Fx Thoughts : Taking a Stand For The FOMC
You know when you get Citi and JP Morgan in your mail box on Monday morning saying the trade of the week is to Buy USDJPY, it is probably time to sell.
They will be right next week probably but this week is the random walk week as we head into the FOMC amidst the backdrop of falling oil prices, historic lows in the Ruble, 16 year lows for the Indonesian rupiah and the rest.
It does not make much sense, does it ?
Cheap oil is good ? Indonesia is showing up green !
And America looks good too !
Now they say falling prices is bad for companies and rentals and so forth.
Thus it does not matter if oil rises or falls, does it ?
In 1 month, we have seen fx vols shoot up through 5-75% for all the currency pairs against the USD.
And no one can really tell where the USD is going at the moment, going up one day and down another.
The time has come to take a stand even as I am smarting from my USDJPY stop loss at 120 and my 116 level has arrived. https://tradehaven.net/market/fx/forex-thoughts-the-deflationary-mindset/
The future depends on the FOMC on Thurs morning at 3 am but it does not look like USD story will go away anything soon, woe betide if the FOMC verves to a dovish stance which would spell doom for the rest of the world looking to America for leadership.
Everything that is happening now is the result of market’s extreme positionings and following the herd and now the herd is disbanding, taking profits to cover the pain as we note that currencies that have been shorted are recovering their ground, such as the SGD which is holding up remarkably well for the past week.
Rather than waste this opportunity to fear of what the markets have in store, perhaps it is time to look at some option trades for all the good that lower oil prices will bring in the months ahead. Companies can go bankrupt for this but surely currencies will not ?
Selling USD puts and SGD calls, anyone ?
“If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
Japan’s trade deficit in November shrank by nearly a third from a year earlier, helped by higher exports and lower bills for oil imports, official data showed Wednesday.
The deficit came to 891.9 billion yen, down 31.5% from the year-before shortfall, the finance ministry said.
“The drop in the trade shortfall in November should be followed by a further narrowing in coming months as lower oil prices will reduce the import bill,” said Marcel Thieliant, Japan economist at Capital Economics.
The November deficit extended the run of Japan’s shortfalls to the 29th straight month but it was smaller than the median forecast of 996 billion yen in the red in a survey by the Nikkei business daily.
Exports rose 4.9%, largely on higher shipments of electronic components, optical equipment and machinery.
Imports fell by 1.7%, the first downturn in three months, as the cost of imports of crude oil and petroleum products plunged.
The yen’s exchange rate against the dollar was lower in November, pushing up import costs.
But lower oil prices more than offset the effect of the cheaper yen.