Friday, January 19, 2007

Journal Entry: Largest position taken on thus far

Jan. 19 2007 (EUR/JPY trade)

Trade: Long 10 lots of EUR/JPY @ 157.11. Long another 10 lots of EUR/JPY @ 157.05.

Stop: 156.50

Target: 158.00 (2:1 profit ratio).

Result: 158.00 (+88 pips)

Comments: The 1st 10 lots of EUR/JPY hit a high of 157.71 netting me a profit of almost $6k. However, I resisted the temptation to close out my position as I believe that EUR/JPY still has alot more upside to go over the next 1-week. Prices retreated to 157.05 a few hours later and I doubled up on my position, purchasing another 10 lots @ 157.05.

Journal Entry: Long USD/JPY

Jan. 18 2007 (USD/JPY trade)

Trade: Long 10 lots of USD/JPY @ 121.29.

Stop: 120.80 (Lowest close on Jan. 18 before the rally upwards).

Target: 122.30 (2:1 profit ratio).

Result: 121.32 (+3 pips)

Comments:

Journal Entry: Short USD/JPY OUCH!!

Jan. 18 2007 (USD/JPY trade)

Trade: Short 5 lots of USD/JPY @ 120.78.

Stop: 121.05.

Target: 120.05.

Result: Trade stopped-out on Jan. 18 @ 121.05 (-27 pips).

Comments: OUCH. BoJ Governor Fukui's press statements indicating reluctance of BoJ to raise i/r in its Feb meeting hurt me so bad. Lucky for my relatively tight stop at 121.05. Prices shot all the way up to 121.58 during mid-day trading.

The reason why I shorted those 5 lots was because after the news release at 9am Tokyo time, prices increased moderately by around +20pips, leading me to believe that the market has already fully absorbed the news. I next set my eyes on the BoJ meeting in Feb and believed that the BoJ would increase i/r by then, leading to an appreciation of the Yen. HOWEVER, at 3pm Tokyo time, BoJ Governor Fukui released the details of the meeting which had a bearish sentiment to it and indicated the reluctance of the BoJ to even raise i/r in Feb. Before I knew it, USD/JPY blew through my stop to reach a high of 121.58.

Thursday, January 18, 2007

Bloomberg: Bank of Japan Keeps Rate Unchanged; 3 Members Dissent

By Mayumi Otsuma

Jan. 18 (Bloomberg) -- The Bank of Japan held its benchmark interest rate at 0.25 percent, averting a clash with government officials who say consumer spending and inflation are too weak to withstand higher borrowing costs.

Policy makers kept the overnight lending rate unchanged for a sixth month in a six-to-three decision, the bank said in a statement today in Tokyo. The split vote prompted traders to increase bets the bank may raise rates in February.

The decision may cool government opposition to higher rates before the release of fourth-quarter data next month, which the bank predicts will show a rebound in household spending. Governor Toshihiko Fukui plans to gradually raise rates to prevent a repeat of a stock and property bubble in the 1980s that foreshadowed a decade of stagnation.

``The impression that they caved to political pressure is unavoidable,'' said Noriko Hama, professor of economics at Doshisha Business School in Kyoto. ``It's not a bad decision, given the statistics, but it certainly does not look good for the BOJ.''

Investors increased bets that the bank will raise rates in February to a 67 percent chance, up from 42 percent before the decision, according to Credit Suisse Group. Credit Suisse calculates the chances of a quarter-point rate increase based on trading in contracts for the exchange of interest payments.

The previous six decisions to keep rates on hold were unanimous.

``The split vote means the BOJ will probably raise rates next month,'' said Tetsuhisa Hayashi, chief currency trader in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd.

Media Speculation

The yield on five-year notes climbed 3 basis points 1.24 percent at 2:11 p.m. in Tokyo.

Yesterday bonds rose the most in almost four months after Kyodo News, the Nikkei newspaper and NHK Television said the central bank was likely to keep the rate at 0.25 percent.

That caused bets for a rate increase today to drop to a 22 percent chance from 80 percent at the start of the week, when media reports said policy makers were leaning toward an increase.

``It turned into a bit of a fiasco, and puts the Bank of Japan in a very bad light,'' said Hama. ``It's very unfortunate.''

Japan's economy expanded at the slowest pace in almost two years in the third quarter of 2006 as consumer spending dropped 0.9 percent, the biggest decline in almost a decade, masking growth in corporate investment and exports.

Consumer spending, which accounts more than half of the economy, probably ``had a big jump in the fourth quarter,'' Hideo Hayakawa, the central bank's chief economist, said at an economic forum on Jan. 10.

Fourth-Quarter Growth

The government will publish fourth-quarter GDP numbers in the middle of next month, a week before the central bank's next board meeting on Feb. 20-21.

``Consumer spending seems to have recovered considerably in the fourth quarter,'' said Teizo Taya, a former Bank of Japan policy board member who's now an adviser to Daiwa Research Institute. ``The Bank of Japan may want to hold off a rate increase until seeing the GDP numbers, which will probably be convincing.''

Gross domestic product will probably expand an annual 2.9 percent in the fourth quarter, according to a Bloomberg News survey of economists, up from 0.8 percent in the third.

The central bank may also want to examine more inflation data before a rate increase. Core consumer prices, which exclude fresh food, rose 0.2 percent from a year before in November, up from a 0.1 percent gain in October.

The 33 percent drop in crude oil prices may drag the inflation measure lower.

Deflation Risk

``With crude oil prices dropping at a faster than expected pace, core prices turning negative is not just a risk, but a real possibility,'' said Takehiro Sato, chief economist at Morgan Stanley Japan Securities Co. in Tokyo. Some investors ``are dumbfounded as to how a rate hike can be justified when prices may slip into a negative territory.''

In the lead up to today's decision government officials have been voicing concern that an increase this month may be too early.

Economic and Fiscal Policy Minister Hiroko Ota said on Jan. 16 that Japan's consumption remains weak and that there is no guarantee the economy wouldn't slip back into deflation following a rate increase.

Hidenao Nakagawa, secretary general of the ruling Liberal Democratic Party, said on the same day a rate increase can't be justified given the current state of the economy and consumption.

Prime Minister Shinzo Abe's government, focusing on policies to spur growth and stop the expansion of the world's largest public debt, wants to avoid an economic slowdown ahead of elections in April and July.

Abe's View

Abe yesterday said that the government and the central bank shared the goal of beating deflation and achieving strong economic growth and that he believed the central bank would ``make an appropriate judgment.''

The government estimated last week a 1 percentage point increase in short-term interest rates would shave Japan's GDP by 0.4 percentage point. A similar increase in the yield on Japan's benchmark 10-year bond would increase the country's annual debt- servicing costs, which already eat up a quarter of total spending, by about 1.6 trillion yen, the finance ministry estimated in December.

The central bank will publish its monthly economic report at 3 p.m. Fukui will speak at a press conference at 3:30 p.m.

To contact the reporter on this story: Mayumi Otsuma in Tokyo motsuma@bloomberg.net
Last Updated: January 18, 2007 00:11 EST

Wednesday, January 17, 2007

Journal Entry: Long EUR/USD finally

EUR/USD Hourlies
MACD shows an intersection on the hourlies signalling increasing velocity in uptrend. Slow stoch and RSI indicates beginning of overbought conditions. However, still got room for further upside.

EUR/USD Dailies
On the dailies, support is found at the fibo 50.0% retracement level. As can be observed, prices have been hovering around that level for 6 days. Next support level to look out for is 61.8% retracement level.


Jan. 17 2007 (EUR/USD trade)

Trade: Long 3 lots of EUR/USD @ 1.2919.

Stop: 1.2885 (Support level is found at 1.2900 but decided to cut some slack below support).

Target: 1.3010 (Key resistance level is found at 1.3000. Will review target once 1.3000 has been breached).

Result: Trade closed on Jan. 17 @ 1.2916 (-3 pips).

Comments: Finally EUR/USD has retreated to a level where I am comfortable in going long. Prices has been hovering around 1.2950-80 for the past few days thus making it too expensive for me to go long. Woke up this morning to find EUR/USD in the 1.2910 range and thus decided to jump at the opportunity. Within the past 6 hrs, managed to capture +16 pips so far.

However, I panicked when prices crashed in a matter of 5 mins to 1.2910-20 and decided to close out my position at 1.2916, losing -9 pips in the process. However, I am pretty comfortable with my move as I didn't like the fact that I was having a long USD/JPY and EUR/USD position ahead of a major US event (Producer Price Index was released on Jan. 17). Both trades are contradictory to each other in light of the PPI data, hence I closed out my EUR/USD to focus on my USD/JPY trade.

As a post-note, the PPI data beat most expectations and showed that US inflation is still a key risk to the economy. However, to my dismay, USD/JPY remained little changed. Must find out the reason to it.

Monday, January 15, 2007

This is what I do for a living these days

This is what I do for a living these days. Getting increasingly hooked onto it. The thrill of identifying the right trends/reversals gives me a high which is beyond words. Simply kick. As for losses, ah thats a different story all together ain't it. However, I am gradually learning to accept my losses and cut it before it cripples me permanently. It is extremely important to review your misses and find out the reasons behind it. Exhaust all possibilities and commit them to mind.

Journal Entry: Quite a tight USD/JPY trade

Jan. 15 2007 (USD/JPY trade)

Trade: Long 5 lots of USD/JPY @ 120.55.

Stop: 120.08 (based on the 120.08 low created on Jan. 11 ).

Target: 121.49 (2:1 profit-loss ratio).

Result: 2 lots closed on Jan. 15 @ 120.47 (-8 pips). Remaining 3 lots closed on Jan. 18 @ 120.80 (+25 pips)

Comments: Unclear signals shown on the hourlies. Will be scaling out my positions gradually. Due to indecisiveness shown ahead of the BoJ meeting on Jan. 18, prices traded narrowly for 2 days without any clear direction. Scaled out 2 lots on Jan. 15 as I wasn't comfortable with my position.

Remaining 3 lots were sold on Jan. 18 after the BoJ decided to keep i/r at 0.25%. However, prices rallied only a few pips to 120.80 which is quite baffling as markets were split over whether BoJ would raise i/r anot. I expected prices to break the 121.00 resistance barrier. Might be going short USD/JPY now. Market speculates that BoJ have a 68% chance of raising i/r in the Feb. 20 meeting.

Journal Entry: Long USD/JPY on oversold conditions

Jan. 15 2007 (USD/JPY trade)

Trade: Long 1 lot of USD/JPY @ 120.12.

Stop: 119.72 (Key resistance level - High on Jan. 09).

Target: 121.00 (Adhering to risk-reward ratio of 2:1)

Result: Trade closed on Jan. 15 @ 120.49 (+37 pips).

Comments: Hourlies on late Friday points to oversold conditions although dailies shows slightly overbought signs. Planning to hold the position not more than 1-day and will close out position once target has been hit. However, will review daily charts for potential further up-trend which started on Dec. 05. Position closed on the same day itself, netting +37 pips in the bag. Decided to go long with another 5 lots @ 120.55 upon locking in my profits from the previous 1 lot sold. Rationale shall be posted later.

Sunday, January 14, 2007

Consolidation going on in USD/JPY?

Seems like there is a consolidation in USD/JPY going into the weekend. The hourlies on Friday shows a very narrow trading range which could lead to a breakout. Both RSI and Slow Stochastics point to oversold conditions while the MACD confirms the declining velocity in shorts. Very tempted to go long on Monday but have not decided on my stops and limits yet. Will analyze the charts later today and enter my trade. Need to find out which direction the breakout (if any) is headed.

Journal Entry: Never ever commit to impulse trade again

Jan. 12 2007 (USD/JPY trade)

Trade: Short 1 lot of USD/JPY @ 120.52.

Stop: 121.00 (Psychological barrier).

Target: No target. Let it run as long as I can stay awake.

Result: Trade closed on Jan. 15 @ 120.14 (+38 pips).

Comments: This was one of my "so-called" impulse trade as I had the gut feel that USD/JPY was trading at too high a level and thus not likely sustainable. In all honesty, I did not even studied the charts carefully and just committed myself to the trade without placing stops (*reminder: do not be a fool next time). Was really lucky to get away with a 38 pips profit on Monday morning as prices trading flat at 120.5+ for the rest of Friday.