The Chinese repo rates (borrowing costs for banks) jumped 47 basis points yesterday that sent investors fleeing to the hills. This saw the greenback pullback some of its fall and the yen strengthened as assets flowed back into safer areas. Some of the funds also found its way into the euro and Swissy as they held up very well comparatively since the other majors/minors got absolutely smoked. How much fun can one little headline make?
Well apart from the big moves in FX, copper was also off 2%, oil continues its fall, down another % point, gold also off almost a % point after huge rally session prior. Bonds naturally rallied with yields off 1% or more across the globe. Stocks also stumbled from its rally with Europe down 0.94% and US 0.47%.
I was saying things were overheated, and it takes just a little shove for the panic to reverse a market, especially when it is already at its extreme point of exhaustion. Anyway, not to crow about being right. I too panicked out of a trade before stopping to think about it. In the flight to safety the Swissy should benefited but I did not consider that as I closed out for 1.5% profit which now would be 2%+ had I held on. Another lesson of STICKING TO MY RULES….yes, my rules work, it seems it’s just me that doesn’t and don’t always comply with them. When I don’t, I lose money (or limit it in this case) every time…every time. Heed what I say people. Do as I say not as I do.
On a lighter note, I had to laugh at this headline…Greenspan lives and will continue to live on in Bernanke and Yellen. But what rubbish to say that the US stocks are undervalued. Muppet. http://www.bloomberg.com/news/2013-10-23/greenspan-says-stocks-are-relatively-low-and-heading-upward.html
DATA HIGHLIGHTS TODAY – NZ Trade balance. Chinese/French/German/Europe/USA Manufacturing PMI’s. US Trade balance & Home sales. UK Carney speaks.
AUDUSD – Massive engulfing bear bar. Hard to trade these bars and I would rather go down timeframes to participate in the anticipated pullback to support around the mid 94 cent mark. Resistance: 9790/9905/10000 Support: 9500/9390/9300
EURUSD – As mentioned, it held up well against the flight to safety last night, even forming a low test bar. Still it is in a position of cant buy cant sell so leave alone. Resistance: 13801/13832/14060 Support: 13452/1340/13339
GBPUSD – A HH/HL seller bar formed after the Chinese news, and the head/shoulder pattern is gone now. It looks more like it is getting ready for another test of 1.63. Although I would prefer it to pullback to the 50ema before attempting that. If it does it from here it wont have the legs to get through, pullback and then have a run at it and it may just hold above it. Resistance: 16300/16390/16620 Support: 15890/15755/15610
NZDUSD – Like the Aussie the kiwi had no business being so high and should be back in the 82’s or lower. Like the Aussie I can’t trade that bar as it ruins my risk:reward ratio so would look at lower timeframes to obtain an entry. Resistance: 8535/8607/8676 Support: 8475/8437/8283
USDCAD – Still lost and range bound as the Canadian central bank stopped pushing for higher rates in their policy statement overnight, this weakened the Loonie somewhat. Add the flight to safety for greenbacks and the fear of slower commodity growth from a fall out of the Chinese banking system saw the dollarcad post a large bull bar. Not worth trading still. Resistance: 10420/10555/10673 Support: 10195/10100/10000
USDJPY – Everytime I yawn I get woken up! Still range bound and still being squeezed in by trend lines so still little interest in this pair as they battle for strength now. Funny uh, a few months ago it was a battle to be the weakest, now in a flight to safety it is for strength. O well, back to the pillow on this one. Resistance: 100.00/100.70/101.20/102.56 Support: 9690/9580/9497
GOLD – A little pullback as funds flowed to US bonds more than the yellow gleam. Looking for an entry opportunity here to get long. Resistance: 1350/1,425/1,489/1525 Support: 1,266/1225/1180
David Long / Proprietary Trading Manager