Too Late to Hedge…? And down we go! Global stock markets continued the downward sweep yesterday with the FTSE reaching levels it was at 10 years ago. The First Rate Cut This Year…?The fall in Oil to below $30 a barrel has smashed the Canadian dollar to levels not seen since 2001, and it doesn’t look like it’s stopping. Can NZDJPY Predict A Market Turnaround…This pair can help identify and confirm market turning points. Oil Below $30 A Barrel, And It’s Not Stopping!
Too Late To Hedge..?
21.01.2016 And down we go! Global stock markets continued the downward sweep yesterday with the FTSE reaching levels it was at 10 years ago. After being in this bull market for so long it seems crazy to think we’ll continue falling. We’re so accustomed to 5-8% drop-offs ending in a quick bull run pushing new highs that we can all get caught up trying to pick bottoms relatively easily. I was talking with a few bankers yesterday and we were discussing where institutions were at in their cycle. Currently it seems as though most of the “intelligent” funds and institutional investors out there are happy chaps. They saw this coming along time ago and have been hedging accordingly ever since. Unfortunately it is the retail investor/trader that loses during times like these. Knowledge is power, and knowing how to hedge when markets are valued like they were is an essential skill when managing your portfolio. Whatever derivative you choose to use; options, futures or CFDs, at-least look at hedging that currency risk. And it’s not too late!
The First Rate Cut This Year…?
20.01.2016 The Canadian economy has had an incredibly difficult time over the last year. The fall in Oil to below $30 a barrel has smashed the Canadian dollar to levels not seen since 2001, and it doesn’t look like it’s stopping. We’re now trading around the 1.4650 level, which is long term resistance from 2000/01. At the meeting this afternoon Poloz is expected to announce either a rate cut to 0.25% from the current 0.5% or the institution of a stimulus programme. If we get the latter then expect a further big move to the downside in the Canadian dollar. The rate cut, as it stands seems to be priced in so don’t expect too much movement if we get what is expected. The third option is of course that Poloz decided to hold tight and not do anything at this meeting. In this instance we should expect to see a bit of a relief rally in the Canadian dollar. Overall however, I don’t see USDCAD stopping anytime soon. It really all depends on the price of oil. If Iran does what they say they’ll do and increases supply, then $25 a barrel is almost a certainty, which means further losses for the Canadian dollar and most likely the institution of a stimulus package by the BoC, if not at this meeting then sometime in the near future.
Can NZDJPY Predict A Market Turnaround…
20.01.2016 As I’ve mentioned before this currency pair is great at predicting market turns. Because the NZD is a commodity based currency, it increases in times of risk on sentiment. The Japanese Yen however is a safe haven currency and increases in times of risk off sentiment. This pair can therefore help identify and confirm market turning points. With the last two weeks’ risk off sentiment, we’ve seen some very bearish action across the board. NZDJPY has hit strong weekly support at 74.85. This support line is a major level in this pair and extends all the way back to October 2012. We also have to remember that by buying this pair we are making a carry trade, taking the difference in interest rates between the NZD and the Yen, and it doesn’t look like the Japanese will drop rates anytime soon. All in all there is a good argument for buying this pair at the moment with a stop below key support. We must be careful when doing this though, as if we do see more risk off sentiment and further scary movements within the Chinese markets, NZDJPY will most definitely go lower!
Oil Below $30 A Barrel, And It’s Not Stopping!
18.01.2016 This morning we opened up with another gap down in Crude. Now we’re trading below the key $30 a barrel mark at levels not seen since 2003 and we’ve still had no technical or fundamental signs of a reversal. I think it looks safe to say we’ll get closer and closer to the $25 a barrel target. Currently supply is far outstripping demand and now that the sanctions on Iran have been lifted we should expect another 500,000 barrels a day coming onto the market from the Middle East. Iranian and Saudi tensions are at an all time high and with the sanctions lifted Iran is really “sticking it to the Saudis” by pumping even more supply into the markets. There is a serious battle going on between the oil producing nations, and at this rate it looks like the only thing that could cause a meaningful turnaround would be the unfortunate outbreak of war between the two Muslim states. We could see a short squeeze, so we have to be careful, however catching knives is not the play here. Many traders have been hurt this year and last picking bottoms in crude. Keep that in mind and remain cautious!
