Trading the Durable Goods

Durables is one of those psychotic data numbers that oscillate wildly back and worth. Recently, it’s been missing forecasts for a while now.

Durables

This is how I’m looking to trade it:

First, background –

*This week has been light on US data and it’s also been mixed (slight negative bias)
* Greece crap is hitting the headlines again and today is going to be noise city.
* The USD Index Futures is at strong support (it dipped below overnight but already back above it)
*German IFO data overnight was pretty good.

If the durables number is REALLY bad – buying the EUR/USD if a good level is offered that still makes sense (price willl have moved substantially).

Price may stall at 1.0900, but we could squeeze to 1.0940/60. I would fade here, especially at the top of the range. Greece headlines would keep some pressure.

If the number is kind of bad (say, bad current number with positive revisions) – Fade 1.0900/20.

If the number is really good – Buy 1.0750 (key level and now also 61% fib of this last rally) .

If the number is just inline  – We would probably get some selling and I would buy sub 1.0800 (1.0770s best entry).

Overall, the bull flag on the EUR/USD from 1.0518 is still there. USD was also sold heavily yesterday. People are looking to sell again if possible.

And for god’s sake, don’t hold EUR/USD leveraged positions over the weekend. Stuff could happen and gap on Monday.

April 22 - EURUSD - Durables

 

 

Charts from April 22nd, 2015

A crazy day for Bunds today. Early action during the European session has dissipated to flat markets though.

The EUR/USD has been calm for most of the NY session. Here is a 5-min triangle I was looking at which has broken to the upside for now (still in play as I type).

EURUSD 5 min

This is really the chart of the day. I posted this because I was thinking that Bunds were going to continue its sell-off (thus rise in yield). The bund is currently sitting at 16.4bps after a super big push. Thank Bill Gross I guess.

April 21 - Bund - Contuantion

This channel has been working since last night. It was broken to the upside recently and the re-test on the TL is something to monitor.

April 21 - USDX - Channe

USD/CHF reached major support and then (essentially 30 mis after this chart was posted) ripped some 150 pips to the upside. The Swiss central bank also came out saying that the exception (related to negative interest rates) on certain deposits was going to be removed.

Overall, the point here was that this is a major support. If it does break, it should have some good follow through. Until then, buying the bounce may work.

April 21- uSDCHF - SUpport

USD/SEK is hanging on by a thread. On the watch.

April 21 - USDSEK - H&S TL

This flag is still in play – Have to respect it.

April 20 - EURUSD - Flag from lows

The key level on the USD Dollar Index Futures is 97.00/10s. The bulls have some control while this holds.

April 21 - USDX - SUpport

Charts from April 21st, 2015

GBP/USD has a possible flag pattern going into the NY session. We’re near cycle highs, so have to be cautious. I would be cashing in longs on any move to 1.4940s/50s.

April 20 - GBPUSD - Wedge

Shark-like pattern on the USD/MXN. I’m already short, so you may ask: Why didn’t you wait for the target at D?

This is the Mexican Peso a.k.a. the wild west. If it looks like duck and quacks like a duck, I’ll trade it like a duck. This is not the most technically perfect pair.

April 20 - USDMXN - Shark

NZD/USD is knocking on the big .7680s/.7700 resistance again. I think the risk here is for upside. If the Canadian Dollar broke the range, I’ll give the NZD the benefit of the doubt. Commodities are also doing OK. No position on pair itself.

April 20 - NZDUSD - Resistance

I’m watching this flag pattern now that we’ve touched the 50% retracement (US Dollar Index Futures). Well, I’m actually short USD since said touch. (Had been long before such touch)

April 20 - USDX

AUD/NZD at lows again. No trade, but give me a reason to go long and I will.

April 20 - AUDNZD - At lows

This ABCD pattern below on EUR/USD goes against the DX pattern above. I prefer the USDX pattern, but if the news flow suggests to follow this guy – I’ll do it accordingly.

April 20 - EURUSD - ACBD

RBA’s Stevens is a smart chap

I think the RBA may be playing a smart game with the market.

The recently released minutes suggest that the council is finding rate cuts likely ineffective.

April 19 - Australia - RBA Mins

However, you get Stevens on the wires talking about possible cuts the day before. I like what they’re doing – or at least, find it quite amusing.

You do one interest rate cut and then keep saying that you may cut again – just enough to keep markets on the edge. This way, you keep the currency in check and the markets tame while you actually don’t do anything else. (pretty clever and probably what I would do to get the most juice from one cut).

Markets were expecting a second cut in March and April but we got nothing. Now it’s all about a May cut. Look, I have no idea whether they’ll cut or not (and neither does the market consensus, as we have seen).

Nevertheless, I agree with them: is it worth cutting 25bps in an environment of super high household leverage? See this post which covers a note from Barclays.

When the market sniffs this, will be interesting. Citi had a comment on it but dimissed it for now.

Australia debt .

Disclaimer: Long from .7680s post minutes.

Respecting price levels

I was on the stream talking about “respecting levels” and someone asked me to explain what I meant. Well, here is an example with the US Dollar index futures (which is what I was looking at anyway).

First, we have to acknowledge that the USD Index was in a downtrend going into Thursday. The day opened with some aggressive selling that was initially bought. The selling pressure resumed during the European session. The index then reached the same level that was bought in the Asian session, which is also a key level on the index. Here, I was covering USD shorts and not willing to sell until (at least) the level was broken (see yellow box on chart below).

Looking at the chart, the bubble “1” is the price action from when the US housing data came out (note: data was worse than expected). As we can see, it was not enough to break the level. As it’s an important level, you’re likely to have a lot of scattered buy orders over there (especially given the overall USD trend). Question is whether those buyers would be enough to end the downtrend. Bubble “2” shows the price action when the Philly Fed came out (slightly better than expected).

After the spike, I went long some EUR/USD at 1.0702 (so, essentially going short this index). I believed this to be a good entry because we can see the chance of the previous support now acting as resistance. Additionally, the downside pressure on the USD was still there and the data was overall mixed (and bad when you look at the whole week). My target on the EUR/USD position was also about 1.0750, which would correspond to the level that refused to break.

Thus, I was respecting the level that had not yet broken. And also respecting the top side level (i.e. assuming that it would hold as resistance).

Eventually, the index did break lower. Bubble “3” on the 15-min chart below clearly shows the first close that was the telling sign. Here, I would respect the break. I wasn’t at the desk when this happened, so I missed this second move.

In summary, respecting levels is giving the benefit of the doubt to the price action. Unless we have a firm belief that something will break, respect it. Once broken, assume it will hold (of course, we sometimes get fake outs). One could argue that the USD would eventually break yesterday given the sentiment and weak data. I know of some traders who stayed short the whole time.

The bigger the timeframe, the greater the respect to a price level. Of course, trading is abou guessing whch levels will break or not.

Respecting levels.

Charts from April 16, 2015 – More USD weakness

The US Dollar started Thursday on a pretty bad note.  The initial sell-off was faded, but the pressure came back late during the European session. I tweeted this chart at around 8PM Eastern. At the end of the day, have to respect the levels.

April 15 - DX Failure to swing

The yield on the German Bund continues its orderly decline. Until this channel is violated, not much to be done but go with the trend (or cash in/stay in the sidelines).

April 15 - Bund - Channel

US yields are also under pressure as US data continues to be weak. We’re at key levels to watch.

April 16 - 10 year - head and shoulders

GBP/JPY is around a key fib level and a broken trend line on the daily chart. This could be a good opportunity to sell a bit. GBP/USD would likely need to stay below 1.4950/1.500 for this to play out.

April 16 - GBPJPY - 61%

I would think that oil re-tests the $54.20 level before going higher…but #WhoKnows.

April 16 - Oil - re-test

During the NY session, I was playing this box below on the USD Index Futs. I sold some Euro right when the EUR/USD was back to 1.0700 (from 1.0750). I cashed in some 30 pips or so, but the pair did go for a full 100 all the way to 1.0800. Bummer.

April 15 - USDX - Box

The USD is on the offer but the USD/CHF did reach some key support levels. It could be a nice place to play for a trade.

April 16 - USDCHF - Key level

Some key tweets from today:

 

Charts Tweets from April 15, 2015 – Fade that USD

Today has been about the ECB and the weak US data.

The morning started with the USD Index futures challenging the broken support. The thought was to respect the level and fade:

April 14 - USDX - Broken Support

Noting a broken triangle here on NZD/JPY daily. This could be a sign of further risk-off in the near-future (this pair is usually considered a representation of risk).

April 14 - NZDJPY - Triangle broken

As the day went by, re-fade was still the play. As of 1PM Eastern, so far so good.USD Bulls

I noted a GBP/CAD support and Melinda (@JeanieNYC) had a much better chart than me. Below is her chart. I think this is a tough call because USD/CAD is breaking its range today. I would wait for now but keep it in mind….

JeanieNYC

The German 10-year hit another new low. Not good for the Euro, but USD data not helping EUR/USD on its side. And we’re near that 1.05.

German 10 year

Some tweets:

Something to keep in mind. Respect the levels.

I took some USD/TRY shorts. Playing the butterfly.

Great chart by Aurelija