Getting close to Christmas

Christmas time is coming and toward the end of the year activity normally slows - if youre ahead of the game you dont want to do anything foolish and those behind dont want to exacerbate. So what would this mean if the Fed hikes in December. I think a more muted response would be in order. Sure it would be bullish for the $ but as this conversation has been running for the entire year, one would think a hike has been priced in - perhaps not fully but last payrolls was a good test. Eur continues to be on a downward path and CAD has been beaten up along with WTI. Cable has been a dissapointment of late and whilst we started the year with discussion on when BOE would hike, the latest numbers coming out from the UK would suggest another long drawn out debate. The antipodean currencies on the other hand are having a little bit of a fightback but will need China to show improvement before anything sustained. Saxo notes that the SilkRoad impact could be massive on the upside for China. Keep an eye on diverging monetary policy is probably the key message here as the market continues to hang of every utterance. Why am I starting Christmas chat already - well its time to be careful of declining liquidity and expect to see some low volume high volatility moves in the coming month or two. Becareful and think about trade notionals as we get closer to the silly season and lets see if Yellen delivers the Christmas present that the market has been waiting for !

Aussie Again

I seem to be devoting alot of time to the aussie lately and its not the only pair I cover but what a day after the job report came out. Employment on a seasonally adjusted basis fell below 6% to 5.9 and the ABS reported the number of people employed increased by 58,600 to 11,838,200 in October 2015 (seasonally adjusted). The increase in employment was driven by increases in male full-time employment (up 33,500) and female part-time employment (up 24,000)

The aussie gapped up and has now closed the price leg down after the NFP last week. Employment numbers decreased the likelihood of a rate cut b4 Christmas by RBA and the aussie pairs all follwed suit. Above 7170 and we will be targetting mid 72.

screenshot_Thu_Nov_12_19.42.32

Source: 6202.0 - Labour Force, Australia, Oct 2015

Glen Stevens RBA Minutes 6 October

"In Australia, the available information suggests that moderate expansion in the economy continues. While growth has been somewhat below longer-term averages for some time, it has been accompanied with somewhat stronger growth of employment and a steady rate of unemployment over the past year. Overall, the economy is likely to be operating with a degree of spare capacity for some time yet, with domestic inflationary pressures contained. Inflation is thus forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate."

Aussie held today with not alot of movement after RBA minutes release showed a slightly positive tone, hinting that another rate cut may not be on the cards this coming November.

Eco Data 10/14/15 – Action Forex

Most notable from yesterdays economic roundup is soft inflation on both sides of the Atlantic as measured thru the PPI as well as dissappointing retail sales from the US. This aided the EUR having a good run toward 1.15 as well as supporting other majors as timing for rate hikes becomes more certain of being pushed back.

Source: Eco Data 10/14/15 - Action Forex

Aussie Aussie Aussie

Oy oy oy.... if you followed my tweets you would be sitting up in the Hawks crib with a glass of wine. Sure there not all winners but after August its nice for a good win. Stop now at 7325 and looking for 7414.

AUD Strength

My long aud/usd from 7035 has benefited from a short term, at least, positive risk sentiment. Equity markets have had a nice couple of days from start of this month + RBA holding rates. Presently aussie around 7180 and hopefully can breach 72 and hold. Energy markets are supportive of the move as well so we are seeing some $weakness.

Other good news is VIX is below 20 after a couple of months since the equities rout in Aug/Sept. All in all positive for aussie and kiwi and CAD which has been on a great comeback from 1.34 now close to 1.30.

As always take everything with a grain of salt and all your own transactions are at your own risk.