Hello comrades! Here you are again, being a member of this big movement to spread knowledge and bring reliable tools at accessible prices! Well done!
This week I made a research on USDJPY and EURCHF, but before you must read the next words!
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Last week I talked about a tool that is a
copy very similar to EIKON(cost 2500 USD/month) this is already happening
More features are being added this week. Let’s move to the analysis!
USDJPY – POSSIBLE BOTTOM
We have a pretty interesting confluence of signals that indicate USDJPY has a great probability of making a pullback from here, before find sellers again! I will start enumerating them, follow me!
You will see on the COT SpreeadSheet that Big speculators(Non-commercials) cut some of their shorts(255813 JPY Contracts), indicative of demand zone and good level to take profit. Another interesting thing to observe is commercials doing what they do best, buying the entire USDJPY drop, but what caught the attention is the fact they started selling. You know commercials sell during uptrends and buy during downtrends, so this is a strong indicative that USDJPY has carved a bottom.
The technical analysis on top of cot data also shows us oversold stochastic and RSI almost reaching the same zone.
USDJPY is mimicking 2002 price curve, coincidence or not was the year we have first coronavirus outbreak. You will see that the predominant trend in 2002 was to the downside, but at the beginning of May, we saw a pullback of approximately 1.36%. So based on Seasonality we can expect USDJPY pushing higher to 108.384
30-DAY FEDERAL Funds( We still talking about USDJPY)
This instrument has a negative correlation with USDJPY and has triggered a powerful cot sell signal, plus other extremes in data that we must observe.
- Exhaustion buying capacity
- Overbought Stochastics
- Overbought RSI
In the next charts you will see some relations I found!
LAST TIME SAME SIGNAL WAS TRIGGERED FOR 30-DAY FEDERAL FUNDS
USDJPY Rebound after the big specs reached their buying capacity and started to take profit, its the same case as now, so we can expect UJ going up.
Rebasing chart 30-DAY FED Funds vs USDJPY
This was what I told you, they have negative relation and this is something that will never change.
Let’s talk about rates
Short-term spread it’s an important driver of USDJPY. As the coronavirus outbreak keeps scaring financial markets, and domestic Japan’s data is deteriorating we must see the JPY rate spread between 10y and 1y widening and this will push USDJPY up.
Markets are pricing rate picking in JPY rates only for the last quarter of 2021. In the following chart, you will see the following relation for (US10YT – JPY10YT)
- Wider Spread -> USDJPY Positive
- Narrow Spread -> USDJPY Negative
And in this chart, you see what I did talk about market pricing spread narrowing only in 2010 last quarter.
So let’s add this to our indicative list that USDJPY has carved a bottom!
I discussed in this article about the power of options and how big players use it to trade. Options markets are supportive of a move up in USDJPY!
In the first chart, we are looking for the At The Money(ATM) volatility for the spot week. One interesting thing to note is how the volatility leads the USDJPY spot price. So we must expect atm volatility going down and spot price going up.
In the second chart and third charts, you will see that 1 month implied volatility is pricing USDJPY near 108.
Risks of reversal
Since April end the risks of reversal skew for USDJPY started showing recovery. Strong indicative that price may also rebound with options. Fewer investors hedging their portfolios against the downside.
To summarize all this we also see that the Reuter’s poll among investors is pricing USDJPY near 108 too: 107.720
107.520 is the point of control from the last 3 months of trading. There is a place we will see the action happening.
I am buying at:
Then I will see how the price will react to the 107.520 level, if we see a clean break there, I am adding and trailing stops to 106.600 with a target at 108.384
EURCHF – SELL SIGNAL
EURCHF has also another set of interesting signals this week, let’s analyze them!
Since 08/03/2020 we are seeing a downside pattern in commercial positions, yet the price has not moved. This is a problem to the non-commercial group, that has spent a lot of money building a long position and it was not sufficient to fuel an uptrend. If you are a more hawk-eyed reader you will see that Open Interest for commercials group has diminished and the positions closed were on LONG SIDE!
Commercials are waiting for a further drop to add those long again and are very well positioned with short positions to it. On the other hand, Non-commercials most probably will stop their longs as they are near to their buying capacity. Poor fucking big speculators.
I can see enough elements to build a case for a short, but let’s continue.
EURCHF is mimicking the 2010 price curve. According to seasonality, we can expect a hard drop in EURCHF this week pushing the price to 1.03500 level.
You can see in the following chart that future expected prices for EUR still skewed to the downside while CHF is to upside. This is not me making predictions this is options volatility. Market pricing. This is a trend that will persist until the end of 2021. Even if we see some spikes in price, the correct trade is to fade it.
RISKS OF REVERSAL
This is one element that at first glance may not be seen as favorable, but if you pay more attention you will realize that:
- even after a huge pop in risks of reversal price has not reacted.
- If the price pops we can short it at a better price
After all, we have a short case here.
Implied volatility tends to lead the spot rate. We can see how the correlation is strong(don’t get fooled by chart scale)
EURCHF VS GOLD
With escalating tensions again between Koreas, Trump threatening China with more tariffs and the USA looking for a way to blame China for Coronavirus outbreak is hard to see inflation picking around the world. This will make big money run for GOLD and CHF! Helping our EURCHF shorts.
We are sitting exactly at the point of control zone in EURCHF. This makes easier to see if everything I wrote is bullshit or is right.
I am waiting for a clear breakout below 1.05.
- Stops at 1.06114
- Target at 1.035
We can then trail and compound our position!
Comrades, that’s it. Headlines are getting troubled again and we are taking positions with different profiles or risk and they are going to offset each other, and in the end, our net will be positive.
Last week I already told you the truth. Stop looking for one thousand indicators and trades. Stop being a loser!
Every week I get a lot of DM in twitter people asking for help on how to trade, how to be profitable, but the majority don’t want to read and study. This report is fucking good. Read and learn.
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Comrade, you can expect more of me for next weeks, and if are you tired of being a loser, join us! To join you just need to change your account to my IB as describe above, join the movement inside the trading room, you get access to all the tools you saw I am using in this post. Or if you just take this for granted, at least share this post on your social media, so other traders can see it!
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