About the time this post gets published, latest FOMC announcement will hit the wires. Both of these events are highly anticipated so expect some delays. Yeah, right. This particular meeting is, in my mind, one of the most interesting ones in a while. Not most important, but interesting. Interest rates are cut to the bone and they are widely expected to be left unchanged. They can’t really be lowered effectively any more and no reason to start raising them. Not yet, anyways. At the same time, financial authorities are under pressure to do more for ailing economy. In short, some new initiative should be expected, but which one? The possibilities mentioned earlier, “among all available tools”, include buying long term Treasuries. Doing so would help further drive down mortgage rates and help the crippled housing market. Another possibility is increased purchasing of other debt issued by other Federal Agencies. We also should be open to hearing of some new programs. Could be an element of surprise here. That’s why I think this one will be interesting, or more specifically, markets reaction to whatever the announcement brings.
I’ll be an observer, since I don’t trade economic news releases. My USD trades, which don’t get any coverage here, have been closed. Recently, Yen has been responding strongly to FOMC also. Should be fun to watch.
Speaking of Yen, yesterday I wrote about closing half of my NZD-JPY trade. Last time it was described in China is worried post. Progress slowed down and I decided to lock some profits.
Exit was at 52.34 for 166 pips. The balance remains open for another 200 pips or just about break even, should the price fall now.
Swiss Franc has been getting stronger last couple of days. In some cases it was a significant gain, against GBP, for example. After the intervention last week, SNB statement suggested that they worried about rate against EUR. This has not changed much, although hourly chart indicates possible move down for EUR-CHF. SNB didn’t give us enough clues about their intentions, so we can’t really speculate if they’ll step in again, at what level or when.
GBP-CHF sold off a lot, almost reaching 62% retracement level of the last up swing. I want to test this level with a buy at 1.6250. Objective could be 250-300 pips. Will see what happens. News release might or might not create some waves, but even if there are some exaggerated moves, which I doubt, by this time tomorrow they will have settled down. Hopefully creating some good opportunities in the process.
re. AIG post this suggestion from Macro Man http://macro-man.blogspot.com/2009/03/big-day.html is a gem:
“… Don’t seize the bonuses via a one-off excise tax. Instead, pay them in the amounts contractually-mandated, and use normal tax treatment. But pay them in stock, and allocate shares on the basis of the average AIG share price in 2008: $27.57.
So someone receiving a million-dollar bonus will receive 36,269 shares of AIG. Current market value: $34,818. This should appease the baying masses and also introduce an incentive to these valuable employees to right the ship as quickly and successfully as possible. Oh, and at the same time, introduce these guys to another concept well-known to hedge fund types: the high water mark.
If and when AIG were ever to surpass the high water mark of the stock allocation price, that would be a very big day indeed, for both the employees and the taxpayer.”
Well, this was interesting. No rate change but currencies exploded. What is your take on this?
Mark, these kind of concepts are interesting. At this point, though, no matter what happens general public will not change opinion about the employees. They in turn, are sure they deserve the payments. Vicious circle. Glad I’m not involved.
Interesting, Jason? Understatement of the year. I think it is perception of debt finally catching up with the dollar. I’ll discuss it in depth in next update.
Now I’m not surprised you avoid trading during time of news releases. I have never seen EUR-USD move so much so fast. Crazy
Hi,
my name is Grace and just wanted to say hello. Have been reading this blog for some time now and find it interesting, even though it is way over my head. I’m still trading demo but getting ready to open a real account. Which currencies do you think a beginner should focus on? Thank you.
Heather, yes it was crazy. Imagine being on the wrong side of it and not being able to get out….
Hi Grace. If you are absolutely new and want to trade short term EUR-USD, USD-CHF, USD-JPY are probably the best. Longer term trades could include GBP-USD, EUR-JPY, AUD-USD and USD-CAD, but beginners should focus on the first 3.
Well, you nailed it. Wanted something intresting to happen and it did. Hope you describe how that GBP-CHF order worked out. This pair also had wild swings.
Those were very accurate observations, about what FED might do. Indeed they are going to buy US debt. I think they are really pushing the envelope here, with both debt issue and deflationary forces. If we don’t see results of these actions soon, then we are stuck in this recession for few more years.
[...] so I closed it also. It was mentioned on these pages many times, most recently two days ago in FED decision. I took about 2 weeks from the time order was placed to execution. There is more potential here, [...]