Going long NZD

Fonterra dropped milk prices today to their lowest levels in several years. As expected, this induced a drop in the NZD. 

Personally I find these levels über attractive and could form a basis for a lucrative carry trade.

Itching to go long

I still have several Aussie longs that haven't turned into profit yet, but I didn't mind before because it was earning interest anyway.

So I was pretty much fine with it until a couple of days ago when the RBNZ or Reserve Bank of New Zealand added an anticipated 25 basis points making the NZD almost 30% more profitable as far as interest is concerned. Moreover, as per my post the other day, the NZD is actually dropping (go figure) so its in what appears to be a nice level to go long

Consequently, since then, I have been itching to go long on the NZD and every time I see a bullish candle on the charts I worry that it might bounce already. Nothing I can do though except to wait with my finger on the trigger with only 3 1/2 hours to market close.

Strange NZD behavior

The RBNZ came out with a decision to raise the NZD cash rate by 25 points to 3.5 from 3.25.

This decision was largely expected though normally, even in this case, the currency tends to rise substantially.

Strangely enough, the NZD not only refused to rise, but even went down substantially.

Explanations of several forex columnists revolved around the statement of an RBNZ governor that this would be the last raise for some time. While this statement is a bit of a let down, this point of  view ignores the fact that the NZDD has the highest cash rate at the moment.

The AUD has a rate of 2.5 right now so the NZD has a significantly higher rate. Sure its a far cry from the 7% in 2008 for the AUD, but 3.5 for the NZD is certainly nothing to sneeze at.

Anyway regardless of this curious behavior, I am happily trying to go long on the NZD right now in an effort to use it as a replacement / supplement for my AUD in so far as my carry trades are concerned.

A Brave New World

Its been quite a long while since my last post. Many things have happened both in the FX world and in mine so there wasn't that much time to post.

I haven't stopped trading though and because of my disgust at the brazen market manipulation, I resorted to scalping. This was a decision that proved to be a wise one because the market has been quite volatile.

Thankfully, there was a bit of a crackdown on market manipulators which can be seen in the smaller swings in currencies.

However, evidence still points to manipulators particularly when economic data is expected. Good data has sent a currency plunging which simply shows that a new strategy of trading forex is needed if one is to survive.

As the post title says, its a brave new world of trading and in truth, it is, now more than ever, something that only the brave should do.

TAPER IS POSTPONED, RISK ON GALORE

The recent releases of data about the US economy was at best, conflicting. However, the jobs numbers were off the mark by too much so there was underlying sentiment that tapering would either be postponed or it would be a small amount, kind of like a token taper if you will.

So the Feds announced no taper at 2 AM HK time, and AUD/USD took off like the shuttle while USD/JPY sank like a stone.

I was a bit nervous going into news time so I closed my AUD/USD positions and missed the chance to make quite a bit of  money. I settled for a little bit since I had AUD/JPY positions anyway so I figured I'll make money there and wait for an Aussie pullback.

Anyway, with my new paradigm of trading, things are going much better. I have to remind myself time and again that the old rules no longer apply and the only way to survive this market is to play by the new rules.

Quite simply, you just have to stop intellectualizing the trades too much because its no longer responding to the old trading principles. Someday I might try write about my new paradigm of trading, but in the meantime, blogging will have to do.

NFP September 2013

For those readers wondering, I have not been taken out by the market.

On the contrary I was able to take the market by the horns and ride out
the volatility over the past weeks. More on this later.

In the meantime, among all the recent Non Farm Payrolls (NFP) releases
in recent history, this will come across as one of the most important.
This is because of its proximity to the much anticipated (or dreaded)
tapering. The NFP along with the employment rate are being watched
closely by no less than the FEDs which makes it even more capable of
inducing volatility. At this point the dollar is heavily bought so if
the NFP goes in a different direction there are likely to be big swings
in the market. The general consensus is that NFPs will print higher than
expected, but time and again, this has proven to be no guarantee of
actual data.

Regarding how I was able to ride out the market, here is what I learned.
You have to UNLEARN what you have known about the forex market over the
last couple of years. It is a totally new ball game and I realized just
how accurate my "new paradigm for forex " really was. Its not as
simplistic but suffice it to say that at this point, the market has
truly rewritten the rules.

I would be a liar if I said that I know how to handle the market now
because I don't. What I do know is how to survive and not be taken by
the manipulation of the market. Like I said, I don't know completely how
the market works, nor do I have the magic formula. But here's a piece of
advice that I think will go a long way in helping you cope with it.
Manipulation is a given today because of the amount of money wielded by
the bigger institutions. Remember though that their ability to
manipulate relies heavily on the predictability of the market to their
moves. If we want to throw them off the track, then lets be
unpredictable in our response. By doing so, we can render their
manipulative attempts impotent.

Anyway, its a little under 1 1/2 hours to NFP. Be careful out there.

Consistent irrationality in forex

If anything, there is indeed a method in the madness that has taken hold
of the market.

Again we have great figures for the US Initial Jobless Claims and the
USD continues to drop.

USD/JPY dropping and the EUR/USD ascending.

Just a bit more and I wouldn't be surprised if a major crackdown
occurs. This is really an "in your face" thing that has no problem
keeping the market irrational for an extended period.