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Macroeconomic Analysis And Trading Ideas

U-Turn In Rate Hike Decision (18 August 2021)The last-minute decision. During their monetary policy meeting earlier today, the Reserve Bank of New Zealand (RBNZ) carried out a last-minute change in decision, holding its overnight cash rate unchanged at 0.25%. New COVID case in six months thwarted RBNZ’s rate hike plan. Just yesterday, the first local COVID case was reported in New Zealand in six months. As a result, Prime Minister Jacinda Ardern announced a nationwide level-four lockdown with immediate effect. Prior to this new COVID case, the RBNZ was expected to announce a rate hike during today’s meeting as the country’s economic recovery has been robust and the economy is starting to overheat. In the released rate statement, the central bank mentioned that the “ Committee discussed the merits of an increase in the OCR at this meeting and considered the implications of alternative sequencing of OCR changes over time ”. However, with what went down yesterday, the central bank decided to put on hold their rate hike decision, highlighting in the rate statement that the “ decision was made in the context of the Government’s imposition of Level 4 COVID restrictions on activity across New Zealand ”. A delay rather than a setback. New Zealand’s “go hard, go early” approach to the containment of the pandemic has been highly effective as is evident from being one of the first few countries to declare COVID-19 free. With the country’s snap lockdown and effective approach, it is possible that the spread of the virus will be contained within a short period of time and is unlikely going to pose a setback to the country. Moreover, the RBNZ has carried forward their expectation of a rate hike from September 2022 to this coming December as indicated in the quarterly monetary policy statement, delivering a hawkish tone. To conclude, this sudden turn of events is unlikely going to hold the New Zealand economy down for long. As the next monetary policy meeting will be held on 6 October, this will give the central bank sufficient time to make a hawkish return, with the condition that the virus is once again contained swiftly.
by GH_Lee
GBPUSD - basic Interest Rates StudyThis is a simple study of how interest rates influence the market. I included 10 last values in my indicator. The base currency (GBP) is black. The second currency (USD) is red. Between June and December, FED (USD) increased the interest rates 3 times by 0.250 BoE (GBP) also increased the interest rates by the same number but only once. Obviously, this was a catalyst for a major bearish move. Not only that the rates difference had already been bearish at a time. The gap between the rates further increased! But look at the moment when BoE increased their rates. Even if insignificant for the long-term, it started a good counter-trend rally in the short-term. In 2019, FED decreased the rate a few times, hence the difference changed a little in favor of GBP. At look how long the pair grew. It even smashed the previous highs until it resumed its downward trend based on the rate difference. March 2020 was full of interest rate changes across all currencies. When BoE dropped the rate a little (in relative terms), FED decreased the dollar's interest rate rather drastically leading to a more than a year and a half long rally. Although it is losing its steam, it might yet continue for a while. I created two indicators that can be used to study these relations and create a long-term vision once the rates change again (might take a moment to update). You can find them both in the public library :)
Education
by OrcChieftain
1
QE Tapering Plan Will Go On (06 August 2021)Three days ago, the Reserve Bank of Australia (RBA) delivered a little surprise when it decided to stick with its quantitative easing (QE) plan announced back in July despite the recent spike in COVID cases in Australia. (Refer to my post "RBA Sticks With QE Tapering Plan (04 August 2021)" on RBA monetary policy) Details on why the central bank decides to proceed with its decision on QE tapering were provided during Governor Lowe testimony earlier today. Lowe’s Testimony During his testimony before the House of Representatives Standing Committee on Economics, Governor Lowe said that the RBA has considered holding back its plan for QE tapering during the monetary policy meeting. However, the central bank’s positive projections on the economic growth for 2022 permitted the plan to continue. Lowe explained that “any additional bond purchases would have their maximum effect at that time and only a very small effect right now when the extra support is needed most.” Furthermore, he mentioned the RBA felt that fiscal policy would be more appropriate than monetary policy in terms of providing aid at the moment. Nonetheless, the flexible approach of its QE programme allows the central bank to make adjustments to the rate of bond purchases in response to any unexpected turn of events. On the subject of the RBA cash rate, Lowe highlighted that the central bank will not be increasing cash rate until inflation is sustainably in the 2-3% range. He emphasised that the RBA needs to be confident that inflation will remain within the targeted range before any rate hike is considered. Finally, Lowe said that the condition for a rate hike “is not expected to be met before 2024”. RBA economic projections. For year 2021, Australian GDP: 4.00 (4.75) CPI Inflation: 2.50 (1.75) Unemployment Rate: 5.00 (5.00) For year 2022, Australian GDP: 4.25 (3.50) CPI Inflation: 1.75 (1.50) Unemployment Rate: 4.25 (4.50) For year 2023, Australian GDP: 2.50 (N/A) CPI Inflation: 2.25 (N/A) Unemployment Rate: 4.00 (N/A) *Figures shown in parentheses refers to projections from May 2021
by GH_Lee
No Signs Of QE Tapering From The BoE Yet (06 August 2021)The BoE’s decision. As widely expected, the Bank of England (BoE) carried out no change to its monetary policy during its meeting yesterday. Interest rate remains at 0.10% with all eight voting committee members voting for no change. Quantitative easing (QE) remains at £895 billion in total. Michael Saunders, one of the hawks of BoE, voted for a reduction in government bonds purchase by £45 billion. Overall positive outlook of the UK economy in the near future. In the quarterly release of the BoE’s monetary policy report, the central bank said that the “impact of COVID on the UK economy fades further over time” although the Delta variant of the virus continues to spread in the UK. The confidence on the economic recovery led to the central bank’s positive revision of its economic projections. Economic Projections: For year 2021, UK GDP: 7.25 (7.25) CPI Inflation: 4.00 (2.50) Unemployment Rate: 4.75 (5.00) For year 2022, UK GDP: 6.00 (5.75) CPI Inflation: 4.00 (2.50) Unemployment Rate: 4.75 (5.00) For year 2023, UK GDP: 1.50 (1.25) CPI Inflation: 2.00 (2.00) Unemployment Rate: 4.25 (4.25) *Figures shown in parentheses refers to projections from May 2021 The BoE expects the UK economy to return to pre-pandemic level during the fourth quarter of 2021. As with the other major central banks, the BoE also felt that the recent rise in inflation is due to transitory factors. With the ceasing of the UK furlough scheme at the end of September, BoE Governor Andrew Bailey highlighted that unemployment was “no longer expected to rise”. He also mentioned that the challenge for the economy now is whether employers can fill up the job vacancies. On the matter of QE. Little was mentioned on QE during this meeting. The BoE said towards the end of its rate statement that “should the economy evolve broadly in line with the central projections in the August Monetary Policy Report, some modest tightening of monetary policy over the forecast period is likely to be necessary to be consistent with meeting the inflation target sustainably in the medium term”. The committee members also intend to start unloading the bond purchased by the central bank when interest rate has risen to 0.5% and will consider to do so actively when interest rate is at least 1%. According to the BoE, interest rate is projected to be at 0.5% by the third quarter of 2024. Hence, it is likely that the central bank will be holding on to its purchases at least in the near future. Interest Rate Projection: 2022 Q3: 0.2% 2023 Q3: 0.4% 2024 Q3: 0.5%
by GH_Lee
Fed QE Tapering Talks Reaching A Crescendo (05 August 2021)Just a couple of days before the release of the long-awaited U.S. nonfarm jobs report, several Federal Reserve committee members expressed their hawkish views on an QE tapering. Fed Vice Chairman sees QE tapering to start this year. During his speech at the Peterson Institute for International Economics yesterday, Fed Vice Chairman Richard Clarida said that together with the other committee members, they expect the U.S. economy to continue recovering towards the central bank’s “substantial further progress” standard although this was not met in July. Also, Clarida highlighted that if his “baseline outlook does materialize”, then he expects the announcement for quantitative easing (QE) tapering to be made later this year. With the progress made in recent months, he believes the Fed is ready for a first round of tapering by year-end. In regard to interest rate, Clarida explained that the three conditions required before the Fed considers a rate hike are: Labor market conditions reaching levels consistent with the Fed’s assessments of maximum employment Annual inflation rising to 2% Annual inflation is on track to moderately exceed 2% for some time And in a scenario whereby the Fed’s economic projections realized over the forecast horizon, Clarida believes that the three conditions will be met by the end of 2022, thus anticipating a rate hike in 2023. Other committee members in favor of carrying out QE tapering soon. Fed committee member Robert Kaplan said in an interview yesterday that the Fed should start tapering QE soon and gradually as this will give the central bank more flexibility in the future in terms of interest rate adjustments. He also highlighted that continued progress in the job market for July and August should warrant an early tapering of QE. Another Fed committee member James Bullard also supported the idea of an early tapering of QE during an interview with the following reasons: Economic growth in 2021 will likely exceed the central bank’s projection of 4% Unemployment rate has declined much faster than projected Annual inflation for 2021 will likely surpass the projected 1.8% Hence, Bullard believes it will not be an issue meeting the criteria to get QE tapering started.
TVC:DXY
by GH_Lee
1
RBA Sticks With QE Tapering Plan (04 August 2021)The RBA’s decision. During their monetary policy meeting yesterday, the Reserve Bank of Australia (RBA) kept its monetary policy unchanged, holding interest rate at 0.10% and quantitative easing (QE) at a rate of A$5 billion per week. A little surprise. With the recent spike in COVID cases in Australia due to the highly contagious Delta variant, the market was anticipating the RBA to announce the holding back of their QE tapering plan that was made during the previous meeting. However, the central bank stuck to its tapering plan of A$4 billion per week that will run from early September to at least mid-November. RBA downplayed impact of virus outbreaks on economic recovery. Although the RBA decided to stick with its QE tapering plan, it did acknowledge that the recent virus outbreaks are “interrupting the recovery and GDP is expected to decline in the September quarter”. Nonetheless, the central bank is confident that the Australian economy will rebound quickly after getting hit by the outbreaks as justified by previous occurrences. Impact on the Australian dollar. The Australian dollar strengthened as a result of the RBA sticking with their QE tapering plan.
by GH_Lee
2 Days, 20 hours from EIP1559Ethereum has been straight running lately, and we have wonderful fundamentals underway with the heavily anticipated upgrade coming very soon. It is worth advising that there is clearly risk of a "sell the rumor, buy the news" event taking place that upon realizing the upgrade we will see those that had accumulated risk off into further strength. While this is a risk, I think it is a low one. It is worth sharing Strategists Russell Napier recently made the potent remark: "This is exactly what happened after World War II. Central banks were impotent during that time. The supply of money was dictated by governments controlling the commercial banking system. I strongly believe that we’re going back to that system. The government can never tell you that, because the whole point of financial repression is to steal money from savers slowly. But this is a fantastic thing for politicians: It isn’t fiscal spending, it isn’t higher taxation, it’s a contingent liability on the government's balance sheet but not an actual liability. It creates politically directed growth, and it creates inflation. For politicians, it’s the magic money tree." (Citation Below) Bond yields are 100% being depressed from central bank intervention which is manipulating yields. Yields are no longer running due to free market forces. This is a hidden penalty on savers, on those living off of fixed income. ETH is a wonderful product as it will enable products to still garner actual market dictated interest rates. This is one of the shocking reasons you are finding such asinine interest rates by providing for example USDC & DAI for example to lenders online offering 7-9% rates. The USD still has high demand, especially from emerging markets and in countries with even worse currency gripes such as Turkey. This is a concept that is hard for many to wrap their heads around: Inflation is taking place The 'Stagflation' cult will eventually be proven right, but their timing is totally (2yrs) premature Despite inflation there is still STRONG DEMAND for the Greenback Yields are being manipulated by central banks, which means to gather yield it is worth going to products which still feature actual free market yields - like ETH or even more broadly speaking DeFi Citation: themarket.ch
COINBASE:ETHUSDLong
by ZenMode
9
FED: Recovery Heading Towards The Right Direction (29 July 2021)The Fed’s decision. The U.S. Federal Reserve delivered no surprise during their monetary policy meeting earlier today as widely expected. The Federal Funds Rate was held unchanged at the target range of 0-0.25% while quantitative easing remains at $120 billion per month ($80 billion of Treasury securities and $40 billion of agency mortgage-backed securities). Optimistic tone on U.S. economic recovery in the rate statement. Although no actions were carried out, the Fed did expressed signs of optimism on the U.S. economic recovery in the interest rate statement. The following changes made in the statement indicate so. The sentence: “Amid this progress and strong policy support, indicators of economic activity and employment have strengthened.” has been revised to: “With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen.” The change indicates continued recovery in economic activities and employment. The sentence: “The sectors most adversely affected by the pandemic remain weak but have shown improvement.” has been revised to: “The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered.” The change indicates that the sectors most adversely affected by the pandemic have improved since the previous meeting. The sentence: “Since then, the economy has made progress toward these goals, and the Committee will continue to assess progress in coming meetings.” has been added into the latest statement, indicating optimism in the economic recovery. Progress made in economic recovery but still far from full recovery. Despite the optimistic tone sent out by the Fed, the central bank’s Chairman Jerome Powell cautioned during the press conference that the economy is still a distance away from making “substantial further progress” towards the Fed’s goals of maximum employment and price stability. This does not come as a surprise since the U.S. job market is still around 6.3 million jobs away from the pre-pandemic level. Furthermore, Powell highlighted that inflation is expected to remain above the central bank’s target in the upcoming months but not sufficient to trigger a change in monetary policy. On the issue of the recent rise in COVID cases due to the Delta variant, Powell downplayed the negative impact it has on the U.S. economic recovery. He said: “With successive waves of Covid over the past year and some months now, there has tended to be...less in the way of economic implications from each wave, and we will see whether that is the case with the Delta variety,” expressing confidence that the handling of the Delta variant will be more effective than handling COVID-19 when it was first declared a pandemic. Impact on the market. The upbeat tone delivered by the Fed resulted in the market going risk-on, increasing the demand for risky assets and currencies. Thus, the safe haven U.S. dollar weakened against the other major currencies.
TVC:DXY
by GH_Lee
ECB Meeting And Its New Inflation Target (23 July 2021)New monetary policy strategy. Earlier this month, the European Central Bank (ECB) reconvened its policy review that was postponed since last year due to the COVID-19 pandemic. During the review, the central bank revised its current goal of achieving an inflation level of “below, but close to 2%” to the new goal of achieving 2% inflation with overshoots allowed. This new inflation target is symmetric, meaning to say that inflation falling below or rising above the 2% target are both equally undesirable. However, knowing that it is unlikely inflation will be constantly maintained at the 2% target, slight deviation from 2% temporarily is still acceptable by the ECB. But if inflation were to deviate from that target by a significant amount for a sustained period of time, the central bank will carry out the necessary actions to address it. Revised forward guidance. During the monetary policy meeting yesterday, the ECB held its interest rate and quantitative easing (QE) unchanged. The central bank’s President Christine Lagarde said that no discussion on quantitative easing was carried out. In response to the newly adopted inflation target, the ECB has revised its forward guidance on interest rates. “In support of its symmetric two per cent inflation target and in line with its monetary policy strategy, the Governing Council expects the key ECB interest rates to remain at their present or lower levels until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term. This may also imply a transitory period in which inflation is moderately above target.” Simply put, the central bank will consider an interest rate hike only when inflation is seen to be reaching the 2% target way before the end of its projection horizon and is deemed to sustain for the rest of the projection horizon. Based on the ECB’s economic projection material, the projection horizon is defined to be three years. With the revised forward guidance, the ECB is now seen to be more accommodative for a longer duration. Looking at the ECB’s quarterly economic projections released in June, Inflation Forecast 2021: 1.9% 2022: 1.5% 2023: 1.4% we can see that the central bank’s inflation expectation is still quite a distance from 2%. During the press conference, Lagarde also highlighted that the ECB is expecting “inflation to rise over the medium term” although it is still below the 2% target, while “longer term inflation expectations have increased” but are some distance away from the target. Lagarde also mentioned that the recent rise in inflation in the eurozone is largely due to temporary drivers such as higher energy prices and base effects from the strong decline in oil prices. With the persistently low inflation in the eurozone, it is unlikely the ECB will carry out a rate hike in the near future.
by GH_Lee
10YR still range bound Waiting to see if this cup n handle will be verified as true, I'm skeptical though with the sharp decline back in Feb/Mar of last year invalidating it. This made a move yesterday exactly towards the bottom and bounced right at trend line indicating there is a good resistance down there. We have been range bound in the S&P for the past 14 days not making a move greater than 1% in either direction so there is some consolidation building for a move in either direction. CPI numbers are still "transitory" but how long will that last before the central bank starts to think about thinking about talking about rate increases. China has seen a notable jump in their inflation numbers though it has yet to be passed onto the consumer. Safe to say with the quantitative easing happening in all central banks around the world that we are looking at a jump in inflation all across the world. Will that be enough to be a bubble burster? or will it be aliens? :o Only time will tell, That's all folks.
TVC:US10Y
by moonman777
Eco/monetary news n°30> The most sociopathic despair scam and the scammiest of all "it's the future" tech/blockchain scams in the same year. I love scams. And I love criticizing them. I love warning people, and I love when deluded bagholders get mad. First scam (family of scams): With covid, crooks are jumping on the new opportunities which are the vaccine scams. You got the fake vaccine certificates, those are not the worst, and you got the fake vaccines. China dismantled a whole criminal network of 80 fake vaccine traffickers, some countries found that hundred of people got "vaccinated" with water. I am not going to debate on the various vaccine efficiency but I can tell you: If you are getting some phy serum injected, you are NOT immune. And the second scam: Less dangerous (to health) than the vaccine scams, I present Earth 2. Ah, the virtual Earth. See, thousands of idiots are paying thousands of dollars (yes yes) to buy squares of a jpeg of earth taken from google map. The project not only has nothing but - this is just too much - their TERMS AND SERVICES clearly states they have no intention to work on the project, none of the info displayed on their website is correct, and they can run away with your money at any time without any warning. It's really in their terms. I have never seen a scam just tell "people" (are real humans falling for this?) that basically it was a scam. On top of checking every single box in the signs of a scam! Dumb morons that fell for this crap claim that it's the future and skeptics just don't get it (here we go again), and that it can't be a scam because it is on the blockchain (wat?). I am not a skeptic, if I was I'd have doubts, here I have 0 doubts I know for a fact it is a scam. I have never seen anything this stupid. This is the record. I noticed they often liked crypto and Tesla, go figure. > Told you China were panicking about their demographics! Get used to the 3 child policy. That was quick (not really). So here we are. I mentionned a few weeks ago that China got its official reproduction numbers about which it was in denial. They started banning (modern) feminists that they consider are part of the issue which made quite a few people smile (or laugh). And now they are changing their old child policy and aiming for 3. In a way it was quick, this comes 1-2 months after the news. But in another way it is really slow as forgive me for saying but that was extremely easy to predict. "You can't predict the future" what a joke! Another prediction: It will take at the very least 20 years to fix the problem! Amazing call! > While Israel FX reserves reach a historic high, a centrist & far-right alliance uses the war to challenge Netanyahou. Israel, which has been accumulating assets for a while and was running out of ideas of what to buy with all that money, just saw its FX reserve cross $194 billion, almost half the country GDP. Still far behind Singapore thought. This did not stop the center & far right of the country to make an alliance to try and replace Netanyahou, obviously not for financial reasons, with the far right frontman potentially being able to become the new PM. He is in strong support of settling in Palestinian territory. And has the support of the centrists. I told you, it's possible for far right to get support from elsewhere in the political spectrum. The left/right divide doesn't make much sense 200 years after the french revolution, and the sides have kept getting redefined. Talking of France, the far right could get the support of what's left of the left (they score about 15% in polls), if you don't understand how relevant that is, make sure to trade EURUSD with high leverage in April 2022, you might get a lesson you won't forget anytime soon. > Brrrrr: New York FED sees record use of its reverse repo facility. They're puking the cash back! There is too much! It almost reminds me of Japan. Almost because I wasn't a trader back then. Companies and Wall Street got way too much socialism, they don't know what to do with the money. Unlike the government that will spend it tills its worth nothing. The numbers reached about 500 billion in a single night, and last week ended at around $2 trillion. "Stimulus". You can't just throw money and "poof" it's magical everybody is happy. Some people aren't even going to work... I don't understand how anyone over the age of 25 can fall for the "stimulus" joke. Is Zimbabwe the most powerful nation in the world? NO. Money is a tool why can't people understand this extremely simple fact? You can use it for example to give capital to legitime and productive companies, and withhold it from WASTEFUL CROOKS such as THERANOS and TESLA. This ensures resources are allocated more ideally which obviously will make a country more strong. > Central Bank Digital Currencies continue to make progress all around the world, and competition is backing down. A lot is happening. Here is a list: - The bank of Korea is starting its 10 month CDBC trial in August - Facebook crypto org quit Switzerland to come back to the USA, and said that if the FED was to make its own crypto, they would drop theirs - A prominent analyst at HSBC wrote an article explaining that China CDBC could help get its currency adopted worldwide - Sweden Riksbank announced friday it was moving to phase 2: doing more than simulations, with a bank and an IT company - Brazil got on board, publishing general guidelines about its own digital currency > The next Venezuela/Argentine/Zimbabwe/Sudan? Tunisia central banks asks loan from the IMF to avoid "explosion". In this era of fiat and demagogues making childish promises to gullible electors, countries are collapsing on a yearly basis. Will Tunisia be yet another name to add to the list? It's governor thinks so, if someone solvent doesn't give them - err I mean "loan" - money. The governor begged the IMF to answer yes to the PM proposal to get loans in exchange for economic reforms. Someone has to pay for socialism. Would be quite bold to ask the IMF to kindly be that fool, and for even more money to continue throwing it around to get votes. The head of government said he was prepared to make cuts in throwing money at (inefficient and wasteful) state owned companies, as well as civil servant wages. You get all these countries collapsing, but the public doesn't react. Nothing changes. There are no coups either. The USA/NATO preventing those? This sounds so insane but: AHEM! The trend of countries collapsing every month is not sustainable. At some point it will all explode. Once the US are no longer able to be the world police, and their allies (Germany, Norway) are no longer able to throw money & stuff at failed states (Greece, every socialist country in the world). "Helping" people doesn't actually help them. It's like getting rich quick, it's actually the slowest way.
by MrRenev
The Stock Market Not a Reflection of The EconomyWe are living through the greatest economic expansion in American history. It has become very clear to me that the stock market is no longer a measurement nor reflection of the health of the "real economy" where average everyday people make their income. If it was then the federal minimum wage should be over $30 an hour compared to economic gains our economy has made in the past 30 years. The full-time and part-time employees, freelance and gig economy workers, and your average mom & pop small business owners will continually become displaced and outsourced as automation technology grows and the elite multi-national capitalist dramatically cut their labor cost through automation this decade & beyond. We've hit the top 4.236 of this Fibonacci cycle I have going from the high of December 2007 to a low on November 2008. 13 years and growing of financial prosperity on paper but not so much in reality. The gap between the rich and the poor have never been more grotesque in the history of capitalism. Our government is in the practice of creating infinite amounts of money that some how never gets to the people that actually are in desperate need of financial resources. That seems like a recipe for disaster and social unrest to me. Don't even get me started in the tsunami of inflation that will be coming. If we drop coming back down to 1.618 may be a decent support area for the market (we dropped to the 1.618 during COVID-19 Quarantine). That would be a 56% retrace from these current levels. Can we actually keep the economy growing from these levels once the infinite money creating stops? Or will it ever even stop at this point?
NASDAQ:NDAQ
by peacefuljustin
2
Macro - Inflationary ShockModel Forecast for Inflation: - Model has forecasted an inflationary shock a la oil & Volcker in 1970s-1980s. - The date is November-December 2021 or 2022. - The nature of the event has yet to be determined, but it is speculated that the shortage will be in liquidity itself. - This will be followed by aggressive global monetary policies to combat stagflation, but a period of deflation will follow. - It is likely that a financial lockdown, and a restructuring of the global financial system will occur. GLHF, DPT Disclaimer: We absolutely do not provide financial advice in any shape or form. We do not recommend investing based on our opinions and strongly cautions that securities trading and investment involves high risk and that you can lose a lot of money. Loss of principal is possible. We do not recommend risking money you cannot afford to lose. We do not guarantee future performance nor accuracy in historical analyses. We are not registered investment advisors. Our ideas, opinions and statements are not a substitute for professional investment advice. We provide ideas containing impersonal market observations and our opinions. Our speculations may be used in preparation to form your own ideas.
FX_IDC:XAGUSDLong
by UnknownUnicorn1043646
1
How I work in Forex: Nzd-Usd analysisIn this article, I show you my way of working in Forex, starting with the choice of the currency pair, passing through all aspects of the operation (position size, maximum loss, etc.), until the analysis of the currency pair and the strategy to be adopted (entry-level, stop-loss and target). Looking at the table of currency pairs I follow, the one that caught my eye was Usd-Nzd. The price is at a level that is not sustainable in the long run for the New Zealand economy. In the last few years, the area 0.72300/0.72800 has been a very important level for Nzd-Usd and above that, the currency pair would be in an area of excess price (actually, already above 0.70000 Nzd-Usd is in an area of excess price). The operation that I am going to open has an optical of the medium-long period, if you are not in a position to hold open the position also for several months, do not replicate it. Let us proceed. The first thing I decide in each of my operations is how much I am willing to lose. My maximum loss is not equal for all the operations, with some more "particular" I have a smaller propensity to the risk. An example is precisely this operation. Although Nzd-Usd belongs to the currency pairs so-called "Majors," the New Zealand dollar is very similar to an "Exotic" currency, therefore with less volume and consequently more volatile and easily speculate. And besides, I already have other long positions on USD. For these reasons, I have decided that my maximum loss on the whole operation is $ 500, and based on the stop-loss, I will decide the position size to open. I now analyse Nzd-Usd trying to understand how it might move in the coming weeks and establish the type of trade and the entry-level. Above, you can see the daily chart with the Nzd-Usd sensitive levels highlighted. New Zealand had less impact from the covid-19 pandemic and this allowed its economy to be less affected. This led to a strong rise in its currency to the 0.75000 area against the US dollar. New Zealand, however, has a strongly export-based economy and a currency so strong, as mentioned earlier, is not sustainable in the long run. The New Zealand dollar also strengthened as many expected the central bank to intervene with a rate hike, "the Committee agreed that the risks to the economic outlook remain balanced, conditional on ongoing stimulatory fiscal and monetary policies. The Committee agreed that, in line with its least regrets framework, it would not remove monetary stimulus until it had confidence that it is sustainably achieving the consumer price inflation and employment objectives. Given that uncertainty remains elevated, gaining this confidence is expected to take considerable time and patience." However, this is currently unlikely, at least in the short term. Also because in recent months the New Zealand economy has slowed down, "Economic activity in New Zealand slowed over the summer months following the earlier rebound in domestic activity. December quarter GDP was weaker than expected and more recent indicators suggest that momentum has reduced. Some members noted that supply chain disruptions could potentially constrain domestic activity in the near term. In addition, business credit growth and investment remain subdued." As for the US, the focus in recent weeks has been on inflation following the entry into force of Biden's economic stimulus plan, "with inflation running persistently below this longer-run goal (2%), the Committee will aim to achieve inflation moderately above 2 per cent for some time so that inflation averages 2 per cent over time and longer‑term inflation expectations remain well-anchored at 2 per cent." In the March "Summary of Economic Projections," the PCE inflation forecast for 2021 rose to 2.4% from 1.8% in December, and the Core PCE inflation forecast rose to 2.1% from 1.8% in December. Inflation is forecast at 2.0% in 2022 and 2.1% in 2022 for both. In the same document, you can see (you can find it on the Federal Reserve's website) that in March compared to December the GDP forecast was raised (to 6.5% in 2021 from 4.2% in December) and the unemployment rate lowered (to 4.5% in 2021 from 5.0% in December). Macroeconomic analysis shows what has already emerged above with New Zealand's data deteriorating in recent months while US data is improving almost steadily. If the vaccination continues apace, the US economy will recover quickly, as the UK economy is doing in Europe. Once the analysis is complete, how do I intend to proceed? I do not want to open the operation at once. The moment is particular and I would not be surprised to see Nzd-Usd go up even 300 pips. So, I decided to open a spy order at 0.72400 to see how the currency pair will react to that level. I will place the primary order, which is larger in size as it is closer to the stop-loss, at 0.73700. For both orders, spy order and primary order, I destine the same maximum loss, which I had decided to be $ 500, so my maximum loss for the two types of orders is $ 250 each. Now with the Value-at-Risk, I calculate the stop-loss and with the stop-loss, I calculate the size of the two orders. To be precise, I use CVaR to calculate the stop-loss (it is all explained in my book on fundamental analysis in forex) and the calculation gives me a stop-loss at 0.75200. I now calculate the two position sizes. Ultimately, I will open a short position of $ 9,000 at 0.72400 (spy order) and a short position of $ 17,000 at 0.73700 (primary order), with a stop-loss at 0.75200. As for the target, I always like to see how the currency pair moves to assess where to take profit. This, somewhat summarised, is how I work in Forex, how I analyse a currency pair and how I organise the whole operation.
Education
by TradingwDavid
2
The Reserve Bank of Australia keeps interest rates on holdThe Reserve Bank of Australia keeps interest rates on hold, at the historically low level of 0.1 percent, it was expected to last until at least 2024. MM Analysis 1. Monetary Policy - Keeps interest rates on hold, at 0.1 percent - The initial $100 billion government bond purchase program is almost complete and the second $100 billion program will commence next week. 2. Economic forecast - The rollout of vaccines is supporting the recovery of the global economy, although the recovery is uneven. - The economic recovery in Australia is well under way and is stronger than had been expected. - CPI inflation is expected to rise temporarily because of the reversal of some COVID-19-related price reductions but inflation is expected to remain below 2 per cent over the next few years. 3. Forward Guidance - The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range, it does not expect these conditions to be met until 2024 at the earliest. 4. Conclusion - The RBA statement meets the market expectation, although employment rate has returned to the pre Covid-19 level, when the salary subsidy policy expires, the employment market is still uncerntain. The Bank of Australia has once again stated that it will not raise interest rates before 2024. In conclusion, this statement maintains dovishness.
by MacroMicro_Global
The Bank of Canada's recent moves on Quantitative EasingOn 23rd March, Bank of Canada announced the discontinuation of market functioning programs introduced during COVID-19, according to the deputy governor Toni Gravelle. MM analysis The discontinuation included the Commercial Paper Purchase Program (CPPP), the Provincial Bond Purchase Program (PBPP), and the Corporate Bond Purchase Program (CBPP), these programs would be deactivated on April and May. In addition, the Bank is announcing changes to its Term Repo operations and the Contingent Term RepoFacility (CTRF). The bank would look at raising its key interest rate from 0.25 per cent, which it doesn’t foresee happening until 2023. The bank of Canada is the first developed country to imply it's end of quantitative easing. The Canadian dollar recorded a slight increase on 23rd March.
by MacroMicro_Global
1