Top Trade Idea for July 11, 2013 – AUD/NZD

Selling into the AUD strength against the NZD

In an effort to avoid the post-Bernanke chaos in the dollar and euro, I am looking a pair where there is both a stable, overall trend, and a lessened impact from the volatility of Bernanke’s statement: “Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy.”

That brings to a currency that has continued to fuel the trends that I have traded for the past few months* and that is the AUD. The Australian dollar did gain against the U.S. dollar after Bernanke’s dovish Q&A yesterday late-afternoon. But to say that the move was based on the aussie as the driver would be wrong. In fairness to the aussie, while the initial move higher in the AUD/USD was based on USD weakness, the Employment Change release did show that the aussie economy added 10k more jobs than expected (10.3k actual versus 0.3k consensus)

*Admittedly, this is still a longer-term time frame commitment and for some traders – especially during the Summer months – this is an uncomfortable time frame considering the volatile nature of this time of year. For traders that would prefer staying nimble here’s a video I recorded on “When it’s time to “retreat” to shorter time frames”

One of the reasons I am looking to the AUD/NZD is of course sidestepping the U.S. dollar. While I am certainly not saying that the SCOPE and VELOCITY of the move is a surprise, volatility and exhaustion under 85.00 in a market that had not yet transitioned into an established uptrend IS expected. I also like the established bearish Directional Bias (aka a quality daily trend) on the pair. The chances that the AUD will gain on the NZD longer-term is low and this is punctuated by NZ FinMin Bill English’s comments that: “New Zealanders think they are going to have 5 percent rates forever…well they aren’t. They are going to go up, it’s just a matter of when.”
The average price hourly price movement range for the AUD/NZD does put the aggro 1.1745 short sell within reach so this entry has what I call “proximity” in that when parking a limit sell at this level there can be a realistic expectations of getting the trade filled. It’s the conservative 1.1795 entry that may take more time to be reached.

The Point of Validity (”POV”) stop-loss on the trade is 1.1920/30 but a Cheated-In stop loss (”CISL”) at 1.1860 is a smarter way to handle this trend. Look to support at 1.1660 for an initial profit target where I would recommend ratcheting in the CISL to a “Break Even” stop loss to just above the conservative entry which would put it at 1.1805/20 to be able to benefit from the major psychological level resistance and the selling pressure that will likely be waiting there.

How To Spot Forex Fraud

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Investments in foreign currencies is a relatively new investment. There are fewer people in this market that people are aware of the different investment opportunities than others, be aware of. Currency trading, also known as forex is the best investment in the market exists. There are several factors that are true, including the successful Forex traders to get real benefits, more than one hundred percent per month. In comparison with some of the investment markets, known as corporate actions, which is unheard of return on investment. It should be noted that the person who invests in foreign currencies, without exception, to the point that detailed but simple strategies and market information. This is really what makes the difference between successful forex traders and merchants. Some other points that have created a strong impact on investors in the Forex market: the amount of capital needed for investment in the market is only three hundred dollars. For most of the investment market requires thousands of dollars from investors, from the beginning. Furthermore, the market will provide opportunities for profit, regardless of market direction may be the most frequently cited market investors sit and wait for the market on an upward trend before the trade. Even then, in general, investors should stay and wait a bit 'more to get out of trading with a good yield. Since the forex market produces several up and down and sideways trends in a single day, one can easily conclude that the currency is significantly higher than in other markets. Moreover, there are the business strategies that are informed, that the provision of services, non-profit gain together. In addition, accounts are free demo in forex trading that is available to allow the refinement of skills, without risk of losing capital. The time factor is used in foreign exchange is very attractive to an investor. Compared with one of the following channels of investment, which often requires forty hours or more a week or seeking housing market, forex market demand requires much less time for investors. Forex trading requires approximately ten to fifteen hours per week, full-time to generate income. It 'easy to see that the advantages and great power in the Forex market, there is, which makes it one of the most profitable time of publication and will be easy at this time

Dealing With Online Forex Brokers

Can play online for competitive advantage Forex Broker in forex online trading. They are a valuable asset, especially if you want high bets in the game forex trading. Because the brokers considered in currencies on the market and there are some misconceptions that were also made around him. To increase the industry, with the time to straighten out some of the misunderstandings, and for each person. The truth behind the trade corridors Most times, we certainly have our own good when we receive the services online forex brokers. The tendency is to believe we that we are in the hands of experts so all we need do is sit back and relax, because they are all the work we need. Therefore, when things are not as we expect from them, tend to put all the blame on the broker. Sometimes I feel cheated even pay anything. But the truth is that we are responsible for their losses. All forex brokers are aware that the commercial sector, there is loss of 95%, but a common cause. Therefore, they look well on a majority of the trading day needs. Currency change is very dynamic and at the end of the day, the riders that you once. The hand is still making all important decisions and not my agent. Featured Broker and make One of the particular features of most foreign exchange traders used to provide leverage. Enjoy all the benefits promised but you have Forex broker. Some even go so far as to 300:1, and unfortunately some people in the trap. Truth is the maximum 20:1-runner process and can assure you. It is easy to think they are considering different methods of trading, but at the end of the day, remember that these people also agents. You can only cover so much and also take it that can not only to take into account clients. Listen to your Forex Broker Can be one of the big business of forex broker, you can enter as an additional advantage is the word of advice. Over all if you are enjoying new to the game. But the thing is, do not swallow all your advice broker. Online Forex brokers are committed to help, most likely, but should never be dealt with, since the course of its business. At day end, must still be listening to instincts, and instincts. In addition, you should not buy more things for the broker will tell you the context of the work. As far as possible, keep your relationship on a professional level.

Forex Options Market Overview

The Easy-market began as "over-the-counter (OTC) financial resources for large banks, financial institutions and large international companies hedge against currency fluctuations. Like the forex spot market, the Easy-market as a" market "subsidiary. However with the plethora of real-time data and financial software forex trading options for most investors over the Internet, today's forex option market now includes a growing number of individuals and companies who speculate and / or hedge foreign currency exposure via telephone or online forex trading platforms. Forex option trading as an alternative investment vehicle for many traders and investors developed. As an investment tool, forex option trading provides investors, large and small, to implement with greater flexibility in determining the appropriate foreign exchange trading and hedging strategies. Most forex option trading is conducted via the telephone, there are only a few forex brokers, online forex option trading platforms. Forex option defines - A forex option is a financial currency contract, the forex option buyer the right but not the obligation to buy or sell a specific forex spot contract (notional) within a specified price (strike price) a certain date (expiry date). The amount of foreign exchange option buyer pays the seller for the forex option forex option contract rights is called the forex option "premium." Forex Option Buyer - The buyer or holder of an option on foreign currency must decide whether the foreign currency option contract before its expiration, or he may sell or decide to hold the foreign currency option contract until maturity and their right to exercise carried out a position in the underlying foreign currency spot. The act of exercising the option of foreign exchange and taking the next position is known in the underlying foreign currency spot market will be as an "assignment" is allocated or "" a spot position. The only initial financial obligation of the buyer of foreign currency option is to pay the premium for the seller prior to when the foreign currency option is initially purchased. Once the premium is paid, the holder of foreign currency option has the obligation of the other financial resources (no margin is required) until the foreign currency option is either offset or expires. At the maturity date, the buyer may be entitled its call to exercise the fundamental position of authority in foreign currency in the foreign currency purchase price of the option to strike, and the holder may make his order to sell the position to exercise the underlying spot foreign currency at the exercise price of the option of foreign exchange. Most options in foreign currencies will be the buyer does not exercise, but are offset in the market before the deadline. Currency options expires worthless if it is at the time of the option in foreign currency, the exercise price of out-of-the-money. In simple terms, foreign currency option is "out-of-the-money when the price of the underlying spot foreign currency is less than the price of a foreign currency call option, strike, or the base price on the spot foreign currency is higher than the search for a put option's price. Following is a foreign currency option expires worthless, foreign currency option contract itself expires and neither the seller nor the buyers have no further obligation to the other party. Forex Option Seller - The seller of foreign currency option can also be as a writer "or" grantor "of a foreign currency option contract. The seller of a foreign currency option is contractually obligated to take place before the base position in foreign currencies, if the buyer of his right exercises. In return for the premium paid by the buyer, the seller assumes the risk of taking a negative attitude possible to exchange at a later date in the foreign market locally. First, the foreign exchange option, the seller, the premium to be paid by the buyer the opportunity, foreign currency (the buyer collects funds are immediately transferred to the account of the seller's trading in foreign exchange). Have the foreign exchange option seller has to transfer to your account to cover the initial margin. If the market moves in a direction favorable to the seller, the seller must not allow more resources to their options in foreign currencies other than the original state of the margin. However, if the market moves in a direction to the detriment of foreign exchange options seller can have the seller to send additional funds to your trading account in foreign currency to the balance of foreign exchange trading account via a demand for margin maintenance. As the buyer, seller forex option to choose whether (to compensate for repurchase) of the foreign currency option contract in the options market prior to maturity or the seller can choose to hold foreign currency option contract until maturity. If the foreign currency options seller holds the contract until the end, enter one of two scenarios: (1) the seller is the face behind the spot foreign exchange will have a position if the buyer exercises the option or (2) The seller simply let the foreign currency option expire worthless (where the entire premium) if the strike price out-of-the-money. Please note that "puts" and "calls" are separate foreign exchange options contracts and not the other side of the same transaction. For every put buyer there is a put seller, and all purchasers of call there call a salesperson. The foreign exchange options buyer pays a premium to the foreign exchange options seller in every option transaction. Forex Call Option - foreign exchange call option gives the forex option buyer the right but not the obligation, to a certain foreign exchange spot contract purchase (the underlying) at a specified price (strike price) within a certain date (expiry date) . The amount paid by the buyer of an option to the Seller a forex option trading for the Common Foreign exchange option contract rights is called the option premium. Please note that "puts" and "calls" are separate foreign exchange options contracts and not the other side of the same transaction. For every put buyer, a modified gearbox put seller, and for every buyer there is a foreign exchange call seller called foreign exchange. Foreign Exchange Options The buyer pays a premium to the foreign exchange option seller for each transaction option. Forex Put Option - A put option allows the exchange of a foreign buyer of an option the right but not the obligation, to sell a particular job in a foreign currency contract (the underlying) at a specified price (strike price) within a certain time (late expiry date). The amount paid by the buyer of an option to the Seller a forex option trading for the Common Foreign exchange option contract rights is called the option premium. Please note that "puts" and "calls" are separate foreign exchange options contracts and not the other side of the same transaction. For every put buyer, a modified gearbox put seller, and for every buyer there is a foreign exchange call seller called foreign exchange. Foreign Exchange Options The buyer pays a premium to the foreign exchange option seller for each transaction option. Plain Vanilla Forex Options - Plain vanilla options generally refer to standard put and call option contracts through the exchange traded (but refer to the case of forex trading in options to the standard plain-vanilla options, foreign exchange option Generic contracts) being traded through-the-counter (OTC) Easy-dealer or clearing house. Simply put, would the vanilla forex options, such as the purchase or sale of a contract, standard forex call option or a forex put option contract to be defined. Exotic Forex Options - To understand what an exotic forex option "exotic", you must first understand what a forex option "non-vanilla." Plain vanilla forex options have a definitive expiration structure, payout structure and amount of payments. Exotic forex option contracts may change any or all of the above characteristics of a vanilla forex option. It is important to note that exotic options, since they are often tailored to a particular investor is not a Forex broker, exotic options, usually very liquid, if at all. Intrinsic and Extrinsic Value - The price of the FX option is in two parts, calculates the intrinsic value and extrinsic (time) value. The intrinsic value of the FX option is defined as the difference between the exercise price and the underlying FX spot contract rate (American style option) or the FX forward rate (European Style Options defined). The intrinsic value represents the actual value of the option FX, in their pursuit. Please note that should the intrinsic value of zero (0) or higher - if the FX option has no intrinsic value, the FX option is as simple as "worthless" (or zero) intrinsic (intrinsic value is never known as a negative number are represented). FX option has no intrinsic value is considered "out-of-the-money, FX option is a value in itself as an" in-the-money "and FX option with a strike price at, or near, the underlying lying FX spot rate as "in-the-money. The external value of the FX option is commonly referred to as the "time" and the value when the value of the FX option on the intrinsic value defined. A number of factors, based on the calculation of the external value, including but not limited to, the volatility of the two spot currencies involved, the time remaining until maturity of the risk-free interest rate of two currencies, the price at which ready for both currencies the strike price and FX. It is important to note that the external value of FX options erodes their expiry date approaches. FX option with 60 days to maturity will be worth more than the same FX option that has only 30 days to maturity. Because there is more time for the underlying FX spot price to possibly move in a favorable direction, FX options sellers demand (and FX options buyers are willing to pay) a premium for the largest share of the extension. Volatility - Volatility is considered the most important factor when pricing forex options and measure the movements of the underlying. High volatility increases the probability that the forex option could expire the money and increases the risk for the forex option seller, which in turn require a larger premium. An increase in volatility leads to an increase in the price of both call and put options. Delta - The delta of the forex option is defined as the price change of an option on a foreign exchange rate variation underlying spot forex defined. A change in the delta of a forex option is a change in the underlying spot exchange rate, a change in volatility, a change in the risk-free rate of the base currency on the spot or just sit down (to be affected almost to the day expiration). The delta is always calculated in a range of zero to one (0-1.0). In the general, the delta of a deep out-of-the-money forex option closer to zero, the delta of an at-l'opzione forex money is in the vicinity, 5 (the probability of the exercise is to be close to 50%) and the delta of deep in-the-money options, foreign exchange would be closer to 1.0. Simply put, the more the price of a currency option to strike at the basic rate of forex spot, the higher the delta because they are more sensitive to a change in the underlying trend.

Global Markets: The Three Little Bears - Dollar Bear, Bond Bear and the Ratings Bear

HIGHLIGHTS

• The stand out market trends of the past month or so have been the massive sell off in long bond yields, the substantial depreciation of the USD and the surprising power of credit rating agencies with some of their recent pronouncements on sovereign credit rating risks.
• With further job losses to come, inflation more likely than not set to fall and any pressure for the Fed to flag the start of a monetary policy tighten cycle well into the future, U.S. 10 year bonds appear set for a correction towards 3.25%
• TD now forecasts that the Canadian dollar will reach parity with the U.S. by the end of 2009 based on a variety of factors discussed in this report.
• The publication also includes quarterly interest rate and exchange rate forecasts for the U.S., Canada, Australia, and New Zealand, and also offers additional exchange rate forecasts for the Japanese yen, the euro, the U.K. pound, and the Swiss franc.

The stand out market trends of the past month or so have been the massive sell off in long bond yields, the substantial depreciation of the USD and the surprising power of credit rating agencies with some of their recent pronouncements on sovereign credit rating risks.

The first two events - the sharp jump in long bond yields and the USD decline - are probably related. The supply of U.S. government bonds is hitting the market at an unprecedented rate, while at the same time, there is a chunky maturity profile of outstanding bonds coming through plus there is an issue with just about every other country in the world ramping up its bond issuance to cover large and increasing budget deficits. The story unfolding is that yields may well have to rise to attract a given amount of global capital. We have tended to downplay this link between rising supply and rising yields simply because the historical experience in fact shows the opposite trend. That is, high bond issuance results from a recession, which results in low inflation and risk aversion, which in all, is bond supportive. Low bond issuance, on the other hand, is usually associated with strong economic growth, upside inflation pressures, and a strong appetite for risk, all of which are bond bearish.

General trends in bond yields, it seems, are much more likely to be influenced by headline inflation than bond supply. This makes the sharp 150 basis point and more back up in U.S. 10 year yields over the past couple of months somewhat hard to fathom with inflation still flat to lower in annual terms and further falls in inflation likely to emerge in the next few months.

We are still not thoroughly convinced that bond supply will have a lasting influence on bond yields. We would prefer to look at likely trends in monetary policy settings (on hold or lower are still dominant themes around the world) and inflation as the greatest lasting influence on bond yields. While inflation is indeed currently very low, there may be some budding inflation pressures being hinted at in both the CPI and PCE deflators. We note that in the first four months of 2009, the core readings in both these key inflation measures have increased at an annualised pace around 2 ¾ % - not fatally high after the inflation fears of 2008, but a trend that is at least a little disconcerting given the amount of policy stimulus flooding around the world. Our bullish bond call and suggestion that the yield curve will flatten significantly, is based on these inflation trends reversing as the recession rolls on.

Where the budget deficit issue may have a more lasting effect is in the USD. With the U.S. heavily reliant on foreigners to fund its budget (more than 50% of all Treasurys are held offshore), the USD may have to cheapen to attract sufficient foreign interest, especially when virtually all governments in the world are escalating their bond issuance to fund their deteriorating fiscal positions.

What's more, with Standard & Poors flagging a negative watch for the U.K. in the light of its fragile public finances, the market superimposed that logic to the U.S., observed an even more parlous position in the U.S. and now is nervous about the ability of the U.S. to contain debt over the medium term. This view looks valid, a point that is likely to weigh on the USD over the medium term, even though rating agencies said that there is no threat of a downgrade in the U.S.

Allowing for all of that, the economic fundamentals of the globe remain extremely bad. The run of Q4 2008 and Q1 2009 GDP results in all major and most minor economies show shrinkages in output. Further, house prices just about everywhere are flat at best, or are still falling sharply at worst while unemployment is rising at a rapid pace. The so-called green shoots of recovery that are being touted by some as a sign of a meaningful recovery in the economy are invariably indicators declining at a less rapid pace which admittedly is always a first thing to turn before a fully fledged recovery, but nonetheless do not inspire unambiguous optimism about the sustainability of the recovery in the near term.

The 'greens shoots', it should also be noted, may simply reflect simple forecasting errors from the consensus. At the depths of the low, there may well have been a bias (subliminal probably), to tilt the forecasts to the downside. This may then have seen a few 'less bad' results that sparked some optimism, risk taking and bond bearish trends. As an aside, who frankly can forecast things like consumer sentiment, the ISM or a raft of other indicators in a credible manner. As a result, surprises in these data releases, which may be seen as green shoots, have little credibility, even though markets may have knee jerk reactions to them.

Suffice to say, global GDP is shrinking, wealth is declining and household incomes are under downward pressure. This is not the material that inspires confidence about a sustained recovery, nor does it validate the back up in long bond yields. It does give one confidence about forecasting low inflation which, as the chart above shows, is usually a key driver of lower 10 year yields.

With many comparisons being made between the current situation in the U.S. and the 1990s in Japan, it is noteworthy that even during what has to be one of the most phenomenal bond rallies ever seen (10 year JGB yields fell from 5% to 0.75%), there were a couple of episodes, which lasted up to 6 to 9 months, where 10 year JGB yields jumped around 150bps. Both were associated with positive expectations for the economy but both were quickly reversed.

With further job losses to come, inflation more likely than not set to fall and any pressure for the Fed to flag the start of a monetary policy tighten cycle well into the future, U.S. 10 year bonds appear set for a correction towards 3.25%, possibly less. Longer end yields are also likely to be dragged lower, and as a result, the yield curve is poised for a major flattening.

(BOJ) Statement on Monetary Policy, June 16, 2009

Statement on Monetary Policy

1. At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided, by a unanimous vote, to set the following guideline for money market operations for the intermeeting period:

The Bank of Japan will encourage the uncollateralized overnight call rate to remain at around 0.1 percent.

2. Japan's economic conditions, after deteriorating significantly, have begun to stop worsening. Domestic private demand has continued to weaken against the background of declining corporate profits and the worsening employment and income situation. On the other hand, exports and production have begun to turn upward, and public investment has also increased. In the coming months, Japan's economy is likely to show clearer evidence of leveling out over time. Meanwhile, financial conditions have generally remained tight, although there have been signs of improvement. CPI inflation (excluding fresh food) has recently moderated reflecting the declines in the prices of petroleum products and the stabilization of food prices, and, with increasing slackness evident in supply and demand conditions, will likely become negative.

3. With inventory adjustments having proceeded both at home and abroad, economic activity will be greatly influenced by developments in final demand. The Bank's baseline scenario through fiscal 2010, in which expectations of both medium- to long-term growth and inflation are assumed to remain generally unchanged, projects that the economy will start recovering and the rate of decline in prices will moderate from the latter half of fiscal 2009, supported partly by the positive effects of measures to stabilize the financial system and of fiscal and monetary policy measures, in addition to a recovery in overseas economies and improvements in conditions in global financial markets. If these developments continue, there are prospects for Japan's economy to return to a sustainable growth path with price stability in the longer run. However, the outlook is attended by a significant level of uncertainty stemming mainly from developments in overseas economies and global financial markets.

4. With regard to risk factors, those that demand attention in the area of economic activity are the continued high downside risks to the economy stemming from future developments in the global financial and economic situation, changes in medium- to long-term growth expectations, and financial conditions in Japan. Regarding the outlook for prices, there is a possibility that inflation will decline more than expected, if the downside risks to the economy materialize or medium- to long-term inflation expectations decline.

5. The Bank, paying attention for the time being to the downside risks to economic activity and prices, will continue to exert its utmost efforts as the central bank to facilitate the return of Japan's economy to a sustainable growth path with price stability.