the Asian model of economic freedom combined with what Americans especially would regard as an authoritarian political system. The SGD has been climbing steadily against the USD for more than a decade.ADVANCED CONCEPTS TRADING STRATEGIES Singapore dollar avoids the dire straits Singapore’s dollar presents a unique case: a currency mostly immune to outside influence. SIMONS The city-state model is so successful in Asia you really have to wonder why it has not been tried on a large scale elsewhere.” Currency Trader. including Paris in France. was the largest single defeat ever suffered 18 by the British in their long imperial history. Only Japan in Asia has a higher per capita GDP. are such you have to wonder why both sides simply do not wish each other the best and get on with their separate lives. the only interruption of note occurred during the financial crisis of 2008-2009. Two countries. The island’s famous fall to Japan in 1942. and from the Indonesian island of Sumatra by the Singapore and Malacca Straits. June 2011). dollar and the Japanese yen. or Mexico City in Mexico. The politics of too many places where a large city’s interests have to be balanced against those of a hinterland.
575 1. the yen over the past 10 years.875 Jan-12 Feb-09 Aug-09 May-03 Sep-06 Sep-07 Sep-08 Feb-10 Apr-04 Oct-04 Apr-05 Apr-06 Mar-07 Mar-08 May-02 Other than a strengthening phase during the yen carry trade heyday of 2005-2006.5 0. the JPY has a markedly different history (Figure 2).55 1.5 1.65 1.775 1. If we take the excess volatility for the SGD (the ratio of implied volatility on threemonth SGD forwards divided by the high-low-close volatility for the SGD. Inverse Scale (Figure 1). As much of this rally was driven by ultra-low short-term interest rates in the U.60 1. its movement has been independent of expected interestrate differentials against the USD since 1999 and against the JPY since 2004.45-1.65 range over the past decade.45 1. 2.] .5 2.3 1. These expected interest-rate differentials are the CURRENCY TRADER • September 2012 Oct-05 Jul-11 Jul-12 -0. The SGD cross rate vs. minus 1. Led 3 Months 1.25 1. the SGD has traded between 1.675 1.375 1.75 SGD Stable Against Yen Interest-rate differentials Regardless of the SGD’s course against either the dollar or the yen. / HLC Vol..325 1.8 0. but outside of that episode it has traded in a 1.65 vs.475 1.275 SGD Per USD.1 1.725 1. the high measure of excess volatility really measures anxiety regarding the sustainability of American policies as much as any level or trend for the SGD. Inverse Scale.45-1.35 1. There is no active option market from which we can construct an excess volatility calculation.3 1.225 XS Vol SGD Per JPY.0 0.30 1.00) we see sustained high levels during the 2009-2011 rally. Aug-10 Jan-99 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Nov-01 Nov-02 Nov-03 Jul-12 19 .FIGURE 1: OPTIONS MARKET NERVOUS ABOUT STRONGER SGD 2.425 1.20 1.50 1.625 1.3 1.5 1. FIGURE 2: SGD STABLE AGAINST YEN 1.0 1.3 0. the options market tends to get nervous about the strong SGD.0 -0. The SGD strengthened during the yen carry trade heyday in 2005 and 2006.S.8 [Implied Vol.825 Oct-04 Oct-05 Jan-11 Feb-09 May-02 May-03 Sep-06 Sep-07 Sep-08 Aug-09 Feb-10 Apr-04 Apr-05 Apr-06 Mar-07 Mar-08 Aug-10 Jan-99 Jun-99 Jun-00 Jun-01 Jul-11 Dec-99 Dec-00 Nov-01 Nov-02 Nov-03 Jan-12 Jan-11 Even though the SGD has been climbing steadily against the USD for more than a decade.175 1.70 1.40 1.525 1.
875 0.00 -0. differences between the forwardrate ratios between six and nine months (FRR6.JPY FRR6.250 SGD FRR6. Inverse Scale.65 1. but the convergence between the USD rate and the interest-rate spread between Singapore and the U.50 1.000 -0.45 1.125 Aug-08 Feb-09 Sep-09 Nov-10 Apr-10 May-11 Dec-11 Jul-12 -1.9 .40 1.85 Oct-01 Oct-05 May-11 Feb-00 Sep-00 Feb-09 May-02 May-06 Aug-04 Mar-05 Aug-08 Sep-09 Dec-11 Apr-01 Jan-99 Jan-04 Jun-07 Jan-08 Apr-10 Jul-99 Jul-03 Dec-02 Nov-06 Nov-10 Jul-12 1.S. the JPY since 2004.425 1.575 1.375 0.500 -0. the steeper the money-market yield curve.125 -0. The FRR6.250 -0.750 0.20 1.775 1.80 1.9 The SGD’s movement has been independent of expected interest-rate differentials vs. The more this measure exceeds 1.525 1.500 0.9 0.9 is the forward rate between six and nine months divided by the ninemonth rate itself.625 0.60 1.90 -1.35 1.75 1. have pushed their three-month September 2012 • CURRENCY TRADER May-06 Nov-06 Jun-07 20 Mar-05 Jan-08 Oct-05 . since the U.875 SGD Per USD SGD FRR .50 SGD FRR6.625 1. went to quantitative easing in March 2009 is visible.30 1.275 1.S.750 -0.00. Does the SGD instead follow. Led 3 Months 1.000 0.70 1.00 0.USD FRR 1.375 -0. This is a very strong hint the SGD trades independently of normally applied standard interest-rate arbitrage.000 -1. a straight three-month interest-rate spread? The answer provided by Figures 5 and 6 is something of a weak “yes.9 .9) of the USD or JPY one on hand and of the SGD on the other. Inverse Scale.325 1.JPY FRR 1.50 SGD Per JPY SGD FRR . As both Japan and the U. Led 3 Months 1.55 1.USD FRR6.250 0.675 1.25 SGD Per JPY.00 The SGD has also moved independently of expected interest-rate differentials vs.725 1.475 1.225 SGD Per USD. the USD since 1999. and the three-month rate spread between Singapore and Japan has paralleled the cross rate for more than a decade.125 0.875 -1.175 1.50 -1.375 1.ADVANCED CONCEPTS ON THE MONEY FIGURE 3: SGD NOT A FUNCTION OF RELATIVE INTEREST-RATE EXPECTATIONS TO USD 1.625 -0.S.825 Feb-00 May-02 Dec-02 Jan-04 Aug-04 Apr-01 Oct-01 Jul-03 Sep-00 Jan-99 Jul-99 1. FIGURE 4: SGD NOT A FUNCTION OF RELATIVE INTEREST-RATE EXPECTATIONS TO JPY 1.” The eye sees and the brain interprets patterns where none actually exist. as so many “minor” currencies do.
825 Oct-04 Oct-05 Oct-06 May-02 May-03 May-04 Sep-07 Sep-08 Aug-09 Feb-10 Apr-05 Apr-06 Mar-07 Mar-08 Mar-09 Nov-02 Nov-03 1. If we map the excess carry return for borrowing the USD and lending the SGD against the relative performance of the two stock markets in USD terms.425 1.25 1.50 1.75% -2.725 1. Asset returns Whenever standard interest-rate arbitrage does not drive currency rates and the country in question does not have an export sector dominated by a single commodity or group of commodities. FIGURE 6: SGD PARALLELS SHORT-TERM RATE SPREAD TO JPY 1.75% -3. SGD .575 1.475 1.625 1.3% 2. perhaps.40 1. went to quantitative easing in March 2009.8% 1.25% -2.7% Oct-05 May-11 May-02 May-06 Aug-04 Mar-05 Aug-08 Feb-09 Sep-09 Dec-02 Nov-06 Nov-10 Dec-11 Jan-04 Jun-07 Jan-08 Apr-10 Jul-03 The three-month rate spread between Singapore and Japan has paralleled the cross rate for more than a decade.50% -2. since the U.S.25% -1.FIGURE 5: SGD HAS CONVERGED TO SHORT-TERM RATE SPREAD TO USD 1.2% -0.75% -1. after all.8% 0.70 Jan-99 Jul-99 Feb-00 Sep-00 Apr-01 Oct-01 1. Here the link between the USD and the SGD is far stronger than the link between the JPY and the SGD — reflecting.325 SGD Per USD.00% -0.00% Three-Month Yield Spread.875 SGD Per USD SGD-USD 0. a free-market economy within a political system intolerant of the Frank Sinatra “My Way” school of thought.45 1. Inverse Scale 1.275 1.25% 0.50% -0.60 1.30 SGD Per JPY.775 1. Jul-12 21 .20 1. this is equivalent to saying the SGD simply follows the Monetary Authority of Singapore’s lead.00% -1.75% Feb-11 Aug-10 Aug-11 Jan-12 Jul-12 -4.35 1.65 1.75 SGD Per JPY SGD-JPY 3.25% -0.675 1.00% -2.50% -1.3% 1.8% Three-Month Yield Spread. we see a general conformity. one that CURRENCY TRADER • September 2012 There is some visible convergence between the USD rate and the interest-rate spread between Singapore and the U. This is.525 1.175 1.S. SGD-JPY 2.25% -3. the reduced role of Japanese banks and yen-denominated loans in South Asia following the 1997-1998 crisis. we should look toward relative investment flows.375 1. Inverse Scale 1.55 1.3% 0.50% -3.225 1.USD rates down toward zero percent for long stretches of time.3% -0.50% 0.00% -3.
1999 = 100% 120 115 110 105 100 95 90 85 JPY : SGD Carry Relative Performance: Vs. 22 . Japan 375% 350% 325% Excess Carry Return: JPY Into SGD March 1. Perhaps the benchmark Straits Times index should be renamed the Un-Dire Straits index. March 1.ADVANCED CONCEPTS ON THE MONEY FIGURE 7: USD CARRY INTO SGD MATCHES RELATIVE STOCK PERFORMANCE 120 USD: SGD Carry Relative Performance: Vs. 375% Excess Carry Return: USD Into SGD. U. U. Nothing of the sort can be said for the Japanese parallel (Figure 8). y For information on the author. marching to the beat of its own interest-rate drum. 1999 = 100 300% 275% 250% 225% 200% 175% 150% 125% 100% Oct-04 Feb-03 Jul-11 May-01 May-05 Sep-99 Sep-03 Aug-07 Sep-08 Nov-00 Dec-01 Dec-05 Nov-09 Dec-10 Feb-12 Apr-00 Mar-99 Mar-04 Mar-08 Jun-06 Jan-07 Apr-09 Jun-10 Jul-02 75% held even through the 2008-2009 financial crisis (Figure 7).S. What we have in Singapore is a currency befitting its status as a city-state: Independent. September 2012 • CURRENCY TRADER These excess carry returns oscillated into and out of conformance and diverged for good after the March 2009 global market low. March 1. a long rally. 1999 = 100% 115 110 105 250% 225% 100 200% 175% 95 150% 125% 100% May-01 Feb-03 Apr-00 Oct-04 May-05 Mar-99 Mar-04 Mar-08 Sep-08 Apr-09 Nov-09 Dec-10 Sep-99 Sep-03 Aug-07 Nov-00 Dec-01 Dec-05 Feb-12 Jun-10 Jun-06 Jan-07 Jul-02 Jul-11 90 85 75% Mapping the excess carry return for borrowing the USD and lending the SGD against the relative performance of the two stock markets (in USD terms) reveals a general conformity that held even during the 2008-2009 financial crisis.S. barely swayed by outside developments and able to prosper during that most feared of events in a world filled with competitive devaluators. Japan. since Singapore joined the global stock market rally while moribund Japan did not. see p.. March 1. Here the excess carry returns oscillated into and out of conformance and diverged for good after the March 2009 global market low — or. should we say. FIGURE 8: JPY CARRY INTO SGD DIVERGED FROM RELATIVE STOCK PERFORMANCE AFTER MARCH 2009 130 125 Relative Performance In USD Terms Singapore Vs. 1999 = 100 350% 325% 300% 275% Relative Performance In USD Terms Singapore Vs. 4.
N o v e m b e r 14 -17 C A E S A R S PA L A C E Linda RaSCHKE LaRRy MCMiLLan jaMES CHEn CaRoLyn boRodEn RoSEnbLooM CoRy ToM SoSnoFF STRaTEgiES opTionS FoREX FUTURES STRaTEgiES opTionS Learn the Tips.LasVegasTradersExpo.com or Call 800/970-4355 Today! Mention Priority Code 028442 To Exhibit: Call 800/822-1134 TiM KnigHT joHn pERSon RobERT gREEn KaTHy LiEn HaRRy boXER giL MoRaLES SToCKS Platinum Sponsor FUTURES Gold Sponsors STRaTEgiES FoREX Silver Sponsors SToCKS STRaTEgiES Media Partner CURRENCY TRADER • September 2012 23 . Tricks & Money-Making Strategies of Profitable Traders Attend the Ultimate Strategy Event for Traders FREE Register FREE at www.
S. 10:00 a.m. dollar index futures (ICE) U.: August personal income France: Q2 GDP and July PPI India: August CPI Japan: August employment report and CPI U.S.S. 8:30 a. dollar index futures (ICE) 5 UK: Bank of England interest-rate announcement ECB: Governing council interest-rate announcement U.m.m.: Q2 GDP and August durable goods Germany: August employment report South Africa: August PPI UK: Q2 GDP U.: August ISM manufacturing report Australia: Q2 GDP Brazil: August CPI Canada: Bank of Canada interestrate announcement Australia: August employment report Brazil: August PPI UK: Bank of England interest-rate announcement ECB: Governing council interest-rate announcement U.m. dollar index options 20 6 21 22 23 24 Chicago fed national activity index 25 26 27 U. Currency Trader is not responsible for the accuracy of calendar dates beyond press time.S.S.: August leading indicators Brazil: August employment report Germany: August PPI Hong Kong: Q2 GDP and August CPI Mexico: August employment report 7 8 9 10 28 U.m.: September ism report Canada: August PPI October 17 September U.m. dollar index options 24 September 2012 • CURRENCY TRADER . this is the first day on which a clearinghouse can give notice to a buyer of a futures contract that it intends to deliver a commodity in fulfillment of a futures contract.m.S. dollar index futures LTD: September forex futures. South Africa: Q2 GDP France: August CPI Germany: August CPI Japan: August PPI UK: August employment report U. 8:30 a. 8:30 a.: September employment report Brazil: September CPI Canada: September employment report Japan: Bank of Japan interest-rate announcement LTD: October forex options. 18 (ICE) Hong Kong: June-August employment report South Africa: Q2 employment report UK: August CPI FND: September U.S. September U. FOMC: Federal Open Market Committee GDP: Gross domestic product ISM: Institute for supply management LTD (last trading day): The final day trading can take place in a futures or options contract. 8:30 a. 31 CPI and August PPI UK: August PPI LTD: September forex options. 8:30 a.S.m. 8:30 a. October U.S.: August CPI and retail sales India: August PPI 29 30 1 2 3 4 U.S.m.S.S.S.) GDP CPI ECI PPI ISM Unemployment Personal income Durable goods Retail sales Trade balance Leading indicators Release time (ET) 8:30 a. 8:30 a.: August employment report Canada: August employment report Mexico: Aug.GLOBAL ECONOMIC CALENDAR CPI: Consumer price index ECB: European Central Bank FDD (first delivery day): The first day on which delivery of a commodity in fulfillment of a futures contract can take place.: July trade balance 11 France: Q2 employment report 12 13 14 15 16 The information on this page is subject to change. September U. The clearinghouse also informs the seller.m. September 1 2 3 4 5 19 U.: August PPI and FOMC interest-rate announcement Hong Kong: Q2 PPI U. FND (first notice day): Also known as first intent day.S. PMI: Purchasing managers index PPI: Producer price index Economic release (U.S. 8:30 a.m.S. 10:00 a.S.: August housing starts South Africa: August CPI Japan: Bank of Japan interest-rate announcement FDD: September forex futures.
75% 11.46% 5.23% / 17% -1.67% 12. 20-day move: The percentage price move from the close 20 days ago to today’s close.2 28. in thousands.63% / 63% 4. while a reading of 0% means the current reading is smaller than the previous readings.8 144.0 99.17% / 0% 3. dollar index NZD/USD E-Mini EUR/USD Sym EC AD BP CD JY SF MP DX NE ZE Exch CME CME CME CME CME CME CME ICE CME CME Vol 228.2 39. Currency) Alder Cap'l (Alder Global 10) Based on estimates of the composite of all accounts or the fully funded subset method. 10-day move: The percentage price move from the close 10 days ago to today’s close.5 72. Does not reflect the performance of any single account.1 5. (millions) 1. 20-day moves. 10.CURRENCY FUTURES SNAPSHOT as of Aug. 9. Price activity is based on pit-traded contracts.68% 5.8 OI 313.53% / 100% 2. (Currency Aggr) Smart Box Capital (Leveraged FX) JarrattDavis (Managed FX) Vortex FX Harmonic Capital (Gl. it shows how the most recent 20-day move compares to the past sixty 20-day moves. BarclayHedge Rankings: Top 10 currency traders managing Managing at least $1 million (as of July 31 ranked by July 2012 return) July return 12. 31 Market EUR/USD AUD/USD GBP/USD CAD/USD JPY/USD CHF/USD MXN/USD U. The % rank is the percentile rank of the volatility ratio over the past 60 days.80% 7.1 3. it shows how the most recent 60-day move compares to the past one-hundred-twenty 60-day moves.91% / 47% -1.17% / 0% Volatility ratio / rank .9 124. in thousands.09% / 82% -0. 7. 5.03% / 38% -0. direction. the % rank for the 10-day move shows how the most recent 10-day move compares to the past twenty 10-day moves.10% 2012 YTD return 4.22% -4.56% 7. 2. 6.36% / 22% 1.4 64.9 10-day move / rank 2. etc.09% / 82% 20-day move / rank 1.24 / 47% .S.4 164. 60-day move: The percentage price move from the close 60 days ago to today’s close.03% 10. The “% rank” fields for each time window (10-day moves.21 / 43% . for the 20-day move.53% / 80% 1.65% / 89% 1. It is intended only to provide a brief synopsis of each market’s liquidity.62% / 63% 60-day move / rank -0.40% 10.19 / 25% Note: Average volume and open interest data includes both pit and side-by-side electronic contracts (where applicable).4 978 11 Trading advisor 1.98% / 83% 1.66% / 69% -0.6 114.10% 9.22% / 82% 0. A reading of 100% means the current reading is larger than all the past readings.19 / 23% .94% / 100% 1. Volatility ratio/% rank: The ratio is the short-term volatility (10-day standard deviation of prices) divided by the long-term volatility (100-day standard deviation of prices). Note: Average volume and open interest data includes both pit and side-by-side electronic contracts (where applicable).6 114.07% 24. for the 60-day move.8 86.71% 1. CURRENCY TRADER • September 2012 25 .39 / 85% .6 176. See the legend for explanations of the different fields.39% 10.36% / 40% 2.75% $ Under mgmt.1 519 849 5 3335 1.25 / 45% . For example.09% / 82% -0.25 / 48% .88% 8. LEGEND: Volume: 30-day average daily volume.19 / 25% .0 14.1 5. 3. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE.15% 5.80% / 27% 1. 8.00% 8.7 35.20 / 7% .74% / 43% 2.75% / 89% -0.49% / 71% -1.0 57.5 19.31% / 23% 1.19% 2.07% / 0% -1.1 22. and levels of momentum and volatility.13% / 3% 5. JP Global Capital Mgmt (Troika I) Alder Cap'l (Alder Global 20) QFS Asset Mgmt (QFS Currency) KMJ Capital (Currency) Ortus Capital Mgmt.51% 7.49% / 47% 0.62% / 63% -1.73% / 27% -0.) show the percentile rank of the most recent move to a certain number of the previous moves of the same size and in the same direction.12% / 37% 3. 4. The information does NOT constitute trade signals. OI: 30-day open interest.15 / 12% .
007995 0.693.0321 0.77 2.81119 1.128.031435 1.67 5.45% 7.21 4.39 3.INTERNATIONAL MARKETS CURRENCIES (vs.523.72% 2.077.868.42% 5.11908 0.01271 0.17% 10.775.13% 3.31% 7.00 19.10 1.554.50% 0.0808 0.6383 0.798.767.00 35.085.55% 2.032 Previous 4 16 17 6 9 11 14 12 15 2 1 3 5 13 10 7 8 GLOBAL STOCK INDICES Country 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 26 Index FTSE MIB Nikkei 225 CAC 40 Xetra Dax BSE 30 All ordinaries FTSE/JSE All Share Bovespa Hang Seng FTSE 100 S&P/TSX composite Swiss Market S&P 500 Straits Times IPC Aug.20 29.45 17.8309 0.21% -1.48 7.21% 2.60% -10.33 18.67% 5.135.80 1.13% 5.410.044.25% 5.80 15.8534 1.521.87 9.75% 2.01% -0.50 6.98% 5. U.30 1.12892 0.970.1427 0.194.62% 2.63% -0.1281 0.426.27% -0.73% 13.80 8.98% 1.58% 3-month gain/loss 8.00 16.1589 1.7397 1.59% 0.1589 0.170.09% 0.83% 4.64% -7. dollar 0.1514 1.57% 5. 27 price vs. 27 15.433.767.49351 0.53% 3.75% 7.93% -6.85% 3.53% -10.600.129 0.965.18% 0.600.06% 5.70 10.08% 1.674.24% 0.905.05% 5.S.01806 1.798.65% 3.44 3.20 49.64% -0.63% -1.95 32.10% 0.37% 52-week high 0.90 3.80% 11.9478 0.10 12.5308 0.62% 2.90 35.1159 0.55% 1.760.031 0.03% -9.7606 0.75% -6.1374 1.0119 0.157955 0.98% 6-month gain/loss -0.491.00 21.85 1-month gain/loss 10.27% 3.0074 1.989.0291 0.50% 0.30 4.799615 0.135.4801 0.13% 8.79% 52-week high 17.462.16% 2.32% 5.93% 1.295.81 4.63% 3-month gain/loss 14.70% 0.158.23% 6.60 52-week low 12.80 4.95% -5.77% 1.78% 0.20 3.848.68% -0.19% 6-month gain loss -7. U.2697 1.41% 6.87% 0.44% -15.515.4506 0.2099 0.89% 2.93% 0.0218 1.74% -2.1552 0.60% -0.03430 52-week low 0.0132 0.048.0347 1.79 2.08% 1.9467 0.36% -5.88% -2.372.35% 4.03% -0.40% 2.04054 0.20 5. Singapore Mexico September 2012 • CURRENCY TRADER .70 12.49 39.68 3.06% -0. DOLLAR) Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Currency Swedish krona Swiss franc Euro Russian ruble Canadian dollar New Zealand dollar Great Britain pound Thai baht Chinese yuan Indian rupee Australian Dollar Singapore dollar Brazilian real Hong Kong dollar South African rand Japanese yen Taiwan dollar Aug.255.67% 6.58118 0.39% 0.088.90 Previous 11 15 2 1 14 8 10 3 13 12 9 4 7 5 6 Italy Japan France Germany India Australia South Africa Brazil Hong Kong UK Canada Switzerland U.83 7.34% 0.54% 2.82 6.69% 0.86% 9.02% 1.64% 2.39% -2.69% -2.30% 0.30 5.48% -1.033380 1-month gain/loss 4.6288 0.074.04197 1.972.53% -3.00% -8.70 58.89% 1.111.69% 6.012.99% 3.60 10.0174 0.0233 0.S.S.0334 0.047.45 41.678.98% -0.70 68.251215 0.
2011 0-0.97% 0.25 0-0.27% -5.32% -7.75 2.41% 4.00% -3.72 1.5434 1.5 (July 12) Feb.81% -0.0425 81.0207 1.99859 1-month gain/loss 3.6879 1.4637 0.36% 2.5 Aug.68% 15.91% -2.1123 1.61% -7.8322 Previous 19 18 9 11 20 13 21 10 6 15 14 16 17 7 5 12 8 3 2 4 1 GLOBAL CENTRAL BANK LENDING RATES Country United States Japan Eurozone England Canada Switzerland Australia New Zealand Brazil Korea Taiwan India South Africa Interest rate Fed funds rate Overnight call rate Refi rate Repo rate Overnight rate 3-month Swiss Libor Cash rate Cash rate Selic rate Korea base rate Discount rate Repo rate Repurchase rate Rate 0-0.5 0.25 0-0.S.00% 10.97% -1.5 12 3.2705 1.5 (Aug 12) 0.70% 0.25 (Sept 10) 0.25 (June 12) 0.20086 1.5 1 0-0.45% 0.58 1.5429 0.535334 124.9981 0.28% -3.5 (March 11) 0.5 2.5 1 0-0.517535 1.1614 1.25 3.63% 2.25 1.025755 1.1 (Oct 10) 0.23 2.38% -6.3229 1.33% -1.73% 2.2406 1.35% -1.5 (Dec 08) 0-0. 2012 0-0.72% 3.71% -0.6261 132.355 1.875 8 5 Last change 0.0755 1.38% -6.NON-U.46% 0.68% 8.31 1.25 4.00% 3-month gain/loss -1. 27 81.1 0.22% 1.2164 1.32% -0.01% -0.79% 5.3943 2.90% -0.21% 52-week high 97.5 3 1.90% 1.24129 2.2481 117.44% -1.1525 1.53% -4.25 4. DOLLAR FOREX CROSS RATES Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Currency pair Franc / Yen Euro / Yen Canada $ / Yen New Zeal $ / Yen Euro / Real Pound / Yen Euro / Aussie $ Canada $ / Real Aussie $ / Yen Pound / Aussie $ Euro / Pound Franc / Canada $ Euro / Canada $ Aussie $ / Real Euro / Franc Pound / Canada $ Yen / Real Pound / Franc Aussie $ / New Zeal $ Aussie $ / Canada $ Aussie $ / Franc Symbol CHF/JPY EUR/JPY CAD/JPY NZD/JPY EUR/BRL GBP/JPY EUR/AUD CAD/BRL AUD/JPY GBP/AUD EUR/GBP CHF/CAD EUR/CAD AUD/BRL EUR/CHF GBP/CAD JPY/BRL GBP/CHF AUD/NZD AUD/CAD AUD/CHF Aug.65% -3.108365 1.25 2.0447 88.7779 1.626 0.25 1.63 57.27% 5.79129 1.815 2.875 8.73% 2.5 10.25 (July 12) 0.03371 1.5 (March 09) 0.25 0-0.5 1 0-0.49 68.568645 0.58 111.97% -0.0128 1.3 63.05% 0.65% 6-month gain loss -9.86 1.6226 72.58% -9.2547 1.6354 0.76% 6.43% 6.125 (June 11) 0.0262 1.81 94.5 27 CURRENCY TRADER • September 2012 .22% 2.16% 2.34 84.65 72.32% -0.405 79.5 7.14% 1.5 5.2439 0.29% 6.25 (July 12) 0.95 98.03225 0.27% 0.25 (Aug 11) 0.875 8 5.75 0.519635 0.1 1.0328 52-week low 78.202495 2.11% 22.36% 2.5 (Apr 12) 0.4231 2.5 3.8853 1.81 2.40% -5.89% 2.55% -2.23% -3.34% -1.51% -0.1 1 0.282885 1.02% 1.03% -2.81 1.18% 3.39% -6.37% 19.
5% 3.5% 0.5% 2.9% 1.9% 2.3% 0.3% 0.1% -0.5% -0.7% 5.0% 1.2% 4.4% 0. 3 LEGEND: Change: Change from previous report release.7% 0.5% 1.4% 0.6% 0.0% 0.4% -0.8% 1.4% 0.7% 5.9% -0. Africa Australia Hong Kong India Japan Singapore Release date 8/10 8/8 8/17 8/14 8/10 8/14 8/22 7/15 8/21 8/31 8/31 8/23 Change 0.2% 3. 28 September 2012 • CURRENCY TRADER .3% -0.9% 1.4% 4.9% 0. Africa Australia Hong Kong India Japan Singapore Period July July June July July July Q2 Q2 July July July Release date 8/10 8/29 7/31 8/17 8/10 8/30 7/23 7/27 8/14 8/10 8/29 Change 1.1% -0.0% 5.3% 0.6% 6.1% 0.6% -0.8% -0.3% 1.2% Next release 11/19 delayed 9/7 9/6 9/27 9/12 9/6 9/18 9/28 10/31 EUROPE ASIA and S.8% 1.3% -0.6% 0.0% Change 0.3% 1-year change 9.1% 0. Rate: Unemployment rate.6% 3.0% -0.8% 4.2% 1.2% 0.2% 0.5% -0.9% -0.9% 1.1% 0. PACIFIC CPI Period Argentina July July July July July July July Q2 July July July July Brazil Canada France Germany UK S.4% -0.5% Next release 9/12 10/1 9/28 9/20 9/7 9/27 11/2 9/13 9/14 9/12 9/28 As of Sept.5% -1.4% 4.7% 1.4% -0.8% 8.1% 0.1% 7. Africa Australia Hong Kong India Japan Singapore Argentina Brazil Canada France Germany UK Australia Hong Kong Japan Singapore Period Q1 Q2 Q2 Q1 Q2 Q1 Q1 Q1 Q2 Q2 Q2 Q2 Release date 6/8 8/31 8/31 6/29 8/14 6/28 6/21 6/6 8/10 8/31 8/13 8/24 Change -4.9% 0.9% 7.1% -0.1% 3.6% 5.0% 1.0% 0.0% 0.3% 9.4% 1.1% 3. PACIFIC PPI AMERICAS EUROPE AFRICA ASIA and S.INTERNATIONAL MARKETS GDP AMERICAS Argentina Brazil Canada France Germany UK S.7% 2.3% 0.3% 0.1% 1-year change -0. NLT: No later than.2% -0.1% Next release 9/21 11/30 11/30 9/28 11/15 9/27 9/11 9/5 11/16 11/30 11/12 11/23 EUROPE AFRICA ASIA and S.0% Next release 9/12 9/5 9/21 9/12 9/12 9/18 9/19 10/24 9/20 9/28 9/28 9/24 AMERICAS EUROPE AFRICA ASIA and S.3% 6.3% 0.8% 0.5% 0.1% 0.6% 12.8% 1-year change 12.0% 0.2% -0.2% 6. PACIFIC Argentina Canada France Germany UK S.6% 4.3% 1. PACIFIC Unemployment AMERICAS Period Q2 June July Q1 July April-June July May-July July Q2 Release date 8/21 7/26 8/10 6/7 8/30 8/15 8/9 8/16 8/31 7/31 Rate 7.6% 9.3% 2.5% 1-year change 13.3% -1.8% 0.3% 0.4% 0.1% 1.
it had rallied as high as .9823.35% LOP . However. bars on Aug. initial (pre-trade) reward-risk ratios are conjectural by nature. It is worth investigating the performance of such patterns to see if inside bars can be ignored.9931). Aug 27. Source: TradeStation RESULT Exit: Trade still open. just below par. The stop was raised to . Initial target: . Initial stop: .9900.m. take partial profits and raise stop to protect remainder of position. bar on Aug. As a result. 30. TRADE SUMMARY Date 8/27/12 Currency pair USD/CAD Entry price .9924 Date 8/30/12 P/L point . the position was initiated before this bit of analysis was conducted. 28 would have qualified as completed buy setups if not for the 9 a.9840 on Aug. 21 in the neighborhood of the support implied by the April lows.9858 when the pair pushed above . 30.0047 Trade length 4 days Legend — IRR: initial reward/risk ratio (initial target amount/initial stop amount). ET on Aug. LOL: largest open loss (maximum potential loss during life of trade). which occurred on the 11:30 a.FOREX TRADE JOURNAL Intraday buy triggers (and triggers again). Outcome: The pair behaved as anticipated in the immediate aftermath of the signal. a little below the Aug.0042 LOL -.0035 % . Entry: Long the U. ET on Aug.9889 Initial stop . 29. 2012. (Both the 9:30 and 10 a.9994.m.m.80 MTM . Second target: . which interrupted the pattern’s required string of three consecutive lower lows. MTM: marked-to-market — the open trade profit or loss at a given point in time.9942. just below the Aug.” With the pair having established a swing low on Aug.9823 Initial target . dollar/ Canadian dollar pair (USD/ CAD) at . Profit/loss: +. 22-24 highs. y Note: Initial trade targets are typically based on things such as the historical performance of a price pattern or a trading system signal.9942 IRR 0.m. Reason for trade/setup: The trigger for the trade was the 30-minute time frame setup described in “Canadian early riser. the pair sold off to around . because individual trades are dictated by immediate circumstances. 28 before rebounding. After the initial rally. and will be raised to breakeven if price hits the initial target (as of 4:15 p.m. ET bar.S. Those who have already read “Canadian early riser” might remember the analysis indicated patterns that concluded around this had a negative expectancy — unfortunately. TRADE Date: Monday. but this signal was not acted upon because the original trade was still in the red. 21 low. LOP: largest open profit (maximum available profit during lifetime of trade). marked-to-market at . price targets are flexible and are often used as points at which to liquidate a portion of a trade to reduce exposure. with another portion held in anticipation of a larger up move on the daily time frame. CURRENCY TRADER • September 2012 29 .) A second signal occurred on the 9 a.9924 around 4:15 p. inside bar.0035.m.9889. the position will be played partially for a very shortterm profit.
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