Long Short Macro

Short USDZAR Profits Big

Short USDZAR Profits Big

4,700 pips won on a single trade. Striking when the iron is hot, is what exactly we have been doing. For the last couple of weeks, we've bagged a couple of decent trades; pretty damn good trades actually, if we spared you the modesty. We won some 1,300 pips on USDTRY, are riding on about 3,300 pips on USDNOK, and today booked a huge winner on USDZAR - a currency pair most retail traders probably never even heard of until now.

We don't have much to comment about other than to say that the trade was highly motivated by technical factors, and that our entry was a tad premature (in hindsight), but we knew where our risk-reward profile stood and believe we still had a risk advantage even though our entry point was off.

We were satisfied with the trade management as we were able to (correctly) ride out some drawdown before the trade earnestly went in our favor. Our objective was well placed, and we would call this trade an overall success with certain aspects that can certainly been improved on.

Short USDNOK Pays Off Well

Short USDNOK Pays Off Well

Update: Our base short position has been closed out at 8.1650 via a buy limit take profit order, for a profit of 3,010 pips, or +3.55%.

It's been a rough week for the markets but that doesn't stop us from sitting on more than 3,300 pips of floating profits on our 2 USDNOK short positions. Recall that just last week, we closed out our USDTRY shorts for a handsome profit (fully documented in our trade journal). What we didn't publicly reveal was that we were already short USDNOK well before we published that article.

There's a lot that could be said about our current trading books. There's a lot going on and it reflects the busyness in our heads. No surprise here as we've been getting some crazy moves across the various markets we monitor and trade, especially in currencies. We won't go into the details in this piece but will briefly explain why we took the trades going long the NOK (Norwegian krone) against the USD. 

Turkish Lira Longs Running With 1,100 Pips

Turkish Lira Longs Running With 1,100 Pips

Update: Our short positions on USDTRY have sinced been closed out via their respective take profit buy limit orders, netting us a total of +1,340 pips. Actual trade tickets posted below.

There are many ways to skin a cat that is the global weakness in the U.S. dollar. Like we have previously mentioned on many occasions, we are bearish the dollar on many aspects and have been looking at different ways in which to gain a healthy short exposure on the greenback.

Congruent with our view that emerging market currencies would outperform most in the FX complex, not withstanding heavily shorted currencies such as the Canadian dollar and Aussie dollar, we have chosen to take the path of being short USD against a basket of EMFX.

Two weeks ago, we initiated our first of the 2 shorts on the dollar against the Turkish lira, at what we believe (and has so far been validated by price action itself) was a good price both fundamentally and technically.

Heavy Short Euro Ahead Of ECB

Heavy Short Euro Ahead Of ECB

Just on the EURNZD alone, we're up well over 550 pips on our 3 short positions. This figure may possibly swell past 800 pips in the next few days as the market awaits a much anticipated December ECB, where Mario Draghi is widely expected inflate the size of the ECB's already gargantuan QE Bazooka, and push interest rates deeper into negative territory. We've made our intentions apparently clear on these pages - that the euro will see more downside and we want to be well positioned to capitalize on this.

August Outlook: Opportune Times

August Outlook: Opportune Times

The Chinese proverb that opportunities lie in crises applies like calculus to a differentiation problem. A hot knife through butter reveals the soft innards of the markets, but it also brings fire sale prices to certain markets worthy of our consideration. This is precisely what a serial opportunist is looking for; and in our eyes, he would have found several.

The two top most seismic episodes in recent history has to be the alpha of Greece, and the omega of China. These dualities have caused mayhem in asset pricing across the field, having affected not just regional but global markets.

The trend is always our friend when to comes to trading and portfolio management. Our books have been positioned in such a way that they welcome continuation of bellwether trends. We certainly see the recent flares in cross asset volatility serving as a much needed shakeup.

Frothy prices have leveled off somewhat, and the market is certainly playing it more cautions now. All these are textbook indications of trend continuation, and is healthy for everyone in the medium term.

 

Still Bearish On The U.S. Dollar

Still Bearish On The U.S. Dollar

Early in April, we were officially bearish the U.S. dollar for the intermediate timeframe. That was in lieu of the more than dismal March non-farm payroll. Almost 2 months forward, we are now revising our outlook while maintaining our bias on the greenback. In today's piece, we will be outlining several key point what will shape our guidance going forward.

With language from the Fed contradicting both the street's expectations and what current economic data suggests, we feel it is crucial that investors and traders take a better look at the situation on the ground. We should however preempt readers that our bias may shift at any given point in time, and is heavily dependent on both market forces and the fundamental dynamics that are responsible for the dollar's performance in the currency markets.

 As we see it, an asymmetric balance will deter the Fed from an impulsive tightening path.We believe the Fed wants to be convinced about an economy that can absorb the shocks of a rate hike without tipping off balance. The time isn't now.

Trading China's Weakness

Trading China's Weakness

The debate about China's slowdown isn't a question of it it has happened but how much. While Chinese officials themselves have downgraded 2015's growth forecast to 7%, the lowest in more than 2 decades, we are more skeptical about the degree of slowdown than what the Chinese themselves would like the world to believe. In short, we feel the deceleration in China's economic growth is far more acute and has both structural and cyclical elements to it.

Being the world's second largest economy, China has a huge role to play in the equilibrium of supply and demand, and therefore price formation. In our eyes, the weakness in Chinese imports implies that the world's largest single source of basic industrial commodities is waning.

The one thing that China imports a lot of is base metals and basic commodities which its once bustling construction industry was so hungry for. More importantly to us, they represent an industry in structural decline, and the demand for industrial commodities that trails in its wake.

 

 

America Is Winning The Energy Skirmish

America Is Winning The Energy Skirmish

OPEC knew fully well that its members would be the ones who would feel the most acute and lasting pain of a collapse in oil revenues for many months or even years to come, financial contagion as their currencies together with their stock and bond markets free fell to their cataclysmic hells. 

 By mid-2014, America had overtaken the Saudis to become the world's largest oil producer. The onus was very much on OPEC to come up with a strategy to impede this development. Their strategy of aiming to crowd out US producers with yet lower oil prices was deemed smart within their own leagues because Arab drillers had substantially lower operating costs than anyone had anywhere in the world.

In short, the oil cartel's grand plan was potentially rewarding in that they would regain some of their market share, but absolutely decimating should the plan backfire. And backfire it did.

 

 

Expect Downside In Oil Prices

Expect Downside In Oil Prices

All investors and traders have expectations, collectively forming the nebulae of the markets. In this sense, we will write a short note on our expectations for oil prices going forward. The bottom line is we see some downside to prices on both Texas Intermediate and Brent oil. We also expect Brent to outperform Texas Intermediate for a considerable period of time.

First of all, we feel price action on prices are telling us that we might be in for more rather directionless backing and filling in the following few days to a decline in prices maybe a few weeks to a month out. We won't make predictions on the precise price and timings as it's beyond the scope of this note. A few levels that remain critical the the structure of both markets still sit under the tape and we wait to see how prices react to those areas.

Trading The Easing Cycle

Trading The Easing Cycle

We have already commented a lot on how central banks across the globe are scrambling to contain the contagion of deflation, which as we correctly pointed out nearly 2 months before mainstream financial media rode on that story, that is careening wildly out of control thanks to the material and psychological impacts low oil and gas prices have on economies. However, we have yet to espouse a particular strategy to profit off this monetary policy easing cycle. A lot of money can potentially be made in this light - a quick look behind our shoulders at the various QE programs by the Fed should paint a color picture, one that financial markets in particular love. As such, we present sage advice from Citi's Matt King on how to trade the "Biggest Bubble Of All" - that of central banking exuberance.