Husar's MySpace Blog |

MySpace

MySpace.com | rss | sign in

Husar

Last Updated: 3/12/2009

Send Message
Instant Message
Email to a Friend
Subscribe

Gender: Male
Status: Single
Age: 42
Sign: Scorpio

Country: US
Signup Date: 8/6/2006

Blog Archive

[Older Newer]

/ /

Sunday, November 08, 2009

Buy and hold.
Category: Jobs, Work, Careers

Currencies are not financial instruments which typically come to mind when talking about long term investments. Vast majority of financial advisors suggests a mix of bonds and stocks to their clients, with some cash investments, like money market funds or CD’s thrown into the mix. Such is long standing, conventional wisdom regarding regarding allocating money for a long haul and is almost universally practised on “main street”. The only difference is specific split among these asset groups, in most cases related to the age of person. Virtually all other forms of investments are considered “derivatives” and not suitable for most people.

These views have been slowly changing over last few years, if not decades. Explosion of hedge funds have brought alternative forms of investments, other than stocks and bonds, into a vernacular of most individual investors. Today just about everybody with any interest in financial markets knows, at least in principle, what options, futures and commodities are. More and more often these groups of securities are mentioned as separate asset classes with a place of its own in a carefully balanced investment portfolio. Same goes for currencies.

Popularity of spot Forex trading proves that currencies are great trading instruments. Brokers report record numbers of accounts opening every year, trading volumes keep rising and the most liquid markets in the world are becoming even deeper. This is easily noticed when spreads from just few years ago are compared to ones today. In many cases they were cut by half, clearly outcome of increased activity as well as competition for clients among Forex brokers.
Currencies as long term investments.

(Add Comment) |

0 Kudos

Friday, November 06, 2009

Unemployment
Category: Jobs, Work, Careers

For all the talk about recovery and supposedly expanding economy NFP delivered a shock to the system today. Unemployment rate is officially above 10%, at 10.2% to be exact. It is the highest rate since 1983, with nearly 16 million people looking for job, and the number is likely to grow even higher. Counting those who have settled for part-time jobs or stopped looking for work, the unemployment rate would be 17.5 percent, the highest on records dating from 1994. People who insist that recession is over coined a phrase “jobless recovery”, trying to validate their opinions.

To put it in another perspective -October was the 22nd straight month the U.S. economy has shed jobs, the longest on records dating back 70 years. This is even longer than during the recession in early 80’s, when unemployment reached 10.8%, postwar record. When that down turn started in July 1981, official unemployment rate stood at 7.2%, compared to 4.9% at the beginning of current slump. Lesson is very simple- during this recession economy has been shedding jobs at much faster, steeper pace. Number of people officially out of work for a period of 6 months or more set a record at 5.6 million. But the recession is over, right?

It's official- 10%+ unemployment.

(Add Comment) |

0 Kudos

Thursday, November 05, 2009

Central banks
Category: Jobs, Work, Careers

With interest rates for Sterling at record low, at 0.5%, there are some speculations floating around that GBP is the currency fueling next wave of the carry trade. By some reports it is replacing Japanese Yen and US Dollar in this role. Currently FED is the source of cheap money, with rates below those Bank of Japan. By some reports speculators are increasingly turning to British Pound, with an idea that any farther quantitative easing would cheapen GBP even more.

While some trades are certainly established shorting the Pound, I seriously doubt it will replace USD or JPY in this role. First of all, these currencies are still cheaper than Sterling, making them better candidates. Second is the money supply. There are far fewer Pounds floating around compared to Dollar or Yen. Any imbalance created by abnormally one sided bets, would become bigger and faster that what happened in Yen last couple of years. We know what happened in Yen pairs when markets corrected this imbalance. It was very painful for many market participants. If this happened with GBP, correction would be even more severe. Also, Pound is expected to have interest rates on the increase again before USD or JPY. Altogether it is not the best option to borrow money for speculation.
Sterling funding currency for carry trade?

(Add Comment) |

0 Kudos

Wednesday, November 04, 2009

US debt.
Category: Jobs, Work, Careers

US Treasury Department works hard trying to raise enough money to cover Federal deficit. Next week alone, agency is expected to bring over $81 billion, in an attempt to finance unprecedented budgetery shortfall, which, this year alone, is expected to reach over $1.4 trillion. Somewhat smaller, yet still huge deficits are projected for the next decade, topping at combined additional $10 trillion, or so. So far Treasury managed to do a good job of raising funds, without pushing interest rates too high, even in difficult climate of ever declining US Dollar. However, new problem is on the horizon- the Federal Statutory Debt Limit.

Federal government debt is limited by act of Congress, which sets a debt ceiling. Currently this figure stands at $12.1 trillion and is expected to be reached by December. Congress must pass a legislation needed to boost that limit and avoid an unprecedented default on the nation’s debt obligations. In theory. Nobody seriously entertains this notion, fully expecting the legislation to pass. Problem is, this will have to be done every year in order to accommodate ever swelling spending. Issue will be brought on the front pages of the media, because it will provide some politicians perfect platform for heated speeches and angry rhetoric. Never mind that the “ceiling” is already largely symbolic. It doesn’t cover some expenses. For example, defense budget can go above this limit, as well as other “emergency” spending needs. Nonetheless, situation will get attention and one could have some influence on the USD.

FED interest rate decision will be announced today, and this is almost guaranteed to play with Dollar pairs. Expectation is for the non-existing interest to remain next to invisible, but that’s not what the markets will be looking for. Attention will go to future “intentions” and ”hints”. Is the tone of announcement “hawkish” enough? This activity reminds me of palm or tarot reading, rather than legit analysis, so I leave it for others. True to fashion, I will not be trading during this time, but currencies have been active all day and so was I.
Federal debt limit.

(Add Comment) |

0 Kudos

Tuesday, November 03, 2009

Rates again
Category: Jobs, Work, Careers

Reserve Bank of Australia has raised interest rates for the second time during its policy meeting today. Benchmark rate was hiked to 3.5% from 3.25%. No surprise of any kind, this move has been widely anticipated. This makes the Australian Dollar to be the highest interest bearing currency among the established economies. Differences between AUD and other currencies are starting to become significant. With the exception of New Zealand, where current rate stands at 2.5%, interests everywhere else are, well, symbolic, marginal at best. Having this in mind, it could be surprising that Aussie sold off on the news. not in a dramatic fashion, but 100+ pips in AUD-USD in a few hours makes for a good trading day. By now large portion of these losses was recovered.

Comparison table of the interest rates among major central banks. RBA stands out with the highest percentage. Dates of policy meetings for other CB’s are also indicated here. Notice that we have more of these events scheduled for this week. FED is next followed by European Central Bank and Bank of England on November the 5th. Nobody expects surprises, but you never know.
RBA does it again.

(Add Comment) |

0 Kudos

Monday, November 02, 2009

Reversal?
Category: Jobs, Work, Careers

Recently media has been very focused on the US Dollar. Remarks about its behavior are becoming ubiquitous if predictable. Same for the Japanese Yen, which also earned a title of being a “safe haven”. This pushed the commodity currencies into a background. They have been the attention magnets for better part of the year. As we know the commodity currencies belong to countries which export huge amounts of raw materials. Their economies largely depend on prices on physical commodities and general economic health of global economy. These are Australia, New Zealand and Canada. Some would add South Africa, Russia and , to a smaller degree, Brazil, into this camp. One could say that very simple, yet accurate, barometer of world economic climate is Australian Dollar-Japanese Yen cross. If this pair is moving up things are good or on the rebound, while falling AUD-JPY indicates either existing or coming problems.

This pair, and all others in this camp, like NZD-JPY, CAD-JPY as well as their crosses with USD, CHF and so on, have been rising most of this year. Recently these strong moves have been developing signs of resistance and maybe even possible reversal. Here is a weekly chart of NZD-JPY, very representative of how most of how most of crosses look like right now. Price advanced from a low of about 44 early in a year to above 69 recently. This is a huge move, which only looks small on this chart because of severity and historic nature of preceding drop. If FIB retracement tool is overlaid on this graph, we can see that the price is between 38 and 62 levels, an area where reversals are very common.
Commodity currencies turning.

(Add Comment) |

0 Kudos

Friday, October 30, 2009

Year later.
Category: Jobs, Work, Careers

Last few days must have felt like very eventful in Forex trading. Volatility increased in relation to previous weeks and a lot of currency crosses experienced large swings. I could be a little skewed in my observation, being mostly focused on Pound and its pairs lately. When GBP moves it, well, moves and gets noticed. But there was much more to it. All commodity currencies were jumpy, AUD, NZD, CAD, and so was Euro. I mean, EUR-NZD had over 500 pips day in the middle of the week.

Let’s not forget Japanese Yen, which responds to all other currencies volatility. JPY crosses had sharp moves in both directions, ranging over 300 pips per day in some pairs, like the beast. While these are good size swings, they must be put in a perspective. I wanted to see this recent activity compared to what happened in the past, namely a year ago. In October last year Yen was also the star of Forex trading world, only conditions were even more extreme. The post Panic was written day after GBP-JPY plunged 2000 pips in a day and then recovered 1200 pips or so just as fast. That happened during the height of financial crisis. It seems to me, that recent tone of press coverage gets more alarmist and about all financial markets are getting increasingly volatile, resembling last year’s conditions. Only the magnitude of fluctuations is still smaller and I hope it stay like this. Once GBP-JPY starts moving over 500 pips per day, and other markets increase by corresponding ratio, things get a little uncomfortable. It may seem like fun when you are on the right of the move, but it also could be an “Ouch”. Big one at that.
The Yen, a year after.

(Add Comment) |

0 Kudos

Thursday, October 29, 2009

The beast!
Category: Jobs, Work, Careers

Turns out my remarks from yesterday’s post, Important trend is emerging, must have touched a raw nerve with investors and traders worldwide. This is very dramatic- worldwide. Towards the end of the post I was making fun about how predictable and one dimensional Forex related headlines have become. Last sentence was ” Maybe by tomorrow everybody forgets about safety and becomes intrepid, or reckless, and dumps the Yen.” It was intended to help my attempts to go long GBP-JPY, the beast.

Today I’m learning that, indeed, a wave of risk appetite swept over the world. At least that’s what major news agencies claim in relation to both Dollar and Yen. Something like “USD, JPY fall on risk demand” is very common today. The more things change, the more they stay the same, really. With one exception, perhaps. Somebody attributed today’s strength in British Pound to … US economic growth? It is a new one, and I don’t expect it to stay around for too long.

No matter what the generally reported reasons, GBP-JPY snapped sharply today. I had tried go long this pair couple of days ago, but order was not filled. Yesterday I bought it at the market seeking good gains, but market didn’t move as swiftly as hoped for and I closed the trade for minor gains.
Forex beast comes alive.

(Add Comment) |

0 Kudos

Wednesday, October 28, 2009

New trend?
Category: Jobs, Work, Careers

Another central bank raised interest rates. This time it is the Norges Bank, which decided to raise its main lending rate by 25 basis points from a record low to 1.5 per cent. Norwegian central bank became second among the industrialized nations to bump interest rates after prolonged period of lowering them. Reserve Bank of Australia was first. Both of these countries represent the so called “commodity currencies”, so with prices of raw materials moving up, they may soon face some inflationary pressures. This action made the Krone strongest of this group, on a day when they experienced largest fall in weeks.

I do not trade NOK on regular bases. Every now and then trades are taken using longer term charts, most recent one covered here was a sale in CAD-NOK, profitable trade. However, move by NB was important, because it suggests more central banks will follow. During last couple of years cutting interest rates was rewarding to currencies. This trend has stopped earlier in the year and is reversing now. From now on we should expect currencies with increasing rates to be appreciating in relation to others. AUD set the tone earlier this month and I think NOK pretty much confirms it, or at least it will over coming weeks a return of historically more typical trend. Those who are trading fundamentals should take it into account before all policy setting meetings in foreseeable future.
Another trend emerging.

(Add Comment) |

0 Kudos

Tuesday, October 27, 2009

Next move
Category: Jobs, Work, Careers

Very interesting question I received in comments to yesterday’s post, New China scare, and it had nothing to do with China or USD. What was I up to in relation to EUR-GBP? Evidently I’m not the only person preoccupied with Euro-Pound recent moves, at least couple of readers keep me company. Pound is causing some controversy. No, not the GBP, but rather the way it reacted to recent recession news. Some question validity of GDP data, some claim it is inaccurate. Perhaps it shouldn’t have been published at all , given the fact it is incomplete and subject to revision? Today retail sales numbers were announced and they are the highest in 2 years. What’s going on? Analysts from major financial institutions are broadly divided on future course of GBP. Some call for parity with Euro, while others see 0.8500 level. At the moment market is very conveniently right in the middle of this wide range and stalling, as if waiting for new data to push it either way.

So, what is the next move? Well, as far as I’m concerned it depends almost entirely on time frame of interest. Most traders are partial to charts that fit their strategy and time constrains. Those who sit in front of terminal all day long probably don’t use weekly charts for entry points. For my latest trade I used 4H chart, with general direction dictated by daily graph. Price moved largely as expected, falling to 0.9100 level, but failed move any more yesterday. With my objective of 0.9080-0.9100, I got out at 0.9108 for 101 pips gain, good score for this cross in one day. Since I closed it, it wouldn’t be prudent of me to use 4H chart for next trade. At this point risks would be much bigger than possible returns, given proximity of major support at 0.8990 or so.
And the next move is...

(Add Comment) |

0 Kudos

Monday, October 26, 2009

China again.
Category: Jobs, Work, Careers

Once again rumors fly regarding Chinese foreign reserve. I already received an email from one of the panic mongers screaming that “China is dumping USD” if favor of other currencies. This new “revelation” is supposedly based on a statement by one of the Chinese central bank’s officials. However, according to more reputable sources, no official statement have been issued regarding this matter. Mr. Yi Gang, a central bank vice governor, told reporters that diversification of foreign reserves is a long term policy, without getting into any details. Absolutely nothing new or even remotely interesting. This process has been going on for a long time now. It must be that putting “China” and “foreign reserves” together makes for good headline, one more scare for the Dollar.

Speak of the devil. Even my local paper got in on the act last week, publishing an alarmist story about USD. Subject was the 1.5000 level of EUR-USD. Now, currency is not a subject of daily or even regular coverage in local press, it starts to surface when it becomes a “hot” topic. This goes for all other financial markets outside of stocks, such as commodities, normally after a prolonged move. When people who clearly have no business talking about something, all of a sudden become “experts”- watch out. This could mean that market of interest could be very late in its move. Our paper has fantastic record of developing interest in “hot” markets at precisely the wrong time. It happened to Canadian Dollar two years ago, grains, oil at the top last year and bottom this year and many others. Perhaps it is time to start looking at weekly charts of Dollar crosses, using Seattle Times story as a contrarian indicator?
New China scare.

(Add Comment) |

0 Kudos

Sunday, October 25, 2009

SNB and interventions.
Category: Jobs, Work, Careers

For better part of this year I have been writing, among other things, about Swiss National Bank intervening in the currency markets. Among the many central banks that talked and threatened with intervention, SNB was the only one that actually delivered. They wanted Swiss Franc to depreciate, in order to stimulate domestic economy. And they did it repeatedly. All market participants had to learn to with this version of “sword of Damocles” hanging above them. Couple of times I happened to be in trades with CHF during these events. They are fast, furious and can be very painful. Or rewarding if you are on the right side of the market at the correct time. That was my experience and I managed to make few pips, courtesy of SNB.

Recently voices have been raised about possibility that era of intervention might be over. Central banks do not publicly disclose details about these kind of actions, trying to keep speculators off balance, so no official statement has been issued by SNB. However, there are signs that Swiss authorities are at least slowing down selling of Franc. Document published on their official website, www.snb.chf shows a breakdown of foreign exchange reserves, by currency. Tables enclosed there shown large increase in reserves occurring during second quarter of 2009, at the height of intervention period. Data shows USD holding jumping from 13 billions to 19 billions and EUR from 20 billion to almost 32 billion. Huge differences, consistent with selling CHF and accumulating other currencies. The third quarter, however, shows much smaller increases, suggesting that SNB is at the very least slowing this activity, maybe even bringing it to a halt.
Is SNB done with interventions?

(Add Comment) |

0 Kudos

Friday, October 23, 2009

British Pound.
Category: Jobs, Work, Careers

What a difference one day makes. Yesterday British Pound was a high flying currency, gaining against all others. Today it is once again taking a beating, falling hard. Office for National Statistics released economic data showing the British economy shrank 0.4 percent in the third quarter. This came as a surprise, most observers expected the number to at 0% or maybe even showing very modest gain. By this measure, UK remains officially in recession, even as some other countries, like Germany and France, are classified as having ended it as long as 6 month ago. On a personal note, I don’t really understand how anybody can be “surprised” with anything any more. Entire year we had nothing but surprises. Numbers and opinions from one day are invalidated the next and so it goes.

Figures from today are not etched in stone, either. They were compiled using only 40% of required data, and could change over next 2 months, as more information is available. It happened before. Just last quarter official estimate was revised and the same can easily take place now. Question is, why do they even publish something that is incomplete and subject to change? Whatever happens, GBP fell dramatically on fears that Bank of England will have to expand its quantitative easing campaign, farther diluting the Pound. This is only speculation, BoE has not commented on it yet.
Reversal for Pound.

(Add Comment) |

0 Kudos

Thursday, October 22, 2009

Improvement or not?
Category: Jobs, Work, Careers

For weeks, and even months now, we have been led to believe that serious economic recovery was under way. Stock markets around the world have been enjoying strong rallies, commodities are working hard to create new bubbles and governments have been issuing ever more optimistic projections. China, the “new engine” of the globe has been growing at dizzying pace. Things look good, right? Even the bailouts and market stimulus packages were said to be doing their jobs. We were told that taxpayer were very likely to recover money injected into individual companies and maybe even make some profit.

While some of it seems true, there are some conflicting signs. Banks have been posting good earnings, but they didn’t come from their core business, lending. Financial institutions have been making money trading, fueling the fore mentioned rallies in markets, partly with cheap money made available to them governments. Meanwhile, what should be cornerstone of their activities, commercial and personal lending, has been suffering. Foreclosures reached nightmarish levels, and, by some accounts, are bound to get worse. Commercial real estate is just starting to do the same. Bank for International Settlements released report which shows that international bank lending dropped by over $300 billion or 1.1 percent in the second quarter as the financial crisis continued to restrain credit. This statistic - the only one of this kind- shows, how banks have been cutting off funds to companies and to each other despite efforts by governments and central banks to unlock jammed credit markets.
Conflicting signs.

(Add Comment) |

0 Kudos

Wednesday, October 21, 2009

The "minutes".
Category: Jobs, Work, Careers

Bank of England released minutes from its last policy setting meeting. What are the “minutes”? It is a transcript of what happened during the meeting, going well beyond any official statement released afterwards. Market observers look into details of these meetings, trying to see if any policy changing vote was unanimous, or not, who said what things, was there any discord, etc. Some people are looking for “hints” of any future changes, weighing in forcefulness of what members said. Search for hidden meanings is on. This is being used to “predict” outcome of next meeting. Entire enterprise reminds me of efforts to crack the “Da Vinci code” or decoding a fake lost Spanish treasure map. As far as I’m concerned it is more of a wishful thinking and dart throwing than bona fide analysis.

British Pound registered strong gains, supposedly in response to the minutes. Policy makers voted unanimously to leave their quantitative easing policy in place. This means no extension or increase in purchasing assets like bonds and other debt instruments, one of the tools used by central bank to pump money into economy. Another one being interest rates cuts, but these are largely pushed to limits. At any rate, all this means that Bank of England will not “print” additional untold billions, farther diluting value of existing Pounds. For now, at least. Markets appreciated it and GBP had a good day.

Reasoning behind the move aside, I liked it. My GBP-JPY trade, last mentioned in the Getting serious with China post made another solid move. Stop loss can be moved to above entry price, thus making sure this trade will be profitable.
Cebtral Bank's minutes.

(Add Comment) |

0 Kudos

Older Posts