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Currency Speculations

This report has been deactivated

September 15, 2008

Mon, Sep 15 2008, 14:16 GMT
by Mihai Nichisoiu

Early Friday I dumped a massive long US dollar exposure built against the Swiss franc and the Canadian dollar, for a marginal profit. The positions happened to be of the 'make or break' type, and as the European transacting time began on Friday I sensed the 'make' part might have already been compromised.

I also liquidated today about 70% of a heavy long EUR/GBP exposure (its breakeven point is at 0.8050), this time for a severe drawdown across my accounts.

Published on Mon, Sep 15 2008, 14:16 GMT

September 11, 2008

Thu, Sep 11 2008, 09:18 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Since September 2 I've been building a massive long US dollar exposure against the Swiss franc and the Canadian dollar. I added the most recent positions late yesterday and in the early European transacting time today - as I believe there is further room for the US currency to even accelerate its appreciation across the board.

Published on Thu, Sep 11 2008, 09:18 GMT

September 8, 2008

Mon, Sep 8 2008, 14:59 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I'm keeping my heavy short sterling exposure via the EUR/GBP.

Published on Mon, Sep 8 2008, 14:59 GMT

September 2, 2008

Tue, Sep 2 2008, 11:46 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Early yesterday I added to my already heavy short sterling positions taken via the EUR/GBP on August 25 and August 28 - and therefore, my exposure in this market is right now at a significant level.

Published on Tue, Sep 2 2008, 11:46 GMT

August 28, 2008

Thu, Aug 28 2008, 21:39 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In line with what I reiterated on August 19, on Monday I finally felt compelled to short sterling via the EUR/GBP - doing so actually for the 4th time since November 12 last year.

I increased exposure early this morning - and my position may turn even heavier once the market starts telling me I'm right.

Published on Thu, Aug 28 2008, 21:39 GMT

August 19, 2008

Tue, Aug 19 2008, 14:15 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Early last month I assumed the Euro was at the time in a good position to resume its impulsive appreciation against the British pound. That judgment may have been a bit premature - but I still think big-picture fundamentals continue to support the scenario of sterling further losing ground versus the Euro (as well as the US dollar).

Under certain circumstances I will have no hesitation to place heavy bets against the pound via the EUR/GBP - doing so actually for the 4th time since November 12 last year.

Published on Tue, Aug 19 2008, 14:15 GMT

August 14, 2008

Thu, Aug 14 2008, 13:53 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In yesterday's European transacting time I dumped some relatively small long Dow Jones EURO STOXX 50 and FTSE 100 positions (opened July 21) for a marginal profit. In the absence of an impulsive recovery of the US and European stock markets, I decided I should make all funds available to finance the newly placed US dollar bullish bet.

Published on Thu, Aug 14 2008, 13:53 GMT

August 8, 2008

Fri, Aug 8 2008, 14:06 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I felt compelled Tuesday and Wednesday to take heavy long USD/CAD positions at market, whereas yesterday I mentioned that the next currency I'd most likely decide to short versus the US dollar might be the British pound.

The question now isn't when and where I want to close the positions - it's when and where I'm going to triple them.

Published on Fri, Aug 8 2008, 14:06 GMT

August 7, 2008

Thu, Aug 7 2008, 14:20 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

After having built massive long USD/CAD positions over the last 48 hours, the next currency I'd most likely decide to short versus the US dollar may be the British pound.

Published on Thu, Aug 7 2008, 14:20 GMT

August 5, 2008

Tue, Aug 5 2008, 13:54 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Today I feel compelled to once again start testing the scenario of an accelerating appreciation of the US dollar against the Canadian currency being underway. I may be facing one of the most important market bets of the year.

Published on Tue, Aug 5 2008, 13:54 GMT

August 4, 2008

Mon, Aug 4 2008, 14:13 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

My most recent attempt to take benefit of a depreciating yen failed again, as a long AUD/JPY position opened July 21 at 104.40 was stopped out last week at about 101.50. I also dumped a long AUD/NZD bet (opened July 21) near breakeven.

On the other hand I'm keeping a long European stocks exposure, although the positions involved are rather small.

Published on Mon, Aug 4 2008, 14:13 GMT

July 30, 2008

Wed, Jul 30 2008, 19:27 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I'm still holding the positions highlighted last Friday - even though their consolidated result may have relatively little impact to my trading accounts.

Published on Wed, Jul 30 2008, 19:27 GMT

July 25, 2008

Fri, Jul 25 2008, 18:22 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I will be holding (over the weekend, at the very least) long AUD/NZD, long AUD/JPY and long Dow Jones EURO STOXX 50 bets placed early Monday.

Published on Fri, Jul 25 2008, 18:22 GMT

July 20, 2008

Sun, Jul 20 2008, 22:23 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I'm once again contemplating the possibility of the Japanese yen being on the verge of further losing ground versus the other major currencies. I'm also of the opinion that the main US and European stock markets may have already found an interim bottom.

On the other hand, I'll be watching out for the Australian dollar breaking out even higher against the New Zealand counterpart - an event which, I think, may take place over the following hours.

Published on Sun, Jul 20 2008, 22:23 GMT

July 15, 2008

Tue, Jul 15 2008, 21:58 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I hesitated to go short the US dollar last night, and I hesitated to place a bullish bet on the main US stock indexes a couple of hours ago right at day's close.
But then again, I can still allow myself the great luxury of waiting.

Published on Tue, Jul 15 2008, 21:58 GMT

July 11, 2008

Fri, Jul 11 2008, 10:59 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I think the Euro is now in a good position to resume its impulsive appreciation against the British pound.
I'm almost prepared to bet against sterling via the EUR/GBP for the 4th time since November 12 last year.

Published on Fri, Jul 11 2008, 10:59 GMT

July 8, 2008

Tue, Jul 8 2008, 21:11 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I remain aside for the time being, but have my eyes zooming in a wide series of a global markets - out of which the Canadian dollar continues to stand upfront.

Published on Tue, Jul 8 2008, 21:11 GMT

July 3, 2008

Thu, Jul 3 2008, 10:26 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

It's intriguing how well supported some yen crosses have stayed recently, despite the US and particularly the Japanese stock market's losses.
After dumping a heavy short yen exposure earlier this week - as short-term adverse fluctuations could have brought me severe equity drawdowns - I may pop back in favoring long CHF/JPY and EUR/JPY positions.

I'm also considering going long the Euro against the British pound - it'd be for the 4th time since last November.

Published on Thu, Jul 3 2008, 10:26 GMT

July 1, 2008

Tue, Jul 1 2008, 07:32 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

There've been some very tough 36 hours.
First off, I hesitated to dump the entire short yen exposure as soon as Sunday evening, and that cost me dearly. Eventually I liquidated about one third of that exposure yesterday, and the rest of it I did a few minutes ago at far more advantageous levels.

I also left behind the sizable long USD/CAD position taken on June 10, half of it yesterday and half of it this morning. The entry timing happened to be unfortunate, minutes before Canada's central bank would leave interest rates unchanged June 10, stating that: 'However, the balance of risks to the Bank's April projection for inflation in Canada has shifted slightly to the upside'.

I still have a bullish view of the US currency against the Canadian dollar in the longer run, though I'm sure I'll be able to put the money where my mouth under better circumstances than the current ones.
Actually in both market cases I think I was in the right place, yet with the wrong kind of leverage. Even though my big picture views may still prove correct, the exposure I held was so huge that any short-term fluctuations could have brought severe equity drawdowns.
Wiping the slate clean gives me now time to reconsider and rebuild confidence.

Published on Tue, Jul 1 2008, 07:32 GMT

June 29, 2008

Sun, Jun 29 2008, 21:31 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I keep the developments in the US and Japanese stock markets under very close scrutiny, as I continue to hold on to a heavy short yen exposure which I started to build late last month. The very next hours, I believe, will be key toward deciding whether to hold further or rather start liquidating.

Published on Sun, Jun 29 2008, 21:31 GMT

June 24, 2008

Tue, Jun 24 2008, 22:51 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I'm leaving tomorrow for a short, 5-day vacation on the beautiful Prahova Valley, some 100 miles from Bucharest. I'll have the proper logistics at hand, however, so that I can keep in touch with the markets full time.

First off, I guess I'll be running a heavy short yen exposure into the FOMC rates decision, but I'm watching all positions involved with great care.
Even though the US stock market has been sliding recently, that hardly looked like a genuinely impulsive event and the Japanese yen has no longer reacted positively. The media seems full of pessimism with regard to stocks - but pessimism of the already known kind, I reckon. That adds to my confidence of being bearish on the yen since in the short run I think the main US stock indices will not sink decisively under their January lows.

In the big picture - unless a remarkably negative surprise hits on short notice or some terrible disruption occurs on a global level - I see the main US stock indices further moving sideways. And so, if my perception is correct, soon the path of least resistance in the US stock market is going to once again favor the buyers - with all the more negative consequences for the Japanese currency.

Another position I hold, taken on June 10, bets on the already foreseen appreciation of the US dollar against the Canadian counterpart (I'll write about this in a few days).

Published on Tue, Jun 24 2008, 22:51 GMT

June 22, 2008

Sun, Jun 22 2008, 22:37 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I think I'll be holding on to the short yen exposure I started to build late last month.

Published on Sun, Jun 22 2008, 22:37 GMT

June 17, 2008

Tue, Jun 17 2008, 12:15 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I disclosed late yesterday the numbers and premises of a heavy short yen exposure which I quite confidently started to build on May 30. But the way the sterling markets have just reacted to Mervyn King's open letter to Alistair Darling forced me into reconsidering the GBP/JPY part of that exposure.

Late yesterday, size of the GBP/JPY bets was accounting for about 80% of my overall yen exposure. However, a few moments ago I decided to liquidate in the profit zone the first two out of the total three GBP/JPY positions (taken at around 209.20 and 210.50 on May 30 and June 11 respectively). Only the third, most recently opened GBP/JPY position (also the heavier one, taken at around 211.90 on June 16) has survived today's portfolio adjustment.

At the same time I opened two brand new short yen positions, via going long the EUR/JPY and the CHF/JPY at around 167.60 and 103.70 respectively. So that right now the GBP/JPY accounts for only about 40% of my consolidated yen exposure.

What I've just done actively responds only to the perspective that sterling may further underperform the Swiss franc and particularly the Euro. It does not alleviate the risks of a still massive yen exposure affecting my trading accounts one way or the other, though.

Published on Tue, Jun 17 2008, 12:15 GMT

June 16, 2008

Mon, Jun 16 2008, 22:20 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I noted here Tuesday May 27: 'The way buyers seem to be slowly taking over in the Japanese yen crosses is also catching my attention. Except for having already taken a long position in the AUD/JPY a couple of hours ago, however, I am not yet ready to commit further funds in order to finance a longer-term position'.
That confidence thing changed only 72 hours later, though. On Friday May 30, minutes before the weekend, I shorted the Japanese yen via some of its most popular crosses - buying the EUR/JPY at around 164.20, the GBP/JPY at around 209.20, and the NZD/JPY at around 82.70.

Last Wednesday (June 11) I felt compelled to double my short yen exposure - and did it solely via the GBP/JPY, buying the cross at around 210.50. Finally, I redoubled the entire exposure today in the early European time - and did it again solely by going long the British pound against the Japanese yen, at around 211.90.

Holding these positions so far turned out to be quite a bumpy road, but I'm not yet looking for the exit door.

Published on Mon, Jun 16 2008, 22:20 GMT

June 11, 2008

Wed, Jun 11 2008, 13:02 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I wrote Wednesday May 28 that I'd just concentrated some of my funds in a brand new long AUD/JPY position. That was taken at slightly above the 100 level, and on the following day minutes before the Q1 US GDP announcement I added to the initial position at around 101 (yet the size of the new bet was far less than what I put on the day before).
The AUD/JPY, however, would begin to fall abruptly right after the US release - and I had to dump everything at about 100.50 for a modest profit. The pair rebounded in the afterwards, and stabilized under the 101 level into the weekend - but no clear directional path has since surfaced.

The day before yesterday I engaged in buying the Australian dollar against the US currency, did it at about Monday's high. As the day moved forward, however, I became concerned about the possibility that I might have acted on thin premises - and thus I dumped the position yesterday with little hesitation.

All my latest currency bets as well as recently acting as a buyer in the oil market - these were all short-term interests on my agenda. Although some profits did emerge, the period wasn't something I could feel overenthusiastic about.
Just as I rarely feel enthusiastic about dealing in tight timeframes unless I have a very clear view of the risks involved - an observation which is becoming all the more critical now as I need my funds leverage trades about far bigger market pictures.

Published on Wed, Jun 11 2008, 13:02 GMT

June 7, 2008

Sat, Jun 7 2008, 21:22 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Yesterday at New York Mercantile Exchange, the oil price had its biggest rally in history. Yet, the Canadian dollar barely budged versus the US currency.

That presented me with a timely opportunity to revisit the premises I noted here on May 5th and June 2nd.

Published on Sat, Jun 7 2008, 21:22 GMT

June 2, 2008

Mon, Jun 2 2008, 21:39 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I wrote here on May 5th a few ideas about what I at that moment perceived to soon be the path of least resistance in the USD/CAD market.

With the data now at hand, I do stick to those ideas and keep this market under close scrutiny. While I cannot point out a specific configuration of fundamental as well as technical premises which could make me be a buyer of the US dollar against the Canadian currency, however I just know I haven't yet reached the point of confidently putting the money where my mouth is.

Published on Mon, Jun 2 2008, 21:39 GMT

May 28, 2008

Wed, May 28 2008, 07:40 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

After the bears gained control of the oil and gold markets yesterday, and the US dollar began to appreciate across the board - I had to decide whether to stay long AUD/USD, NZD/USD and AUD/JPY. Since at least one of the positions involved happened to be leveraged to the hilt, I chose the 'no way' option and dumped everything for a marginal profit. I certainly didn't like the air anymore, and wanted to reconsider the charts and premises with a much clearer mind.

It is now in Europe the debut of a new day, and I've just concentrated part of the available funds - not a small part, actually - in a brand new long AUD/JPY position.
I wrote yesterday that I'm not yet ready to commit large funds in order to finance a longer-term bet in any one Japanese yen cross pair. However, I sense buyers are gradually taking over, and I do keep this 'sector' under close scrutiny.

Published on Wed, May 28 2008, 07:40 GMT

May 27, 2008

Tue, May 27 2008, 11:51 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I still feel well about being long the Australian and the New Zealand dollar against the US currency, as a matter of fact I have just doubled my AUD/USD bet across my trading accounts.

The way buyers seem to be slowly taking over in the Japanese yen crosses is also catching my attention.
Except for having already taken a long position in the AUD/JPY a couple of hours ago, however, I am not yet ready to commit further funds in order to finance a longer-term position.

Published on Tue, May 27 2008, 11:51 GMT

May 22, 2008

Thu, May 22 2008, 07:53 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Tuesday in the European morning I proved hesitant in my attempt to open a long position in the oil market based on daily chart observations, although I had a very strong conviction price would eventually break out of the recent congestion.
It goes without saying, that did cost me a wasting opportunity. I was an intraday buyer yesterday in the European time, and profited from a $1 underlying appreciation. Acting in a very tight timeframe, though, I felt like my hands were tied and the position happened to be relatively small. The oil price would advance another $5 in the afterwards.

On the other hand, I feel reasonably well about the long AUD/USD and NZD/USD positions opened and disclosed yesterday. As a matter of fact, I've increased the AUD/USD position just a few moments ago.

Published on Thu, May 22 2008, 07:53 GMT

May 21, 2008

Wed, May 21 2008, 07:54 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I see strength boiling in the commodity currencies, particularly in the Australian dollar against the US counterpart. I have just placed a bet that would profit from the Australian and the New Zealand dollar going higher against the US dollar.

Published on Wed, May 21 2008, 07:54 GMT

Great deal of interest

Thu, May 15 2008, 22:11 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

With all the hype surrounding it, I start building up a great deal of interest in the oil market.
It's only a contemplative interest for the time being - that, however, can always change very rapidly.

Published on Thu, May 15 2008, 22:11 GMT

An anomaly called the Canadian dollar (republished)

Sat, May 10 2008, 21:34 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In a special research note forwarded to the brokerage house I work for, titled 'An anomaly called the British pound' and dated September 13th last year, I was anticipating a significant depreciation underway of the sterling versus the Danish krone and the Euro (a revisitation of those ideas was published here on September 19th). Just one day later, on September 14th, the British lender Northern Rock Plc publicly requested emergency funding from the Bank of England.
Since those days, the British pound had come down about 20% versus the Euro - a remarkable market move from which I happened to profit handsomely.

One brand new anomaly I perceive is now unfolding in the foreign exchange comes down to the recent dynamics of the Canadian dollar, particularly versus the US dollar.

Last Wednesday I noticed here: 'With the data now at hand, I perceive that the Canadian dollar has a very good chance to turn significantly weaker versus the US dollar. I see that process starting soon, and then unfolding impulsively over several months'.
I continue to hold the perception, based on several premises, that the Canadian dollar remains in a significantly vulnerable position versus the US currency.

First of those premises refers to the monetary policy. Over the latest months, Canada has clearly been lagging the US in that regard - and I just don't see that fact changing anytime soon. If it were for both corresponding central banks to radically go for the opposite of their recent monetary policy approach, I still expect Canada to remain a laggard by far.

Secondly, just like the British currency, the Canadian dollar failed to benefit in any particular fashion from the massive depreciation suffered lately by the US dollar in most of its major markets. It failed to benefit from the fresh record highs which have been seen along a wide spectrum of commodity markets. Most of all, it failed to benefit from fresh all-time highs that have been attained recently almost on a daily basis in the oil market; although historically there has been a strong, direct correlation between the oil price and the Canadian dollar, lately that correlation has no longer been working. The oil market still displays one of the last major bubbles that hasn't yet come to at least a temporary bust; when such an event finally materializes I think the path of least resistance in the USD/CAD proxy is going to be upward.

And then, there are the charts - which, beyond tight timeframes, I believe still appear to be constructive for those buying the US currency against the Canadian counterpart.

Published on Sat, May 10 2008, 21:34 GMT

An anomaly called the Canadian dollar

Mon, May 5 2008, 21:35 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Published on Mon, May 5 2008, 21:35 GMT

About the Canadian dollar

Wed, Apr 30 2008, 23:14 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

With the data now at hand, I perceive that the Canadian dollar has a very good chance to turn significantly weaker versus the US dollar. I see that process starting soon, and then unfolding impulsively over several months.

Early next week I'll briefly document the premises of such a perception.

Published on Wed, Apr 30 2008, 23:14 GMT

Rational Exuberance (reloaded)

Sat, Apr 26 2008, 23:59 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

After having watched the financial markets from around the world over the last several months, I remember a few lines I wrote in late May last year.

Published on Sat, Apr 26 2008, 23:59 GMT

Currency bets rebuilt (liquidated)

Mon, Apr 21 2008, 21:56 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Last Friday I was forced to abruptly liquidate my entire exposure consisting of sizable long EUR/USD, short USD/SGD and long EUR/GBP positions.
Although the market moves against me that day were not quite huge, percentage wise, the massive exposure I had been holding could have put me in a dangerous position had I not decided to dump everything at once. The consolidated loss taken on Friday practically shattered the remarkable profits resulted from a similar sequence of market bets closed out last month.

Within days I'll put in writing a few details about the latest rounds of currency speculations. With the data now at hand, however, it appears stepping back in, even in some of the markets that left me behind last Friday, becomes a matter of time rather than one of possibility.

Published on Mon, Apr 21 2008, 21:56 GMT

Currency bets rebuilt (revisited)

Wed, Apr 16 2008, 13:13 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In the early debut of the European transacting time yesterday, I increased my already fairly large market exposure betting the Euro would continue to appreciate against the British pound, and that the US Dollar would resume its depreciation versus both the Euro and the Singapore dollar.

Published on Wed, Apr 16 2008, 13:13 GMT

Currency bets rebuilt

Mon, Apr 14 2008, 21:55 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Over mid last week I rebuilt a sizable market exposure betting the Euro would resume its appreciation against both the US dollar and the British pound.

Published on Mon, Apr 14 2008, 21:55 GMT

Remaining aside (reloaded)

Sat, Apr 5 2008, 21:17 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I have remained aside in the wake of a fresh round of currency and other global speculations.
It goes without saying that I'm not going to build a presence in the markets again unless I get a far better grasp of things.

Published on Sat, Apr 5 2008, 21:17 GMT

Remaining aside (reloaded)

Mon, Mar 31 2008, 14:19 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Published on Mon, Mar 31 2008, 14:19 GMT

Remaining aside

Sun, Mar 23 2008, 22:37 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Published on Sun, Mar 23 2008, 22:37 GMT

Massive bets, closed out

Tue, Mar 18 2008, 20:52 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Just minutes after the FOMC announcement today I liquidated at market my entire heavy exposure consisting of long silver and gold, long Euro against the US dollar, and long Euro against the British pound positions opened several weeks ago. In a few days I will be documenting the levels, dates and rationales.

While the bets involved have been some of the most remarkable in my trading history to date, I will have no hesitation to put the same ideas to the market test again - if certain circumstances do apply.

Published on Tue, Mar 18 2008, 20:52 GMT

Massive bets ongoing (revisited)

Mon, Mar 17 2008, 22:44 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

For the time being, I continue to hold a fairly large exposure consisting of long silver and gold, long Euro against the US dollar, and long Euro against the British pound positions opened several weeks ago.

Nonetheless, I am closely watching all the markets involved in a rapid search for better clues.

Published on Mon, Mar 17 2008, 22:44 GMT

Massive bets ongoing

Wed, Mar 12 2008, 23:06 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Even in spite of some of the markets involved having exhibited increasing volatility lately (not meaning, however, that I have disrespected the risks) - I continue to have a fairly large exposure long silver and gold, long Euro against the US dollar, and long Euro against the British pound.

Published on Wed, Mar 12 2008, 23:06 GMT

Fresh Round of Currency Speculations (reloaded, again)

Fri, Mar 7 2008, 22:36 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

All bets - introduced by my latest FXstreet.com notes - are still on.

However, I'm watching the markets involved even more closely - the precious metals markets, in particular - in the wake of terrific volatility seen this week.

Published on Fri, Mar 7 2008, 22:36 GMT

Fresh Round of Global Speculations (reloaded)

Sun, Mar 2 2008, 22:20 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

With the single, although notable, exception of my short US 10-year T-Notes position, all the other global bets introduced by my latest FXstreet.com notes have presented me with not half bad, and in some cases remarkable, interim results. My bullish bet on spot silver, for instance, has so far seized an underlying market move of about 11% (unleveraged).

All bets are still on. With, again, the exception of my bearish US Treasuries bet, the size of my positions has been increased to a sizable extent over the latest days.

Published on Sun, Mar 2 2008, 22:20 GMT

Fresh Round of Global Speculations (revisited)

Tue, Feb 26 2008, 10:37 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In addition to my FXstreet.com notes of last Sunday, I'm also of the opinion that chances for the US dollar to suffer a sizable, accelerating depreciation - particularly via the EUR/USD and the US Dollar Index - are growing exponentially.
I have already placed a bet accordingly, planning to increase size of the position under specific circumstances.

As well, I keep intact my exposure in the precious metals markets (spot silver, in particular), the US Treasuries and the EUR/GBP - as disclosed in my latest FXstreet.com notes.

Published on Tue, Feb 26 2008, 10:37 GMT

Fresh Round of Global Speculations

Sun, Feb 24 2008, 23:06 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

My FXstreet.com notes of February 15th and February 19th provided the background on which I'd engaged into a fresh round of global speculations.

More precisely, I already assumed brand new, long positions in the spot gold, spot silver and the EUR/GBP markets. As well, I set up a separate trading sub-account with a futures broker several days ago and took a large short position in the US 10-year T-Notes.

Published on Sun, Feb 24 2008, 23:06 GMT

Long−term US yields set to move upward (revisited)

Tue, Feb 19 2008, 14:47 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I had made a reasonable amount of money over the latest months mainly from betting on three global, major scenarios: the US dollar to sell-off enroute to new all-time lows versus the Canadian dollar, the gold market to surge to record highs, and the British pound to breakdown massively versus the Euro.
With the data now at hand, I think at least two out of those three scenarios may not be history yet (I refer specifically to the EUR/GBP and the gold markets, which - in my opinion - may soon chart new all-time highs).

However, I recently embarked myself on a search for a new global theme from which I could yet again profit handsomely.
I started the search while acknowledging two bets made by legendary financial speculators: a market bet placed late last year by Julian Robertson, and an intellectual bet put in print in the Financial Times on January 22nd by George Soros.

I wrote here last Friday:

'I've recently started to contemplate the opportunity for a new global bet - one that would benefit handsomely from a surprising rise in the long-term US yields (i.e. a fall in the price of 30-year and 10-year Treasuries).

I believe the long-term US yields are already being set for moving upward. As shorter-term US yields like the 2-year continue to be moving lower, this evolution itself - in my opinion - becomes vulnerable to somewhat of a positive reversal. And even if such positive turn doesn't take place or does materialize yet in a shy manner, the spread between the long-term and the short-term US yields may further keep widening.

I could well document the directional guess plotted above mainly from a technical perspective, and implying a rather tight time horizon. I can hardly say I have a remarkably clear view of the bigger picture yet, though.'

For the time being I keep those opinions intact - including that even the multi-month price advance experienced by shorter-term US Treasuries (the 2-year T-Note, for example) becomes vulnerable to a negative correction.

Published on Tue, Feb 19 2008, 14:47 GMT

Long−term US yields set to move upward

Fri, Feb 15 2008, 11:26 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I've recently started to contemplate the opportunity for a new global bet - one that would benefit handsomely from a surprising rise in the long-term US yields (i.e. a fall in the price of 30-year and 10-year Treasuries).

Published on Fri, Feb 15 2008, 11:26 GMT

New Round of Currency Speculations (revisited)

Sat, Feb 9 2008, 00:39 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I got involved recently in a new round of currency speculations, as proxies for what I'd perceived to come in form of a recovery of the global stock markets, as well as a depreciation of the US dollar.

After the brutal sell-off I saw hitting the international stock markets on Monday, January 21st, it took me little time to realize the Federal Reserve would most likely cut the interest rates substantially as soon as the next day, and ahead of that week's first trading minute on Wall Street. That, in fact, was not a fancy prediction to spell out in the office, as the context of that Monday pretty much resembled what I saw last year on August 16th, before the US 'discount' rate was lowered just one day later in the wake of an emergency Federal Reserve meeting.

So to me it came as no surprise that on Tuesday, January 22nd, the US central bank did just what I thought - cutting the interest rates by 75 bps, an hour or so before the start of the regular Wall Street transacting time, in the most Pavlovian reaction possible to what at that moment was happening in the international stock markets. However, Wall Street's positive response was not immediate. I remember watching the computer screens and uttering, unless something or somebody pushes the US stocks upward, we may well see a revisitation of October 19th, 1987.

Something or somebody did push the Wall Street upward that Tuesday, though. But it wasn't earlier than Thursday, January 24th, that I'd put various things together, figuring out somewhat of a recovery would be embraced worldwide in the stock markets. Then, I thought, the Japanese yen an the Swiss franc would go down.
As I'd write in a research note forwarded to the brokerage house I work for, dated Thursday, January 24th, I found intriguing that the financial sector - precisely the one which pushed the US stock market on the verge of a collapse both last summer and last month - enjoyed a remarkably good day on Wednesday, January 23rd. For only the most relevant example, after heavily dropping on the preceding days, giant bond insurers like Ambac Financial Group Inc. and MBIA Inc. had their shares up about 71% and 32% that Wednesday.

Friday, January 25th, for me it was time to put my latest thoughts to the market test. I decided to buy a high yielding currency and sell a low yielding one, so I went long the NZD/CHF at 0.8459.
The following Tuesday, on January 29th, I saw merit in selling the US dollar via the USD/CAD, so I went short the pair at 1.0027 and 1.0010 - thinking that a second interest rate cut in 9 days by the Federal Reserve could make a daily chart congestion break down to below parity.

Minutes after the US central bank's interest rate announcement on January 30th, Wall Street skyrocketed, so it looked like my bets were about to once again pass the market test. The NZD/CHF soared to nearby 0.86, whereas the USD/CAD sank to below 0.99.

Yet, in what would later prove as only the first ambush of the week, the sentiment on Wall Street rapidly changed course just less than an hour ahead of the day close.
I then had to make a fast call, reconsider the developments with or without holding the initial positions. My vote came for 'without', hence few minutes before the closing bell I dumped my entire exposure at 0.8510 (NZD/CHF) and 0.9930 (USD/CAD) respectively.

Even so, the US dollar would stay on my radar in the afterwards.
On February 1st, hours before the release of January US nonfarm payrolls, I went long the EUR/USD at 1.4898 and again long spot gold at 934.00, setting firm stop-loss orders at 1.4736 and 915.69 respectively.

Just as the labor market numbers got publicly known, both bets went in the money. The EUR/USD reached into 1.49, whereas at nearby 937 the price of spot gold was quoted at a new all-time high.
Yet the sentiment on the US dollar's fronts turned upside down, 30 minutes or so both markets I was targeting began to fall precipitously.

I managed to dump the EUR/USD position during a shy price recovery that Friday, at 1.4855 - and that was a reasonable exit given the facts, I reckoned. But the gold market fell too much too fast, hence my position was automatically closed out within minutes.

Overall, last week turned out to have little impact on my equity. On some trading accounts, the consolidated result was close to breakeven. Though, on other accounts where my gold position happened to be larger and its stop-loss order wasn't honored orderly by one of my retail brokers, last week brought a net loss.

Playing fast almost always comes at a cost. To me, that cost rarely justifies stepping in for quick rewards.
On the other hand, last week also reminded me that one of the most important things in my business is losing insignificatly at those times when markets prove me awfully wrong. Seen from that very perspective, last week was no failure.

Published on Sat, Feb 9 2008, 00:39 GMT

New Round of Currency Speculations

Mon, Feb 4 2008, 09:29 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I will be back with few more details on the involved positions.

Published on Mon, Feb 4 2008, 09:29 GMT

USD/CHF: '2B Bottom' in the Making? (revisited)

Sat, Jan 26 2008, 20:49 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

On Monday, January 21st, I was noting:

'I wonder whether the US Dollar is plotting a bullish reversal of the '2B bottom' kind against the Swiss Franc.
If the chart pattern is being confirmed beyond tight timeframes, the US currency has the best chance in some time to regain the initiative.

I will be watching.'

However, no bullish reversal of the kind mentioned on Monday - or of any other kind, for that matter - has materialized eversince. Accordingly, at no time whatsoever did I feel compelled to bet against the market.

Published on Sat, Jan 26 2008, 20:49 GMT

USD/CHF: '2B Bottom' in the Making?

Mon, Jan 21 2008, 15:45 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I wonder whether the US Dollar is plotting a bullish reversal of the '2B bottom' kind against the Swiss Franc.
If the chart pattern is being confirmed beyond tight timeframes, the US currency has the best chance in some time to regain the initiative.

I will be watching.

Published on Mon, Jan 21 2008, 15:45 GMT

Against the British Pound

Sun, Jan 20 2008, 11:32 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

At 0.7425 in the European transacting time of Thursday, January 17th, I put an end - temporarily, at least - to my 67-day campaign of staying long the Euro against the British Pound.

The position, opened on November 12th, 2007 at 0.7043 and taken on margin across all my trading accounts (minimum leverage applied was 5:1), sought to capitalize on what I perceived could come out in form of a dramatic depreciation of the British currency across the board, particularly versus the Euro as well as the Danish Krone. It eventually turned into my biggest, most successful global bet ever.

Over the mentioned period, the Euro had moved 382 pips upwards against the British Pound, roughly 5.4% in unleveraged terms.

Published on Sun, Jan 20 2008, 11:32 GMT

Interested Again in the Gold Market (closed affair, for now)

Tue, Jan 15 2008, 23:17 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

As disclosed on January 8th, I was an aggressive buyer in that day's European transacting time. Orders to buy at market were executed in the $874, $875 and $876 price areas on multiple trading accounts.

It would be fair to say, however, that I have since hardly felt comfortable. I feared my buying might have been late. 'Late' not relative to where I thought the market would be going - since I never have predetermined scenarios - but to an already multi-month bullish view that could have fuelled a longer-term, sizable personal exposure. Since my dedicated notes published here on January 2nd alone, the spot price of Gold has already gained almost 10%.

Today was not too early for fears of being late to materialize. The market plunge experienced in the late US transacting time forced me just a few moments ago to dump my entire position for a marginal overall profit. The exits went splitted in the $890 and $892 price regions.

I am now out of the golden market. This, however, may not last for too long.

Published on Tue, Jan 15 2008, 23:17 GMT

Latest Hours

Thu, Jan 10 2008, 22:30 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Even though the Bank of England did not cut the key interest rate today, my long EUR/GBP position taken almost two months ago has just yielded brand new dividends.

I've also been able to profit not half bad from Gold extending to fresh all-time highs.

Published on Thu, Jan 10 2008, 22:30 GMT

Interested Again in the Gold Market (revisited, again)

Tue, Jan 8 2008, 21:37 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

My FXstreet.com notes published on January 2nd and January 7th were manifests of my outright bullish view of the Gold market.
The spot price of Gold has since cleared out its previous 28-year record high, having gained about $35 from $845 up to $880.

I happened to be an aggressive buyer in today's European transacting time.

Published on Tue, Jan 8 2008, 21:37 GMT

Interested Again in the Gold Market (revisited)

Mon, Jan 7 2008, 22:26 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

On January 2nd I reinforced in writing my several month old bullish view of the Gold market. Just a few hours in the afterwards, the spot price of Gold cleared out its 28-year high at about $850, extending for another $20 upwards to reach $869 on January 3rd.

Unless new data comes into play, I remain bullish about the near-term prospects of the Gold as well as Platinum markets.

Published on Mon, Jan 7 2008, 22:26 GMT

About the Hong Kong Dollar (revisited)

Sun, Jan 6 2008, 12:05 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In a research note forwarded to the brokerage house I'm working with, dated October 16th, I detailed a series of premises which would have voted against Hong Kong imminently depegging its currency from the US Dollar. It was, in fact, a revisitation of my FXstreet.com notes published on June 12th, several months prior to that institutional note.

At about 7.75 during the second half of October, the US currency indeed tested versus the Hong Kong Dollar the lower end of the officially accepted range, forcing the Hong Kong Monetary Authority to step up directly into the forex market in the attempt to block a sudden appreciation of its own currency. In the early days of November, however, the massive Hong Kong Dollar buying pressures just stopped, while currently the USD/HKD hovers around 7.80.

Recent data showed the Hong Kong Monetary Authority's foreign exchange reserves reached $150.4 billion at the end of November, versus $142.2 billion at the end of the preceding month. The $8.2 billion surplus could well have been the cost of further maintaining the USD/HKD within the accepted 7.75 - 7.85 range. Hong Kong is the 9th largest foreign exchange reserves owner in the world, behind China's almost $1.5 trillion coming in the first position - numbers which would virtually turn any speculative attack directed toward either the Chinese Yuan or the Hong Kong Dollar into the most expensive one in history.

Personally, I think the Hong Kong Dollar's performance over the latest months may have been the reflection of the remarkable Hong Kong stock market's rally fuelled by series of hyper-advertised local IPOs, rather than the outright representation of a speculative attack.
Nonetheless, none of the premises I was writing about in that research note of October 16th were to suggest a massive surprise linked to the Hong Kong Dollar cannot happen. And as a fact, for speculators whose names already became legendary, history had a habit to reward betting on surprises rather than conventional rationalizing.

All in all - I suspect - no matter how exactly the Hong Kong Monetary Authority proceeds in going with a revaluation of the Hong Kong Dollar, what China has to say about it most probably will not come in form of just a recommendation.

Published on Sun, Jan 6 2008, 12:05 GMT

Halloween Reloaded...

Thu, Jan 3 2008, 14:38 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I wrote here on November 1st:

'Whom exactly did the Federal Reserve scare off on the Halloween day yesterday?
Themselves, perhaps, otherwise how come the US central bank pumps $40+ billion worth of liquidity to the financial system just hours after the key interest rate cut, and the Dow Jones Industrial Average closes the day with a 362.14-point loss...?'

A similar situation took place last month. On December 11th, the Federal Reserve decided cutting the key interest rate yet again 25 bps, for it to announce just one day later - alongside four other major central banks - the most important intervention in the monetary markets since the 9/11 terrorist attacks, in the attempt to at least calm down the revitalized liquidity crisis.

I think, if the following key economic reports are to suggest the debut of global economic contractions (particularly in the United States), whereas the latest inflations numbers (global, again) will not have proved themselves as just statistical aberrations, the most notable central banks worldwide may soon have to reconsider their generosity toward the international stock markets.

For the time being, nonetheless, I see the same stock markets' dynamics as well as the Japanese Yen's movement across the board as mixed - with some exceptions already considered in my FXstreet.com notes of December 12th.
Against the British Pound, though, the Japanese currency has just been quoted at price levels superior to those registered last year in August. Such a market event, I reckon, is linked to the British Pound's generalized weakness rather than being caused by a brand new, sudden carry trade global-scale liquidation.

Published on Thu, Jan 3 2008, 14:38 GMT

Interested Again in the Gold Market

Wed, Jan 2 2008, 14:58 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I'd been a buyer in the spot Gold market in October, for a not half bad profit.
I have stayed a bull eversince - a reference of that appeared in my FXstreet.com notes published on December 12th - however, over the latest weeks I haven't been able to determine a comfortable brand new entry point for a brand new involvement.

That may be about to change.

Published on Wed, Jan 2 2008, 14:58 GMT

Sinking British Pound

Sat, Dec 29 2007, 16:01 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I've been documenting a view against the British Pound since mid September, reffering in particular to the currency's odds via its cross pairs.
My position against the British Pound has hit somewhat of a home run this week, as the British currency further sank versus the Euro.

I will put in writing, in a few days, a recollection of facts and events which have lately only reinforced my 3-month old view that mounting fundamental as well as technical pressures would accelerate the British Pound's depreciation across the board.

Published on Sat, Dec 29 2007, 16:01 GMT

An Anomaly Called the British Pound (reinforced)

Mon, Dec 24 2007, 11:46 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I for the time being hold unchanged my position and previous views against the British Pound.

Published on Mon, Dec 24 2007, 11:46 GMT

Aggressively Long USD/CAD (revisited)

Sun, Dec 16 2007, 11:46 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In my FXstreet.com notes dated November 7th I quoted the following lines privately emailed to clients a couple of days earlier:

'I see room for the US Dollar to go further down across the board. I see the USD/CAD making new lower lows, soon.

Nonetheless, beware of the US Dollar.
The US currency already looks like one of those Amazonian venomous snakes - you step over it repeatedly, and it may turn around and hit with a mortal bite just as you least expect it.'

Since November 5th, the US Dollar had sunk for another 300 pips versus the Canadian Dollar, only to recover in the afterwards for about 1,200 pips.

Almost one month later on, convinced that the US currency would soon break even higher against the Canadian Dollar, on Monday December 3rd I went long the USD/CAD at market at 1.0025 - and then, just 24 hours later, in the early European transacting time of Tuesday December 4th I allowed myself to buy again, at market at 1.0037, and that I did only hours ahead of the Canadian central bank's latest monetary policy decision.

As soon as the Bank of Canada made the rather surprising announcement of cutting the key interest rate by 25 bps on that Tuesday, the USD/CAD surged to test 1.0150 that same afternoon, and 1.0200 on the following day.

As an intriguing observation, a couple of hours before the monetary policy decision went public, the USD/CAD spiked downward just below parity, only to recover in an instant. The event immediately drew my attention, it was as if something or somebody did have advanced information of what would soon hit the newswires.
That wasn't the first time I saw such a thing in front of a governmental report to be released from Canada. A similar event, I remember, took place a couple of months ago - at a time when I was running an increasingly large exposure in the USD/CAD based on the great degree of confidence the pair would collapse to fresh multi-decade lows.

In my FXstreet.com notes of December 4th I acknowledged that 'I had run into today's Canadian interest rate decision while holding sizable long USD/CAD positions'. My presence, however, got thrown out of the market on December 6th, when a consolidated, trailed in the money stop order got triggered at 1.0086.
I now think I wasn't quite ready to see those two recent long USD/CAD positions as the debut of something big unfolding in larger than usual timeframes, but I didn't have a hit-and-run perspective either. At times, such kind of hesitating leads to only fractional profits. Taken into account that my long USD/CAD positions opened on December 3rd and 4th happened to be sizable, perhaps I should have dumped my exposure just as fast as those who presumably were bidding the pair aggressively just before the Bank of Canada's monetary policy announcement might have done themselves.

Published on Sun, Dec 16 2007, 11:46 GMT

Going Global

Wed, Dec 12 2007, 15:05 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

With the data at hand, I think at least several of the major global stock indices maintain a positive image - for example, I have been bullish on Indonesia's JSX Composite and German DAX 30 for a couple of weeks already, still holding such a view. I also perceive the pressures gathering in some of the Japanese Yen crosses (the EUR/JPY is one of them which comes to my mind right now) to be bullish.

There is mounting case for somewhat of a positive US Dollar correction, I know and see that myself (the British Pound and the Canadian Dollar appear to be the most vulnerable currencies to such a scenario) - however, unless something truly remarkable happens on terms of my own perception, my view currently remains as it's been directed to the brokerage house I'm working with for a number of weeks already, i.e. bearish on the US currency particularly against the Singapore Dollar, Hungarian Forint, Czech Koruna and New Zealand Dollar. I happen to also being bullish about the price of Gold.

I have been keeping as well an outright bearish view on the British Pound particularly against the Euro and the Danish Krone since mid September, reinforced in mid November - still holding it for the time being.

Published on Wed, Dec 12 2007, 15:05 GMT

Notes Revisited

Sun, Dec 9 2007, 21:03 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

The views included in my FXstreet.com notes published on November 12th and December 3rd still make the top shortlist of my real-time, global market observations.

Published on Sun, Dec 9 2007, 21:03 GMT

Aggressively Long USD/CAD

Tue, Dec 4 2007, 22:32 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I had run into today's Canadian interest rate decision while holding sizable long USD/CAD positions. As of this very minute I'm still holding the exposure.

I will deconstruct the business in a couple of days here on FXstreet.com - as I've gathered particularly interesting and intriguing notes from my experience as it's been unfolding over the latest hours.

Published on Tue, Dec 4 2007, 22:32 GMT

At the Periphery of Global Risk

Mon, Dec 3 2007, 22:09 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

The bulls, I think, still have a chance to regain the upper hand in the world's main stock markets - thanks in particular to the Federal Reserve's so far kind generosity. A weekly chart of the German DAX 30, for just one instance, looks to me nowadays far more constructive than it did only a few weeks ago.

But it is, once again, the Asian periphery of global risk which catches my attention - with the BSE Sensex and particularly the JSX Composite currently topping the list of my real-time observations, as I perceive considerable bullish pressures ongoing may drive both mentioned stock indices higher in the near term.

Published on Mon, Dec 3 2007, 22:09 GMT

Charting Further (republished)

Fri, Nov 30 2007, 15:57 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Nonetheless, I will be charting the following days with a great deal of interest - with particular respect to the US Dollar.

Published on Fri, Nov 30 2007, 15:57 GMT

Charting Further

Sun, Nov 25 2007, 16:24 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

After some of the greatest, most profitable weeks of my life as a trader - as they had been minutely described here on FXstreet.com - with only one notable exception my market exposure finally has come to almost zero.

Nonetheless, I will be charting the following days with a great deal of interest - with particular respect to the US Dollar.

Published on Sun, Nov 25 2007, 16:24 GMT

An Anomaly Called the British Pound (reloaded)

Thu, Nov 22 2007, 21:56 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

The opportunistic view included in my FXstreet.com notes of November 12th remains intact.

Published on Thu, Nov 22 2007, 21:56 GMT

USD/CAD: Hitting & Testing (closed affair, for now)

Sun, Nov 18 2007, 12:22 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In the wake of my notes published here on FXstreet.com on November 7th I received questions about whether I regret putting an end in late October to my intense and sizable wave of selling the USD/CAD short - wave which got started in late September - whereas the pair had since extended its collapse for another about 400 pips until the bears reached exhaustion on November 7th.

The answer is negative, for several reasons.
Most importantly, my exit had been well-documented and planned beforehand, not just instantly decided and emotional. My exposure on the USD/CAD had become so large that I refused to take unnecessary risks surrounding the latest Federal Reserve's monetary policy meeting as well as the October US nonfarm payrolls report.

As quoted in those same above mentioned FXstreet.com notes, in my letter to clients of November 5th I warned:

'I see room for the US Dollar to go further down across the board. I see the USD/CAD making new lower lows, soon.

Nonetheless, beware of the US Dollar.
The US currency already looks like one of those Amazonian venomous snakes - you step over it repeatedly, and it may turn around and hit with a mortal bite just as you least expect it.'

Since November 5th, the US Dollar had sunk for another 300 pips versus the Canadian Dollar, only to recover in the afterwards for about 800 pips.

Published on Sun, Nov 18 2007, 12:22 GMT

An Anomaly Called the British Pound (revisited, again)

Thu, Nov 15 2007, 15:34 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I can now disclose that the position against the British Pound suggested in my latest notes dated November 12th was a long EUR/GBP position opened on that same day at market at 0.7043.

I am keeping it.

Published on Thu, Nov 15 2007, 15:34 GMT

An Anomaly Called the British Pound (revisited)

Mon, Nov 12 2007, 16:19 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

For the notes gathered under the title 'An Anomaly Called the British Pound' and published here on FXstreet.com on September 19th I was noting:

''So, of course my attention has been fully focused on the British Pound as of very late, acknowledging in my letter dated Sunday, September 16th massive (and leading) selling pressures accumulating on the currency's (too) various fronts like against the US Dollar, and particularly the Euro and the Danish Krone:

'The world's major central banks - the Bank of England in particular - act nowadays like under the pressure of being caught between quite a rock and quite a hard place.

The Bank of England's recent lack of pro-active initiative relative to the global liquidity crunch - let alone the incoherence of its messages sent one way or another to the global markets - as well as the Northern Rock announcement have synchronized with the currency markets reloading selling pressures in the British Pound against the Euro and the US Dollar (and that at a time when the US Dollar really had some hard times mostly elsewhere across the board).

As well, within a large technical context, the British Pound looks vulnerable to a heavy downfall against the Danish Krone right through a long-term line of support being nowadays tested in the corresponding, GBP/DKK pair. The following, updated monthly chart of the GBP/DKK reveals a picture worth checking on a regular basis: (...)''

Two months in the afterwards I could only reiterate that reflection: beware of the British Pound's increasing vulnerabilities across the foreign exchange board.

I have already assumed a short British Pound position against a major European currency, and may further want to increase and even diversify my exposure if charted conditions turn a certain way.

Published on Mon, Nov 12 2007, 16:19 GMT

USD/CAD: Hitting & Testing (reloaded)

Wed, Nov 7 2007, 21:54 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In the notes published here on FXstreet.com dated October 9th, 11th, 20th and 25th I deconstructed the rationale behind repeatedly selling the USD/CAD short since late September, market action done in a personal attempt (eventually proved successful) to profit handsomely from the pair's rapid extension to all-time lows.

Mentioning the rather hastily decided exit out of the market, I also noted here on October 25th, 'If conditions turn a certain way (and they do seem to do just that), I'll have no hesitation to short again.'
There was nothing cryptic in that message. In my letter to clients of the same day I wrote:

'The US Dollar doesn't look well at all against the European currencies - at a time when the Gold market trembles like a volcano ready to break upwards, and the price of Oil is soaring.
Such a global cocktail may well drive the USD/CAD further lower enroute to fresh multi-decade lows, soon. As a matter of fact, in tomorrow's early European transacting time I will take into consideration shorting the pair for a small size position. A great deal of caution is required, though, as the seller becomes increasingly more vulnerable now than at any time recently to an abrupt short-squeeze like the one we saw on Monday, October 22nd, which may or may no longer prove just temporary.'

Confident that the US Dollar would be crashed yet again versus the Canadian Dollar, in the European transacting time of October 26th I opened two brand new short USD/CAD positions, at market at 0.9639 and 0.9621. On October 29th I shorted the pair for the third time, at market at 0.9590 - still, in my letter to clients emailed on the same day I cared to add:

'Nonetheless, considering what I currently perceive as the 'moral hazard' of the upcoming Federal Reserve's monetary policy meeting scheduled for this Wednesday, October 31st - I will be very closely monitoring my USD/CAD exposure and most probably will decide in favor of a consolidated exit ahead of the underway US interest rate decision.'

And indeed, just minutes before the Federal Reserve's interest rate announcement last week on October 31st I without hesitation closed out my 0.9639 and 0.9621 shorts at market at 0.9509. I dumped the third, 0.9590 short a couple of hours after the US central bank's announcement - at market at 0.9453.

My exposure on the US Dollar has since stayed at zero. Still, in my letter to clients of Monday, November 5th I noted:

'I see room for the US Dollar to go further down across the board. I see the USD/CAD making new lower lows, soon.

Nonetheless, beware of the US Dollar.
The US currency already looks like one of those Amazonian venomous snakes - you step over it repeatedly, and it may turn around and hit with a mortal bite just as you least expect it.'

That warning about the US currency's worsening odds has materialized indeed: since this week's first trading hours, the US Dollar dropped about 250 pips against the Euro, 300 pips versus the Canadian Dollar, while spot Gold surged almost $40.
The second part of my Monday's private notes, however, still remains to be observed.

Published on Wed, Nov 7 2007, 21:54 GMT

GBP/JPY (revisited)

Sun, Nov 4 2007, 14:23 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I made a handsome profit recently from betting that the British Pound would break out of a multi-day congestion and appreciate against the Japanese Yen.

I began to gradually build a rather large exposure in the GBP/JPY by taking a long position at market at 234.71 on September 28th - followed by longs added, again at market, in the 235, 236 and 237 price areas - and finally accompanied by a sizable order to buy at the round 238 level which got triggered on October 5th.
With my exposure going deeply into the profit zone, I'd kept my enthusiasm pretty much in check over the period, though. As noted in my letter to clients dated October 8th, '(...) one should take into account the potential impact of an adverse, downward movement against one or more long positions entered recently. Beware, far more than in recent days'.

It only took what in late US afternoon of October 8th I perceived as an early warning sign, for me to dump all long GBP/JPY positions just a few hours later on, in the early European transacting time of October 9th - right at market at 238.39.

As highlighted in my FXstreet.com notes of October 13th, the warning sign actually came to my mind while updating a daily chart of the EUR/JPY instead of the Yen cross pair I happened to be directly involved in.
So I got a few questions about why did I decide to dump all those GBP/JPY longs on behalf of a warning signal which occured in the EUR/JPY.

Basically, the justification lies in the very nature of those long GBP/JPY positions. They were not intended to form a long-term exposure, nor did they attempt to test a notable bottom hypothesis. Those positions stood only as a pure momentum play; while I think I did have a pretty good idea of the current market conditions as they were unfolding several weeks ago, I at the same time knew I could be in those positions only to hit fast and then run even faster. And, in order to achieve that fast exit, I opted for a minimalist way of looking out for early warnings - and therefore, the moment the bullish initiative appeared even slightly compromised in one of the main Japanese Yen crosses, I knew I had to ask myself out of the GBP/JPY.

Published on Sun, Nov 4 2007, 14:23 GMT

How Shakespearean Is That...? (revisited)

Thu, Nov 1 2007, 22:50 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Whom exactly did the Federal Reserve scare off on the Halloween day yesterday?
Themselves, perhaps, otherwise how come the US central bank pumps $40+ billion worth of liquidity to the financial system just hours after the key interest rate cut, and the Dow Jones Industrial Average closes the day with a 362.14-point loss...?

A couple of days ago I noted here on FXstreet.com:

'Stanley O'Neal retired today as head of investment giant Merrill Lynch - apparently under pressure from a board frustrated with the largest quarterly loss in the 93-year old firm's history. 'It is a tragic Shakespearean story', said a management professor at Yale University.

Shakespearean or not, Wall Street must be the only place in the world where you're awarded a $160-million exit package for leaving $8+ billion in losses behind your back.'

And, there's more. According to The Wall Street Journal, Bear Stearns CEO James Cayne was playing bridge and golf far away from Wall Street during the most critical days of the global financial crisis in July, while the firm's hedge funds were collapsing.

Published on Thu, Nov 1 2007, 22:50 GMT

How Shakespearean Is That...?

Tue, Oct 30 2007, 20:26 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Stanley O'Neal retired today as head of investment giant Merrill Lynch - apparently under pressure from a board frustrated with the largest quarterly loss in the 93-year old firm's history. 'It is a tragic Shakespearean story', said a management professor at Yale University.

Shakespearean or not, Wall Street must be the only place in the world where you're awarded a $160-million exit package for leaving $8+ billion in losses behind your back.

Published on Tue, Oct 30 2007, 20:26 GMT

USD/CAD: Hitting & Testing (revisited)

Thu, Oct 25 2007, 19:19 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I could hardly take the US Dollar's rapid surge against the Canadian Dollar seen in this week's first hours as a notable price inflection. Reversals of markets which have been overextending for years, plotting multi-decade lows in the process, almost always take a different price representation.

But the same Monday's upward movement of the USD/CAD did in fact shake a lot of my confidence as a bear. Not only the market has been overextending recently - I did it too, shorting the pair at 1.0048 and 1.0046 on September 26th, at 0.9790 on October 11th, and at 0.9730 on October 19th (this last position happened to be double in size compared with each of the previously opened shorts). In the European transacting time of Monday, October 22nd, however, I decided to dump at once all my short USD/CAD positions, and effectively did so at market at 0.9756 for a profit.

The pair's return to fresh multi-decade lows on Tuesday has not come as a surprise. But as the new week started to unfold my working hypothesis abruptly took a different path, given that any small inch charted against my exposure could have put me in an uncomfortable situation to say the least.

Business as usual, I get out first and ask questions later (if at all). It's so easy for one's selling bias to grow geometrically when the prices fall the way they did last Friday, and an overly highlighted G7 meeting fails to include references to the US Dollar's current weak odds - but it is exactly that which makes the seller all of the sudden vulnerable to a bullish sort of black swan event.

The most powerful argument which made me start shorting the USD/CAD a month ago was all about the raw graphical representation of a genuine downtrend. When prices fall like they have done lately, I'm going to be right as a seller each and every day until one day on which I'll decide being right does no longer bring a reward higher than the sum of all risks.

If conditions turn a certain way (and they do seem to do just that), I'll have no hesitation to short again.
Nonetheless, it's already been quite some time since I started to practice as a bear in this market while actually being on the journey to discover a buying opportunity of remarkable reward vs. risk characteristics. But as the frenzy of lower prices has only continued feeding on itself recently, I well know being exposed as a seller and recognizing the early signs of a notable price inflection won't be easy jobs while I'm trying to perform both at the same time.

Published on Thu, Oct 25 2007, 19:19 GMT

USD/CAD: Hitting & Testing

Sat, Oct 20 2007, 12:04 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In my letter to clients of Thursday, I considered:

'In spite of the price of oil having soared today, and the EUR/USD having achieved a new all-time record high, the USD/CAD hasn't yet descended to new lows.

Regardless, I continue to believe that seeing brand new, multi-decade lows in the USD/CAD remains just a matter of when, not if.'

Confident that the market would soon collapse again under its own weight - in yesterday's early European transacting time I opened a brand new, yet this time larger short position, at market at 0.9730. For in the immediate afterwards of the September Canadian inflation data release, the USD/CAD indeed crashed down through the round 0.97 level.

I also keep intact the previously opened shorts as they were disclosed in my 'Current Standings' titled FXstreet.com notes of October 11th. A far greater deal of caution will be leading my market observations from now on, though.

Published on Sat, Oct 20 2007, 12:04 GMT

Spot Gold (closed affair)

Tue, Oct 16 2007, 20:36 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Last Thursday I disclosed here on FXstreet.com:

'Yesterday, in the early European transacting time, I opened a medium size, long spot Gold position, at market at 741.30 - as well as placed an order to buy on stop marginally above the latest 27-year high level established only a few days ago for yet another medium size position. That buy stop order got triggered in the European time today, at 748.60.

My bet basically has been that the gold market was going to break higher out of a multi-day price congestion. That happens to be consistent with my still ongoing bearish view of the US Dollar.
I am keeping both current spot Gold positions as pure momentum play. That means hitting fast, yet virtually getting out even faster.'

In my yesterday's letter to clients, I was as well warning myself:

'After the success lately recorded in the GBP/JPY - the long positions I took in spot Gold only a few days ago have themselves gone today deep in the profit zone. I will be holding with caution.'

I decided only a few hours ago to dump both my medium size, long spot Gold positions - at market at 757.40, for a not half bad profit.

What I did fail at in the very early European transacting time today was admitting the few-minute, impressive price surge could have been of an overshooting nature. That would have been a critical market observation coming at a critical time, given that my long positions had been all about a pure momentum play in the first place.

A very subtle mistake - true, since recognizing an intraday blow-off while monitoring a trading idea picked off larger timeframes is almost always a very difficult job - but a mistake nonetheless.

Published on Tue, Oct 16 2007, 20:36 GMT

GBP/JPY

Sat, Oct 13 2007, 19:43 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In the wake of my last Sunday notes here on FXstreet.com, in my letter to clients of Monday, October 8th, I warned:

'I don't perceive an inflection to have occured in the GBP/JPY either.
Nonetheless, one should take into account the potential impact of an adverse, downward movement against one or more long positions entered recently. Beware, far more than in recent days.'

I began going long the GBP/JPY on September 28th, at market at 234.71. I continued to build a rather large position by gradually adding longs at market in the 235, 236 and 237 areas, then placed an order to buy on stop at 238.00 for an amount equal with the cumulative amounts of all previously entered positions - and that was triggered on Friday, October 5th.

In my letter of September 27th I wrote, 'In the longer run I remain generally pessimistic about the British Pound, - however, if I were a momentum trader, I would keep an eye on the multi-day price congestion that's still ongoing in the GBP/JPY.'
But, as a matter of fact, my very first interest in going long the GBP/JPY appeared on September 20th - a day on which the cross pair ranged between mid 232 and mid 229, testing the lower end of that 'multi-day price congestion' which commenced in late August.

Nonetheless, I did not have the courage to be a buyer on September 20th. As admitted in my letter of September 28th, '(...) setups like that multi-day (even multi-week) price congestion still ongoing in the GBP/JPY are not as easy play as one may generally expect (or a standard manual of technical analysis would have one to think) (...)'. So I decided to wait a few more days in order to earn enough confidence before starting to build that kind of exposure described above.

Finally, as in late US afternoon of Monday, October 8th, I saw what I took as an early warning sign while updating a daily chart of the EUR/JPY - I decided to dump all long GBP/JPY positions only a few hours later on, in the early European transacting time of Tuesday, October 9th, right at market at 238.39.

Published on Sat, Oct 13 2007, 19:43 GMT

Current Standings

Thu, Oct 11 2007, 18:55 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I disclosed here on Tuesday that I intended to hold two short USD/CAD positions taken on September 26th, at market at 1.0048 and 1.0046.

Then, in my yesterday's letter to clients, I wrote:

'I am keeping my short USD/CAD positions as they were disclosed in my yesterday's letter. I continue to perceive a mounting bearish pressure which in my opinion is going to make the US Dollar overshoot lower against the Canadian Dollar.'

In today's European session I decided it was a good time to short the USD/CAD again - which I did, at market at 0.9790.

Yesterday, in the early European transacting time, I opened a medium size, long spot Gold position, at market at 741.30 - as well as placed an order to buy on stop marginally above the latest 27-year high level established only a few days ago for yet another medium size position. That buy stop order got triggered in the European time today, at 748.60.

Published on Thu, Oct 11 2007, 18:55 GMT

USD/CAD (revisited, again)

Tue, Oct 9 2007, 23:09 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In the wake of my FXstreet.com notes published on last Saturday and then yesterday - I should now disclose the fact that I hold two short USD/CAD positions taken on September 26th, at market at 1.0048 and 1.0046.

I am keeping them.

Published on Tue, Oct 9 2007, 23:09 GMT

USD/CAD (revisited)

Mon, Oct 8 2007, 21:37 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I still don't recognize a point of price inflection to have occured yet in the USD/CAD.
I have to presume the pair is soon going to test its low recorded on Friday, October 5th, extending even lower.

Published on Mon, Oct 8 2007, 21:37 GMT

Latest Confirmations (part 2 of 2)

Sun, Oct 7 2007, 09:47 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I began the first of my two letters to clients emailed on Monday, October 1st, as follows:

<All I can say now at the debut of the European transacting time is that my previous market opinions remain in place.

Once again, beware of the GBP/JPY.>

My opportunistic interest in the Japanese Yen crosses is hardly any new story. As described in my FXstreet.com notes dated August 26th, on Monday August 20th - immediately after the Federal Reserve's decision to cut the discount interest rate - I privately emailed the following notes:

<I believe sellers have just lost the initiative in the global stock markets, the USD/JPY and the Yen crosses, as well as in the European currencies versus the US Dollar. If some congestion time develops from here, the Federal Reserve have just bought us time to decide what next.

I see the GBP/USD having room nowadays to advance to 2.01 - 2.03.>

My bullish view of the Yen crosses took a break in mid September, when as mentioned here on FXstreet.com I thought that 'a perfect storm may be approaching, primarily in the global stock markets - some of the major European and US stock indices currently topping my list of regular observance - as well as in the Japanese Yen's currency markets'. At that point, the main Yen crosses had already recovered for hundreds of pips since their bottoming out on August 17th.

But I never truly wanted to utilize what is known as a limit order in order to sell short any global stock market or Japanese Yen cross pair. I only wanted to do it at market, at the price right there in front of me, and with enough courage to overleverage. Such kind of courage never came, though.

And then, all of a sudden, something got me interested in the GBP/JPY back again in the late US afternoon time of Thursday, September 27th, and made me consider as follows:

Only hours later, on Friday September 28th, I updated my observations and felt necessary to add:

<And, even though it dipped under 233 in the Asian time yesterday, the GBP/JPY eventually closed the week just nearby the 235 level.
Although setups like that multi-day (even multi-week) price congestion still ongoing in the GBP/JPY are not as easy play as one may generally expect (or a standard manual of technical analysis would have one to think) - I now can only reinforce my recent opinion, that a momentum trader should take notice of the significant bullish pressure which apparently is accumulating in this Yen cross pair and which may lead to a breakout higher.>

And then, in the second of my two letters to clients emailed on Monday, October 1st, it seemed like relatively safe to announce:

I chose to only reinforce my expectations further on the following two days.

Tuesday, October 2nd:

Wednesday, October 3rd:

Finally, on Thursday, October 4th, alongside yet again stressing my outright bearish stance on the USD/CAD, I as well noted:

Between its low and high recorded on Friday, October 5th, the GBP/JPY surged for about 200 pips.
Since September 27th - the day I started to update the pair's charts far more often than usual - the GBP/JPY went up for almost 450 pips.

Published on Sun, Oct 7 2007, 09:47 GMT

Latest Confirmations (part 1 of 2)

Sat, Oct 6 2007, 10:21 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

On Thursday - only one day before the latest Canadian and US labor market releases - I wrote here on FXstreet.com:

<I continue to perceive the bearish pressures on the US Dollar against the Canadian Dollar to be considerable - and thus far the price action has well confirmed my previous expectations.

That is to say, I still don't recognize a notable point of price inflection to have already occured in the USD/CAD. Nonetheless, I think the eventual appearance of such an inflection may create a trading opportunity of remarkable reward / risk characteristics.

The above pretty much reinforces my notes published here on FXstreet.com a couple of weeks ago.>

Between its yesterday's high and low, the USD/CAD sank for about 200 pips.
Since September 13th - when I decisively turned outright bearish - the pair went down for more than 500 pips.

And as of now, I still lack the perception of a notable point of price inflection in the USD/CAD.

Published on Sat, Oct 6 2007, 10:21 GMT

USD/CAD

Thu, Oct 4 2007, 20:22 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I continue to perceive the bearish pressures on the US Dollar against the Canadian Dollar to be considerable - and thus far the price action has well confirmed my previous expectations.

The above pretty much reinforces my notes published here on FXstreet.com a couple of weeks ago.

Published on Thu, Oct 4 2007, 20:22 GMT

Early No Longer...

Mon, Oct 1 2007, 20:05 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Among my notes published here on FXstreet.com on June 21st gathered under the title 'Hindsight's One-Way Bets (revisited)' - just 1 month before the Japanese Yen found a notable low and the main US stock indices did a notable high - there were the following:

<It still is the Japanese Yen that appears to me as the biggest potential bet among the Asian currencies.

Bloomberg.com published couple of days ago a very interesting material, titled 'Housewives Outmaneuver UBS, Deutsche Bank Trading Yen', describing how 'Japanese businessmen, housewives and pensioners betting against the yen in their spare time are wrecking the forecasts of the world's biggest currency traders'.

When last year in May - June I was making the call of an 'important bottom' and forecasting a 'sizable recovery' in the NZD/JPY - I had no particular perception of the public roaring about the New Zealand currency being at the time ready to catch up with the Yen carry-trade.
Nowadays, however, housewives outmaneuver UBS, according to mainstream financial media. 'Carry-trade' pre-paid package offerings become a 'must-have' among signals providers across the board. FXCM, undoubtedly a benchmark for small retail, spot FX trading, introduces a 'carry-trade' model portfolio with a not half bad, multi-year backtested performance.

With the rampant chasing of high-yielding currencies quickly moving from the elite pack of the multi-billion dollar funds down to the mob of retail, to me it looks like we are no longer in the early stages of a self-reinforcing boom in the Yen carry-trade.>

Just a couple of months later, the British Pound collapsed between its August high and low versus the Japanese Yen for about 2,500 pips.

Published on Mon, Oct 1 2007, 20:05 GMT

It All Started from Those 'Modestly Low' Rates...

Wed, Sep 26 2007, 21:22 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Several days ago, the former Governor of the Federal Reserve, Alan Greenspan, was the guest of CBS correspondent Lesley Stahl for the popular TV broadcast '60 Minutes'. The recording was made just before Alan Greenspan's launching of his own book, 'The Age of Turbulence: Adventures in a New World'.

As follows, directly from the CBS transcript:

'He insists there's nothing he could've done to prevent today's plummeting home prices and the fact that a million families have lost their homes, and many more could. But some economists now say Greenspan actually created the housing bubble and the credit crunch by keeping interest rates too low for too long.

"Just remember we raised interest rates at every meeting from June of 2004 till I got out of office," he says.

"You raised rates in 2004. But only after you held interest rates at historically low level for three years, while the bubble, the housing bubble was forming," Stahl points out. "And that you had 13 rate cuts in that period of time."

"It was our job to unfreeze the American banking system if we wanted the economy to function. This required that we keep rates modestly low," Greenspan explains.'

Since when 1% would make for a 'modestly low' key interest rate in the US...?

Published on Wed, Sep 26 2007, 21:22 GMT

USD/CAD, USD/CHF Going Down (revisited)

Tue, Sep 25 2007, 22:58 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I keep my opinions already expressed in my very latest FXstreet.com notes.
I continue to think that no remarkable point of price inflection has occured yet in either of the two pairs.

Published on Tue, Sep 25 2007, 22:58 GMT

USD/CAD, USD/CHF Going Down

Thu, Sep 20 2007, 22:17 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

On September 12th I published here on FXstreet.com the following notes:

'In my letter to clients of August 1st - as the USD/CAD was spiking up to 1.0700 (the pair would later surge to nearby 1.0900) - I was writing:

'I'll stick to my idea, graphical representation of the last few days via a USD/CAD daily chart does not look to me as a notable turnaround.

I know the following makes room for a certain bias - still, I wonder whether the USD/CAD is going to experience a '2B bottom' appearance in form of a far more complex inflection stage.'

I have eversince repeatedly highlighted the above, including in my FXstreet.com notes - like for example on August 21st:

'What happened in the USD/CAD over the last few days partially confirm both my doubts toward considering late July as a remarkable, swiftly-shaped bottom, and my earlier thinking that a '2B bottom' might be developing in the pair.'

The USD/CAD yesterday finally was sold down under the 1.0500 level. It has dropped right under 1.0400 today. As for the '2B bottom' scenario, that remains a possibility - although my attention at all times remains focused on recognizing early signs of already happened change of sentiment, rather than anticipating the technical signals themselves.'

Nonetheless, in my letter to clients of September 13th I came to notice:

'The USD/CAD is at these hours testing its July lows - so, the most important part of my one and a half month old forecast has already been confirmed.
However, the other part of that forecast (actually it has stood more as a wondering than a prediction) - referring to the possibility of a '2B bottom' chart appearance bringing on a surprising bullish reversal upon the pair's revisiting its July lows - does not look consistent with 3 different kind of factors: first off, today's price action in the USD/CAD has not been pointing to a notable bullish reversal, which would have been the key prerequisite for a '2B bottom' setup to show off in the first place, secondly, I don't yet perceive a notable point of price inflection in the US Dollar elsewhere across the board, and thirdly, I don't yet perceive a notable point of inflection in the price of oil either.'

And then, I began my letter of last Sunday, September 16th as follows:

'Beware once again of my observation I made about the odds of the USD/CAD market in my letter dated Thursday, September 13th.'

Since September 13th alone, the USD/CAD has dropped for about 350 pips.
I still don't perceive a notable point of price inflection in the pair. Nonetheless, I continue to believe that the eventual appearance of such a point of price inflection may create a trading opportunity of remarkable reward / risk characteristics - and thus, the USD/CAD is to remain on my list of regular observance.

In my letter to clients dated September 7th I was noting:

'Two of my latest market calls were strongly backed up by today's market action: the USD/CHF testing again its long-term horizontal support at 1.20 - 1.19, and the reloading pressures in the USD/CAD which still point downward despite the fact the pair still holds.
I believe both markets still have room to go down.'

Further on, on September 10th I was adding:

'There are a few market events to still watch for.
First off, whether the USD/CHF will be sold under 1.18 - as for the time being the bearish pressures, I believe, remain considerable.
Secondly, whether the bears will get stronger yet again in the USD/CAD - bringing the prospective bulls close to a long position of remarkable reward/risk characteristics.
With data now at hand, I continue to believe the two above described scenarios have a very good chance to come into reality.'

The USD/CHF moving nowadays under the 1.20 - 1.19 supportive 'line in the sand' has been followed over the last 24 hours by the pair sinking right under 1.18.

Published on Thu, Sep 20 2007, 22:17 GMT

An Anomaly Called the British Pound

Wed, Sep 19 2007, 13:57 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In my letter to clients of last Wednesday, September 12th - less than 48 hours before the Northern Rock bailout announcement - I was noting (an adaptation appeared on FXstreet.com on Sunday, September 16th):

'Says one of those articles, 'In the U.K., the gap between the three-month money market rate, which stood at 6.9 percent today, and the benchmark central bank rate has widened to the most in at least two decades.'

In an article titled 'Is FX Volatility Dead?', dated November 29th, 2006, and published on the European Central Bank's website - Monica Fan, Global Head of FX Strategy for RBC Capital Markets was concluding in a way that now sounds very interesting relative to the current context of most global markets, as well as ahead of the approaching Federal Reserve's monetary policy decision:

'Increases in volatility are only likely to be sustained if there is a loss of credibility in central bank policy, i.e., central banks appear to be behind the curve.'

In spite of liquidity worth almost half a trillion US Dollars injected over the past 5 weeks, and even though the Federal Reserve finally has a fundamental pretext at hand in order to cut the key interest rate i.e. the very recent dynamics of the US non-farm payrolls - central banks across the board still do not really seem pro-active.

However, during a global crisis and manifest of generalized panic, the ties between fundamental logic and economic calculations - on the one hand - and the market mechanics - on the other hand - more often not are being compromised. If global markets transacting tens of billions of dollars every day have already taken on a life of their own counter to the multi-annual trends displayed until very recently, I think the fundamental pretexts justifying the new reality won't be too difficult to be found.'

Now, think about this: on September 12th the Governor of the Bank of England, Mervyn King, tells lawmakers that central banks should avoid giving the impression they will help lenders that made bad decisions.
And yet, only one day later the same Bank of England decides to relax deposit rules in order to spur lending. And just another day later, Northern Rock gets emergency Bank of England funding - first event of such magnitude in almost 35 years.

While today, the Bank of England has decided in favour of precisely what it did not want to do one week ago: providing funds at a 3-month maturity against a wider range of collateral, including mortgage collateral. In a statement published today, the Bank of England writes, 'This measure is being taken in order to alleviate the strains in longer-maturity money markets'.

So, of course my attention has been fully focused on the British Pound as of very late, acknowledging in my letter dated Sunday, September 16th massive (and leading) selling pressures accumulating on the currency's (too) various fronts like against the US Dollar, and particularly the Euro and the Danish Krone:

'The world's major central banks - the Bank of England in particular - act nowadays like under the pressure of being caught between quite a rock and quite a hard place.

Since early this week, buyers have been driving the EUR/GBP higher, while the GBP/DKK already began a heavy downfall right through a line of important long-term support. Plus, the Northern Rock shares plunged last Friday and on the first day of this week for about 50%.
Right now, with the current technical data at hand, I could only be reinforcing the perception of just massive bearish pressures existing in the British Pound against the Euro and the Danish Krone.

After all, the succession of events related to the Bank of England's own performance nowadays strikingly resembles the central bank's massive lack of coherence during the speculative attack against the British Pound happened precisely 15 years ago.
The bigger irony is that Mervyn King - who on August 8th, just one day before fear turned into riot in the credit markets, sustained the 'not an international financial crisis' hypothesis - is a former professor at the London School of Economics - meaning, the same institution which earlier on had hosted George Soros as a student.

Published on Wed, Sep 19 2007, 13:57 GMT

Extraordinary Events

Mon, Sep 17 2007, 21:03 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Extraordinary events are now happening even on a daily basis - and what we see now and filter through the current experiences may echo many years into our future as global speculators.

I continue to perceive that a perfect storm may be approaching, primarily in the global stock markets - some of the major European and US stock indices currently topping my list of regular observance - as well as in the Japanese Yen's currency markets.

Published on Mon, Sep 17 2007, 21:03 GMT

At the Other Side of Rediscovered Optimism (revisited)

Sun, Sep 16 2007, 11:16 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I wrote once, deconstructing notable market conjunctures and their more or less obvious triggers will always appeal to me far more than the latest ebook on how accurately a stochastic indicator predicts the twists and turns of a rangebound market on a 1-minute chart.
These days, it just couldn't have been different.

The following media headlines - which had me focused as of very late - I consider key toward what I could call the 'dark side of the moon' relative to the current global context:

'Why Libor Defies Gravity'

'BOE's King Refuses to Relax Money Lending Standards'

'Three-Month Pound Libor Rate Stays at Nine-Year High'

'Bank of England Relaxes Deposit Rules to Spur Lending'

'Northern Rock Gets Emergency Bank of England Funding'

'Liquidity Support Facility for Northern Rock plc'

'In the first significant borrowing from the Fed since it lowered the discount rate last month, U.S. banks borrowed $7.2 billion from the Federal Reserve as of Wednesday, the most since just after the attacks of Sept. 11, 2001, the Fed said Thursday'

'Increases in volatility are only likely to be sustained if there is a loss of credibility in central bank policy, i.e., central banks appear to be behind the curve.'

In spite of liquidity worth almost half a trillion US Dollars injected over the past weeks, and even though the Federal Reserve finally has a few fundamental pretexts at hand in order to cut the key interest rate - central banks across the board still feel the pressure of being between quite a rock and quite a hard place.

However, during a global crisis and manifest of generalized panic, the ties between fundamental logic and economic calculations - on the one hand - and the market mechanics - on the other hand - more often than not are being compromised. If global markets transacting trillions of dollars every day have already taken on a life of their own counter to the multi-annual trends displayed until very recently, I think the fundamental pretexts justifying the new reality won't be too difficult to be found.

Published on Sun, Sep 16 2007, 11:16 GMT

At the Other Side of Rediscovered Optimism

Sat, Sep 15 2007, 12:45 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I wrote for my letter to clients dated Saturday, September 1st:

'If I were to pick the one phrase which sounded to me as the most relevant from Ben Bernanke's speech wired yesterday, that phrase would well be the following:

'Further tightening of credit conditions, if sustained, would increase the risk that the current weakness in housing could be deeper or more prolonged than previously expected.'

Mr. Bernanke indeed is watching the right charts. Regardless of the brand new euphoria rediscovered in the stock markets, the US short-term yields continue the most abrupt downfall in 19 years. It could be a sign that something extremely serious is happening precisely where most market participants do not seem to be watching.

Remember when months ago I was writing that, since most people interviewed by the mainstream media did not feel like the carry trade was in any kind of danger just because the interest rate differentials between Japan and the rest of the world were not going to shrink anytime soon, the demise of the carry trade would rather come at the other end of the tunnel i.e. the global stock markets as well as other speculative environments, intoxicated by ultra aggressive exposures financed by super cheap money, eventually going bust?
Nowadays, if we perceive the stock markets at the one end of the tunnel, and all the current craziness in the credit market at the other end, the situation may not be all that different.'

That particular kind of intuition seems to having been working yet again.

'Volatility in the euro money market has increased and the ECB is closely monitoring the situation', said the European Central Bank on September 5th in a statement. It continued, 'Should this persist tomorrow, the ECB stands ready to contribute to orderly conditions'. The ECB did honor that promise, on September 6th pumping liquidity worth of almost $60 billion.

A few, key excerpts as follows from a very interesting article titled 'Why Libor Defies Gravity', which appeared September 5th in the online edition of The Wall Street Journal:

'The Federal Reserve could cut short-term interest rates in the weeks ahead, but right now one key rate is going in exactly the opposite direction, something that could have a big impact on markets and the economy.'

'Credit-market turmoil has pushed the Libor higher, even as other short-term interest rates, such as the interest rate on Treasury bills, are falling.'

'The disjointed movement in Libor and other short-term interest rates underscores the turmoil that persists in money markets more than two weeks after central banks in the U.S., Europe and Asia sought to settle short-term lending by injecting massive amounts of cash into the global financial system.'

'Libor is an interest rate charged by banks for short-term loans to each other. It is set daily by a bank trade association in London. The loans can be in U.S. dollars, euros, British pounds or other currencies.

U.S.-dollar Libor rates usually closely track the federal-funds rate, which is the overnight lending rate managed by the Federal Reserve. But the two rates are now parting ways, complicating matters for the Fed as it tries to manage the global credit crisis and pushing up many short-term interest rates for borrowers.

For the first eight months of this year, the U.S.-dollar Libor rate for three-month loans between banks nudged between 5.34% and 5.36%. Yesterday, the rate hit 5.7%, marking the rate's fastest rise in several years. The Libor hasn't been this far above the base short-term rates set by central banks since the Enron and WorldCom collapses in 2001, according to the British Bankers' Association, which sets the rate.'

On September 5th, Bloomberg.com wrote as well:

'The rate banks charge each other to borrow in dollars for three months rose for a 10th day as concern about losses on securities linked to U.S. subprime mortgages kept lenders from offering cash for any time longer than a few days.

The London interbank offered rate, or Libor, increased to 5.72 percent, the highest since January 2001, from 5.70 percent yesterday and 5.36 percent at the end of July, the British Bankers Association said today. Other short-term rates also rose, including the three-month rate for the euro, which climbed to 4.76 percent from 4.74 percent, its highest since 2001.

Lending rates have risen so fast that the Bank of England today offered to provide additional cash to ease the squeeze on borrowing and the European Central Bank said it may act tomorrow to soothe money markets if needed. The moves came amid concern banks may be sitting on undisclosed losses as a result of late payments by homeowners with poor credit histories.

``I've been in this market for 15 years, and I've never seen any thing quite as bad,'' said Joerg Vogt, director of euro trading at Deutsche Bank AG in Frankfurt. ``It's a bid only market, and the repo market for most of non-government paper is practically shut down.'''

I couldn't agree more.

Published on Sat, Sep 15 2007, 12:45 GMT

Latest Calls

Wed, Sep 12 2007, 21:19 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In my letter to clients of August 1st - as the USD/CAD was spiking up to 1.0700 (the pair would later surge to nearby 1.0900) - I was writing:

'I'll stick to my idea, graphical representation of the last few days via a USD/CAD daily chart does not look to me as a notable turnaround.

I know the following makes room for a certain bias - still, I wonder whether the USD/CAD is going to experience a '2B bottom' appearance in form of a far more complex inflection stage.'

I have eversince repeatedly highlighted the above, including in my FXstreet.com notes - like for example on August 21st:

On Monday, August 20th - with the GBP/USD ranging for the day between mid 1.98 and 1.99 - I was noting the following in precisely the same letter in which I estimated that a global positive correction would ensue after the August 16th - 17th turmoil:

'I see the GBP/USD having room nowadays to advance to 2.01 - 2.03.'

I reconfirmed that kind of expectation on FXstreet.com only one day later, on August 21st, while reinforcing the anticipation of a relief rally in the global stock markets, the Japanese Yen cross pairs, and the European currencies against the US Dollar.

Yesterday and today, the GBP/USD displayed levels even above 2.03.

The USD/CHF moving nowadays back under the 1.20 - 1.19 'line in the sand' also confirms another personal, few week old guess.

Nevertheless, other recent forecasts have failed.

For example, on July 8th I was perceiving underlying strength in a myriad of American and European stock markets. And although that 'underlying strength' did push the global stock markets higher almost instantly (on July 12th, the Dow Jones Industrial Average noted a 283.86-point gain - the most important in absolute terms since October 2002, and in percentage terms since October 2003), the tops found by the US stock markets almost just as quickly, on July 19th, eventually drove a large number of international stock markets close to a collapse. Surprisingly or not maybe, the single notable exception happened to be the Chinese stock market, on which I have remained bullish for a considerable period of time (the Shanghai Composite Index surged about 20% during the recent global panic, while other Asian stock indices actually lost the same percentage).

My expectations that the price of oil turned downward just after revisiting its last year's highs, as well as that the gold market would commence a negative movement upon a test of $680 - $700, weren't confirmed by recent market action.

Published on Wed, Sep 12 2007, 21:19 GMT

Between a Rock and a Hard Place

Fri, Sep 7 2007, 09:10 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

According to Bloomberg.com yesterday, 'The ECB earlier today added 42.2 billion euros ($57.7 billion) in emergency cash to ease a credit drought that had pushed overnight deposit rates to a six-year high'.
With both the ECB and the Bank of England directly involved in the monetary markets, it would have been quite unusual - to say the least - to see either of those central banks cutting the corresponding key interest rates yesterday.

The major central banks across the board, nevertheless, - let alone the Federal Reserve itself - are being caught between a rock and a hard place, between on the one hand the need to see the inflationary pressures going down, the need to overshoot in their monetary policy until enough is really enough, and on the other hand the brand new, self-reinforcing worries about the financial markets. When a solution to this dilemma finally emerges, it may already be late for global markets which - as I wrote on past occasions - seem to have taken on a life of their own beyond the point of no return.

Published on Fri, Sep 7 2007, 09:10 GMT

The Case for a More Profound Movement (part 2 of 2)

Sun, Sep 2 2007, 13:41 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Since my FXstreet.com notes posted on Tuesday, August 21st, the Euro and the British Pound have surged against both the Japanese Yen and the US Dollar. Most US, European and Asian stock market indices have soared. The pressures in the USD/CAD nowadays still point downward.

My latest ideas have been simple ideas. Not all simple ideas are necessarily good ones, but with simple ideas one may far easier detect when something goes wrong.
After betting that a concerted global corrective movement could start in the immediate afterwards of the Federal Reserve's decision to cut the discount interest rate on August 17th, however, for me it is now time to consider a different market hypothesis.

The monthly charts of cross pairs like the EUR/JPY and the GBP/JPY showed on July 31st that a significant change of sentiment might have been underway in the Japanese Yen markets. We know now that mid July marked an important point of price inflection in the main US stock indices.
My new hypothesis is that the ongoing positive correction in most global markets - the very same markets which have exhibited exuberant correlations for months already - is only a dead cat bounce, a temporary relief just ahead of a brand new manifest of panic.

If a new huge global riot is being underway, then major US and European stock markets are on the verge of collapsing, while the Japanese Yen is going to surge against the US Dollar and particularly via its cross pairs. The US Dollar may resume its recent appreciation across the board, albeit selectively.

Published on Sun, Sep 2 2007, 13:41 GMT

The Case for a More Profound Movement (part 1 of 2)

Sat, Sep 1 2007, 14:49 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In my letter to clients of May 30th I was writing:

'I don't yet see an immediate meltdown to happen in either of the major US or European stock markets - in better words, I don't see the blow-off in the making. However, I have been watching the Japanese stock markets for some time and the image is quite intriguing, it appears as if these markets could be really vulnerable to a possible sell-off; one fund manager and friend of mine called me a few days ago telling me the intriguing price deceleration that has been visible for some time in the Nikkei 225 could be a sign of the Japanese stock market expecting higher interest rates in Japan, but that is highly questionable since the same prospects of higher interest rates don't seem to be currently discounted by the Yen markets.'

An intriguing, purely visual observation nowadays is, relative to the US stock markets' recent performance, some of the European stock indices (the German DAX, in particular) have not been able to benefit significantly from the concerted global correction reinforced after the Federal Reserve's decision to cut the discount interest rate on Friday, August 17th.
The difference between how some of the European stock markets have lately performed versus the US indices could herald significant global selling pressures reloading ahead - just like the Nikkei offered one of the few leading signals months before the current riot in the global stock markets.

July 30th, in my letter to clients:

'24 hours from now, the monthly charts will give a definite view of July.
The monthly charts of the main Yen crosses - including but not limited to those of the EUR/JPY and the GBP/JPY - already suggest an important change may be ahead.'

What I'd thought at that time was in direct connection with displaying the month of July's graphical representation in Yen crosses like the EUR/JPY and the GBP/JPY, and then placing that image against the long-term uptrend of those markets.

August 1st:

'The USD/JPY did in fact drop under the 118.50 immediate technical support highlighted several days ago - a thing which complicates the big picture (it may complicate the whole world as we know it, for that matter), and in my view presents sellers with the upper hand for truly the first time in a long period (...)'

August 5th:

'Even if an immediate bounce happens, long-term bulls may be losing initiative in the USD/JPY.
As a matter of fact, the Japanese Yen might have bottomed across the board.'

Writing on August 14th that 'However, I do have to warn just as I did a number of weeks ago: we may at this moment be experiencing a very particular context applied to a wide range of exuberantly correlated global markets - particular even from a historical perspective - where and when thinking within the rigid matrices of Technical or Fundamental Analysis 101 could be the worst, least opportunistic idea possible' - I added the following on Thursday, August 16th, the day when huge global markets had been the closest to a collapse:

'That is exactly what's happened. The distance between the lack of confidence / tight risk and a good deal of confidence / greater risk has been that short over the last couple of weeks, that judging events within the rigid patterns of Technical Analysis 101 might have put us in a comfortable position of waiting precisely when the global markets spent not one minute doing it themselves.'

It is also remarkable how the ideas presented in my FXstreet.com article of July 11th, titled 'Yen Shows', sound nowadays toward the latest developments experienced by the Japanese Yen markets.

The Yen showed, indeed.

Published on Sat, Sep 1 2007, 14:49 GMT

Those Rough Days Are Ahead

Thu, Aug 30 2007, 19:48 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Last Friday's US durable goods and the new home sales releases came on the bright side of expectations - yet the US Dollar eventually went further downward versus a wide range of currencies.
When the market wants to get somewhere, it just will - regardless of the day's news. Friday was yet another day when conventional fundamental analysis didn't seem to reasonably explain the market mechanics.

Wall Street looks nowadays way more calm about the apparently diminishing chances that the Federal Reserve will cut the key interest rate at the pre-announced FOMC meeting next month. It is the same Wall Street which publicly launched the call a couple of weeks ago that the US central bank MUST cut rates in order to avoid a financial disaster.
Of course, it won't take more than a 3% or so depreciation in the Dow Jones Industrial Average for Wall Street to change its tone yet again.

Then, the media could turn this subject matter upside down for hundreds of times - still, I continue to believe the Federal Reserve seem to be making 5 late steps instead of just one and early. And, none of the other major central banks across the board don't yet read a dramatic threat, a systemic danger into the current global riot. But ultimately, there's not much use in pumping liquidity if huge global markets have just taken on a life of their own and already have gone beyond the point of no return.

Last days also showed that while the speculator can be mentally set on the big picture, he can get upfront and act in far shorter-term timeframes when rapid-fire opportunities present themselves.
However, as a newly born wave of optimism currently inundates the global financial markets, for the longer-term, opportunistic part of us, the rough days are finally just around the corner.

Published on Thu, Aug 30 2007, 19:48 GMT

We're Living Interesting Times, More Interesting Yet to Come

Sun, Aug 26 2007, 16:30 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In my letter to clients of Friday, August 17th - hours after the Federal Reserve's decision to cut the discount interest rate - I was writing:

'It would be wrong to make any kind of comments about the global markets - FX including - right now.
It's hard to balance the odds, nevertheless I still hope fresh bulls will be taking over in the global stock markets as well as the Yen cross pairs. That is, daytraders still buying time for longer-term players (as a matter of fact, 'opportunistic players' would be more correct than 'longer-term').'

Then, on Monday:

'I believe sellers have just lost the initiative in the global stock markets, the USD/JPY and the Yen crosses, as well as in the European currencies versus the US Dollar. If some congestion time develops from here, the Federal Reserve have just bought us time to decide what next.

I see the GBP/USD having room nowadays to advance to 2.01 - 2.03.'

I reinforced then my opinions on Tuesday (including in these FXstreet.com notes published on the same day), in my private letter adding as well some extra technical observations regarding few stocks constituents of the Dow Jones Industrial Average:

'My guess is, for the time being the global stock markets and the Yen pairs must be quite illiquid.

Anyway, I continue to assume buyers are slowly taking over in the stock indices and the Yen crosses. The European currencies have room to correct positively against the US Dollar. The situation in the USD/CAD remains strange, as a retest of July lows looks to me as a likely possibility.

Technically, out of the stocks which constitute the Dow Jones Industrial Average index, I believe Alcoa and Home Depot still show signs they may continue to appreciate in the days ahead. Another constituent, 3M, offered at the close last Friday - after the Federal Reserve's decision to cut the discount interest rate - probably the best buy signal.

I say these as some of the constituent stocks may give better clues than the index itself - let alone clear-cut technical observations in themselves.'

Writing on Wednesday that 'In the short run I'm keeping unchanged all my recent ideas about the global stock markets, Yen crosses, USD/CAD and the European currencies against the US Dollar', a new reinforcement came out on Thursday:

'In the big picture, I don't think a new wave of panic has just started out. What I'm seeing now in the early US transacting time could be only a short-term repositioning of limited trading interests.
I see a continuation of the last few days' congesting time as very likely in the short run - and for the time being I'm also keeping my latest, global market opinions intact.'

Since my Tuesday's FXstreet.com notes alone, the GBP/USD has soared 300+ pips. The EUR/JPY has surged for almost 500 pips. The pressure on the USD/CAD still points downward.
For the whole week, the Dow Jones Industrial Average gained about 300 points.

In an article that appeared here on FXstreet.com on June 5th, titled 'Rational Exuberance (revisited)', I wrote, 'We're living interesting times, more interesting yet to come.'

That was truly the forecast that really did count, alongside my words published here on July 21st, only 2 days after the major US stock indices topped out, '(...) for a wide range of financial markets across the board the clock is ticking, which I believe makes the times ahead some of the most interesting in many years.'

Published on Sun, Aug 26 2007, 16:30 GMT

Still Buying Time (revisited)

Tue, Aug 21 2007, 14:49 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I believe sellers may have just lost the initiative in the global stock markets, the Yen crosses, as well as in the European currencies versus the US Dollar. If some congestions develop from here, it means the Federal Reserve have just bought longer-term players time to decide what next (although I feel like 'opportunistic' would be a more appropriate term instead of 'longer-term players', given the current global context).

What happened in the USD/CAD over the last few days partially confirm both my doubts toward considering late July as a remarkable, swiftly-shaped bottom, and my earlier thinking that a '2B bottom' might be developing in the pair.

Published on Tue, Aug 21 2007, 14:49 GMT

Bad Getting Worse (revisited)

Thu, Aug 16 2007, 18:16 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

As follows you will find what I wrote in my letter to clients on this Tuesday, August 14th. I continue to stand by each and every word of that text:

'I say - make no mistake, when leverage is involved, timing is almost everything.
When notable opportunities seem to present themselves, the hardest thing for a speculator is making a compromise between having remarkable confidence in whichever technical or fundamental scenario at hand, and indulging the lowest level of risk possible (we in retail could read: attaching the tightest, most rigid stop-loss order possible).

I do have this very, very distinct feeling that a wide series of global stock markets - including the major US and European ones - as well as the Japanese Yen markets - particularly the main Yen cross pairs - have already made a remarkable turnaround. World financial disaster may not happen, nonetheless I feel like extremely interesting times are ahead, and truly notable opportunities to speculate could well be underway.

To me, the best, immediate case scenario would have been the global stock markets as well the Yen markets entering a period of price constriction - in other words, daytraders entertaining their own agenda buying time for longer-term players. Such price constrictions may help one constructing positions counter to multi-year trends in a number of stock and currency markets with far better risk/reward characteristics than those various price charts are advertising right now.
However, I do have to warn just as I did a number of weeks ago: we may at this moment be experiencing a very particular context applied to a wide range of exuberantly correlated global markets - particular even from a historical perspective - where and when thinking within the rigid matrices of Technical or Fundamental Analysis 101 could be the worst, least opportunistic idea possible.'

Published on Thu, Aug 16 2007, 18:16 GMT

Bad Getting Worse

Sat, Aug 11 2007, 14:23 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Bad has just gotten worse.

The 'subprime' issues no longer appear as a light theme best interpreted in a contrarian way.
Nonetheless, I'd always been reluctant to consider the 'subprime' as the next major prevalent theme of the global markets.

First off, opposite to the 'carry trade', the 'subprime' is a rather difficult concept. The simpler the concept, the more widespread recognition it may get, and so, the higher the chances for it to become the multi-trillion dollar markets' main theme.
Secondly, the mainstream media (let alone financial officials of the highest rank across the board) had pointed to the 'contained' nature of the 'subprime' troubles - as if they weren't supposed to lead to a global situation. The BNP Paribas piece of news, and the concerted actions of several central banks in the money markets late this week might have just resolved that, though.
Thirdly, I never really thought the 'subprime' would reach the status of being the global markets' brand new prevalent theme. Instead, it only could have played the role of another one piece rolling in an intricate domino. Just like in 1998, a liquidity crunch could eventually be the effect of that domino, and the ultimate trigger of a worldwide financial crisis.

The longer the current global riot lasts, the more confident I grow that what we're experiencing nowadays is indeed remarkable - and truly historical trading opportunities could soon be presenting themselves from just around the corner.

Published on Sat, Aug 11 2007, 14:23 GMT

Still Buying Time

Mon, Aug 6 2007, 21:24 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I wrote here last Thursday:

'Making current observations rather than predictions becomes paramount for the next several weeks ahead.
With so much negative press around, the stock markets could see a bounce. That buys some of us pretious time. And, if indeed the bounce materializes itself, what is going to happen for some time on the right side of the charts may give us a better indication about whether we truly have historically remarkable opportunities ahead of us, or just good looking traps.'

I continue to believe the same.

Published on Mon, Aug 6 2007, 21:24 GMT

Buying Time

Thu, Aug 2 2007, 21:22 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

The currency markets had been left at some point last week without their preferred prevalent theme. Carry trade stopped being in vogue.

The Yen went up, although the current state of affairs at the Bank of Japan might have reached the climax of incoherence. The Canadian Dollar got sold-off, although the public was just beginning to grow even more confident in that the next move in Canada's monetary policy could be a hike. The European currencies lost terrain versus the US Dollar - even though the interest rates in both the Euro zone and the UK may see further hikes this year, whereas the US futures markets have discounted these days an almost 100% chance the Federal Reserve will lower the rates until the end of the year.

For the time being, what I can spell out about the main global stock markets as well as the Yen (the Yen crosses in particular) is, jumping with conclusions may be the worst idea.
We still don't have enough data to discern whether the last week was the real debut of a far more sizable movement counter to the already huge, multi-year trends - or just another 'crying wolf' sort of moment.

Making current observations rather than predictions becomes paramount for the next several weeks ahead.
With so much negative press around, the stock markets could see a bounce. That buys some of us pretious time. And, if indeed the bounce materializes itself, what is going to happen for some time on the right side of the charts may give us a better indication about whether we truly have historically remarkable opportunities ahead of us, or just good looking traps.

Published on Thu, Aug 2 2007, 21:22 GMT

Pieces in Search for a Puzzle

Sun, Jul 29 2007, 11:43 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

George Soros said once his success as a speculator had not been due to making valid predictions, but to correcting the false ones.

Latest events in the global markets - FX included - have definitely caught me by some surprise. A lot of former calls recently had been working out quite well in a wide series of stock and currency markets, but at one moment it seems the mechanism gets broken and one should begin exploring new market hypotheses.

Whether the global markets' prevalent theme is currently switching from the carry trade to subprime and the end of the credit bubble, and whether there truly is a major change in sentiment underway across the board - those remain to be seen. We're still dealing with just a few day price action versus multi-year trends.
This week's events have gotten a bit out of hand, and I wouldn't touch anything or push the buttons anywhere, yet. In my opinion, what is going to happen in the days, even weeks ahead will be far more important than what we saw recently, on Thursday and Friday in particular.

There are some similarities between late February and this week - for example, in both situations while the stock markets went down, the Yen went up. However, reportedly China triggered the late February global riot (which I still find somewhat of an overstatement), whereas during the latest days the Chinese stock markets have actually maintained a buying frenzy.

I believe this week, as those days in late February, was a panicky manifest of a huge carry trade liquidation. I say that as not only the stock markets across the board had been sold-off, but the Yen and the Swiss Franc went up considerably. As long as this correlation exists, it all comes down to the carry trade.

Most important right now, in my opinion, is gathering all data available and start putting the pieces together.

To be continued.

Published on Sun, Jul 29 2007, 11:43 GMT

Latest Forecasts (revisited)

Wed, Jul 25 2007, 17:11 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

What a better confirmation of a USD/CAD outright bearish view than the pair dropping yesterday 100+ pips down to 1.03 area, and making a new historical lower low in the process?

I can formulate an early contrarian interest, and guesstimate that a notable counter-trend bet could be just around the corner.
Nevertheless, good money has been made nowadays actually on the pair's downside, and so far the only thing I could have done - and have done so - was acknowledging the relentless bearish pressure.

The New Zealand Dollar has just tested new highs via its main cross pairs. It did, in fact, display new higher highs against the Euro, the British Pound and the Swiss Franc - and it currently looks like just about doing the same versus the Australian Dollar.
The idea, advanced in one of my letters to clients a couple of weeks ago, of hedging a short AUD/NZD or EUR/NZD exposure by shorting the EUR/AUD and/or going long the AUD/USD would have been not half bad - but one should recall taking positions in one or both of those Australian Dollar pairs, no matter how profitable eventually, still would have come down to a form of hedging only, not speculation.

I don't yet perceive a notable shift in price action of the New Zealand Dollar via its main crosses.
Extra prudence is required, though, particularly if leverage is involved - prudence not just market wise, but also Reserve Bank of New Zealand wise.

As anticipated, as well, both the US Dollar and the Yen had gone further downward across the board. Since a couple of weeks ago more than 500 pips upward had been noted in the GBP/USD, around 200 pips in the EUR/USD.

On July 1st, I included here the following mention, ' (...) my opinion is China's stock market itself still has upside potential ahead of a potentially severe blow-off'. Few days later, on July 8th, I noted in my letter to clients, 'China's stock market took a few hits recently - but I think it is recovering and further headway is ahead.'

This chart of the Shanghai Composite Index, and this of Shenzhen 100 Index are relevant to the revival of buying frenzy in the main two Chinese stock indices - even in spite of the recent interest rate hike.

Published on Wed, Jul 25 2007, 17:11 GMT

Latest Forecasts

Sat, Jul 21 2007, 15:44 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Writing and publishing here my latest notes on the yields' new conundrum and the Japanese Yen, even though thought-provoking, made me feel more like a journalist. Some of the following articles, however, will make the necessary adjustements.

I wrote in my letter to clients of Friday, June 29th, 'I think the USD/CAD is still going to drop to new historical lows. Chance that the recent short-term volatility actually marks a notable inflection point in the pair's larger timeframes is, in my view, extremely small.'

I came to reinforce my USD/CAD bearish views here on FXstreet.com on July 1st, then privately added to those comments on that same day, 'In spite of terrific intraday volatility seen on Friday, I still don't perceive a major inflection point having already occured in the USD/CAD.'

Since June 29th, the US Dollar tumbled versus the Canadian Dollar for approximately 250 pips. I still don't have the perception of a major inflection point in the making in the USD/CAD - although I do estimate, as far as I am concerned, that placing a notable bet in the pair remains just a matter of when, not if.

As anticipated, both the US Dollar and the Japanese Yen went further downward across the board. Since a couple of weeks ago, the GBP/USD surged for about 450 pips, the EUR/USD did for almost 200 pips.

Whereas my recent observations have remained fairly unchanged - for a wide range of financial markets across the board the clock is ticking, which I believe makes the times ahead some of the most interesting in many years.

Published on Sat, Jul 21 2007, 15:44 GMT

Yen Shows (republished)

Thu, Jul 19 2007, 20:23 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Bloomberg.com quoted on June 23rd:

'"The carry trade remains a very convincing story,'' said Mike Moran, senior currency strategist at Standard Chartered Bank in New York. ``Unless we see a reversal in the rate expectations, that's going to continue. We don't see any risk of a rate hike by the BOJ until the end of the year."'

Reuters recently cited as well:

'"Unless there is a radical change in expectations for interest rates, people will look for levels to sell the yen," said John McCarthy, head of foreign exchange trading at ING Capital Markets in New York. "I find it unfathomable at times, but so much (trading) is model-driven interest rate plays."'

In their quest for what they should fear, I think a lot of people nowadays may be looking in the wrong, or incomplete to say the least, direction.

The indiscernible future of the Bank of Japan hiking interest rates is not the only scenario which could bring on a sizable turnaround in the Japanese Yen.

First off, I recall Michael Shedlock - one my favourite market commentators - noting that there seems to be too much consensus on what could exhaust the multi-year global credit bubble (a subject matter so closely related to the Yen carry trade). He writes, 'I am not sure what will pop this global credit bubble, but I suspect it will not be higher U.S. interest rates or a rising yen. More than likely, it will be either pure exhaustion, something totally off everyone's radar, or simply the reverse of some scenario that everyone expects.'.

That reminds me of my own, still living expectation that a sizable reversal in the Yen may be triggered mainly as a result of extreme technical conditions already embedded in some of the ongoing price parabolas themselves - for only in the later stages of the new state of affairs the public will undoubtedly manage to associate a fundamental rationale.

Secondly, as many of the major financial markets across the board - including but not limited to the stock markets - have continually overstretched over the latest months (and, in some cases, years), a sudden change in sentiment happening in one or more of those markets may have an instant and strong impact on the Japanese Yen as well. We already have been able to experience exuberant global correlations - like, for just one of the many examples, between the graphical price representation of some of the Yen cross pairs and that of several major European stock market indices.

Chrystia Freeland, Financial Times US Managing Editor, and Financial Times reporter James Politi interviewed George Soros in New York on March 6th - just a few days after the late February global financial riot. One idea in particular from the edited transcript of that interview I have found interesting by association with the second scenario of a possible turnaround in the Yen markets as described above:

'FT: We're speaking at a moment of a lot of turbulence in the markets. What's your explanation for what's happening?

SOROS: I think there are several factors but, very important, is the carry trade, the fact that the yen is basically interest free and a lot of money is coming from borrowing and a lot of Japanese money going abroad. And the yen was weakening so a lot of people got into that trade and there's a little bit of a shake-up going on.

FT: With the appreciation of the yen?

SOROS: That's right. I mean the appreciation of the yen shows that there is a shake-out. (...)'

Perhaps it is going to be again the appreciation of the Yen which will reflect rather than lead notable market turbulences happening elsewhere.

The third scenario could be about the indiscernible future of the Japanese interest rates moving upwards.
Even this perspective may not happen as in the academia - namely, it may have less to do with intrinsic Japanese fundamentals, and more to do with events about which I doubt the mainstream media or the bulk of market participants will find a reasonable fundamental reasoning any time soon.

The fourth scenario, at last, is about all the things I just cannot perceive or foresee as of now.
Although all three scenarios described above already began sending their early signals, one should stay even more alert - since there always is a fourth scenario.

Published on Thu, Jul 19 2007, 20:23 GMT

Yields' New Conundrum (republished)

Sun, Jul 15 2007, 11:00 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

According to Bloomberg.com (July 2nd), 'JPMorgan says investors in Treasuries are the most bullish in more than five years. A weekly index by the third-largest U.S. bank, which subtracts the percentage of investors expecting bonds to fall from those forecasting a rise, reached 31 for the period ended June 25, the highest since a reading of 36 on Jan. 7, 2002'.

And yet, I stay reminiscent of the dive in US note and bond prices synchronized with a run-up in yields which hit the financial markets across the board in early June - an event which mainstream media could not yet deconstruct.

For example, in the article titled 'Global Rate Increase Yields Haze of Explanations' published on Bloomberg.com on June 14th, Caroline Baum writes:

'We in the media are forced to explain these events, often tripping over ourselves in the process.'

'The sentiment shift was stunning to behold and difficult to explain.'

'Ultimately the rise in market interest rates will be limited if it's not supported by the fundamentals. And the fundamentals only reveal themselves with time (and maybe data revisions).

That's one reason technical traders pay no attention to news or statistics, gleaning all the information they need from price charts and momentum studies.

That isn't to say that candlesticks patterns and relative strength indexes always predict the future accurately. They don't.

It's just that fundamental arguments have a way of coming back to haunt us. Just when everyone thought the global saving glut was a satisfying explanation for historically low long-term rates, higher rates come along to spoil a good theory.'

All the more intriguing - at some point in an article titled 'Not so risk-free' which appeared in the online edition of The Economist on the same day of June 14th, with regard to the early June slump in bond prices one could read, '(...) economic fundamentals may not be the primary cause for the sell-off'. That's an interesting premise for a text published in The Economist.

I wonder whether the recent run-up in global yields actually spells out a perfect illustration of what I published on my own website on May 30th:

'When huge trends are being reversed, more often than not the initial counter-trend movement will lack a fundamental rationale. Only in the later stages of the new trend, the crowd will associate what is commonly known as a prevalent fundamental theme. That is, when the new trend is young, there will be a positive rate of growth in price action but the crowd will miss the fundamental reasoning - whereas in the late stages of the trend, there will be a negative rate of growth in price action (most popular price indicators will start diverging with price action) but the crowd will manifest an increasingly confident frenzy about the prevalent fundamental theme.'

BusinessWeek's cover story of February 19th uttered ''It's a Low, Low, Low, Low-Rate World' (subtitle was 'Why money may stay cheap longer than you think').
Big question remains, does that cover ultimately herald a major shift in the global financial markets (not just global yields) - much like in the way some of David Lereah's publications came out at the onset of remarkable trend changes like the collapse of the dot-com bubble or the bust of the housing market in the US?

The near future, I believe, nearer perhaps than in most expectations, may be entirely willing to show us.

Published on Sun, Jul 15 2007, 11:00 GMT

Yen Shows

Wed, Jul 11 2007, 19:54 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Bloomberg.com quoted on June 23rd:

Reuters recently cited as well:

In their quest for what they should fear, I think a lot of people nowadays may be looking in the wrong, or incomplete to say the least, direction.

The indiscernible future of the Bank of Japan hiking interest rates is not the only scenario which could bring on a sizable turnaround in the Japanese Yen.

'FT: We're speaking at a moment of a lot of turbulence in the markets. What's your explanation for what's happening?

FT: With the appreciation of the yen?

SOROS: That's right. I mean the appreciation of the yen shows that there is a shake-out. (...)'

Perhaps it is going to be again the appreciation of the Yen which will reflect rather than lead notable market turbulences happening elsewhere.

Published on Wed, Jul 11 2007, 19:54 GMT

Yields' New Conundrum

Sat, Jul 7 2007, 12:26 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

For example, in the article titled 'Global Rate Increase Yields Haze of Explanations' published on Bloomberg.com on June 14th, Caroline Baum writes:

'We in the media are forced to explain these events, often tripping over ourselves in the process.'

'The sentiment shift was stunning to behold and difficult to explain.'

'Ultimately the rise in market interest rates will be limited if it's not supported by the fundamentals. And the fundamentals only reveal themselves with time (and maybe data revisions).

That's one reason technical traders pay no attention to news or statistics, gleaning all the information they need from price charts and momentum studies.

That isn't to say that candlesticks patterns and relative strength indexes always predict the future accurately. They don't.

I wonder whether the recent run-up in global yields actually spells out a perfect illustration of what I published on my own website on May 30th:

The near future, I believe, nearer perhaps than in most expectations, may be entirely willing to show us.

Published on Sat, Jul 7 2007, 12:26 GMT

Global Medley (revisited)

Tue, Jul 3 2007, 20:15 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

My latest FX forecasts - public as well as private - keep on being validated by market action. That's almost irrelevant, however, since in most of the cases involved it is not the currently self-shaping market puzzle which interests me, but notable shifts in price action which still may be ahead.

I was writing for my column here at FXstreet.com, on June 20th:

'The main stock markets from both sides of the Atlantic are well recovering these days - even to the point that late last week I would have been tempted to open long positions on margin in a few select European stock indices.'

One of those 'few select European stock' markets would have been the Hungarian stock market - two main Hungarian stock indices of the Budapest Stock Exchange in particular.
I am thinking as well of more Western targets, like the main German stock indices.

As for the Romanian currency, if it continues to appreciate as it has done over the latest days, it has a notable chance of ending up the year again as the world's strongest currency - just like it reportedly did last year, according to mainstream media sources.
I began having an elevated interest in the Romanian currency late last year, when I also publicly spelled out a distinct bullish call. I may take the time in a couple of days to put in writing more on this subject matter - in my view, one of the most remarkable events I've been experiencing in the currency markets.

Published on Tue, Jul 3 2007, 20:15 GMT

Global Medley

Sun, Jul 1 2007, 18:30 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In my letter to clients of last Sunday I was noting:

'I think both the Australian and the New Zealand Dollar are going to extend higher against the US Dollar.
The only thing which could temporarily disrupt the current state of affairs is a brand new central bank intervention; while I don't think such action would be enough to decisively change the current market sentiment, it could be quite difficult to deal with if leveraged positions are being held.

In the short run, I don't see much positive potential for the US Dollar against the main European currencies either.

I think the USD/CAD is still going to drop to new historical lows. Chance that the recent short-term volatility actually marks a notable inflection point in the pair's larger timeframes is, in my view, extremely small.

I don't perceive the Yen bottoming across the board - on the contrary, to me the underlying strength in the USD/JPY looks enormous and the pair seems ready to make further headway enroute to the upper 120. Moreover, since the US Dollar does not yet seem to attract any significant buying interest elsewhere across the board, I could only assume further price gains loom in the main Yen cross pairs.'

Eventually, the high yielding currencies finished the week higher against the US Dollar, as the main European currencies did themselves. The USD/JPY's down movement did not turn into a collapse, whereas most Yen crosses have recovered surprisingly well. The USD/CAD did reach new historical lows.

I'll stick to my last Sunday opinions for now, although I don't think the ongoing market movements are unconditionally self-preserving and therefore I stand ready to adjust my views if the situation requires so.

A few days ago I saw on Reuters a possible explanation for Tuesday's relatively modest performance of the Japanese stock market: the Yen hurting exporters.
One could only stand amused. So, after a sizable - or, better yet, 'anomalous' decline of the Yen, according to the Bank for International Settlements itself - the Japanese exporters have any time thinking how a 80-pip or so negative correction in the USD/JPY could start looking like a disaster.

Even though just another top Japanese official has recently warned about the risks of making one-way currency bets (but, doesn't a one-way bet even in foreign exchange actually suggest exactly the opposite, namely a highly unlikely chance of losing?), I continue to perceive a strong deal of underlying strength in the USD/JPY - and I believe that, unless major, global surprises arise just out of the blue, the currency pair will make further headway.

For just now, I don't 'buy' the global corrections which have been ongoing nowadays - including the Yen's rebound.

Although they may be listed as fundamental pretexts of a global financial turmoil at some point in the future, the most recent US subprime related worries seem like a brand new 'crying wolf' sequence - in spite of all the negative headlines about hedge funds inundating the mainstream media these days (supposedly, hedge funds had triggered the main events in the most important financial markets across the board over the latest years, so when the same hedge funds are presented to the public as 'villains' one may think something more major in changing - much like in the way that extremely serious US corporate malfunctions started to make the mainstream media's covers and frontpages only after the US stock markets topped out several years ago).

Meanwhile, I do not perceive a reversal underway in the main European and US stock market indices, and my opinion is China's stock market itself still has upside potential ahead of a potentially severe blow-off.

Published on Sun, Jul 1 2007, 18:30 GMT

Not Yet

Thu, Jun 28 2007, 20:30 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

On June 10th I was noting for my column here at FXstreet.com:

'When I began shorting the EUR/USD several weeks ago, one of my doubts was that I could not properly correlate my play with what I was observing in other US Dollar markets like the AUD/USD or the NZD/USD. At the time I just didn't feel like the Australian Dollar or the New Zealand Dollar were placing remarkable tops versus the US Dollar.

For the US Dollar to keep moving higher even if only against the European currencies - perhaps it would have taken a greater element of surprise. In other words, perhaps the US Dollar bears may not have been enough bearish, yet.
The idea of selling the US Dollar versus the major European currencies has not tempted me - firstly, I wouldn't assume such a position just in front of the US Dollar Index's historical line of support unless my confidence was remarkably high, secondly, I don't think the multi-month uptrends ongoing in pairs like the EUR/USD or the GBP/USD are nowadays the most appropriate for pure momentum-chasing plays.

When I decided to dump my latest EUR/USD shorts for a marginal profit, I thought I was just taking a break. I thought I should retreat and stand aside for a while, in search for timing and a new sort of confidence.
I am thinking pretty much the same nowadays. I am not a US Dollar bull by tradition, but I'll have no hesitation to become one by opportunity if the situation requires it.'

Again, I'm thinking pretty much the same nowadays.

Published on Thu, Jun 28 2007, 20:30 GMT

AUD, NZD

Mon, Jun 25 2007, 21:02 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In my view, the AUD/NZD breaking down through the 1.1 level looks like almost imminent.
I also perceive the New Zealand Dollar's pressure over the European currencies to still be considerable.

Although it may seem paradoxical, just as the AUD/NZD descends through 1.1 I'd immediately start looking out for any early signs suggesting a shift of sentiment, from outright bullish to hardly discernable, in the New Zealand Dollar via its cross pairs.

I think both the Australian and the New Zealand Dollar are going to extend higher against the US Dollar.
The only thing which could temporarily disrupt the current state of affairs is a brand new central bank intervention; while I don't think such action alone would be enough to decisively change the current market sentiment, it could be quite difficult to deal with if a leveraged engagement is being held.

Published on Mon, Jun 25 2007, 21:02 GMT

Central Bankers May Get It Wrong This Time

Sun, Jun 24 2007, 09:43 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

On June 14th, the online edition of The Economist published an article titled 'A warning shot' - an attempt to see through the premises of the recent Reserve Bank of New Zealand's foreign exchange intervention which hit the currency markets in the early hours of June 11th.
The material is available here: http://www.economist.com/finance/displaystory.cfm?story_id=9340724. At some point the author writes, 'It was a well-timed intervention.'.

From a purely technical standpoint, I totally disagree. To me it looks like the New Zealand's central bank had too easily ignored an obvious, yes - although not yet parabolic - deal of strength that has been fuelling notable gains of the New Zealand Dollar against the US Dollar as well as via the currency's cross pairs. In other words, the New Zealand Dollar's ongoing uptrends may not have reached yet out-of-hand, rampant (and hence, potentially nearby notable exhaustion) stages; reversing or even decelerating those uptrends, not yet vulnerable, would require remarkable efforts and is probably too difficult to do at this time.

Soon after I began putting on a column at FXstreet.com, during the very first days of 2004 I made the following forecast: although a large part of the mainstream media was at the time engaged in talking down the US Dollar versus the Japanese Yen, what I thought was the USD/JPY would find an interim bottom at around 105 and then soar in a positive correction able to target 110, perhaps even 112 before losing steam.

I wrote once I don't usually seek an involvement in sophisticated markets because - for one - I am not a sophisticated player. When I made that above mentioned call in the early 2004, my observations were entirely technical. Basically, I thought the USD/JPY had already been performing on a tightrope just as a large 'falling wedge' type of chart pattern was about to climax.

I don't even recall the generic fundamentals that were making the rounds at that time.
Then again, there should be no fundamentals decisively triggering a personal engagement in the markets unless a certain price configuration as well as proper terms of risk present themselves. My recently treading waters on topics like the 'carry-trade', for one, should be considered as only tangential, and in no way essential to my contemplative interests or eagerness to assume effective market positions.
I do not say events external to the intrinsic dynamics of price action cannot pull the triggers, but my interest ultimately comes down to the charts, as I believe the charts can be 'extraordinary' themselves. And in the end, I vision charts before envisioning big fundamental schemes.
An almost purely technical approach, though, does not stop me from spotting anomalies, virtual elements of surprise or extreme stages within the fundamental background, in terms of my own perceptions.

After months of slow price depreciation and low volatility overall, the USD/JPY indeed bottomed in mid February only a handful of pips above the round 105 level. It then took the pair only 3 weeks to reach the 110 and 112 levels, before significant selling pressure reemerged.

This happened to be one of the most spectacular market calls I have ever made - but that is not the point. The point is, rumours had it the surprising 3-week, 700-pip movement in the USD/JPY could have been all about a covert Bank of Japan's intervention.
Of course the rumours went unconfirmed, but the scenario never looked to me like overly far-fetched. If the Japanese financial authorities really were behind that upward spike in the USD/JPY, from a technical point of view they got the timing almost perfectly right; over the first weeks of 2004 the USD/JPY had been going into a state of such a vulnerable equilibrium, that a central bank intervention could have found an easy time making the currency pair dramatically departing the price action observable in February.

Another, far more notable example that comes to my mind is the US Dollar's depreciation across the board hugely accelerating its pace during the fall of 1985.
On September 22nd, 1985, France, West Germany, Japan, the United States and the United Kingdom agreed to depreciate the US Dollar versus the Japanese Yen and the Deutsche Mark by directly intervening in the currency markets.

According to Wikipedia, 'Unlike some similar financial crises of the 1990s (such as the Mexican and the Argentinian financial crises of 1994 and 2001 respectively), this devaluation was planned, done in an orderly manner with pre-announcement, and did not lead to financial panic in the world markets.'.
I could only add that the 'planned' interventions also conveniently matched very specific technical conditions discernable in the US Dollar at the time, otherwise the central banks' objective might have been accomplished less smoothly.

Published on Sun, Jun 24 2007, 09:43 GMT

Hindsight's One−Way Bets (revisited)

Thu, Jun 21 2007, 18:46 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Toshihiko Fukui, the current Governor of the Bank of Japan, has recently warned: expectations that interest rates in Japan will stay low could invite 'inefficient' investments. But, aren't the greatest rewards actually coming out from playing the most 'inefficient' markets and developments?

Central bankers uttering expressions like 'one-way bet' or 'inefficient' at a point where the practical applications of the 'carry-trade' concept enters parabolic stages in a myriad of major financial markets across the board may have exactly the opposite of the intended effect. Even more rampant, 'fundamentally misaligned' speculations may actually be encouraged.

It still is the Japanese Yen that appears to me as the biggest potential bet among the Asian currencies.

Published on Thu, Jun 21 2007, 18:46 GMT

Hindsight's One−Way Bets

Wed, Jun 20 2007, 18:35 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I watch long-term, monthly charts of the USD/JPY as well as of main Yen cross pairs and I see a good deal of bullish pressure currently at work.

The main stock markets from both sides of the Atlantic are well recovering these days - even to the point that late last week I would have been tempted to open long positions on margin in a few select European stock indices. China's stock market is rebounding itself after a recent 'crying wolf' sequence - with the Shenzhen 100 Index leading the Shanghai Composite Index in making new, higher highs.

The Romanian currency is back rocketing straight up (reportedly, it had been the world's strongest currency last year), to the absolute dismay of most highly regarded economists working for the best known international banks. The bullish call I spelled out in the fall of last year within a 5-year old personal column kindly hosted by the Romanian website Kmarket.ro has been well confirmed over the latest months, although my initial expectations were that the Romanian currency's appreciation would be even more rampant.

These are all marks of the global carry-trade being back with a vengeance, strongly self-reinforcing nowadays.

Several weeks ago I was privately reinforcing my bullish expectations about the Yuan. The Chinese currency has since continued to appreciate against the US Dollar - as a matter of fact, the Yuan has just had a stellar week (if 'stellar' could be considered an appropriate term at all given of course the accepted pace of the currency's appreciation).

I have a very strict understanding of the notion 'one-way bet', in relation to foreign exchange as well as other types of financial markets. I rigorously perceive a 'one-way bet' via two main elements: a very small, highly unlikely chance of losing, and an exceptionally high probability of a great reward.
In my view, in foreign exchange such a 'one-way bet' development may have taken place in the Chinese Yuan versus the US Dollar.

What would have been the chance of the currency markets selling the Yuan and reversing the July 21st, 2005 revaluation? Particularly small, I say. Two years ago China as a whole was a huge attraction for the financial communities and interests everywhere - for just one example now observable with the benefit of hindsight, a major inflection point in the Shanghai Composite Index almost perfectly synchronized with the July 2005 Yuan revaluation and the Chinese stock market's incredible uptrend does not yet seem to be over.

While discussing the virtues of holding a long-term bet in the Chinese Yuan against the US Dollar, I agree however there would have been at least two potential negatives adjusting those benefits: first, the disputable availability of such a trading deal (particularly via small retail, spot FX intermediaries), second, the interest rate differential considerations.

Published on Wed, Jun 20 2007, 18:35 GMT

Recent Notes

Sat, Jun 16 2007, 17:40 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In my Thursday's letter to clients I was noting:

'I do not see a bottom forming in the Japanese Yen across the board, yet. Of course, everything is possible - and I think we could make a serious mistake if we wanted to shape the case of the Japanese currency within a Technical Analysis 101 framework exclusively. Nevertheless, there is nothing about the price action and charts I regularly monitor suggesting a major inflection stage is developing right at this point in time in the Yen markets.'

'Opposite to a considerable part of the mainstream media, over the latest months I have never seriously considered the US Dollar being on the verge of a dramatic breakdown versus the main European currencies. Even as of now, though, I still lack the confidence to step in buying the US Dollar against the Euro or the British Pound.

There's been so much focus on the global surge in yields and the positive path of the US Dollar mostly everywhere in the media recently, that I won't be surprised to actually see the yields and the US Dollar altogether starting to go back down for a while.'

Both observations were validated on Friday in the Yen markets as well as in the US Dollar against the major European currencies. Nonetheless, I am keeping the same opinions for the longer run.

Published on Sat, Jun 16 2007, 17:40 GMT

What Really Bothers the Reserve Bank of New Zealand?

Thu, Jun 14 2007, 18:57 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

It has been quite some time since I last saw a central bank intervention in foreign exchange.

The Reserve Bank of New Zealand confirmed it intervened on Monday, June 11th in the foreign exchange market to sell the New Zealand Dollar. Reserve Bank Governor, Alan Bollard said, 'As stated in our June Monetary Policy Statement, we regard current levels of the exchange rate as exceptional and unjustified in terms of the economic fundamentals.'.

Then, I saw some epic titles in the mainstream media and series of weblogs. I am not in the show business, though - and as such I still want to try to discern what may go beyond a first-hand, 150-pip drop in the New Zealand Dollar versus the US Dollar.

A potentially new sign that a real problem with the global liquidity may be developing is, had the New Zealand's central bank been awfully dissatisfied with the current New Zealand Dollar exchange rate, it could have just skipped hiking the interest rate on June 7th. But the interest rate did go up to 8% because it HAD to go up.

Is there a pattern emerging that select central banks will first hike the interest rates because they MUST do that, then sell their own currencies in the foreign exchange market? Will the Bank of Japan go next and hence reinforce such a pattern?
Meanwhile, unless there is a coordinated foreign exchange intervention rigorously planned and executed by the major central banks in the US, Europe and Japan - I just don't think a huge unwinding of the Yen carry-trade will follow a few hour shakeout on the basis of an isolated central bank intervention alone, at least not at this point in time.

Published on Thu, Jun 14 2007, 18:57 GMT

It's a Low, Low, Low, Low−Rate World...or Isn't It?

Wed, Jun 13 2007, 18:51 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

When several weeks ago I began thinking of a scenario involving the US Dollar going stronger versus the European currencies and Gold sinking to revisit its last year's lows, there was something more on my mind yet not on my written list: a generalized drop in bond prices and a consequent worldwide runup in yields. It seems that what I left out of my written scenario has just made the global markets' prevalent theme (FX including) for the last few days.

There were basically two main reasons for which I had thought of a possible runup in yields: first, I remember I saw long-term, compressed charts of the US 2-year and 10-year note yields and what I read was compelling strength, second, BusinessWeek's February 19th, 2007 cover story 'It's a Low, Low, Low, Low-Rate World' (subtitle was 'Why money may stay cheap longer than you think').

The big question is, does that February cover of BusinessWeek herald a major shift in the global financial markets (not just global yields), much like in the way some of David Lereah's publications came out at the onset of remarkable trend changes like the collapse of the dot-com bubble or the bust of the housing market in the US?

What if the Japanese bonds continue to sink? Perhaps the markets may start buying the Yen just out of the blue on the (disputable) rationale that the Bank of Japan will hike interest rates. Even if Japan's central bank doesn't hike, it will only matter what the markets themselves want to discount - after all, most of the latest multi-month uptrend of the main European currencies against the US Dollar has been made possible as the markets saw the Federal Reserve's cutting the interest rates in the US as a sure bet.

I continue to be a supporter of this experience-based theory that remarkable market movements are often preceded by 'crying wolf' sequences. In late February we had China's stock market plunge. Last week we had the global surge in yields.
Like always there is one discussion about outstanding lands of opportunity, and another one, perhaps a very different one, about timing and confidence.

Published on Wed, Jun 13 2007, 18:51 GMT

About the Hong Kong Dollar

Tue, Jun 12 2007, 20:39 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Couple of days ago, William Pesek Jr., columnist for Bloomberg News, published on Bloomberg.com an article titled 'Hong Kong Is Ripe for Currency Attack' - which on the website's frontpage actually went as titled 'Hey Soros, Hong Kong Is Ripe for Currency Attack'.

The article's data and premises are interesting beyond any doubt - following other texts I have read about the Hong Kong Dollar over the last few months. Readings about notable market conjunctures and their more or less obvious triggers will always appeal to me far more than the latest ebook on how accurately a stochastic indicator predicts the twists and turns of a rangebound market on the 1-minute chart.

But Mr. Pesek's latest currency related material actually reminds me of George Soros's long-term relationship with journalist Anatole Kaletsky and their often dialoguing in the media in the early '90s.
For just one example, in his book 'SOROS: The Unauthorized Biography, the Life, Times and Trading Secrets of the World's Greatest Investor', Robert Slater writes:

'It did not surprise anyone when in June 1993 Soros took the remarkable step of publicly stating that the German mark was bound to fall. This was the ultimate act of a man who had concluded that he had extraordinary powers he could exploit.
In a letter to the Times of London on June 9, Soros responded to one written on May 20 by Anatole Kaletsky, the newspaper's economics editor, urging Soros to attack the French franc. Soros, in his answer, said that he disagreed with Kaletsky, that it was not the French currency and bonds that needed to be sold, but the German ones.'

William Pesek Jr., however, is no Anatole Kaletsky. Whereas Mr. Soros seems to being quite more preoccupied with a truly generous social program only a couple hundred miles from where I am writing now than about preparing to 'attack' the Hong Kong Dollar.

As far as I am concerned, it still is the Japanese Yen which actually appears to me as the biggest potential Asian currency play.

Published on Tue, Jun 12 2007, 20:39 GMT

The Carry−Trade, and the Whole Rest

Mon, Jun 11 2007, 18:53 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

A few days ago, Chairman of the Federal Reserve Ben Bernanke made a series of comments. Then, there were news outlets I was checking where in the sections related to the stock markets Mr. Bernanke's comments were rendered as suggesting the Federal Reserve wouldn't cut the interest rates anytime soon (the US stock markets were dropping that day), whereas in the sections related to currencies the very same comments were taken as pessimistic about the state of US economy (the US Dollar was under pressure that day).

Given the exuberant global correlations currently at work and the market's huge appetite for the carry-trade, I just don't see how Mr. Bernanke's same words can be rendered to basically suggest two opposite conclusions.

I am surprised about the US Dollar's performance against the European currencies as exhibited over the last few days. It should be all fair to say I had not expected such a behaviour - more correctly, I had not expected such a behaviour this fast.

I find the discrepancy between how the US Dollar has been moving recently versus the European currencies and the US Dollar's performance against higher-yielding currencies like the Australian and the New Zealand Dollar all the more interesting, although hardly surprising. This confirms once more that the FX world, just like the bulk of the most liquid global financial markets, remains splitted between the same two prevalent categories: the carry-trade, and the whole rest.

Published on Mon, Jun 11 2007, 18:53 GMT

US Dollar, In and Out (revisited)

Sun, Jun 10 2007, 09:38 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

When I began shorting the EUR/USD several weeks ago, one of my doubts was that I could not properly correlate my play with what I was observing in other US Dollar markets like the AUD/USD or the NZD/USD. At the time I just didn't feel like the Australian Dollar or the New Zealand Dollar were placing remarkable tops versus the US Dollar.

Published on Sun, Jun 10 2007, 09:38 GMT

Japanese Yen Revisited

Thu, Jun 7 2007, 20:24 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

The views of an 'important bottom' and 'sizable recovery' I'd had of the NZD/JPY back last year in May - June eventually have been confirmed to a remarkable extent even if these events were not forewarned by a spot-on, one-bar reversal.

Then, precisely one year ago I privately noted that I couldn't possibly be bearish on the AUD/JPY, then constricting at around 85. In early October I made an unsuccessful attempt to go long AUD/JPY at about 88. At that same time I openly adopted a bullish view of the major European currencies against the Japanese Yen as the EUR/JPY and the CHF/JPY seemed they were breaking out of triangle-shape price contractions.

Nonetheless, I didn't happen to be an effective buyer in either of the above situations, partly because of my too rigid search for a positioning spot, failure to consider the market's prevalent theme within the big picture, or inability to take direct or even synthetical positions in the nominated currency pairs via my traditional broker.

Global correlations which I recently referred to as exuberant have been at work today once more. The European currencies started to go down versus the Yen today just as the main European stock markets began sinking themselves.

Furthermore, there is an intriguing similarity between the recent price action of major US stock markets (the Dow Jones Industrial Average, the S&P500) and how these markets behaved earlier in the year just ahead of the massive late February global sell-off.

Published on Thu, Jun 7 2007, 20:24 GMT

Rational Exuberance (revisited)

Tue, Jun 5 2007, 18:53 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Under the title 'Rational Exuberance' I was recently noting here on FXstreet.com:

'A few days ago, Chet Currier, editorialist for Bloomberg News, published on Bloomberg.com a certain material under the title 'This Bull Market Is More Rational, Less Exuberant', in regard particularly with stock market developments ongoing in the US.

The bull market may look 'rational' in the US, but not necessarily on the level of global correlations.
The similarity between the Japanese Yen and the Swiss Franc price performances over the latest weeks has been striking. Some of the Yen cross pairs and major European stock market indices are nowadays at a point where they exhibit almost the same graphical price representation. These resemblances are to me rather a sign of exuberance, than anything else.'

Today, inter-market correlations which I recently referred to as exuberant have seen a new day of confirmation. The Swiss Franc has gone stronger, the Yen has gone stronger. The FTSE100 went lower alongside other main European stock market indices, the EUR/JPY lost ground as well.

We're living interesting times, more interesting yet to come.

Published on Tue, Jun 5 2007, 18:53 GMT

About the Canadian Dollar

Mon, Jun 4 2007, 18:58 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I was writing in my letter to clients last Monday (mentioned in my FXstreet.com report as well, on Wednesday) that I still saw room for the Canadian Dollar to move higher both against the US Dollar, and via its cross pairs - the USD/CAD and the EUR/CAD have since depreciated further for about 300 pips.
Since April 2nd, when I privately debated a certain Bloomberg.com bullish headline, the USD/CAD sank for one thousand pips.

I don't yet recognize a notable point of price inflection having already taken place in the USD/CAD.
Being a seller of the Canadian currency across the board at this moment would not tempt me, either.

Published on Mon, Jun 4 2007, 18:58 GMT

Deconstructing the 'Bearish Malaise' (part 2 of 2)

Sat, Jun 2 2007, 11:49 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Among the Canadian Dollar crosses I had been watching about a couple of months ago, the GBP/CAD was the first that topped out. During March the pair was already congesting off its January highs - at a time when the EUR/CAD began sliding from its own, newly recorded highs. Watching in tandem compressed daily charts of those two cross pairs should be visually compelling.

There would have been something more, however. When the EUR/CAD emerged in March out of a multi-week contraction, one might have thought a further sizable price gain would have been at hand (I myself happened to be quite bullish around that time). But precisely therein lied the anomaly: just as the EUR/CAD was about to rocket, the bears swiftly returned in mid March and the price gain recorded earlier that month vanished almost entirely over just one week. Three 'doji' weeks then followed - a sign that the earlier bullish impetus might have been strongly compromised already by mid April.
And again, the EUR/CAD seemed to accelerate in March for a continuation of the overall uptrend at a time when the GBP/CAD was already off its January highs and moving within an horizontal contraction - an intriguing divergence.

The deconstructing above partly explains why I'd called the scenario of a spreading bearish malaise among the Canadian Dollar crosses one of 'vague intuition'. I just couldn't put my finger on a certain daily or weekly bar or candlestick and say, this now is the representation of a spot-on reversal.

Cared to deconstruct all the above in writing because this kind of subtle inter-market correlations appears to me as still worth exploring. This might be a good time to recall that the views of an 'important bottom' and 'sizable recovery' I had of the NZD/JPY back in May - June last year eventually have been confirmed to a remarkable extent even if these events were not forewarned by a spot-on, one-bar reversal either.

Published on Sat, Jun 2 2007, 11:49 GMT

Rational Exuberance

Thu, May 31 2007, 18:39 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

A few days ago, Chet Currier, editorialist for Bloomberg News, published on Bloomberg.com a certain material under the title 'This Bull Market Is More Rational, Less Exuberant', in regard particularly with stock market developments ongoing in the US.

Published on Thu, May 31 2007, 18:39 GMT

US Dollar, In and Out

Wed, May 30 2007, 19:26 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I was short EUR/USD for a few days recently, and took a marginal, 70-pip compound profit - which happens to be irrelevant since I had been in search for another kind of reward, yet also another sort of confidence before assuming a longer-term holding. I have dealt recently with a scenario in which I see the US Dollar higher in the medium term versus the major European currencies, as well as Gold revisiting its last year's lows.

I was noting in my Monday's letter to clients that I still saw room for the Canadian Dollar to move higher both against the US Dollar, and via its cross pairs.
I continue to be thinking the same, as I don't 'buy' today's depreciation of the Canadian currency across the board. However, the USD/CAD in particular remains on top of my list of regular observance in foreign exchange, assuming still that a notable trading opportunity may present ahead in this currency pair.

Last year I went long in the USD/CAD on May 31st, precisely when the pair bottomed and then never looked back.
Nowadays, however, I happen to be more interested in having conviction rather than timing.

Published on Wed, May 30 2007, 19:26 GMT

Deconstructing the 'Bearish Malaise' (part 1 of 2)

Tue, May 29 2007, 18:26 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

About a couple of months ago I advanced in my communication with clients a scenario of rather vague intuition - one in which a subtle bearish malaise developing in the GBP/CAD I at the time began taking note of could spread over the Euro and even higher-yielding currencies like the Australian Dollar and the New Zealand Dollar versus the Canadian Dollar.

This scenario has been on track over the latest weeks, to an extent somewhat beyond my initial expectations.

I also had stayed bearish on the USD/CAD since early April (when I privately debated a certain Bloomberg.com bullish headline) until very recently - a period which has encompassed an almost 1,000-pip freefall. I made one attempt to buck the pair's severe downtrend - earlier this month - needless to say, an unsuccessful attempt.

On May 15th, in a private note to acknowledge my swift retreat from a modest long USD/CAD position (opened May 9th), I was as well writing, 'Perhaps I just lost a small position in order to more confidently build a larger one in the near future.'

Published on Tue, May 29 2007, 18:26 GMT

Canadian Dollar in the Headlines (revisited, again)

Sat, May 26 2007, 20:44 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

About a couple of months ago I advanced in my letter to clients a scenario of rather vague intuition - one in which a subtle bearish malaise I at the time began taking note of in the GBP/CAD could spread over the Euro and even higher-yielding currencies like the Australian Dollar and the New Zealand Dollar versus the Canadian Dollar.

This scenario has been on track over the latest weeks, to an extent somewhat beyond my initial expectations.

For the sake of a full disclosure I also thought (and still do, particularly while applied to the prospect of using leverage) that taking an effective position in any of the nominated Canadian Dollar cross pairs would present a technical incompatibility with the ways in which I search for confidence in my trading. Moreover - although less relevant to the situation at hand - neither of the involved Canadian Dollar crosses is currently available for dealing with my traditional broker.

I also had stayed bearish on the USD/CAD since early April (when I privately debated a certain Bloomberg.com bullish headline) until very recently. I made one attempt to buck the pair's severe downtrend - earlier this month - needless to say, an unsuccessful attempt.
On May 15th, in a private note to acknowledge my swift retreat from a modest long USD/CAD position (opened May 9th) I was as well writing, 'Perhaps I just lost a small position in order to more confidently build a larger one in the near future.'

Published on Sat, May 26 2007, 20:44 GMT

About the US Dollar (republished)

Tue, May 22 2007, 20:28 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Longer term, I remain an outright US Dollar bear - as I think technical as well as fundamental evidence is mounting to suggest the US Dollar Index may at some point collapse under the key 80 level. Still, by watching series of long term charts, I am thinking that since early 2005 we may have entered a 'swing' sort of market environment in the US Dollar Index; while tanking under the 80 line-in-the-sand remains a possibility, such an event may still be months away.

If a US Dollar upleg is really in the making - particularly against the main European currencies - its fundamental premises may indeed be highly questionable.
But if the market has found itself in a 'swing' sort of environment since early 2005 and the US Dollar still will be 'swinging' for some time, then what it really matters, I think, is whether the public frenzy against the US Dollar is overheating, not the outright fundamentals.

Published on Tue, May 22 2007, 20:28 GMT

About the US Dollar

Sun, May 20 2007, 09:58 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Published on Sun, May 20 2007, 09:58 GMT

Missing the Fundamental Pretext

Wed, May 16 2007, 18:24 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In many of my letters to clients (as well as within this column of mine at FXstreet.com) I rewind back to past opportunities, times when notable points of price inflection (some of them truly remarkable) had been pinpointed, in a personal attempt to meet the future with the ability to also construct notable trading positions.

However, in early March I had no perception whatsoever of a notable low having just popped out in the main Japanese Yen cross pairs - let alone the thought of building a notable long position. Early March in the world of the Yen crosses was just one of those situations when a parabolic movement emerges out of mostly nothing, for the mainstream media to subsequently spend months asking how could it all happen.

Otherwise, many explanations can be found with the comfortable benefit of hindsight - one of them coming down to the lack of a fundamental pretext.
When huge trends are being reversed, more often than not the initial counter-trend movement will lack a fundamental rationale. Only in the later stages of the new trend, the crowd will associate what is commonly known as a prevalent fundamental theme. That is, when the new trend is young, there will be a positive rate of growth in price action but the crowd will miss the fundamental reasoning - whereas in the late stages of the trend, there will be a negative rate of growth in price action (most popular price indicators will start diverging with price action) but the crowd will manifest an increasingly confident frenzy about the prevalent fundamental theme.

Months ago when I thought a huge counter-trend movement in the major Yen crosses would commence mostly on behalf of extreme technical conditions embedded in the price action itself, and then progressively get reinforced - I definitely underestimated the market's monster appetite for yield and consequent strong demand for the carry-trade. And, when that particularly rapid and rather alarming, late February - early March counter-trend movement in the Yen crosses eventually ran out of gas, the crowd (debatable now whether it has been the mob of the retail, or rather the crowd of the multi-billion portfolios) was still left with no fundamental pretext in order to carry on shorting the carry-trade.

Published on Wed, May 16 2007, 18:24 GMT

Canadian Dollar in the Headlines (revisited)

Sat, May 12 2007, 09:20 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In my letter to clients of April 2 I was noting:

'I saw a headline today on Bloomberg, 'Canadian Dollar Declines From High as Charts Indicate Currency Overbought. Canada's dollar fell from its strongest level this year as some traders speculated the currency's recent gains were overdone.' A very 'technical' headline, particularly for Bloomberg.

I believe the Canadian Dollar is probably not that weak. I do not perceive a sound change of market forces having already taken place in the USD/CAD - in simpler words, I do not recognize a notable low in the USD/CAD, yet.'

Around the same time I advanced a scenario of rather vague intuition - one in which the just started bearish malaise I began taking note of in the GBP/CAD could spread over the EUR/CAD, possibly affecting as well higher-yielding currencies like the Australian Dollar and the New Zealand Dollar against the Canadian Dollar.

Since April 2, the USD/CAD collapsed for about 500 pips more. The pair has nowadays been coming down closest in an year to the level at which I went long on May 31, 2006 - a day which would later be confirmed as a remarkable point of price inflection in this major US Dollar market.

That scenario of a widespread bearish malaise in the Canadian Dollar cross pairs as well has been on track during the latest weeks.

As a note of curiosity - there has been a strong visual similarity that could be noted between the USD/CAD's downleg started in early February (this year) and the EUR/USD's down movement recorded during the first half of 2005.

I don't consider such a resemblance to be all that relevant. It tells us very little about the future.
But the same similarity could point out that the best, most opportunistic from a reward/risk perspective, recent opportunity to go short the USD/CAD actually emerged in early March at around 1.18 seeking to confirm a '1-2-3' top reversal in the making - in the same way in which shorting the EUR/USD in mid March 2005 at about 1.34 on behalf of a similar chart pattern would have benefitted from a disproportionately high reward relative to the initial risk.

Published on Sat, May 12 2007, 09:20 GMT

In the EUR/GBP (closed)

Fri, May 11 2007, 19:35 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

First off, I want to apologize for not having been able to update my report here at FXstreet.com for the last almost three weeks.

I decided several days ago to leave behind the only bet I had been holding as of late, a short EUR/GBP position opened on March 14 (and disclosed here on March 21), at around breakeven. This was an underleveraged bet targeting a depreciation of the cross pair enroute to the lower half of 0.67, possibly even lower.

While confronted with recent 'fundamental tests', the Pound did not quite behave the way I thought it would - still, as usual, I was not going to fight the market.
A much bigger regret still is that I did not hold the long EUR/GBP position taken on January 23 - a position I could have closed out and reversed on March 14 -, as well as that I could not go long the EUR/AUD with my traditional broker on January 22 when a bullish call emerged in my letter to clients of that day.

I will seek to reposition in the EUR/GBP, under certain circumstances.

Published on Fri, May 11 2007, 19:35 GMT

USD/CAD

Mon, Apr 23 2007, 20:07 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I see several longer-term scenarios while thinking of the USD/CAD.
The first one is a notable low is being at hand - but no one can say precisely how far the pair would go up during a positive correction. However, such a correction can be sizable.

The second scenario goes for a '2B bottom' interpretation of the price action in ongoing development since May 31, 2006. This means the bears are going to make a breakdown attempt nearby 1.10, but such an attempt will quickly be defeated. Prior to testing 1.10, a modest (interim) positive correction may happen.

Make no mistake, this is only one of the paths price action may be following. As I have claimed recently, under circumstances which are not exceptional it may be a costing mistake to have just one, predetermined scenario. Chairman Maoxian once wrote on his website http://maoxian.com/, 'The trouble that some folks have is that they’re always thinking in terms of “2B tops” and worried about getting trapped or picked off, which makes them unable to enter strongly trending markets.'.
On the other hand, even by just reacting to '2B bottom' appearances last year in the Canadian Dollar crosses and then holding on to the positions I would have made a little fortune.

The third scenario is the one of a collapse for real through 1.10. That will most probably happen in tandem with a collapse for real of the US Dollar Index through the 80 level as well.
With the data now at hand I think this appears to be the least likely scenario.

Published on Mon, Apr 23 2007, 20:07 GMT

Australian Dollar Upfront (Revisited)

Sun, Apr 22 2007, 12:05 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

The way some of the Australian Dollar cross pairs have been moving in latest days was somewhat more 'erratic' than I had expected - but at the same time I know one of the biggest mistakes for a trader is to consider the future course of the market must automatically follow some pre-established technical or fundamental set of principles.

If at least half of the elite hedge-fund managers most probably suffer from the Icarus syndrome, my greatest concern is that at some point I may begin to think that, based on certain, re-ocurring technical or fundamental factors, I already know what, where and when action will happen. This is why I am becoming nowadays increasingly more apprehensive about saying I use technical analysis, and increasingly more comfortable saying I only use charts.

The Australian Dollar cross pairs continue to attract my observing interest to a very significant extent (the GBP/AUD in particular). The current image in these pairs strongly resembles what I had been eyeing immediately prior to introducing my January 22 letter to clients with a bullish call on the EUR/AUD.

As a note of curiosity, a strong similarity could have been noted during the latest weeks, in the shape of price action, daily chart wise, between the AUD/JPY and the AUD/CHF. A similarity which I think will continue as long as the carry-trade remains the market's prevalent theme.

Published on Sun, Apr 22 2007, 12:05 GMT

'Low−Yielding' Yet Again (Revisited)

Thu, Apr 19 2007, 19:48 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

On April 4 I was noting here:

'I continue to believe that there are technical as well as fundamental clues suggesting the short-lived panic seen several weeks ago in the Yen as well as major stock markets from both sides of the Atlantic only heralded what in the future may come as a far more ample movement - one counter to already well-established, multi-year global trends. However, as I wrote recently, my leading opinions do not count as much as certain price configurations do.

I have a feeling that when the Yen starts appreciating again just out of the blue, the major stock markets will record a solid downmove.'

China's stocks fell from record highs today, after consistent price gains having been made recently - the downfall came apparently on concern the interest rates may rise in China (so we are learning that if Japan's monetary policy can be ridiculized, we can blame it on China instead). Major stock indices from both sides of the Atlantic took a dive as well. The Yen and the Swiss Franc initially went up. Gold went down.

Sounds familiar? We just received yet another sign of how apprehensive the global markets are nowadays about the possibility of a massive carry trade liquidation. A sign of how strongly correlated the global markets can become in an instant. A sign of a very specific configuration of the global markets which goes far beyond Technical Analysis 101, heralding opportunistic plays for the globally diversified trader.

In my view, however, the last hours might have been yet another 'crying wolf' sequence. I do not perceive the existence of a notable bottom of the Yen via its crosses, nor do I recognize a remarkable top of the main stock market indices from both sides of the Atlantic having already occured.
Multiple corrections tend to erode the power of a trend, and remarkable market movements are exceptions often preceded by 'crying wolf' sequences. I know I will stay actively concerned about the future developments, forex as well as non-forex wise.

Published on Thu, Apr 19 2007, 19:48 GMT

Canadian Dollar in the Headlines

Wed, Apr 18 2007, 19:51 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In my letter to clients of April 2, I was writing:

Since April 2, the USD/CAD sank for about 300 pips more. The pair is coming down closer to the level I went long last year on May 31. And, just like in the days immediately prior to May 31, 2006 - my interest in the USD/CAD nowadays links to the possible appearance of a notable point of price inflection.

As a note of curiosity - there is a strong similarity that can be noted between the shape of the USD/CAD's movement since February 8 (this year), daily chart wise, and the shape of the EUR/USD's movement recorded during the first months of 2005, again daily chart wise.

Published on Wed, Apr 18 2007, 19:51 GMT

Australian Dollar Upfront

Tue, Apr 17 2007, 20:14 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

One of the most interesting things nowadays to me has been to line up the EUR/AUD, the GBP/AUD, the CHF/AUD, the JPY/AUD - all four Australian Dollar crosses on the same screen.

The current image in these pairs strongly resembles what I had been eyeing immediately prior to introducing my January 22 letter to clients with a bullish call on the EUR/AUD.

Published on Tue, Apr 17 2007, 20:14 GMT

Interests

Sun, Apr 15 2007, 21:08 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I maintain strong observing interests in the US Dollar, the Yen cross pairs, as well as in the Australian Dollar and the Canadian Dollar cross pairs.

Published on Sun, Apr 15 2007, 21:08 GMT

Lands of Opportunity (revisited)

Wed, Apr 11 2007, 18:18 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

The day before yesterday I read on Bloomberg.com one of the most EUR/USD bullish articles I have checked in quite a while.
At some point somebody is quoted in the article saying: 'The euro's the safest bet'. To me, however, the safest bet is actually not betting at all.

I wrote here on Sunday:

'I would not be wise to make detailed comments about the US Dollar markets right now.

However, my interest has increased significantly about most FX markets I have been looking at for some time: the major US Dollar pairs, the Yen crosses, the Canadian Dollar crosses. I am moving from chart to chart, and I see lands of opportunity.

I know I will have to be quite contemplative during this weekend.'

Several days prior to Sunday, in my letter to clients of April 5th I was noting:

'Getting back to the US Dollar markets of these days - by compressing hundreds of daily chart data in the EUR/USD, I still have the feeling an ambush may be due soon. This doesn't automatically make me an unconditional US Dollar bull, though.'

As of right now I remain in perfect agreement with both sentences of the above quoted paragraph.

I wrote not a long time ago that in the months ahead I would rather take trades out of conviction, than of just intuition. In my view, intuition does a fairly good job to preserving wealth, but it is a strong conviction which builds wealth.
However, to avoid getting caught in tricky positions, intuition is still most of what one has at hand.

Now, if you allow me spelling it out in trivial words - I still 'smell a rat' about the bullish impetus we are seeing these days in the EUR/USD, once this bullish impetus is placed against the pair's big picture. Against the big picture, even a 1-day price action may play the 'butterfly effect'.

These days I also have strong observing interests, contemplative interests for now, which link to the one-way momentum we have seen as of late in some of the Yen crosses, as well as to the Canadian Dollar and Australian Dollar cross pairs.

What I see now in the AUD/JPY fairly reminds me of the major European currencies against the Yen in the days immediately prior to February 3rd, last year. Back then, upon acknowledging the upward price extensions started in mid January (in the GBP/JPY, such upmove had been preceded by a '2B bottom', daily chart wise), I was only waiting for an 'anomaly' to allow me taking a short position.

In terms of my own perception, in the EUR/JPY the 'anomaly' came on February 3rd, in form of a low-volatility, 'harami' day. The short EUR/JPY position I put on that Friday, at the expense of less than 40 pips in the stop-loss order, achieved a reward/risk ratio of 7:1 after just 5 days of active holding. Unfortunately for my model account, though, the leverage deal utilized was roughly mediocre; I know now I could have risked around 2% of the whole model equity playing that early February setup in the EUR/JPY, and even that would have been a conservative bargain.

Published on Wed, Apr 11 2007, 18:18 GMT

Lands of Opportunity

Sun, Apr 8 2007, 10:30 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I would not be wise to make detailed comments about the US Dollar markets right now.

However, my interest has increased significantly about most FX markets I have been looking at for some time: the major US Dollar pairs, the Yen crosses, the Canadian Dollar crosses. I am moving from chart to chart, and I see lands of opportunity.

I know I will have to be quite contemplative during this weekend.

Published on Sun, Apr 8 2007, 10:30 GMT

'Low−Yielding' Yet Again

Wed, Apr 4 2007, 21:11 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

The Yen sank yesterday, the Swiss Franc did as well. The world's major stock indices have continued to recover; if I am not wrong, the German's DAX is already at a new, multi-annual high.
To me all these short-term developments spell out very clearly that the carry trade is back. The Japanese currency might have just become the Reuters's 'low-yielding Yen' once more.

I continue to believe that there are technical as well as fundamental clues suggesting the short-lived panic seen several weeks ago in the Yen as well as major stock markets from both sides of the Atlantic only heralded what in the future may come as a far more ample movement - one counter to already well-established, multi-year global trends. However, as I wrote recently, my leading opinions do not count as much as certain price configurations do.

I have a feeling that when the Yen starts appreciating again just out of the blue, the major stock markets will record a solid downmove.
This explains why I as of late have been checking the Yen cross pairs always in tandem with the world's major stock indices. It also explains, at least partly, why I recently have been apprehensive about going long the Yen, even against the US Dollar.

Published on Wed, Apr 4 2007, 21:11 GMT

About the US Dollar

Sat, Mar 31 2007, 18:32 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Latest days have been quite bluffing in the US Dollar markets, and I bet a lot of players are being now overly sensitive to the short-term developments.
I am not so, however. I am still more interested in getting a grasp of the 'forest', rather than in counting the 'trees'.

I continue to think we may nowadays be at an important juncture in the US Dollar.

On the one hand, some of the latest developments are undeniably bearish for the US Dollar. The AUD/USD has just broken out to reaching new multi-annual highs, while the USD/NOK looks like on the verge of a massive breakdown.

On the other hand, once compressing a long-term chart of the US Dollar Index - the upleg developed in 2005 seems too short a movement to have reasonably corrected the preceding, 3-year downtrend (same idea I have about the USD/CAD).

In the long run I am outright US Dollar bearish, as I think there is solid fundamental as well as technical evidence suggesting the US Dollar Index will at some point break under the 80 level.
What interests me at the moment, however, is whether the US Dollar's positive correction triggered in late 2004 will actually continue for some time on. If it will, then I have to suspect the major European currencies may be currently moving toward the upper end of a multi-month (actually, a multi-year) constriction against the US Dollar - and then a change in the balance between supply and demand in the corresponding markets is soon going to become apparent.

Published on Sat, Mar 31 2007, 18:32 GMT

Not Quite There

Thu, Mar 29 2007, 20:28 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Making extensive comments about the FX markets nowadays - particularly about the short-term developments - would mean the effort to deliver something out of almost nothing.

Most of the mechanical as well as discretionary strategies in trading are intuitively built, I think, not to be making money, but actually in order to respond to the innate, human demand for action. As such, my greatest concern these days is that I may be seeing things in the market that are not quite there.

Published on Thu, Mar 29 2007, 20:28 GMT

Crying Wolf

Wed, Mar 28 2007, 20:35 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I have been apprehensive about selling any Yen cross pair as of late. My leading opinions do not count as much as certain price configurations do.
The Japanese currency's rebound of late February - early March - via the crosses - might just have failed to compromise the Yen carry-trade environment.

The EUR/JPY has nowadays been hovering actually above the level I shorted on February 16th.
Then, ironically, had I shorted the AUD/JPY in late February at around 96, I would have gathered about 700 pips of profit in early March, yet almost zero reward today.
So - I guess - in the Yen crosses nowadays, one may hardly resist the temptation of taking quick profits.

This reminds me of January 3rd, this year. I have some regret that I did not sell any of the Yen crosses dealable with my model account's broker on that day. I know I should have put on at least one short position, most probably in the AUD/JPY - the right signal was right there, daily chart wise, on January 3rd.
I have not brought up any self-criticism in this regard so far just because I also know I would not have taken profit on January 8th - that would have been an almost 200-pip reward at the expense of about 50 pips in the risk. I would have stayed for longer, instead, inherently doomed to being stopped out on January 18th.

Remarkable market movements are exceptions often preceded by 'crying wolf' sequences. Nevertheless, I think, the big money is made rather out of pain than comfort.

Published on Wed, Mar 28 2007, 20:35 GMT

The Year of the '2B Bottom' (part 2 of 2)

Sat, Mar 24 2007, 17:54 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

The '2B' reversals are among the most panic-driven chart patterns and trading setups I have ever experienced in my early trading years. The most fascinating and the least philanthropic market mechanics involved.

Last Saturday I wrote and illustrated here that in my view the Canadian Dollar had been the most interesting of the major currencies last year - and mostly because of the Canadian Dollar, 2006 as well could have been labelled the year of the '2B bottom'.

However, '2B bottom' chart appearances had been involved in setting notable swings or even new trends during 2006 in other currencies as well. Two such instances come to mind right now.

First of them, the day of January 12th, 2006 revealed a '2B bottom' in the GBP/JPY, daily chart wise. In just a couple of weeks then the cross pair surged for about 1,000 pips before finding an interim top on February 3rd (the day I shorted the EUR/JPY). January 12th also printed the last year's low in the GBP/JPY from where a staggering 3,000-pip uptrend had already made history.

The second '2B bottom' instance surfaced on May 18th, 2006 in the EUR/CHF, again daily chart wise (same day I went long the EUR/GBP on a signal of comparable confidence). No lower low has since been seen, and the almost 1,000-pip uptrend which started on May 18th had at no moment been seriously questioned by the market until very recently.

If we go further back into the past - the remarkable upleg of the US Dollar Index (as well as of the USD/CHF) experienced over the whole course of 2005 had actually been preceded by a '2B bottom' occurence in those two markets' weekly chart timeframe.

The '2B' reversals are not exclusively linked to foreign exchange dynamics. I myself have experienced this particular kind of setups in various, highly liquid futures and stock markets - one example being the bullish reversal experienced by Nasdaq Composite in the spring of 2005 on behalf of a '2B bottom', daily chart wise.

Published on Sat, Mar 24 2007, 17:54 GMT

A Greater Interest

Thu, Mar 22 2007, 21:17 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Although, as disclosed yesterday, I currently remain exposed to the EUR/GBP's short-term fluctuations, actually my greater interest is in the Japanese Yen, the world's main stock markets, and even the US Dollar.

The view I had of the last couple of weeks' one-way movement seen in the main Yen crosses was one of a 'dead cat bounce'. I thought a new downleg could soon take place, but I did not want to put my money where my mouth was. I did not want to put on a position of a longer-term holding just because, for example, a classic fibonacci retracement might just have been tested.

Actually, the fact that the Yen crosses took a tumble in February out of a price configuration which I have not yet found familiar is making me nowadays even more careful and extra-prudent about what I am doing. We all know about the hurricane that begins with the flap of a butterfly's wings - but the matter is, I have not yet been given the chance to discern the 'butterfly'.

The rebound of Yen crosses since a couple of weeks ago now interests me greatly even as a short-term development.
Watching daily charts of main Yen crosses now reminds me of the days immediately preceding February 3rd, 2006. At that time, especially the European currencies were surging in a one-way upmove against the Yen, whereas I was wondering whether a subtle bearish anomaly would become apparent during all that bullish frenzy. The 'harami'-type day of February 3rd, 2006 positively answered my interrogation, pushing me to make the very confident move of selling the EUR/JPY short on that Friday.

In my February 2nd, 2006 letter to clients I was writing, 'I see it interesting that, if you showed me a monthly chart of almost any JPY-cross without indicating which timeframe is that chart about - I would prepare for buying with little hesitation. But, if you did a daily chart, I would prepare myself for selling.'
Only 24 hours after noting the above, I was shorting the EUR/JPY off the cross pair's daily chart with no hesitation. However, since the point I took profit on February 10th, 2006, the EUR/JPY still has been able to make an almost 2,000-pip leap up to the levels it is printing nowadays.

I think we are nowadays at an important juncture in the US Dollar - one that reminds me of late 2004.

Published on Thu, Mar 22 2007, 21:17 GMT

In the EUR/GBP

Wed, Mar 21 2007, 21:07 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I can now disclose I am holding a short EUR/GBP position opened on March 14th - targeting the lower half of 0.67 as an indicative profit objective. As I wrote in my today's letter to clients, either I will be taking profit below 0.6750, or I am not really interested in taking profit at all.

The bet is underleveraged, and I have no problem admitting a great deal of luck was actually responsible for the position's survival on early Monday.

Published on Wed, Mar 21 2007, 21:07 GMT

The Year of the '2B Bottom' (part 1 of 2)

Sat, Mar 17 2007, 17:24 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In an article published here on January 24th I deconstructed a '2B bottom' scenario applied to the price action of the Yen versus the US Dollar apparently in development since December 2005. I reviewed the same theme this week on Tuesday and Wednesday.

Last year, though, in my view the Canadian Dollar had been the most interesting of the major currencies. Mostly because of the Canadian Dollar, 2006 as well could have been labelled the year of the '2B bottom'.

Momentum traders may feel attracted to the current, short-term developments of the EUR/CAD - but this pair's uptrend, not yet invalidated, happened to be triggered by a '2B bottom' confirmed in early March last year (weekly chart). Since back then, the EUR/CAD has been able to appreciate for about 2,000 pips.
Price action that could have been interpreted as a '2B bottom' became visible in the AUD/CAD in June last year (weekly chart), since then the pair has managed a 1,000-pip appreciation. The GBP/CAD's uptrend last year emerged in March, again on behalf of a '2B bottom', that has resulted in a multi-month, multi-thousand-pip appreciation.

Last year the day of May 31st proved as a remarkable point of price inflection in the major USD/CAD market - once again, a '2B bottom' was involved.
Just a few weeks in the afterwards, in late June the bullish reversal of the NZD/USD took the shape of perhaps one of the most clear '2B bottoms' I have ever experienced. Meaning, one of the most intriguing chart patterns I know making its appearance in two different USD-based markets at approximately the same time of the year - hinting not only at a possible appreciation of the directly corresponding markets i.e. the USD/CAD and the NZD/USD, but also at an all the more sizable rebound of the New Zealand Dollar against the Canadian Dollar.
Since late May last year, the USD/CAD has managed a multi-hundred-pip recovery. Since July last year, the NZD/CAD has seen a multi-thousand-pip rebound.

Published on Sat, Mar 17 2007, 17:24 GMT

Yen Transitional Notes (continuation)

Wed, Mar 14 2007, 21:24 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

The '2B bottom' scenario I advanced here on January 24th regarding the JPY/USD remains valid as a possibility (check my yesterday's article for further references). Its price configuration, however, I do not find as entirely familiar.

A 'textbook' '2B bottom' pattern, in terms of my own technical perception and experience of course, consists of a flat price formation as the first bottom, and a spike-low as the second bottom. In Alan Farley's words, the first bottom should be of the 'Eve' shape, whereas the second bottom should be of the 'Adam' sort.

To be even clearer on this matter, let us take for example how the (already remarkable for my experience) USD/CAD's '2B bottom' had been formed last year: May 9th, 10th, 11th altogether provided the first, flat bottom, for then the single day of May 31st (the day that I actually went long the USD/CAD) did the second, spike-low bottom of the whole chart pattern.

Getting back now to the JPY/USD, if price action which had been developing between December 2005 and a couple of weeks ago will have been confirmed as a '2B bottom' setup, the tricky thing is the pattern's both bottoms, weekly chart wise, currently appear as flat.
Which is to say, waiting for the USD/JPY to marginally overshoot past the 123 level just ahead of a collapse might have been in vain - yet another reason explaining my current lack of a participation in the recent Yen's movement. The most recent low the Yen has found relative to the US Dollar a couple of weeks ago resembles much more how the EUR/USD bottomed in late 2005, or how the JPY/USD itself bottomed in early 2002, rather than the USD/CAD's spike-low day of May 31st, 2006.

If this very specific, technical view of the JPY/USD I have depicted today and yesterday will have been confirmed, then the US Dollar is going to further depreciate versus the Japanese Yen. And, given the internal structure of the price action which had been developing between December 2005 and a couple of weeks ago, I would not at all be surprised to see actually an impulsive breakdown taking place in the USD/JPY.

To receive my market views on a daily basis as a private service, visit my own website at MihaiNichisoiu.com.

Published on Wed, Mar 14 2007, 21:24 GMT

Yen Transitional Notes

Tue, Mar 13 2007, 21:25 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In an article published here on January 24th (adapted from a letter emailed to clients on January 16th) I performed a little exercise of imagination regarding how the climactic phase of the Yen's downtrend would look like across the board:

'First of the ideas still assumes the Japanese Yen reaching a blow-off stage via most of its cross pairs. Given the currently overextending environment, there is an increasing chance these markets may at some point collapse under their own weight.'

One of my biggest regrets in trading is linked to early January 2005.
In my very first letter to clients that year - dated January 2nd - I spelled out the warning the US Dollar in its large timeframes could have already bottomed versus the Euro and the Swiss Franc (only a couple of days later I managed to perceive a yet more complex bottoming pattern in the USD/GBP). The ultimate technical argument that made me resolute about issuing that warning was, to my mind, as simple as it was compelling: the previous year had just ended with a 'shooting star' on ground of a long-lasting bullish frenzy in the EUR/USD, as well as with a '2B bottom' on ground of a long-lasting bearish frenzy in the USD/CHF, in those two pairs' weekly chart timeframe.

At that time, however, my trading happened to be definitely more rigid, more 'systemic' than it is nowadays, at least on the execution side; two years ago, one of my rules was to open or dump positions exclusively off the daily chart, whereas any positioning involvement in the larger timeframes was strictly forbidden.
Needless to say, I could have made a fortune during 2005 by thinking big, acting big, and holding for indefinitely long.

In late 2004 the US Dollar made its turn against the Euro and the Swiss Franc via weekly chart wise signals of extreme subtleness. Not nearly the case of what we saw a couple of weeks ago in the world of Yen cross pairs; thinking about selling short one of the JPY cross pairs on Friday, March 2nd- on behalf of a super bearish close of that week - would have been almost like writing in late hours of October 19th, 1987, 'well, I have just received a bearish signal on the Dow Jones'.

However, there is still more about this whole Yen story.
In the same article of January 24th from which I have quoted above, I was also noting as follows:

'The second scenario interprets price action of the Japanese Yen versus the US Dollar eversince December 2005, in the weekly chart timeframe, as a huge '2B bottom' pattern currently still in development.

Interestingly, the latest Commitments of Traders reports show the sentiment surrounding the Japanese Yen has been growing extremely bearish over the last several weeks - something that could actually match the case of a '2B bottom' approaching its climax.

I do not advance a verdict that an extreme reading of market sentiment automatically leads to a '2B bottom' sort of technical appearance, but remember this chart pattern ultimately spells 'panic' - as a matter of fact, it may well stand as the most panic-driven chart pattern and trading setup I have ever experienced during my very early trading years - so what I can do right now is gathering any early signs and premises.

This second case scenario is also a new challenge for me. What I have thought during the latest months was that if a major JPY opportunity was to present itself, it would primarily do so via the currency's cross pairs. Now I presume the Japanese Yen may as well chart a notable opportunity against the US Dollar.'

Recently re-charting the JPY/USD via its weekly timeframe has made me update my January 24th considerations.
More on this '2B bottom' scenario applied to the price action of the Yen versus the US Dollar, however, I will publish here tomorrow as a continuation of today's article.

To receive my market views on a daily basis as a private service, visit my own website at MihaiNichisoiu.com.

Published on Tue, Mar 13 2007, 21:25 GMT

The Yen and the Global Panic Movement (part 2 of 2)

Sun, Mar 11 2007, 15:50 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Some of the market's latest 'short the carry-trade' has been covered this week - and I am thinking that as (not by coincidence, I believe) not only the Yen has been sold back over the last days, but also the Swiss Franc.

The stock markets on both sides of the Atlantic saw a rebound this week, too.

My take is a global panic environment requires a globally diversified trader - and therein lies just another of my personal limitations. Because, regarding this week's developments for example, in terms of my own technical perception bucking the recent global panic movement would have been best done actually not in the foreign exchange (i.e. by selling either the Yen or the Swiss Franc), but actually by opening a short-term, leveraged long position on Monday, March 5th in either one of the main European stock market indexes (British, French, German).

I am not exactly an avid researcher of inter-market correlations, not even when it comes down to hugely liquid environments. But to me the recent stock markets turmoil, the quasi-compromised carry-trade, and the sell-off in the precious metals markets look like parts of the same story.

In spite of the informational frenzy, I have not yet met any definite explanation for the very recent increase in the volatility of several select financial markets. Dozens of fundamental as well as technical theories would probably explain the volatility blowout just as reasonably.

Predictably, the public seems at the moment a lot more interested in deconstructing the very first tick of the recent panic movements, questioning which market precisely made the first move and why.
To me, however, the most important question right now refers to the future rather than the past: has the technical picture of the markets under scrutiny changed beyond a 'point of no immediate return'?

It happens that I am looking now at long-term, compressed charts of the main European and US stock markets. In the EUR/JPY's monthly chart timeframe, last month took the shape of a 'doji' in an already extended uptrend. Then, imagine the main European currencies already on the verge of depreciating relative to the US Dollar, yet the USD/JPY staying rather flat or even in a mild downtrend.

Somehow I have the feeling what we saw recently - particularly in the US and European stock markets, as well as in the Yen cross pairs - has only heralded the approaching of a more ample movement.

Published on Sun, Mar 11 2007, 15:50 GMT

The Yen and the Global Panic Movement (part 1 of 2)

Sat, Mar 10 2007, 12:59 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I assume Reuters might just have dropped the 'low-yielding' stigma while referring to the Japanese Yen in its online headlines.
Is it because the interest rate differential between Japan and the rest of G7 has just been tightened dramatically? Or, is it because of the recent price action experienced in the Yen markets?

The most notable idea that now comes to mind is my long addressed consideration that a Yen correction would begin prominently in technical terms, not any longer needing fundamental triggers or catalysts - and that a large part of the financial media would have a tough time interpreting at least the very start of such a panic movement.

In a note published here on January 25th under the title 'JPY Interim: The Achilles' Heel', I was writing:

'If my 'purely technical' presumption eventually proves right, though, passive observers and market participants altogether have very little at hand in order to at least estimate what is going to be the effect of a panic counter-trend movement of the Japanese Yen (or the mere start of it) over certain 'layers' of the 'carry trade'. With other words, the key causative relationship involved by a 'carry trade' sort of market environment may at some point be established in an inverted manner relative to the popular conception: that is, while most market participants would expect a compromised 'carry trade' to produce a change of direction in the JPY price action, perhaps it will actually be a sudden turn in the JPY price action that will hit the 'carry trade'.'

Almost one month in the afterwards of the above quoted observation, the Yen actually sank across the board as the Bank of Japan decided to raise the interest rate. Upon closely examining recent facts step by step, it looks to me that it was not the February interest rate hike in Japan that hit the Yen markets (interest rate hike which happened to be awfully ridiculized in various media across the board anyway, immediately before and after the monetary decision was announced to the public), but actually the price action itself (forex and non-forex) and an increase of volatility that conventional theories may find extremely difficult to deconstruct.

On February 19th I was writing in my letter to clients:

'On the one hand, I hardly believe the financial markets will be pushed into generalized chaos just because the EUR/JPY has just posted a bearish week. On the other hand, though, if the Japanese Yen does not offer nowadays an environment in which we should be asking more from trading, then I do not know how such an environment would truly look like.'

Although I continue to fully agree with the latter part of the above quoted paragraph - I am no longer entirely sure about the former.

Readings about global market crises and their more or less obvious triggers will always appeal to me far more than the latest ebook on how accurately a stochastic indicator predicts the twists and turns of a rangebound market on the 30-second chart (remember, after all, I happen to be just another Eastern European). To me, furthermore, the Yen case may be far from over, toward the currency's long as well as short side.

Nevertheless, what is currently happening in the Yen markets (as well as in other highly liquid financial markets) is something I would rather be dealing with a few years from now, - not just now. This is a sheer acknowledgment of my current limitations as a trader, both subjective and objective.

Published on Sat, Mar 10 2007, 12:59 GMT

The Pain of Being Comfortable

Wed, Mar 7 2007, 20:40 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Early Monday the EUR/GBP tested levels around 300 pips north from my January 23rd long entry.

I can now only reinforce what I wrote here on February 22nd, 'On February 1st when I decided to exit, there would have been a certain amount of pain associated with holding my long position. At the time I decided not to assume that pain - although I was fully aware of the risk I might not be able to reposition. On February 1st I had to choose between comfort and pain, and I chose comfort.'

I wonder what may have happened had I been able to trade the EUR/AUD bullish warning that made the introduction to my January 22nd letter to clients (the EUR/AUD is dealable with my traditional broker only in a synthetical manner, not a direct one).
Most probably I would have cashed between 250 and 350 pips of profit in the EUR/AUD either on January 31st or February 1st, this way letting the long EUR/GBP position effectively taken in my accounts on January 23rd developing into a longer-term bet. This now all comes down, of course, to just a hypothesis.

Either way things would have turned out, I can already annotate now the long EUR/GBP position assumed on January 23rd yet prematurely cut off for a marginal profit on February 1st as the first big wasted opportunity of the year so far.

Published on Wed, Mar 7 2007, 20:40 GMT

Yen Contemplative

Sun, Mar 4 2007, 16:22 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I am being questioned, what sort of confidence have I been looking out for these days in order to make a move on the Yen. The sort of November 2003 confidence, I believe.
I made a very good profit buying the EUR/JPY on limit at 125.00 on November 10th, 2003 - and closing out the trade, again on limit, at 133.00 only a few weeks later on December 16th. But I think my trading style as it was defined back then - namely, putting the greatest accent on anticipating rather than reacting to actual price action - made that the profit reported on December 16th turned out to be a lot, lot smaller than it could have been.

A similar price configuration reoccured last year in the NZD/JPY - the similarity was so compelling that I had no hesitation whatsoever to call a bottom and a sizable recovery underway in May - June.
Since last summer, the NZD/JPY has up to very recently recorded a staggering 1,500-pip appreciation. Just as staggering, however, happened to be my total inability to take a position in the NZD/JPY with my traditional broker, not even in a synthetical manner.

I know I would have been hugely disappointed had I missed the November 2003 trade in the EUR/JPY - but I hardly feel the same about my current lack of participation. However frustrating has been for me to recently see the EUR/JPY collapsing only a few days after I got stopped out, deep inside myself I know this has not been 'my story', at least not yet - and this sort of acknowledgement is an ingredient to my survival just as important as anything else.

Published on Sun, Mar 4 2007, 16:22 GMT

Dollar Clueless, Yen Contemplative

Wed, Feb 28 2007, 21:23 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

As perhaps an attempt to explain the latest Yen rebound, the following note could have been read a couple of days ago on the DailyFX.com website: 'During a scheduled press conference today, Japanese Chief Cabinet Secretary Yasuhisa Shiozaki sparked the Yen rally when he said that an “end to deflation is in sight,” though he failed to elaborate.'

Interesting, the Yen collapses as the Bank of Japan actually hikes the interest rate, yet in the immediate afterwards reportedly the Yen rebounds as a quasi-anonymous Japanese official talks Economics 101.

I think these days, not only for the Yen but also in regard to the turmoil currently witnessed in the global stock markets, are yet another example of what I often call 'the single bullet theory' applied to the markets: an increase of volatility particularly when it is counter-trend, not entirely rational for most market participants (as if we could only establish anything rational about the markets), brings about a myriad of fundamental and/or technical explanations which in all honesty do not seem any more rational themselves.

For the time being I know I can only contemplate the Yen cross pairs.
Either way price action is revealing itself these days, I want my next Yen engagement to be one of strong conviction, not just intuition.

I have refrained myself from making any comment on the US Dollar markets recently. The reason for my 'silence' was extremely simple: I have been totally clueless as to where the US Dollar could be heading these days, and absolutely unwilling to force an opinion just in order to assume a position.
By comparison, even though I just took a loss in the Yen, at least the Japanese currency has exhibited, and still does, technical conditions which interest me to a great extent. In turn, a personal participation of any sort in any of the USD markets these days, I believe, would have been a sure path to repeatedly losing money.

I know I will be very curious of how the GBP/USD will behave upon a retest of 1.97 - 1.98. The pair does not send me any intriguing signals as of yet, and I think it is my temperament which leads me to wondering whether the bulls are nowadays actually being drawn into a trap.

Published on Wed, Feb 28 2007, 21:23 GMT

Failing on the Other Side of 'Living Dangerously'

Sat, Feb 24 2007, 12:23 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Judged with the benefit of hindsight, the case of shorting the EUR/JPY on February 16th looks now to some extent weaker than it appeared immmediately prior to taking the position. However, even if the number of reasonable doubts had been greater beforehand, I think I would still have placed a light, counter-trend bet at the end of last week.

One 'reasonable doubt' which intrigued me to some extent prior to shorting the EUR/JPY was actually not of a technical nature. It was not a doubt of a fundamental sort, either.
As a matter of fact the 'anomaly', so to speak, was an article published online by The Economist on February 8th, under the title 'Carry on living dangerously' (still available at the following location: http://www.economist.com/finance/displaystory.cfm?story_id=8679006). The article, I guess, must have been largely appreciated in the media as perhaps one of the best documented pieces of analysis on the subject of Yen carry-trade.

I, however, was not nearly interested in the analysis itself - after all, I suspected the material would simply consist of an agglomeration of fundamental premises for which, sooner or later, the demise of the Yen carry-trade would become inevitable. What I was truly interested in, actually, was the title of the article, the source of its appearance, and the timing of publishing.

I of course remember the December 2nd, 2006 cover of The Economist highlighting the US Dollar bearish sentiment - well, that came up only days prior to the USD/JPY forming a bottom from where the pair has so far appreciated for almost 800 pips.
Then, I believe it was 'The Incredible Shrinking Dollar' cover of Newsweek that actually preceded the start of a remarkable upleg in the US Dollar in the spring of 2005. Wrote Michael Shedlock at that time, 'Where was the warning about the US$ two years ago or even 1 year ago? Indeed, big money is not often made on front page news. Big money is made on page 16 news that is headed to page 1. The Euro was probably on page 16 in 2002. Now look at it. "The Shrinking Dollar" has been on page one of the Wall Street Journal for months and just made the big time with the cover of Newsweek. Is there anyone out there that is not aware of the plight of the US dollar?'

Although not an outright rule in my trading so far, I think I would rather have texts published in The Economist or Newsweek - let alone their covers - going counter to my currency bets.

Published on Sat, Feb 24 2007, 12:23 GMT

Out of the EUR/GBP (for now) (reloaded)

Thu, Feb 22 2007, 22:02 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

It has been a frustrating personal experience to see the EUR/GBP hovering nowadays around 200 pips upwards from my January 23rd long entry. This happened to be yet another time when I accurately indicated a notable point of price inflection only hours after its occurence.

On February 1st when I decided to exit, there would have been a certain amount of pain associated with holding my long position. At the time I decided not to assume that pain - although I was fully aware of the risk I might not be able to reposition. On February 1st I had to choose between comfort and pain, and I chose comfort.

Published on Thu, Feb 22 2007, 22:02 GMT

JPY Cross Pairs (revisited)

Wed, Feb 21 2007, 20:40 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Last Saturday in a note here unassumingly titled 'JPY Cross Pairs' I disclosed a short EUR/JPY position taken in my model account only hours prior to publishing the material.
The position was opened on Friday, February 16th at 156.70. It eventually got stopped out today, making me leave behind around 1.5% of my model account's equity.

This has been my first attempt in many months to position myself on the other side of the G7's 'one-way bet' - an attempt defeated quite rapidly.
I had stayed bearish on the Yen for the most part of last year - accurately predicting an important bottom and a sizable recovery ahead in the NZD/JPY back in May - June, but also unsuccessfully attempting to take a long position in the AUD/JPY at around the 88 level in early October. Then, I spent the recent weeks on a quest to define and profit from a counter-trend opportunity - but such an opportunity, seemingly, has not come yet.

I have been fully aware of the remarkable level of attention I have been paying to the Japanese Yen markets as of late - a hidden vulnerability that could have put me in the position to lose more money than I actually did. Placing a relatively light bet on February 16th, and then refusing to increase my Yen exposure early this week turned out to be good decisions.

I may at some point in the future decide to go long the Yen once again.
However, as the latest G7 meeting did not single out the Yen in its official statement, and today's rate hike in Japan actually led to the Yen depreciating across the board - at this moment in time I can only reinforce my long addressed view that a notable Yen correction (or at least the very start of it) may come prominently on technical terms. That is, a serious rearrangement of market forces may not any longer need fundamental triggers or catalysts.

Published on Wed, Feb 21 2007, 20:40 GMT

About JPY Crosses: An Attribute to Backfire (reloaded)

Mon, Feb 19 2007, 20:58 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

Reuters has today once again utilized the term 'low-yielding' in several headlines about the Japanese Yen.

To my knowledge, it is for the first time since the fall of last year that I see Reuters explicitly associating the Japanese currency with the above mentioned fundamental stigma.

Published on Mon, Feb 19 2007, 20:58 GMT

JPY Cross Pairs

Sat, Feb 17 2007, 12:59 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In the introduction to my letter to clients of Monday, February 12th I was noting as follows:

'It has been an interesting day for the EUR/JPY.

I have seen today a whole plethora of bullish views on Bloomberg, perhaps as the G7 avoided to single out the Japanese Yen in its weekend statement.
Then, it was Reuters's 'low-yielding' Yen back in the fall last year - it is now G7's central bankers' 'one-way bet'. If there was anyone around not yet willing to sell the Yen - then the world's top financial officials themselves have just nominated such a trading enterprise as a sure bet.

At the same time, the EUR/JPY breaks upwards past its January 3rd and January 24th highs, establishes a new higher high just nearby round 159 - yet retraces back down and most probably it will close the day below the open.
This reminds me of May 17th last year when the EUR/GBP sank as the French Finance minister was talking down the Euro, yet the cross pair subtly reversed on the following day i.e. May 18th and subsequently the bulls managed to drive the cross pair gradually higher (the EUR/CHF at the time followed a similar pattern, whereas its bullish reversal would actually span over far longer space and time).'

I already assumed a light position in the EUR/JPY. I may prudently increase my Yen positioning exposure over the subsequent days, either again in the EUR/JPY, or via the AUD/JPY.

Published on Sat, Feb 17 2007, 12:59 GMT

The GBP Connection (revisited)

Fri, Feb 16 2007, 12:56 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

My Wednesday's bullish view of the GBP/CHF proved incorrect - and I would have been stopped out yesterday (marginally under the low of February 13th), had my model account's broker permitted me to trade in this market.
It also came as bit of a surprise to see the pair extending further on the way down yesterday.

Published on Fri, Feb 16 2007, 12:56 GMT

The GBP Connection

Wed, Feb 14 2007, 23:31 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I wrote yesterday in my letter to clients:

'My Sunday's 'very abstract (...), not yet 'dealable'' USD bearish view seems to be working out. The Australian and New Zealand Dollar have done well against the US Dollar today. The EUR/USD seems well supported as well. The USD/CAD is in free fall.
I actually find the GBP/USD interesting. Once zooming-in there's a whole lot of mess on the pair's daily chart - but what I think is if the bears probe under 1.94 the downside would be just marginal and the reversal swift as the path of least resistance to me seems to be on the way up.'

It turned out that I was just half step behind. Still, the GBP/USD went up today for almost 200 pips.

I suspect a short-term bottom is in place in the GBP/CHF. I see it likely for a positive correction to develop in this market over the following days.

The GBP/CHF actually raised my attention 48 hours ago. I wanted to include a short bullish note in my Monday's letter to clients, but after some thought I quickly abandoned the idea.
Then, although the pair fell yesterday extending to new lows, since January 23rd price action has remained rather choppy, and the technical 'anomaly' I saw on Monday has just reoccured today - something which makes me think the immediate path of least resistance may be bullish.

Published on Wed, Feb 14 2007, 23:31 GMT

Weekend Notes

Sun, Feb 11 2007, 09:54 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

My latest expectation about the EUR/GBP (it more visibly transpired in my letter to clients than here) eventually proved incorrect, as the cross pair failed to retest mid 0.65, whereas Thursday's entirely fundamental upmove made my repositioning case more difficult than anticipated.

In my Thursday's letter I nominated the day as 'interesting for the USD/CAD' after flipping Globex charts - but I considered the conditions as a tad too tight for me to go short the pair.

In a more diversified trading account (in that of dealable currency pairs) I would have done not half bad over January.
As disclosed in my letter, I would have gone long the GBP/NZD and short the NZD/CAD on January 7th, but the aggregate result would have proved almost meaningless - as on January 16th I let my clients know I would have cut the exposure by half, then on January 23rd I announced I would have been out altogether.
The bullish view of the EUR/AUD issued on January 22nd would have produced between 250 and 350 pips of profit on a less than 2-week time of holding. The long EUR/GBP position taken on January 23rd effectively brought a 45-pip profit on February 1st (this was dealable with my traditional spot FX broker).

Under certain circumstances, I will continue to press for getting larger market moves, even if occasionally the positions involved will end up at breakeven or with a marginal loss (as it happened with my EUR/GBP trade held during November - December).

There is already a mounting number of past examples that makes me absolutely resolute about such an approach - including but not limited to the large move the NZD/JPY recorded in the wake of my 'sizable recovery' call I had made last year in May - June, and the multi-hundred-pip advance of the USD/CAD registered after I went long on May 31st, 2006 i.e. precisely when the pair bottomed.

Same it may be with, for instance, selling short the EUR/JPY at some point in the future. If the position turns right immediately after entering it, I can foresee a considerable psychological pressure in the direction of getting out, cutting the profit as soon as possible - even if in the initial scenario the market may further collapse for hundreds more pips.

Reportedly, Steven Cohen told the 'Wall Street Journal' in September last year, 'It’s hard to find ideas that aren’t picked over, and harder to get real returns and differentiate yourself. We’re entering a new environment. The days of big returns are gone.'

For once, we disagree.

Published on Sun, Feb 11 2007, 09:54 GMT