Wed, 23rd August 2017

Anirudh Sethi Report


Archives of “foreign exchange market” Tag

Latest CFTC Data shows :EUR saw the largest net selling

  • Leveraged funds were net buyers of USD for the first time since mid-May
  • EUR saw the largest net selling in the week
  • NZD recorded the second biggest net selling as leveraged funds pared back their overall net long exposure to the kiwi
  • GBP also saw net selling
  • Meanwhile, net JPY shorts were cut for the fourth consecutive week 
  • Funds’ bullishness on AUD and CAD continues. Net long AUD positions rose for the tenth consecutive week … Net long CAD positions rose
  • Funds’ positioning in crude oil were trimmed for the second consecutive week
  • Net longs in gold rose for the sixth straight week
  • Net longs in 10yr USTs longs were cut following net buying in the previous week

Trade base on Facts, Not on Hope -Anirudh Sethi

Knowledge is the key to winning and gain in the Stock, Commodity and Futures, and Forex markets.

Trading on trust is a fools game.

Do not attempt to place a trade. If the market triggers the exit signal you had predefined, without emotion follow it immediately. Many traders enter the market with more ‘hope’ than understanding. You have to take complete charge of your trading. The best way to do this is to get knowledge and all of the information you can about the market you wish to trade and then form a plan.

You plan should include not only the entry parameters but also the exit parameters. The departure is the most important. Your trade should be protected. Failure to admit that you’re wrong when the trade is moving south is one of the reasons.

Learn to trade on knowledge. There isn’t any need for fear and hope that get in your way. When you’re able to trade on knowledge, you’ll have the ability to react to trading opportunities when it’s time to do 31 and to exit out.

Your best friend needs to be the Stop Loss order.

Why 95 % Traders Lose ?- Anirudh Sethi

What if I told you that there is one thing that you can do as a trader? What if I said that all professional traders have one key habit in common. Further, what if I told you this secret habit allows the future to be anticipated by these expert traders and allows these traders to trade in a manner than traders? Traders using this habit understand what to expect from the markets and this habit gives a decided advantage that forex traders don’t have, confidence in their trading systems to these traders. Keep reading to see how you may create this habit yours that is key.

Would you like to know what this secret habit is?

This habit is not adopted by many traders though this secret habit is by far the single best predictor of trading success.

This is the one thing that all successful traders have in common. This one habit is known by many dealers but adopted by a few traders. Consequently, these few dealers are often the most prosperous traders on Earth and constitute the 3.7percent of profitable forex traders. Adopting this habit is the most important thing you can do for your trading.

This is a secret as it allows this group of forex traders to trade relaxed, anticipate the future and remain confident that traders hold dear.

That successful forex traders share, this one habit is this: their trading strategies are back tested by successful traders. They take the time to pour over market information using one of three testing methods. Successful forex traders have the ability to keep a more relaxed approach as they’ve seen their trading system perform over the years – often over the course of thousands of market scenarios and transactions. Armed with the data these consistently successful forex traders have the ability to anticipate the future. Maintaining a quiet assurance, successful forex traders have information to support their trading knowing that they will prevail in the markets have seen their trading platform work previously, and they know it is going to work later on.

Upcoming Week Events: Yellen at Jackson Hole, solar eclipse mania and Canadian banks

Top central bankers will gather in Wyoming for their annual policy summit at Jackson Hole next week; solar eclipse mania grips the US and the Royal Bank of Canada kicks off the earnings season for Canadian banks.

Here’s what to watch in the coming days.

Yellen at Jackson Hole

Mrs Yellen will speak on the topic of financial stability at 8am local time (10am EST) on at the conference hosted by the Federal Reserve Bank of Kansas City on Friday, August 25.

Solar eclipse mania

It promises to be one of the most watched natural spectacles of all time. On the morning of Monday August 21, a band of darkness will race across American skies as the Moon glides smoothly and perfectly across the face of the Sun.

Trading Position -An Update For Forex ,Crude

Since the beginning of May the Canadian dollar has been the strongest of the major currencies. However, until the most recent CFTC reporting week ending July 18,  speculators in the futures market were net short.  The persistent buying has seen the speculative gross long position rise to 60k contracts (adding nearly 14k contracts during the latest reporting period.  The gross short position was trimmed by 2.k contracts, leaving 52k.  The net long position rose to 8k from -8.6k.  It is the first time since the end of Q1 that speculators have a net long Canadian dollar futures position. 
Speculators also continue to amass a large Australian dollar position.  They added another 13.1k contracts to lift the gross long position to 69.1k contracts.  The gross shorts were trimmed by 1.4k contracts, leaving a 17.7k contracts.  The net position rose to 51.4k contracts up from 36.8k and the largest since March.  
The other substantial position adjustment, by which we mean 10k or more contracts was in the Japanese yen. Speculators continue to build a large gross short position.  They sold another 11.4k contracts to bring the gross short position to 164.3k contracts.  The gross long position was pared by 3.3k contracts, leaving 37.4k.  The net short position rose to 126.9k contracts from 112.1k.  Since the middle of June the net short position has doubled.  
Speculators remained bearish toward the US dollar.  They added to the gross long currency futures positions except for the yen, as we have seen, and the New Zealand dollar.  Speculators covered short the dollar-bloc currencies and the Mexican peso.  They mostly added to the gross shorts of the other currency futures but sterling.  

China Central Bank Advisor: “Bitcoin As A Currency Could Collapse Entire Economies”

An advisor to China’s central bank, Sheng Songcheng, said that virtual currencies like bitcoin are assets but do not have the fundamental attributes needed to be a currency that could meet modern economic development needs. Speaking in an interview with financial magazine Yicai, the PBOC advisors said that the adoption of Bitcoin as a national currency by a country “could lead to its economic collapse.”

Sheng Songcheng, a counselor at the PBoC, dismissed digital currencies like bitcoin as assets that lack the value basis of a legitimate currency. “Bitcoin does not have the fundamental attributes needed to be a currency as it is a string of code generated by complex algorithms, and does not have inherent value… But I do not deny that virtual currencies have technical value and are a type of asset,” he said cited by Reuters. Apparently he is unaware that paper currencies – the type preferred by central bankers – is made of either strings of linen and paper or strings of 1s and 0s, and – while also having no inherent value – can be infinitely created out of thin air.

Sheng, who was the director-general of the Department of Statistics and Research at the People’s Bank of China, holds a PhD in economics from the Shanghai University of Finance and Economics in the 90s. He is currently the professor of economics and finance at a business school in Shanghai.

 Sheng warned that the deflationary nature of digital currencies – unlike fiat money there is a hard limit on how much can be reated – would mean that they would not function well as a currency or medium of exchange in modern economies. Expanding on his criticism, Reuters quoted Sheng as stated that “Bitcoin would reach its ceiling of 21 million in 2140. If it is accepted as standard money, that will inevitably lead to deflation and constrain economic growth.” Of course, that same feature would assure that consumers’ purchasing power does not vaporize every time central bankers make a mistake and unleash hyperinflation.

Think of it as the old fiat vs gold-backed currency debate, only in this case it’s bitcoin-based.

His objection is to be expected: after all no central bank wants to be constrained in how much “money” it can print to stimulate inflation in a world where debt/GDP is 327%; and where China’s credit creation dwarfs every other central bank. Recall that in the aftermath of the financial crisis, it was China that served as the dynamo of global “growth” as it doubled its total debt over the past decade, something it would be unable to do if there was a hard ceiling on the amount of currency in circulation.


Emerging Markets: What has Changed

  • The US confirmed North Korea’s claims that it tested an intercontinental ballistic missile.
  • The Pakistani rupee was devalued, prompting a new central bank governor to be named.
  • Vietnam’s central bank cut interest rates for the first time since March 2014.
  • Egypt’s central bank surprised markets with a 200 bp hike to 18.75%.
  • South Africa’s ruling ANC reportedly proposed that SARB be state-owned.
  • Petrobras announced two separate cuts to fuel prices.

In the EM equity space as measured by MSCI, Chile (+1.9%), Hungary (+1.8%), and India (+1.7%) have outperformed this week, while Qatar (-1.4%), Hong Kong (-1.3%), and Russia (-1.1%) have underperformed.  To put this in better context, MSCI EM fell -0.8% this week while MSCI DM fell -0.4%.

In the EM local currency bond space, Argentina (10-year yield -6 bp), India (-3 bp), and Taiwan (-3 bp) have outperformed this week, while Turkey (10-year yield +27 bp), Colombia (+25 bp), and Indonesia (+21 bp) have underperformed.  To put this in better context, the 10-year UST yield rose 8 bp to 2.39%.

In the EM FX space, EGP (+1.4% vs. USD), BRL (+0.5% vs. USD), and HUF (up 0.2% vs. EUR) have outperformed this week, while TRY (-2.9% vs. USD), RUB (-2.8% vs. USD), and ZAR (-2.6% vs. USD) have underperformed.

The US confirmed North Korea’s claims that it tested an intercontinental ballistic missile.  The US and South Korea almost immediately announced a new joint military exercise.  Although the US has indicated that all options are on the table, there does not appear to be support for military options by South Korea, Japan, Russia, or China.  

World’s central banks still cool on yuan

Central banks around the world are not loading up on the yuan despite the currency being added to the International Monetary Fund’s basket of elite currencies. Experts think central banks are still wary of the Chinese currency’s future value.

Latest data from the IMF showed that the world’s central banks reported holding $82 billion worth of yuan, also known as the renminbi, as of March 2017. This equaled only 0.9% of the $8.8 trillion of disclosed foreign reserves holdings.

 The most popular foreign currency was the U.S. dollar, often referred to as the world’s reserve currency. It made up $5.7 trillion, or 64.5%, of disclosed reserves.

The euro was the second most widely held currency at 19.3%, followed by the Japanese yen at 4.6% and the pound at 4.3%.

Central banks were expected to increase their holdings of yuan after the Chinese currency was officially included in October 2016 among the IMF’s special drawing rights — an artificial asset consisting of four other currencies: the dollar, Euro, yen and pound.

Emerging Markets :An Update

EM FX ended the week on a mixed note, as investors await fresh drivers.  US jobs data on Friday could provide more clarity on Fed policy and the US economy.  Within EM, many countries are expected to report lower inflation readings for June that support the view that most EM central banks will remain in dovish mode for now.   We remain cautious on the EM asset class near-term.   

 Caixin reports June China manufacturing PMI Monday, which is expected at 49.8 vs. 49.6 in May.  Official manufacturing PMI was already reported at 51.7 vs. 51.2 in May.  While the two series often diverge, we warn of upside risk to the Caixin reading.  For now, markets are comfortable with China’s macro outlook.

Thailand reports June CPI Monday, which is expected to remain flat y/y.  This remains well below the 1-4% target range.  Bank of Thailand meets Wednesday and is expected to keep rates steady at 1.5%.  Indeed, with no price pressures to speak of, we believe rates will remain steady into 2018.

Indonesia reports June CPI Monday, which is expected to remain steady at 4.3% y/y.  This remains well within the 3-5% target range.  Bank Indonesia next meets July 20 and is expected to keep rates steady at 4.75%.  While the bank has signaled an end to the easing cycle, we do not see any tightening in 2017.

Trading position :An Update

The expiration of the June contracts and the roll into September positions appears to have boosted activity in the currency futures, and may obscure the signaling effect.  Of the 16 gross positions we track, speculators add to exposure in all but four positions.  There speculators covered gross short Swiss franc, Canadian, Australian, and New Zealand dollar positions.
There were several significant position adjustments, which we define as a gross position change of 10k or more contracts.  Speculators boosted the gross short euro position by 37.2k contracts (to 122.4k).  This accounted for the vast majority of the sharp drop in the net long position from 79k contracts to 44.9k.   Gross longs grew by a mere 3k contracts to 167.2k.
Speculators sold 49k Mexican peso contracts to bring the gross short position to 76.7k contracts.  The gross longs added a 2.2k contracts (to 125.7k).  As a result, the net long position was halved to 49k contracts from 95.8k.
The bulls added 10.1k sterling contracts to lift the gross long position to 50.6k contracts.  However, the bears added 8.2k contracts to the gross short position, which stood at 88.2k contracts.  This means that thee net short position barely changed, slipping to -37.6k contracts from -39.4k.
New Zealand dollar futures were active.  The gross long position rose 11.1k contracts to 38.4k, while the gross short position fell 8.7k contracts to 16.9k.  The net position, which had swung to the long side in the prior week rose to 21.5k contracts from 1.6k.