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Yen Crashes As Risk Aversion Hits Markets Dec. 10, 2014

The PBOC Liquidates 80 Billion From Its Shadow Banking Sector Starting Risk Aversion Moves

There are multiples of reasons I can see that could cause the panic that happened yesterday but these moves always have a catalyst that sparks the flame. I have to admit almost nobody saw the move from the PBOC coming but in reality they (central banks) will have to start somewhere. It does surprise me that it was the Chinese first but the Chinese are smart people. One only needs to look at how many US jobs they imported to see that.

The next thing in line that shows the probability that actually several issues came to a head at one time are the comments from the BIS (Bank of International Settlements) in a report released not long ago.

“The highly abnormal is becoming uncomfortably normal. Central banks and markets have been pushing benchmark sovereign yields to extraordinary lows – unimaginable just a few years back. Three-year government bond yields are well below zero in Germany, around zero in Japan and below 1 per cent in the United States. Moreover, estimates of term premia are pointing south again, with some evolving firmly in negative territory. And as all this is happening, global growth – in inflation-adjusted terms – is close to historical averages. There is something vaguely troubling when the unthinkable becomes routine.”

What is actually comical about this report coming from them and should actually be enraging is looking at who sits on its board of directors. Take a look. If thats not the pot calling the kettle black I am surely missing something. If you thought good old Jens Weidmann was feeling like the black sheep at the ECB, just imagine how he feels when he goes to board meetings at the BIS. Again the only word is FUBAR.

The BIS Board of Directors 1

Chairman: Christian Noyer, Paris

Mark Carney- London,  Agustín Carstens-Mexico City,  Luc Coene- Brussels,  Jon Cunliffe- London,  Andreas Dombret-Frankfurt am Main,  Mario DraghiFrankfurt am Main,  William C Dudley-New York,  Stefan Ingves- Stockholm,  Thomas Jordan- Zurich,  Klaas Knot-Amsterdam,  Haruhiko Kuroda-Tokyo,  Anne Le Lorier-Paris,  Stephen S Poloz-Ottawa  Raghuram Rajan-Mumbai,  Jan Smets-Brussels,  Alexandre A Tombini-Brasília, Ignazio Visco-Rome,  Jens Weidmann-Frankfurt am Main, Janet L Yellen- Washington, Zhou Xiaochuan, Beijing

Now the real kicker is the statement from the traders or more importantly firms who deal with this every day, essentially the big boys. Not necessarily the normal big boys that we look to see manipulate Forex but the smaller firms will be where it starts like this quote from one. Its only a safe assumption that he is not alone in these thoughts.

 “Fed talk is losing its luster. Data is irrelevant unless it’s extremely weak or extremely strong,” says Todd Colvin, senior vice president at Ambrosino Brothers, a futures and options execution firm.

 “This is the year the Fed is going to lose credibility when it gets to March or June and they announce why they’re not moving.”

Of course we will see another round of “do anything to save the status quo” but once credibility has been totally lost it only gets worse from there.

EUR/USD Gains In Risk Aversion?

Another sure sign that something is broke is when we have risk aversion moves across the board and the EUR/USD moves 155 pips to the upside. This probably had something to do with a propping up of oil prices but seems odd in any flight to quality move. Especially when Greece is stumbling again along with most of Europe in recession.

The move yesterday looks cleaner as a three intraday push move with topping while not typical, however we are learning to expect more of these types of moves these days and need to be more focused on the significant levels and manipulator habits than their ability to follow a plan extending more than a couple days. The markets wont allow it confirming again that they can only manipulate short term even if its shorter now. I will be open on direction looking to short from 1.2436 if they can reach there or the Asian highs if they manage to widen the Asian range enough. Longs are valid from 1.2366, 1.2343 and 1.2292. The 1.2343 level is what I see has the most potential but the 1.2366 has the hourly 200 as confluence and they have widened the Asian range enough now to give the Asian lows more probability.

EUR/USD Hourly chart 12-10-2014

GBP/USD Confusion With USD Weakness and GBP Weakness on Bad Data

The chop on the GBP/USD is no surprise considering both currencies were weak for different reasons yesterday. At this point the levels are most important while direction questionable. The best entries will be around the highs/lows yesterday with the extra potential shorting level at 1.5693. However the risk is higher with the 1.5711 just above. The Asian range has also widened enough to consider its high/low for entries but again higher risk in the middle of the chop.

GBP/USD Hourly chart 12-10-2014

EUR/JPY Crashes with UJ, Supported By Pension Fund (BOJ?)

The EUR/JPY and all Yen crosses started the plummet when China made their announcement, then continued after the NY open dropping below 147.00 before finding support. The word on the street was a Japanese pension fund was on the bid in UJ at 118.00 but we all know the probability is the BOJ was most likely in there as well.

As for direction the intraday pushes add probability to another push down but at this point I have my doubts it will get far with the stopping volume that came in at the lows. Therefor I will be more open on direction today looking at the 147.55 level for a long or the backside long if they show conviction above 148.36 this morning. I am open for the short from 148.26 but considering the added risk will need both UJ and GJ to confirm the set up. The stop run to 148.83 has much better potential for the short but I would rather be long taking profit if it gets there.

EUR/JPY hourly chart 12-10-2014

Forex News Today

The calendar is rather dead today so they will likely be still digesting yesterdays tape bomb potentially contemplating a move to save their own butts if markets get wacky again. Otherwise it will likely be a slow moving day while they regroup after yesterday.

Happy Trading




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