January has a very interesting Calendar, the Polish central bank is looking to hold interest rates. After 6 months of no posts due to lots of trading and no time for typing, I am excited about this one. The Polish economy showed a lot of promise in December with its first positive inflation figure in over a year with markets forecasting 1% in January, whether the Polish central bank takes the bait is yet to be seen. Let’s brush all that aside, it is all about rates at 1.5%, good inflation I am expecting a hold at 1.5. This should be a good sign for the Zloty, with an incredible break last week continuation could be the name of the game.
Well the damage is done. Brexit has finally happened. Doesn’t matter what I think we are firmly in uncharted waters, our navigation skills should get us through… As long as we don’t run into any Icelandic folk. Brexit is likely to dominate the agenda for months to come.
It was no surprise that trading this was a one shot affair, the market crashed several points before rallying. It is not far fetched to rule out a final major drop through the 1.3000 barrier but bare in mind, this is a final decline if at all. I have no trades I want to do. On the 5th of July I should cash my premium on Dollar Yen Option trade, with Dollar Yen now at 102 levels, I can be hopeful of a nice finish.
The Japanese Yen continues to offer relative safety to investors in the face of Brexit uncertainty. Abe and Kuroda seem not to concerned about current Yen strength and with no sign of further easing and an uncertain equity market. The Japanese Yen is not a bad play relative to the Dollar.
I am thinking short Calls (sell call) and let the optimistic Dollar buyers, get what they are asking for. In my opinion the Yen is becoming a real darling of the market. It may be an easy premium to collect. So let’s see how we do in 2 weeks time.
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No surprises today from the Bank Of England, there was no reason for a change in direction ahead of Brexit, in fact if we exit the EU, there might be more of a need for stimulus. 9-0 was the vote to keep policy unchanged. So what’s the future?
Poor inflationary prospects, falling wages for low skilled workers, the UK economy is far from perfect. Oil prices are probably bracing for another dip. I am suspecting back to $40 a barrel. We are definitely Long Yen and the Dollar, so it is total risk off for now. I would say keep writing those calls and stay short all things Europe. The Bank Of England is unlikely to pull the trigger on higher interest rates.
There is a lot of expectation from the BOE this week, Carney may just have something to say around Brexit (I doubt it), none the less, the market will expect answers on low inflation, flat GDP and wage drops among unskilled workers, this is probably the aspect fueling Brexit.
How do we trade this week? Well, I am thinking of something more guaranteed. I am bullish on the Euro against Sterling especially when Cable is in free fall. So I am playing Buy a Call and Put at the money and selling a Call as a hedge with a higher strike. So in effect Out of the money.
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Super June is truly under-way with the Royal Bank Of New Zealand holding their key rate at 225 basis points.
Inflation would have a lot to do with this decision. At 0.4% the inflation rate isn’t good but steady, with exports improving, the New Zealanders are expecting growth, weakening the currency further is not a necessary play. The market reaction to the decision was clear strengthening the Kiwi significantly. I however believe that the events in Europe around Brexit is causing markets to price in a possible exit vote this could see the Dollar rally significantly, so a combination of covering and risk pricing could be the reason for a stronger Kiwi more so than the rate hold.
While everyone is focused on the Pound, the Euro seems to be bullet proof to all head winds. In the face of Brexit it is indeed very confident. It could be that Mario Draghi and the ECB are keen to make the Euro look good ahead of the crucial vote. Perhaps David Cameron have found some common ground, let’s pray that England does not meet Germany in the Euro championships.
Well, whatever we think about the Brexit, it seems like the Euro is showing real value for traders. My play this week is a little unorthodox seeing the Euro has been a real dog over the past months. I am long OTM calls looking for a bullish close by Friday, it is my only play for the week but with solid range extension into value, it feels worth it.
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Well, if you are like me, you were probably wondering what the hell happened with Cable?
See the spike in H period roughly 5am? We cleared the last months high. My guess is some Rookie market maker at one of those big banks dropped a pen and loaded up. Well, a true leap of faith if you sold the up move. I was in a 4 day Call Option looking for 1.4600 to exercise and strike at 1.4480, well I missed all the action and had to get out as soon as possible with measly $10 gain, had I opened my bloody eyes at 4am (not unless I was in Oz), I would have maybe tripled my premium. Anyway, a profit is better than a loss. The market makers have drawn a line in the sand at 1.4500, till they figure this out. Looks like Cable’s new name is the Flash.
I thought it will be an idea to shed light on some of the agricultural commodities that offer great trading opportunities. Coffee has been on my radar since last year. It has been tipped for a shortage so prices are expected to rise significantly. Already $127/lb things are heating up. All this is due to poor harvest and a Beetle that is waging war against the plant.
If you think global temperature changing is a myth… Think again. The change in temperature in the pacific has caused temperatures to rise and cause this new enemy of Coffee plants to over breed. So my expectation is higher coffee prices for 2016. There are a few currencies that will no doubt come in demand as a result. The Brazilian Real maybe…
Well, one of the many things that greet Option traders. I was exercise this Option on writing this post. In my gut I knew there was a chance of Cable going long I had a 2 Day Option on this. As of today we were at 1.4400, How many of you traders would have been stopped out? Well for me adversity turned to opportunity 40 mins from expiry I have more than doubled my premium value… That’s the beauty of Options. It was a whisker away from disaster but the massive increase in volatility added to Vega and hence I gained more intrinsic value That’s why brokers trade Options. Imaging how short all those retail traders would have been as the brokers were all long in the Options market. A lesson or two to be learned.
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