This morning we all woke up to a small surprise. Despite the PBOC stating over the last few days that there was no need to devalue the yuan, they surprisingly fixed it lower. Normally when this happens, people feel concerned over Chinese growth and as such Chinese equities tank, commodities tank (since China is the worlds largest importer), Gold and the JPY do well (as people buy haven assets) and the AUD and NZD suffer (due to these countries trade relationships with China).
We decided to position ourselves after this surprise by selling AUDUSD and NZDUSD. Unfortunately both trades did not perform to expectations (all the other assets did perform as expected) and we closed these two trades at a loss. In hindsight a few hours later, they seem to have recovered significantly, but at the time the risk of keeping them open was not worth the reward, so we closed and moved on. Sure it was a mistake, but it was a mistake made with the best of intentions. Sorry about that.
Then in the afternoon, in line with our predictions, Eurozone inflation showed that it is declining. This resulted in the Euro coming under pressure and our EURO sells performed well, as did our USDCHF buy and our USDJPY buys and GBPUSD sells and we closed all these trades for a nice profit. Please note that this last inflation report thats the ECB’s current level of QE is unsufficient and all the benefits have been nullified. Expect them to conduct far more aggressive QE next month, which will make the EURO heavy and make European equities perform well. So keep an eye out for opportunities and bargains.
If you are wondering why we picked the dollar as our bid currency against those we expected to soften, the reason is that I believe the dollar will be supported as people begin to accept the reality that the FED has to start moving by June again, and even possibly by March.
Our HF trading today so far:
After closing all of our trades, we made a profit of 2.8% today. I am happy with that result but I feel we should have done much better had we been not so unlucky with the spreads. For example our NZDUSD sell had a TP that would have granted us $1000 profit had it hit. As the market approached it this morning, I watched live as the spread increased from 26 to 35 and then 48 as it got closer to our TP almost as if the market was teasing me saying we will not hit your TP unless we absolutely have to. Incidentally as well, the same thing happened to SL one of our USDJPY positions as well later to the very pip before returning to normal. Maybe I am just being paranoid since when watching things live, its always easy to think constant bad luck is targeting you, especially after this happened over 40 times in the last 2 days of last week. I guess I shall just have to continue to do our best and not let such bad luck frustrate or throw me off our game.
These seemed to work well and many people on twitter have messaged me saying that had success with these, so good work all around. Well done. If you are one of these people, please comment below (it will only take you a few minutes) and others can see how you did it and benefit from other ideas as we post them. It is only fair that everyone who is willing should be able to benefit so please spare some of your time to share your experiences below.
I suggest keeping an eye on the following currencies: AUD, CAD, JPY, NZD. It will be a volatile day tomorrow and will really be data dependant. Do not rely on technicals alone tomorrow or you will get hurt. Please trade carefully and consider data results when you do.
For the AUD: we have the RBA interest rate decision. They are likely to hold rates for the moment but given falls in employment, capital expenditure and business sentiment, they are likely to be Dovish in their statement afterwards.
The Chinese PMIs (Caixin not official which will not surprise) if soft will throw the market into panic. That will make JPY stronger and NZD and AUD weaker. It also happens early in the morning so will roughly set the tone for the day and determine whether there is any risk appetite tomorrow in the markets at all.
Canadian GDP: This is expected to be flat. And if anaemic as expect or even shows contraction, the CAD will become weaker as it will prompt expectations of further cuts from the RBC.
We had a good start to the week, already 3% up on day 1 and our account in green. Lets stay positive, not be intimidated by the market, support each other and do our best!