Nikkei Futures and USD/JPY on Major Support

10. April 2014 · Write a comment · Categories: Uncategorized

From a risk/reward perspective, if you want to be long the USD/JPY or Nikkei futures, this is the time to do it.

However, considering the risks fundamentally (loss of faith of Abenomics, massive JPY short positions, Japan starting its nuclear power programs again, etc) and the risk of the JPY carry unwind (which, as many know I am not a believer of this story but the market still trades on it like the AUD has an 800bps advantage over the JPY still…lol) should risk aversion pick up, you may think otherwise.

I want to turn your attention to the massive supports both sit on:

4-10-14NikkeiJPY

The USD/JPY is sitting on the massive 101.00-101.50 support

The Nikkei massive support is at 14,000.

If you are like me, and trade correlations, then you also know the JPY (6J) and SPX have a very strong inverse correlation.

4-10-146JSPX

And here is the 10 Year and JPY (6J):

4-10-14ZN6J

Lastly, here is the USD/JPY (candle) matched up with the E-mini’s, Nikkei and Bonds.

4-10-14ESJPYNikkeiZN

Correlations in markets are a lot like dominoes. One falls, it tends to knock down the other, then the other…

Playing long risk is fine for now, but the USD/JPY or Nikkei are so close to support, if they break down, you better “watch your 6!”

 

Blake Morrow

Chief Currency Strategist, Wizetrade

Disclaimer, I am long the JPY against most major currencies and have been for weeks.

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Observation on the USD and Fed Funds Rates

08. April 2014 · Write a comment · Categories: Uncategorized · Tags: , , ,

Last week, I was having a conversation with one of my friends, @Vulgi about a research piece that was written by Nordea bank. The research showed how historically the USD would not rally just as the Fed would raise rates. I took it upon myself to look and see if that was the case or not.

As you can see in this chart, since 1970 this is the EFFR (Effective Fed Funds Rate) and the USD overlayed:

4-8-14EFFRUSD

The vertical lines are  when we started a rate hike cycle (Red) and  when the USD rally followed (Green). What I noticed is that the USD (in most instances) rallied quite some time after the Fed actually hiked rates.

The “Taper is not tightening” TV expert monologue may actually be quite true in today’s market. And frankly, even when the Fed (sometime in 2015) decides to hike rates, it may also be true that the USD may not rally immediately following any monetary policy tightening from the FOMC.

One function of the USD that is true at the moment, and has been for quite some time, is that the USD is the reserve currency of choice. Which means, during prolonged periods of risk aversion the USD tends to be the beneficiary.

4-8-14EffectiveFedFundsRateUSDSPX

The USD does have a unique role as the reserve currency of choice for most (for now until there is a better alternative). What you will notice about the chart above, when the stock market moves lower, the USD is usually already in demand, especially in 2000 and 2008. If the Stock market does turn lower in the next couple of months, the USD could benefit from risk aversion flows, and if the FOMC is still hell bent on raising rates at that point, the USD rally could continue.

So, before you get too comfortable with shorting the USD, do take note we are in the “apex” of a long term wedge which make it increasingly difficult to trade.

4-8-14DXY

Also, keep in mind the SPX may be at the upper end, or top, of an up sloping channel of the last 5 years.

4-8-14ES

One last thought. Steve “Sully” S also said “this ain’t your Daddy’s FOMC” which is very true. This isn’t your Daddy’s market or monetary policy he has ever seen.

Excuse the website for now, it is a work in progress.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

Disclaimer: I am pretty sure within the next 72 hours I will buy and sell the USD in some way shape or form.

 

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NZD/JPY bearish wedge attacking trend line support

07. April 2014 · 1 comment · Categories: Uncategorized

4-7-14NZDJPY

 

NZD/JPY has a bearish wedge pattern (blue) with the pair looking to break trend line support (red line).

If the pair trades below the 88.50 and close below this level, downside may be opened up towards .8400 in the coming days.

I will update with chart in the event that happens.

Blake Morrow

Chief Currency Strategist, Wizetrade

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MILK/NZD update

04. April 2014 · Write a comment · Categories: Uncategorized

For those familiar with the NZD/USD and the Milk futures strong correlation (China consumption of milk increasing from middle class….from New Zealand….get it?) we have been following this chart for a while.

Milk is sitting on key support here and next week should Milk futures slip through the red line (support), we will see a nice fall in the NZD (perhaps across the board)

4-4-14MilkNZD

 

Blake Morrow

Chief Currency Strategist, Wizetrade

Disclaimer, I am short the NZD/USD at .8595 avg

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USD/SEK threatens long term breakout

04. April 2014 · Write a comment · Categories: Uncategorized

The USD/SEK is threatening some major breakout points. A close above 6.5700 could be potentially a huge move higher.

With Mario Draghi of the ECB intent on capping the EUR/USD and fighting the deflationary monsters at his dorrstep, is seems that other European currencies (like the krone) may feel the heat as well.

4-4-14USDSEK

Blake Morrow

Chief Currency Strategies, Wizetrade

Disclaimer, I am long at 6.5314

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Double bottom long term on the EUR/GBP

10. March 2014 · Write a comment · Categories: Uncategorized

3-10-14EURGBP

 

EUR/GBP setting up for a major double bottom after a weekly test or the 61.8% retracement. If we clear the .8350, a move above .8500 in the coming weeks seem warranted.

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