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John Kicklighter is the author of Dynamic Carry Trade Basket, Watch What The Fed Watches, and Forex Trading Weekly Forecast on DailyFX.com
John brings up some fantastic charts here. Thanks, John.
He shows "dropping volatility" which is good for carry traders. He shows that stocks have stabilized and so have carry trades (another "plus" for carry traders.
He also points out that the RBA may be the ones that have the higher odds of a rate hike coming up, not to mention they are the highest rates out there for the majors anyway.
So you might look to AUD/JPY and see what you think. See my charts below.
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John brings up some fantastic charts here. Thanks, John.
He shows "dropping volatility" which is good for carry traders. He shows that stocks have stabilized and so have carry trades (another "plus" for carry traders.
He also points out that the RBA may be the ones that have the higher odds of a rate hike coming up, not to mention they are the highest rates out there for the majors anyway.
So you might look to AUD/JPY and see what you think. See my charts below.
How is that a fantastic chart? Is this pro-carry trade or what?
What I see is a corrective channel, in form of a wave 4, which is showing much divergence in the MACD. I see a clear impulse wave down, and even if my wave iii is in fact a v, which I don't believe because 3 waves come with deep MACD readings, then this is still at best a wave 2.
A MACD reading above zero is not necessaraly bullish, in fact, this one is bearish since it crossed down already. It might be held up by the zero line, but will eventually fall through. Also, RSI, although not as clear, is also showing divergence. Volatility although normal right now, was up 16% yesterday after someone sneezed. Better be very careful right now, sentiment is still bearish.
This pair is about to continue its main direction, which is down.
How is that a fantastic chart? Is this pro-carry trade or what?
What I see is a corrective channel, in form of a wave 4, which is showing much divergence in the MACD. I see a clear impulse wave down, and even if my wave iii is in fact a v, which I don't believe because 3 waves come with deep MACD readings, then this is still at best a wave 2.
A MACD reading above zero is not necessaraly bullish, in fact, this one is bearish since it crossed down already. It might be held up by the zero line, but will eventually fall through. Also, RSI, although not as clear, is also showing divergence. Volatility although normal right now, was up 16% yesterday after someone sneezed. Better be very careful right now, sentiment is still bearish.
This pair is about to continue its main direction, which is down.
Ilovepippin, thanks for commenting. I'll take the other side of your trade. If these global economies are coming out of a recession like their GDP numbers show...which means that corporations should be on the mend too ...stocks should improve and carry trades should do the same (with pull backs along the way like we've had the past few days).
Aussie's stocks are stronger than that of many world stock markets too, which will help "inflows" of money into their stocks that FIRST must to through the "door" of their currency to get there.
Hey dude, seriously...thanks for your insights. Whether I agree or disagree, it's always good to have the different view points here. Besides, there's nothing that says I'm always right. That's what good risk management is for...for when I'm wrong. hehe!
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The DailyFX Forums have over 75,000 members, and many discussions going on at once. If you aren’t sure where to get started, email me with your questions and I’ll introduce you to the community and point you in the right direction. I look forward to hearing from you.
Sean Hyman - DailyFX Forum Moderator - shyman@dailyfx.com
Ilovepippin, thanks for commenting. I'll take the other side of your trade. If these global economies are coming out of a recession like their GDP numbers show...which means that corporations should be on the mend too ...stocks should improve and carry trades should do the same (with pull backs along the way like we've had the past few days).
Aussie's stocks are stronger than that of many world stock markets too, which will help "inflows" of money into their stocks that FIRST must to through the "door" of their currency to get there.
Hey dude, seriously...thanks for your insights. Whether I agree or disagree, it's always good to have the different view points here. Besides, there's nothing that says I'm always right. That's what good risk management is for...for when I'm wrong. hehe!
You are welcome!
Good to trade your own idea. Its better to go wrong with your own idea than with the idea of someone else.
Carry Trade is a long term trade, how long do you intend to hold?
What is your entry?
You are welcome!
Good to trade your own idea. Its better to go wrong with your own idea than with the idea of someone else.
Carry Trade is a long term trade, how long do you intend to hold?
What is your entry?
I've been in NZD/JPY for a few weeks now and just got into CAD/JPY yesterday. Will likely hold onto them unless I see the economies slumping, recessions returning, etc.
Global recoveries and expansion should cause these carry trades to prosper overall, over time.
__________________
The DailyFX Forums have over 75,000 members, and many discussions going on at once. If you aren’t sure where to get started, email me with your questions and I’ll introduce you to the community and point you in the right direction. I look forward to hearing from you.
Sean Hyman - DailyFX Forum Moderator - shyman@dailyfx.com
I've been in NZD/JPY for a few weeks now and just got into CAD/JPY yesterday. Will likely hold onto them unless I see the economies slumping, recessions returning, etc.
Global recoveries and expansion should cause these carry trades to prosper overall, over time.
As far as the recession goes, we are not out of the woods yet...
I am with Trichet. Also, look at the front page of Dailyfx,..."Euro Reverses Losses, As Traders Ignore Bearish Comments From ECB's Mersch"
Stocks are up due to traders optimism, not fundamentals. Thats why I think this is a bear market rally. I hope I am wrong though, but I need to see an impulse wave up before I go long on the carry trade.
As far as the recession goes, we are not out of the woods yet...
I am with Trichet. Also, look at the front page of Dailyfx,..."Euro Reverses Losses, As Traders Ignore Bearish Comments From ECB's Mersch"
Stocks are up due to traders optimism, not fundamentals. Thats why I think this is a bear market rally. I hope I am wrong though, but I need to see an impulse wave up before I go long on the carry trade.
Ilovepippin, Yeah, we've gone so high recently...that we could be due for a good sized pull back before the upside resumes.
I'm starting to see some bearish shooting star patterns on AUD/USD, NZD/JPY, etc. that I don't like in the near term...bearish possibility for longs.
The dollar and yen are both attempting a near term upward thrust it seems right now too.
But actually all of the central bankers admitted to the worst being behind us. Trichet just commented that it would be a "bumpy road ahead"...which I've never seen a recovery period that wasn't. So I'd agree with that.
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The DailyFX Forums have over 75,000 members, and many discussions going on at once. If you aren’t sure where to get started, email me with your questions and I’ll introduce you to the community and point you in the right direction. I look forward to hearing from you.
Sean Hyman - DailyFX Forum Moderator - shyman@dailyfx.com
Ilovepippin, Yeah, we've gone so high recently...that we could be due for a good sized pull back before the upside resumes.
I'm starting to see some bearish shooting star patterns on AUD/USD, NZD/JPY, etc. that I don't like in the near term...bearish possibility for longs.
The dollar and yen are both attempting a near term upward thrust it seems right now too.
But actually all of the central bankers admitted to the worst being behind us. Trichet just commented that it would be a "bumpy road ahead"...which I've never seen a recovery period that wasn't. So I'd agree with that.
You still believe in the "Central Bankers"?
I just have to chuckle, sorry.
Anyway, here is my SP500 forecast.
A double zigzag, and we are looking for equality in wave W and Y, which would bring us (at maximum) to the 61.8% retrace 1159.
However, I am already seeing bearish divergence in the MACD. The MACD might be caught by the zero line and bump up again though.
In time I would say the end of September is crucial. Things will probably slowly turn around with some corrective movement. Dow pretty much paints the same picture.
You still believe in the "Central Bankers"?
I just have to chuckle, sorry.
Anyway, here is my SP500 forecast.
A double zigzag, and we are looking for equality in wave W and Y, which would bring us (at maximum) to the 61.8% retrace 1159.
However, I am already seeing bearish divergence in the MACD. The MACD might be caught by the zero line and bump up again though.
In time I would say the end of September is crucial. Things will probably slowly turn around with some corrective movement. Dow pretty much paints the same picture.
Ilovepippin, Thanks for posting these charts and counts. Because knowing how the stock market may go tells us how the carry trades may be influenced too.
If we head higher for now on the S&P, according to your count...then that would be bullish for carry trades for now.
However, if the divergence persisted...it's my understanding that it usually happens on a wave 5 as the momentum from the wave 5 is much lower than that of 3.
Listening to central bankers is a lot more unbiased than a stock analyst. So I listen to their speeches and pick out what I think may be true.
For instance, when they say "the worst is over"...so far, the other fundamental data backs that up (barring another downturn).
However, when they say, we can pull out the stimulus before it causes inflation....they are smoking something then.
__________________
The DailyFX Forums have over 75,000 members, and many discussions going on at once. If you aren’t sure where to get started, email me with your questions and I’ll introduce you to the community and point you in the right direction. I look forward to hearing from you.
Sean Hyman - DailyFX Forum Moderator - shyman@dailyfx.com
Last edited by Sean Hyman; 08-25-2009 at 04:04 PM..
Apologisies Ilovepippen, on simple business maths, I must go with John and Sean.
In background, I'm just mainly a business guy dealing in real-world products with an eye for return on capital outlaid. My main FX experience is limited to buying stuff from China where my suppliers require USD (not my home AUD). For sideline fun, and to learn more, I now scalp one or two daily trades on AUDUSD.
However, I am seriously considering making a carry trade investment right now because my business eye sees AUDJPY for sale at 0.79 already returning healthy interest on FXCM leverage with much near term upside.
Broadly, $100k paid to FXCM equity account to buy only 1,000 AUDJPY leveraged lots returns me about 14% pa compounding daily at today's rates on that $100k ... and that $100k includes reserves to cover about a 10 cent downside risk in AUDJPY. That 14% pa, paid daily, is a healthy return in my business language and that opportunity is available right now.
On more upside, I see:
1. Japan's interest rate is going nowhere for the next year or so whereas Oz rates will be the first G10 to rise, resulting in my interest revenue stream increasing to some 20%pa during 2010. As a businessman, I'd be quite content with just that.
2. However, AUD is still about 25% less than its high of last year against JPY, pointing to conservatively a 5 cent AUD increase during 2010 ... resulting in capital gain of about 50% on initial outlay. It may well be much greater but I'll settle for 50% outlook any day.
My bottom line assessment ... 90% chance of at least 70% gain from interest and capital appreciation on my investment during the next 12 months ... 10% chance of losing it all. That makes for no contest in a business sense where new business veture risk always well exceeds 10% in any sort of business you care to name.
Ilovepippen, I guess there's a million others thinking exactly like me. They may be waiting for the economic green shoots to prove a bit more sustainable in order to reduce the 10% risk ... but, on simple maths, I can virtually feel the pent up demand ready to pounce ... I wonder how many like me are thinking "Hey, get ready this train is about to leave the station"?
Apologisies Ilovepippen, on simple business maths, I must go with John and Sean.
In background, I'm just mainly a business guy dealing in real-world products with an eye for return on capital outlaid. My main FX experience is limited to buying stuff from China where my suppliers require USD (not my home AUD). For sideline fun, and to learn more, I now scalp one or two daily trades on AUDUSD.
However, I am seriously considering making a carry trade investment right now because my business eye sees AUDJPY for sale at 0.79 already returning healthy interest on FXCM leverage with much near term upside.
Broadly, $100k paid to FXCM equity account to buy only 1,000 AUDJPY leveraged lots returns me about 14% pa compounding daily at today's rates on that $100k ... and that $100k includes reserves to cover about a 10 cent downside risk in AUDJPY. That 14% pa, paid daily, is a healthy return in my business language and that opportunity is available right now.
On more upside, I see:
1. Japan's interest rate is going nowhere for the next year or so whereas Oz rates will be the first G10 to rise, resulting in my interest revenue stream increasing to some 20%pa during 2010. As a businessman, I'd be quite content with just that.
2. However, AUD is still about 25% less than its high of last year against JPY, pointing to conservatively a 5 cent AUD increase during 2010 ... resulting in capital gain of about 50% on initial outlay. It may well be much greater but I'll settle for 50% outlook any day.
My bottom line assessment ... 90% chance of at least 70% gain from interest and capital appreciation on my investment during the next 12 months ... 10% chance of losing it all. That makes for no contest in a business sense where new business veture risk always well exceeds 10% in any sort of business you care to name.
Ilovepippen, I guess there's a million others thinking exactly like me. They may be waiting for the economic green shoots to prove a bit more sustainable in order to reduce the 10% risk ... but, on simple maths, I can virtually feel the pent up demand ready to pounce ... I wonder how many like me are thinking "Hey, get ready this train is about to leave the station"?
No need for apologies, an analysis is just that. I could, and actually hope, that I am wrong because I benefit more from a good economy than from a bad economy, like everyone.
Every trader has a choice and it is all about being prepared to take the risk. When you put your money into a market you have to be comfortable with losing that, or part of that, money. If you are, you sleep well, if you are not there will be many sleepless nights. Trust me, I have been there.
If in your opinion it is a risk well worth taking then I wouldn't listen to anybody to tell you right or wrong. It doesn't matter how many people agree or diagree with you, the market doesn't care, it will do its own thing.
Now, as far as my technical analysis goes, I believe the markets are in a bigger downtrend, little bit like the Nikkei from 1999 till present. But it is hard to time these movements. We could be in a longer term uptrend before we go down again. All we have is speculation.
However, with fundamentals and technicals shaky as they are I will wait for some more confirmation.
Banks are still failing here (US) on a daily basis. You don't even see it in the news anymore but we just lost a big bank, Colonial Bank, and last year that was reason to sell everything, now nobody seems to care, actually financials are up. So, I am seeing mixed signals here and think that traders optimism is unfounded for now. What is the role of the bailout in this? Wasn't that supposed to prevent bank failures? Why did such a big bank fail? You know, that raises questions about the bailout program and if it is doing what it is ment to do. I know that all the transportation stimulus money has not even began to reach its destination.
On the other had I see increased consumers confidence. Retail sales are up a bit and consumers confidence is rising. However, just before the big crash in 1929 consumers confidence was at an all time high, so what do we make of that?
I for sure didn't buy any shares when the Dow reached 6500, eventhough I predicted it would turn there. But look what happened, one of the biggest rallies in a long time and those who bought at 6500 are sitting very pretty right now. So, who knows?
However, I would like to know more about the carry trade program that FXCM is offering. What I am looking at is just buying/selling a currency pair and holding it for a while. What are the details of this FXCM offer?
No need for apologies, an analysis is just that. I could, and actually hope, that I am wrong because I benefit more from a good economy than from a bad economy, like everyone.
Every trader has a choice and it is all about being prepared to take the risk. When you put your money into a market you have to be comfortable with losing that, or part of that, money. If you are, you sleep well, if you are not there will be many sleepless nights. Trust me, I have been there.
If in your opinion it is a risk well worth taking then I wouldn't listen to anybody to tell you right or wrong. It doesn't matter how many people agree or diagree with you, the market doesn't care, it will do its own thing.
Now, as far as my technical analysis goes, I believe the markets are in a bigger downtrend, little bit like the Nikkei from 1999 till present. But it is hard to time these movements. We could be in a longer term uptrend before we go down again. All we have is speculation.
However, with fundamentals and technicals shaky as they are I will wait for some more confirmation.
Banks are still failing here (US) on a daily basis. You don't even see it in the news anymore but we just lost a big bank, Colonial Bank, and last year that was reason to sell everything, now nobody seems to care, actually financials are up. So, I am seeing mixed signals here and think that traders optimism is unfounded for now. What is the role of the bailout in this? Wasn't that supposed to prevent bank failures? Why did such a big bank fail? You know, that raises questions about the bailout program and if it is doing what it is ment to do. I know that all the transportation stimulus money has not even began to reach its destination.
On the other had I see increased consumers confidence. Retail sales are up a bit and consumers confidence is rising. However, just before the big crash in 1929 consumers confidence was at an all time high, so what do we make of that?
I for sure didn't buy any shares when the Dow reached 6500, eventhough I predicted it would turn there. But look what happened, one of the biggest rallies in a long time and those who bought at 6500 are sitting very pretty right now. So, who knows?
However, I would like to know more about the carry trade program that FXCM is offering. What I am looking at is just buying/selling a currency pair and holding it for a while. What are the details of this FXCM offer?
Ilovepippin, not sure what you mean by this: What are the details of this FXCM offer?
Can you explain? Thanks. There is some "carry trade basket" analysis done by the DailyFX analysts. Is this what you refer to maybe?
__________________
The DailyFX Forums have over 75,000 members, and many discussions going on at once. If you aren’t sure where to get started, email me with your questions and I’ll introduce you to the community and point you in the right direction. I look forward to hearing from you.
Sean Hyman - DailyFX Forum Moderator - shyman@dailyfx.com
Ilovepippin, not sure what you mean by this: What are the details of this FXCM offer?
Can you explain? Thanks. There is some "carry trade basket" analysis done by the DailyFX analysts. Is this what you refer to maybe?
In specific I was wondering what this meant:
Quote:
However, I am seriously considering making a carry trade investment right now because my business eye sees AUDJPY for sale at 0.79 already returning healthy interest on FXCM leverage with much near term upside.
Broadly, $100k paid to FXCM equity account to buy only 1,000 AUDJPY leveraged lots returns me about 14% pa compounding daily at today's rates on that $100k ... and that $100k includes reserves to cover about a 10 cent downside risk in AUDJPY. That 14% pa, paid daily, is a healthy return in my business language and that opportunity is available right now.
Is that some FXCM managed investment or just opening an account and buy ausjpy?
Is that some FXCM managed investment or just opening an account and buy ausjpy?
That's just opening up an FXCM.com account and placing a buy on AUD/JPY.
However, it's my understanding that FXCM is looking for profitable traders. I don't know the details of that program but if you are profitable and have an account statement that shows it, they may be interested.
I literally know no details of the program but would be happy to find out for you if you like.
__________________
The DailyFX Forums have over 75,000 members, and many discussions going on at once. If you aren’t sure where to get started, email me with your questions and I’ll introduce you to the community and point you in the right direction. I look forward to hearing from you.
Sean Hyman - DailyFX Forum Moderator - shyman@dailyfx.com
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