TNX trade ideas
Trump Expect and detect about China and JpyIn early February, Donald Trump accused China and Japan of currency manipulation. Associated with his campaign promise to brand China a currency manipulator on his first day in office, the market remains deeply worried that Trump could use this as a justification for introducing punitive trade actions against China.
In the next two pages we discover that China does not qualify as a currency manipulator, using the US’ own criteria. In fact, no country in Asia can be justifiably called that. Nonetheless, the fact will not necessarily stop Trump in carrying out protectionist policies.
Economic nationalism is set to rise in the US. It continues to pose a large growth risk to the export-dependent economies in Asia. Thus,
we remain cautious on these currencies. We also look pessimistically at the MYR due to the country’s large and rising external funding need and the sensitivity to the USD strength. Our relatively bearish picks : SGD, KRW, TWD and MYR Our relatively bullish picks: INR and THB
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Gold Intraday Trade ideaMajor resistance - $1188
Major support - $1152 (200- H MA)
The yellow metal has made a high of $1183 and declined sharply from that level. It is currently trading around $1174.
US 10- year bond yield shown a slight jump till 2.42% from low of 2.34% after US Non farm payrolls.The yield is trading slightly below 2.45% (200- HMA) and a break above confirms 2.52%. It is currently trading around 2.42%.
Gold major resistance is around $1188 (Dec 5th high) and any break above targets $1200 in the short term.
On the lower side, immediate support is around $1172 (60- H EMA) and any indicative break below targets $1161 (61.8% retracement of $1145 and $1188)/$1156 (200- HMA).
It is good to sell on rallies around $1175-77 with SL around $1185 for the TP of $1161/$1156.
Economic cycle, market cycle, interest rates, trend lines & SPXThis chart provides probable market behavior given current market behavior, interest rates, and other factors such as presidential elections.
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I am expecting a down turn during the next week which would last until late February and another leg up in SPX until the final move down in August 2017.
Trend line colors mark the same conditions on both cycles.
US 10Y Yield. The US 10Y yield has been in a downtrend for an extremely long time (further back that this data shows). We could be capped at between 2.5-3% from here on in and the yield suggests that future interest rates are going to remain low. Well, the expectations theory says that long-term rates embed a prediction of future short-term rates. So we could imply from this that we could see a rate rise in December. However, after, we could see risk off behaviour on bond buying which could send the yields heading back closer to 0.
Short US10Y Yield (long 10Y bond)I feel as though bond buying is going to commence again. The risk on behaviour is hugely unfounded. The only caveat is that Yellen has almost completely said there will be a hike in December. This would obviously be bullish yields. I dont necessarily think it is the right move, as this will deleverage equity indices, which I think are very fragile still as well. If you look at the downtrend that yields have been in, it would be foolish to expect that it would break here, considering the trend has lasted for 8 years. Now that I have said that I'll probably end up eating my words.
TNX SPX and the CPIThe divergence between stocks and bonds is the key. Stocks can't hold at present level if interest rates, as measured by the 10 years treasury, continue their path to higher grounds. On a short term basis my target is 2.49, which would completely erase the preceding 5th. A bad CPI number (out tomorrow before opening) could certainly do the trick.
More on the TNX long term view later.
Stay tuned and happy trading.
Shorter term bearish on the TNX with a longer term bullish viewWe like the short side of the 10 year treasury note for a bearish move to the 1.59 level as a target. Price action could continue higher to 1.73 from current levels, but the 1.59 should be achieved before a longer term bullish move is sustained. So on the longer term scale, we are bullish for price action to make a move for the 2.11 level, which could be reached by year end 2016.