FTSE through the 5200 level but will it hold ?.. personally I dont think so.. will probably shake out a few of the shorts but personally I like to short markets when they break through the resistence the first time around.. markets like to screw as many people as possible in the short term and with that in mind I am shorting at around 5215 sh level!
Wallstreet1928 Analysis & live calls on FTSE,DAX,S&P...aimed to help New traders
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wallstreet1928
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wallstreet1928
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Can Dollar Weakness Turn Into a Currency Crisis?
After a mild counter trend rally over the past several weeks, the dollar once again finds itself near yearly lows against most major currencies as the new trading week begins. The currency market continues to like risk pushing the greenback lower against the euro, pound and Aussie on carry trade flows.
The dollar carry trade rolls on without pause as US rates remain inordinately low at 0-25bp with no possibility of rising in the foreseeable future and this dynamic offers currency traders plenty of time to take advantage of interest rate differentials present in the market. The sharp difference between US monetary policy and the rest of the G-20 became evident last week after the Fed left its ultra dovish language in the communiqué noting that economic conditions are, “likely to warrant exceptionally low levels of the federal funds rate for an extended period.” In contrast ECB chief Jean Claude Trichet hinted that limitless liquidity in the 16 member region will soon end as conditions in Eurozone begin to normalize and the central bank removes its 12 month tender offer from the market. The RBA was even more hawkish in its outlook noting in its quarterly statement that its program of gradual rate hikes will continue in 2010.
The Fed meanwhile is unable to help the dollar, hampered in its policy choices by the weak US labor market conditions. US monetary authorities have never raised rates until the unemployment rate has peaked and with Friday’s NFP data showing the jobless rate breaching double digits for the first time in 26 years, the currency market remains convinced that the Fed will be stationary for at least the next six months.
The buck will therefore will remain under pressure, as long as the US economy continues to be the laggard in the G-20 universe. There are only two possible scenarios that will make the dollar rally – risk aversion or material improvement in US labor market conditions. For now the recovery trade in global capital markets continues to maintain momentum as equity investors remain optimistic about the prospects for growth in 2010. There is a very real danger however that risk assets have been priced to perfection. This week the market will get a glimpse as Australian employment data and if the jobless report from Down Under shows a larger than expected contraction the enthusiasm for the Aussie - which has been the poster child for the recovery trade - could very quickly evaporate leading to a broader sell off in risk assets. For the time being Dow at 10,000, S&P 500 at 1100 and EUR/USD at 1.5000 continue to be the key resistance points for the risk trade and unless those barriers are broken with conviction the dollar’s weakness may be limited by risk aversion flows.
On a longer term time frame the dollar will not generate any sustainable rally until US labor conditions begin to improve. Despite the multi-decade high unemployment rate, there were a some rays of hope in last week’s US labor data. Most notably the fall in the weekly jobless claims to 512K suggests that job losses are reaching a nadir. Weekly jobless claims have been the best precursor to the overall US labor trends and if that number falls below the key 500K mark, currency markets could become much more enthused about the prospects of US recovery. In that case the dollar is likely to rally the strongest against the yen as US yields begin to uptick.
For the time being the Fed remains on the sidelines, leaving the greenback to the vagaries of the market, as the buck’s decline remains relatively orderly. If however, the present slow descent prompted by continuous carry trade flows turns into a runaway market against the buck, in other words if dollar weakness decouples from the recovery trade , with the greenback diving in tandem with stocks, the Fed will have no choice but to act more aggressively on the monetary front even at the expense of US economic growth as dollar weakness could then run the risk of turning into a currency crisis. For now the Fed officials are clearly relieved at not having to make such an unpleasant choice.
After a mild counter trend rally over the past several weeks, the dollar once again finds itself near yearly lows against most major currencies as the new trading week begins. The currency market continues to like risk pushing the greenback lower against the euro, pound and Aussie on carry trade flows.
The dollar carry trade rolls on without pause as US rates remain inordinately low at 0-25bp with no possibility of rising in the foreseeable future and this dynamic offers currency traders plenty of time to take advantage of interest rate differentials present in the market. The sharp difference between US monetary policy and the rest of the G-20 became evident last week after the Fed left its ultra dovish language in the communiqué noting that economic conditions are, “likely to warrant exceptionally low levels of the federal funds rate for an extended period.” In contrast ECB chief Jean Claude Trichet hinted that limitless liquidity in the 16 member region will soon end as conditions in Eurozone begin to normalize and the central bank removes its 12 month tender offer from the market. The RBA was even more hawkish in its outlook noting in its quarterly statement that its program of gradual rate hikes will continue in 2010.
The Fed meanwhile is unable to help the dollar, hampered in its policy choices by the weak US labor market conditions. US monetary authorities have never raised rates until the unemployment rate has peaked and with Friday’s NFP data showing the jobless rate breaching double digits for the first time in 26 years, the currency market remains convinced that the Fed will be stationary for at least the next six months.
The buck will therefore will remain under pressure, as long as the US economy continues to be the laggard in the G-20 universe. There are only two possible scenarios that will make the dollar rally – risk aversion or material improvement in US labor market conditions. For now the recovery trade in global capital markets continues to maintain momentum as equity investors remain optimistic about the prospects for growth in 2010. There is a very real danger however that risk assets have been priced to perfection. This week the market will get a glimpse as Australian employment data and if the jobless report from Down Under shows a larger than expected contraction the enthusiasm for the Aussie - which has been the poster child for the recovery trade - could very quickly evaporate leading to a broader sell off in risk assets. For the time being Dow at 10,000, S&P 500 at 1100 and EUR/USD at 1.5000 continue to be the key resistance points for the risk trade and unless those barriers are broken with conviction the dollar’s weakness may be limited by risk aversion flows.
On a longer term time frame the dollar will not generate any sustainable rally until US labor conditions begin to improve. Despite the multi-decade high unemployment rate, there were a some rays of hope in last week’s US labor data. Most notably the fall in the weekly jobless claims to 512K suggests that job losses are reaching a nadir. Weekly jobless claims have been the best precursor to the overall US labor trends and if that number falls below the key 500K mark, currency markets could become much more enthused about the prospects of US recovery. In that case the dollar is likely to rally the strongest against the yen as US yields begin to uptick.
For the time being the Fed remains on the sidelines, leaving the greenback to the vagaries of the market, as the buck’s decline remains relatively orderly. If however, the present slow descent prompted by continuous carry trade flows turns into a runaway market against the buck, in other words if dollar weakness decouples from the recovery trade , with the greenback diving in tandem with stocks, the Fed will have no choice but to act more aggressively on the monetary front even at the expense of US economic growth as dollar weakness could then run the risk of turning into a currency crisis. For now the Fed officials are clearly relieved at not having to make such an unpleasant choice.
Dentalfloss
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ws. where do u get all that stuff from...??
wallstreet1928
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SuperDriveGuy
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SuperDriveGuy
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SuperDriveGuy
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Good call!
Da.DesiTrader
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Short at 5220
I'm with you Da.Desi! The FTSE could pull back from these levels over the next couple of hours ahead of wall st open http://bit.ly/2mYaV2
SuperDriveGuy
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Hi DesiTrader,
What was your rationale behind going short at 5220?
Just trying learn from the thought process. Thanks is advance.
Regards,
SDG
Looks like we are not the only short players here! looking at paddy power open positions! http://bit.ly/1FZNcV
SuperDriveGuy
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Hi Dealer911,
Do you spread between the Z(FTSE Futures) and FTSE 100(Cash) or arbitrage between the 2 in any way or use the one as a leading indicator for the other???
Thanks,
SDG
Da.DesiTrader
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Number of things. Resistance trend line over couple of troughs on dailies. Horizontal resistance level. Shooting star type candle on 30M and 15M. Market already made more than 40 points move since start. An exhaustion is very likely. A proper break of this by reaching upto 50ish would mean the trade was wrong. So stop is above 5050. Therefore good risk reward.
Lastly, US futures whenever they are very high from the open, they go for a strong gapfill (may not fill it, but they go for it). That's when you can catch FTSE short and amend it to b/e.
wallstreet1928
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We are coming into resistance now chaps........
@ 5225 .......then we have a big gap between 5225 - 5250 region
my variables are showing signs of exhaustion .....
i will wait for this trend line to be negated before taking a potential short opportunity
FTSE very bullish above 5166-5168
But DAX still lagging ............we need to get above 5613-5615 in order to negate bear flag on daily chart
but remember my friends the FTSE has to close today above 5166-5168 in order to negate the inside bar ............
@ 5225 .......then we have a big gap between 5225 - 5250 region
my variables are showing signs of exhaustion .....
i will wait for this trend line to be negated before taking a potential short opportunity
FTSE very bullish above 5166-5168
But DAX still lagging ............we need to get above 5613-5615 in order to negate bear flag on daily chart
but remember my friends the FTSE has to close today above 5166-5168 in order to negate the inside bar ............
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Hi superdrive.. I just trade outrights. Sometimes I spread between DAX and FTSE or Nasdaq and S&P if theres a strong story in one of the companies in the INDEX. Mainly outrights with strict stop loss policy.. always get a bit nervous if there are too many people on my side of the market which is why i check that paddy power page to see how people are betting.. I am mainly an event driven trader though but I use technicals to try and time trades and manage my risk!.. how about you ?
Da.DesiTrader
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I also dont like when majority is on my side. I wouldve been happy if more spreadbetters were long and I was short. Good opportunity to squeeze em out.
SuperDriveGuy
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Thanks DaDesiTrader.
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I agree.. I have a tight stop at 5227.. I would have given it a bit more room had the spread betters been neutral!.. 85% of spread betters lose their cash!.I must ad that the paddy power reverse indicator (as i call it) is not very reliable! I like to at least know if i am running with the crowd though!
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