A chaotic day and one filled with data leaks from the looks of it. The markets seem to have over-reacted to Dudley’s comments yesterday. In effect all he said was:
1.) Conditions are tighter than in December.
2.) It is too early to decide.
To me, that does not say “Yes no rise coming in March”. Especially when you contrast this with other voting members who spoke earlier this week. Fisher who said, we will be data dependent and George who said she sees no reason why the rate of rate hikes should be delayed due to volatile markets. As I said last week, I will not rule out a raise in rates completely unless tomorrow posts NFP results that are soft (less than 150K). At the end of the day, the markets are no worse now than they were in Jan, when the FED last met and said it expects 4 hikes this year.
Furthermore the BOE reports came out today. Interestingly enough, there is a strong possibility that they were leaked. This is due to the price action not just 30 mins before the report but also 1 minute just before it. Unless my $25,000 dollar a year Bloomberg terminal showed me a fictional graph (and has done so for the past 18 months), it is apparent that someone big is finding out something early, ahead of the competition:
As for trades:
Today we went short EURUSD and long USDJPY. While these trades have been hammered today, I have set strict SL’s that I am willing to risk because I believe the current price action is a market over reaction (it is the 5th week of the year and the markets are already ruling out ANY action by the FED?) and despite what people are publicly saying, if we look at banks actual forecasts on which they trade and advise their clients:
So I am happy to patiently wait with the SLs on these trades and risk 10% of my portfolio on these for a potential 30% profit. Bear in mind they cost nothing to hold, unless they stop, in which case they cost a great deal. At the end of the day the BOJ is planning to cut more, as is the ECB while the FED is going to raise. I see this as clear divergent monetary policy. Of course, if you do not feel the same way, you can feel free to manually close these trades.
In addition, those of you with spare capital should watch the USDCHF. If it drops below 0.99, it is a good opportunity to buy.
Going to walk away now for the day, as watching the markets today is nothing short of miserable, hope to post an update tomorrow after what I hope are decent NFPs. I expect a number around 170k+ and a reduction in unemployment to 4.9%.
Good luck to everyone,