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Originally Posted by Malcik
Hi Simba and others,
I wonder what are your opinions on the current situation at USDCHF, USDJPY, GBPUSD, EURJPY, EURCHF, AUDUSD, and GBPJPY.
It seems to me that on all of these an uptrend could have been expected because of the position of SMA 205 (below last major cycle high). At the same time though there were false up signals by Chandelier. It wouldn't have hurt us very much but yet they were false.
Now the three shortest SMAs are close to each other, heading steep down, crossing each other all the time in different spots -- IMHO an indication of dominating 205 period cycle with the direction down (as opposed to the expected upturn mentioned above) - maybe except for Swiss Frank pairs.
What do you think?
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Hi Malcik,
Go to the 4h tf for analysis,as you said.. there were false 1h chandelier entries,so,it is better to analyze on 2 tfs minimum..wait a few days and possibly the situation will be clearer,if it isn`t...don`t enter
There is a fundamental reason behind these moves and this is the unwinding of carry trades..if this process is going to continue..the upmoves for jpy and chf will continue..if this process stops-one reason is that there is still a big int rate difference between aud,gbp,nzd,zar,usd versus jpy and chf,and that the jpy int rate move looks like it won`t have a continuous following on a quarter by quarter basis since data from japanese economy is not strong enough to support a continuous increase in int rates-the reversals will be sudden and fast...MY PERSONAL OPINION is that we are now in a very dangerous area..any comments by BOJ officials can create panic/greed moves..so,switch to the double 1h/4h tfs for analysis...
Try to do this kind of thinking..presume you are a hedge fund,working on leverage,so you invest 10 billion dollars of which 1billion is "yours" and 9 billion you can take on credit in any currency you want,you have to put this money(fund money+credit taken) somewhere..
Where would you put it?which currency would you use for funding?
Until now the mechanics were something like:
1-you took the jpy equivalent of 9blln $ on credit at 1.5/2% interest and invested them plus your 1blln $ at 4%-7% on fixed income assets in usd,gbp,aud,nzd,zar...do the math and calculate the return on your 1billn$ fund equity..add into the equation that jpy depreciated 10/20% per year,so,your actual cost of capital was negative..ok,you are running a currency exchange risk,but so what,running risks is your job
2-Same as above but you invested in European stock exchanges,USA stock exchanges,"developing markets" stock exchanges(check the evolution of the brazilian real and of the brazilian stock exchange from 2004 to 2006 as an example of a double whammy)
3-Mix of 1 and 2 above
What are you going to do now?
Are you going to fund your investing business with credits in gbp,usd,etc at 6 or 7% int rate?To invest in japanese fixed income?I don`t think so..to invest in japanese stock exchanges..mmm possible the investing in japan stocks..but funding at 6/7%..not probable..etc,etc,
There are many alternatives..and one of them is going to be the one to make a lot of money..there is a lot of thinking to be done..
And remember always JM Hurst`s definition of trend..the longest cycle at work,so,when in doubt,switch to a higher tf..
Regards
Simba