Wednesday market outlook

Interesting times we`re trading in. The markets are screaming for an impeding correction, but as the global printing press pumps liquidity into the markets the game of musical chairs has no choice but to continue. What will happen when the music stops and all these injections will prove they have diminishing returns? Until then, let`s take a look on what the markets did this week: gold has managed to hold the bullish channel it entered on the 22nd of February, the S&P looks like a rabid bull and the effects of Bank of Japan`s massive intervention on the yen seems to be wearing off.

BoJ sprays markets with 10 trillion Yen of liquiditity and all I got was a lousy SL

The Bank of Japan announced more monetary easing today and pumped $128 billion into money markets in a move set to reverse the appreciation of Yen against other currencies. Copy-catting the US Federal Reserve they also expressed their intention to target a 1% inflation for the period. This comes after disappointing GDP news which revealed that the Japanese economy contracted by 2.3% on an annualised basis, on expectations of a 1.8% shrinkage.

Back to the USD/JPY long trade

I`m re-entering the USD/JPY position at $77.71 with a very tight stop loss at 77.48 to capitalise on the disappointing GDP figures posted today. The Japanese annualised GDP was posted at a negative 2.3% on expectations of -1.4%. Moreover, the Bank of Japan is starting today a two-day policy meeting in which they might decide that further intervention is warranted. The risk-reward ratio is favourable.

Closing the USD/JPY trade @ 77.58

I`m closing the USD/JPY trade started a few days ago. Better leave some money on the table, than have nothing at all. I`ll wait for a move closer to 75.5 to get back in. If there is a central bank intervention at this level, then so be it. A few good pips from 76.42 will aid the bottom line.

Is it time to long USD/JPY ?

With the European Union debt deal talks and the US primaries under way, there is little space left for news regarding the second biggest debtor country: Japan. The ugliness contest between the dollar and the euro, seized the news and took the limelight away from the real contestant: the Japanese yen. In the last months the Japanese currency has been slowly appreciating in value against the dollar from 81.11Yen to what is now 76.36Yen. Bank of Japan is most probably going to intervene in the market again, and then traders will be able to fade the intervention again, locking in profits on both ways.

Weekly FOREX outlook: USD/HUF, USD/JPY and GLD

Provided that Berlusconi does not surprise us in a negative way, this week's investor sentiment should switch from from the European debt crisis to the US structural problems. The day of 23rd of November is closer and closer and by that date the leading American parties will have to decide on $1.2 trillion in spending cuts over the next decade. If the budgetary supercommittee fails to reach an agreement, the US budget crisis circus may repeat itself. So the limelight switches to US.

...and it's Yentervention time !

The Bank of Japan has unilaterally intervened on the FOREX market to devalue the YEN last night. After reaching pre-World War II levels, the yen was brought back to 79.15 where the chart turned into a horizontal line for a few hours (signaling a great support level), then trending downwards to the 78.8 level. The devaluing of the Japanese Yen would arguably stimulate the exports and the external demand of Japanese products, but is not a sustainable move since they have large current account and balance of trade surpluses

Next week's FOREX trading outlook

This week has been a hectic trading week, with most of the FOREX currency pairs behaving like in a bee hive. The global turmoil was enhanced by the two major news: first is the agreed haircut of 50% of the Greek debt and the subsequent leverage of the EFSF and the second one is the systematic dump of US Treasuries by the foreign investors (the latest to join the party is the Norwegian sovereign wealth fund which dumped all US Treasuries and all US mortgage backed securities). What is in store for us next week?

FOREX market, why u so mean ?

Trading on the Foreign exchange market has been a bumpy ride, and the highest possibility is that it will get even bumpier. Most of the currency pairs surprised investors some way or the other: the EUR/CHF Swiss Bank intervention, the EUR/USD sharp drop then rebound on  EFSF news, the USD/JPY fat finger and the expected Japanese easing, the USD/HUF breakout of its channel and imminent retest of channel resistance, etc. It's been a looong month.

Yen reaches pre-WWII levels as FED hints at more easing

Interesting development on the FOREX market today was the unparalleled volume in the USD/JPY. The Japanese currency appreciated 0.9% to Y76.14 after it reached its all-time low of Y75.82. If you want to pick up this trade, tread carefully, as an intervention from from Bank of Japan is imminent on further signs of weakness. The Bank of Japan is trying to maintain the JPY at low levels to keep Japanese exports attractive, but doing so it hurts the Japanese savers who see their wealth generating lower and lower real returns.

Smoke and mirrors in finance and investment

This blog is created to provide quality economic, financial and investment analysis. Whilst sometimes focusing on macroeconomics or microeconomics, the clear tendency is to stick to down-to-earth common sense.

In the investment world, as you may know, common sense is not so common.