Long USD/CHF?<-- I state my case inside.

[afarghaly9]

 

[scose-no-doubt]

lol

 

[Splitlink]

My honest view of this is that it does not matter. Traders, in general, simply do not have the time to take note of such long scales. Perhaps I am wrong, it would not be the first time, but, even if a trade was held for months could your charts have told him anything?

I have never been a complicated trader, always trading for short periods, unless in shares, and believe that charts such as yours are only academical. With everyone talking of the heavy debt burden that most western countries carry and with the rising asiatic countries holding more and more devalueing western currency bonds, Heaven knows where we will be, even in only a few months time.

 

[YouAreNotFree]

Dollar crisis within 10 years easy so I'll keep my Swiss Francs thankyou.

 

[afarghaly9]

My honest view of this is that it does not matter. Traders, in general, simply do not have the time to take note of such long scales. Perhaps I am wrong, it would not be the first time, but, even if a trade was held for months could your charts have told him anything?

I have never been a complicated trader, always trading for short periods, unless in shares, and believe that charts such as yours are only academical. With everyone talking of the heavy debt burden that most western countries carry and with the rising asiatic countries holding more and more devalueing western currency bonds, Heaven knows where we will be, even in only a few months time.

Uploaded with ImageShack.us

The following chart shows COT figures, which show us that a strong decline is likely as comercials havent been this bearish on the swiss franc in more than 5 years, the COT index reading was and is close to 100 relative to the past 5 years



Uploaded with ImageShack.us

Regards,
Ahmed Farghaly

 

[afarghaly9]

Dollar crisis within 10 years easy so I'll keep my Swiss Francs thankyou.

I'm only reporting numbers and patterns in an objective manner. All 'fundamentals' disagree at extremes, historic peaks are usually acompanied by the best news, and 'bad data' only sets in after the declines have started. I see the EUR gaining some ground against the CHF in the coming years as well contrary to most belief the extent of the swiss franc decline would be more apparent as the declines unfold. This could be but need not be the end of the 41 year bull market for this currency, at best I'm anticipating a significant correction which should see the USD/CHF well above parity.

 

[Martinghoul]

I am with you, afarghaly... I wouldn't use USD or EUR, as I think there are better choices for ccies that you actually want to hold. However, short CHF is a trade I like a lot.

 

[YouAreNotFree]

What you have marked as the bottom coincides with the US default and the end of the Gold standard (ie $ no longer redeemable for Gold) does it not?

Would that not render the whole analysis invalid because the rules of the game were changed?

That's the way I see it anyways but i'm a trading noob.

 

[scose-no-doubt]

what currencies, ghoully?

 

[Martinghoul]

what currencies, ghoully?

Well, my personal preference is based on the assumption that fiscal health matters, so I like to own ccies whose sovereigns are in a relatively good shape, debt/GDP and deficit-wise. Also, I think there's a case to be made for not straying too far from the region, to avoid big global issues which may affect different regions differently (e.g. the possible effect of Chinese slowdown/crash on AUD). Given all of the above, I like SEK and NOK, so I am short CHFSEK and CHFNOK both. I am thinking about DKK, but that one is a bit more complicated, given the peg. In all this, positive carry is a nice bonus.

 

[afarghaly9]

I am with you, afarghaly... I wouldn't use USD or EUR, as I think there are better choices for ccies that you actually want to hold. However, short CHF is a trade I like a lot.

What currencies would you recommend?

 

[Martinghoul]

What currencies would you recommend?

Haha, I just beat you... See above.

I am 100% open to ideas, so if you like any others pls don't hesitate.

 

[afarghaly9]

I think the U.S dollar seems better from an elliott wave prespective than the SEK. I see the U.S dollar gaining some ground against the SEK over the coming years but not as close as the gains that I'm anticipating relative to the swissy. As for the NOK I'm not sure. Elliott wave analysis works best on heavily traded pairs. Hence I tend to avoid exotic currecies. What methods of analysis do you use in terms of such pairs other than sentiment. Models? etc.?

 

[scose-no-doubt]

well i see you're not straying from the pack. my digging to date has revealed scandies seems to be consensus. bit disappointed youre not looking at anything more exotic

what your view on rmb?

 

[Martinghoul]

well i see you're not straying from the pack. my digging to date has revealed scandies seems to be consensus. bit disappointed youre not looking at anything more exotic

what your view on rmb?

Haha, consensus, really? That's a bit unfortunate, I suppose. Also I'm sorry to disappoint and I guess CHFKZT or CHFPGK might just be the best trade out there, but exotic things are bit out of my comfort zone. I have seriously looked at CHFMXN and CHFTRY, but those are much too volatile for the minimum size I can do.

As to RMB, I am pretty sure it has to rise, but the exact timeframe is all about politics, so I stay away.

 

[Martinghoul]

I think the U.S dollar seems better from an elliott wave prespective than the SEK. I see the U.S dollar gaining some ground against the SEK over the coming years but not as close as the gains that I'm anticipating relative to the swissy. As for the NOK I'm not sure. Elliott wave analysis works best on heavily traded pairs. Hence I tend to avoid exotic currecies. What methods of analysis do you use in terms of such pairs other than sentiment. Models? etc.?

You may well be right re USD. I rely solely on macroeconomic fundamentals, which is why I don't like USD. As to models, I have built a whole variety of fair-value models and they do all indicate that USD is undervalued and CHF is overvalued. However, I do think we're going through a genuine regime change for USD, so I disregard the model predictions. For CHF, I don't really see any reason why the current situations represents a meaningful long-term regime change, so I am happy to short it.

 

[DashRiprock]

oioioioioiioioioioioioioii



i seen like on macro man and others about the models can u give example?



pleeeeeeeeeeeeeeezzzzeeeee??????????????????

 

[Martinghoul]

Yeah, sure... The simplest type of model around is multiple regression. For example, a common fair value model for something like AUDUSD will be a result of AUDUSD regressed on a) interest rate differential (say, USD 3m LIBOR vs AUD 3m BBSW); b) relative stock mkt index levels (say, SPX vs ASX100); c) price of a commodity or a commodity basket (say, gold or maybe the CRB index); d) a proxy for risk-aversion, such as the VIX; and e) a relative indicator of fiscal soundness (say, debt/GDP for Australia vs USA).

In general, you can do these sorts of things with a whole variety of macroeconomic and market factors as independent variables. You can refine them by doing sensitivity analysis to arrive at some sort of a best fit. Needless to say, these sorts of approaches have their own issues, i.e. the weights may not be stable with time, multicollinearity, etc.

There's more sophisticated stuff you can do with currencies with varying degrees of success, e.g. PCA, ICA etc, but, ultimately, the fundamental flaws that all models have remain.

 

[DashRiprock]

As a token of my gratitude for that informative post I will take a brief hiatus from my unique lexicon.

A while ago I posted a simple diagram about how I consider a trade decision as a process of comparing different information sets. I consider the process you have described as a form of technical analysis - using information that has been generated by the markets in order to arrive at or compliment trading decisions.

Technical Analysis often evokes derisory reactions to those who use other, more mainstream approaches, or those who have inherited their view without investigating the subject in any depth, but using appropriate information in intelligent ways can contribute to a trading strategy with a positive edge.

In order to prevent yet another Technical Analysis vs. Fundamental Analysis furore, I will revert to my traditional style of communication shortly.

 

[Martinghoul]

Ah, you see, Dash, you have actually stated a deeply-held belief of mine. Specifically, that there is no qualitative difference between technical and fundamental analysis. The difference is in the degree of robustness and the quality of reasoning. I never use technical analysis because I can't explain how it works and the assumptions behind it, which means it's a black box to me. An analysis such as I have described above, on the other hand, is something that's based a) simple mathematics; and, b) common sense; which means I can understand it very well. Let me offer an example. If my "technical" system is giving me a bad signal, I have no way of detecting it. In contrast, if my regression model is telling me that weights for some of the independent variables are counterintuitive, I know that there could be an issue with variable choices. That's sorta how I think about it.

At any rate, I remember I still owe you a trade thread. It's coming.