A lot is being made about the size of foreign reserves held by China. Sources estimate it to about $2 trillion (scary number). Some of this money is held in a perceived safety of US treasury bonds, some is being used to combat economic slowdown in China. Parts of this enormous pool of money, however, is being used for investments on behalf of the country. Few years ago China Investment Corporation was formed. It became a sovereign wealth fund, with about $200 billion in assets. Balance of the funds is overseen by State Administration of Foreign Exchange .
Over the weekend both of these agencies came under criticism, after China Investment Corporation (CIC) was reported to have lost about $4 billions due to recent market events, although this figure is likely much higher. At the same time, State Administration of Foreign Exchange (SAFE) is accused of loosing maybe as much as $80 Billions. Some of this is speculation since SAFE is very secretive and doesn’t comment in public on these reports. CIC, while a little more open, also lacks transparency.
Not sure why there is any uproar over these losses. Numbers are large, but in terms of percentages of total sums involved, what are we talking about? About 2% percent for CIC and maybe a little more by SAFE? When we compare it to losses sustained by major stock markets, real estate and other markets around the world, this is NOTHING. Well, just one company, AIG, managed to loose almost twice that much and now they are rewarding themselves with bonuses. Losses in single percentages? Great result!
Trades outlined yesterday didn’t happen, but they are still valid. Pound- Aussie remained in the range, so my orders are unchanged. I traded short term breakouts up in GBP-JPY.
Three winning trades and 2 of them met the objective of 60 pips nicely, before reversing. It is not every day that the beast moves in such nice pulses. It is also not every day that a high probability longer trading opportunity presents itself in GBP-JPY. Today price almost reached 140.00. This is very close, on daily chart, to previous high.
Major resistance is established at about 141.75 or so. Breakout above it could produce a move to as high as 162.00 over time. I don’t think this would happen in straight line and even a pullback below 135 must be considered, but entire picture is very encouraging. Price have created couple of reasonable stop/losses and an intermediate target of 148.00, so buying here can really be tailored to many risk/reward criteria. As for me, I will most likely focus on smaller steps, using 4H and 1H charts, but this also will be taken in a separate account. I will not even place a stop/loss but rather add to existing position IF the price should dip to under 129 or so. I don’t do it very often , but think it is worth the risk here.
I received a lot of positive feed back about the EUR-SEK trade. Thank you. There is another one of these more “exotic” currencies creating a longer term trade set up right now. It will be discussed tomorrow.
[...] Original post by fxmadness.com [...]
[...] Original post by fxmadness.com [...]
Many thanks for a very educational site, and commentary. The exotics are particularly good ! Have you looked at sek/jpy recently ?
best wishes
mike lavin
You are welcome, Mike. Yes, I checked sek/jpy. It is also building bottom ( I think) just like most other JPY crosses. Gets a little too expensive to trade very actively and not many brokers support it. Currently worth attention, though, if this happens, GBP-JPY will be just as good for most people, in my opinion.
Mike, could you do me favor and take a look at EUR-GBP and share your thoughts in next update? Would be much appreciated.
Your GBP-JPY analysis have not changed from before, longer term look. If the breakout happens, do you still think summer is the time for the 160 area to be reached?
Andy, I’ll do it time permitting. depends on what happens with the pairs mentioned recently.
Yes, Casey, if the breakout happens, summer is very likely for the objective to be reached. These are current clues. Outlook can change depending on how market develops. Unfortunately, it is us who have to adjust to what the market is doing, not the market to accommodate what any of us think or want.
I read about these losses by Chimese sovereign fund in FT. Seems like western press gives it much more attention than it deserves. As you pointed out these losses are marginal. But I guess it is always easier to point somebody’s mistakes or shortcomongs.
Did you watch the grilling Commedy Channel gave Cramer and CNBC? It was hillarious! They did better job than 60 Minutes ot any other of those “serious” journalism shows.
[...] at 2.1535 remains valid, although it is unlikely I’ll see it filled very soon. As promised yesterday, I’m considering another trade in one of more exotic crosses. Currency is Polish Zloty(PLN) [...]
Yes, I watched it. Not live, but you can find it all over internet. Good stuff.
[...] For a long time I’ve been waiting for this breakout on daily charts. It was explained in Chinese Forex Losses and many other posts. Today price reached first objective of this move. I settled for 142.00 [...]
[...] something little odd. The Abu Dhabi Investment Authority, one of world’s largest sovereign wealth funds (by some accounts the largest), partially lifted its veil of secrecy last week. The fund issued its [...]