Tuesday 23 June 2015

The recovery of the Euro has finished

The dollar's strenght is back. The EURUSD tumbled to 1.12436 in the Asian trading session. At the beginning of the european session we have seen a positive releases of the eurozone:
           -French Manufacturing PMI (50.5 vs 49.5 expected)
           -French Markit Composite PMI (53.4 vs 52.3 expected)
           -French Services PMI (54.1 vs 52.6 expected)
           -German Manufacturing PMI (51.9 vs 51.3 expected)
           -German Services PMI (54.2 vs 53.0 expected)
           -European Manufacturing PMI (52.5 vs 52.2 expected)
           -European Markit Composite PMI (54.1 vs 53.5 expected)
           -European Services PMI (54.4 vs 53.6 expected)

But even the good data, the EURUSD has gone down. The main reason, the doubts about Greece and the weakness of Europe as an economic union. On the other hand US released good data.
           -US Core Durable Goods Orders (MoM) (0.5% vs 0.6% expected)
           -US Durable Goods Orders (MoM) (-1.8%)
           -US New Home Sales (546k vs 525k expected)
           -US New Home Sales (2.2% vs 1.5% expected)

 EURUSD 15 Min  23/06/2015

The daily trend, only this rate bounced back around 15:00 London time.
 
 
EURUSD 4Hours 23/06/2015
 
As you can see in this chart, the EURUSD broke the "triangle" two days ago. Today's downfall confirms that the recovery of the EUR has finished.



Sunday 21 June 2015

Relationship between bonds and fx market (EURUSD)

Weekly Summary

The most relevant event this week was the FOMC minutes. As I said, the Fed is unwilling to raise the interest rates soon. Janet Yellen said that even with the progressive improvement of the US economy the FOMC members declined the interest rate hike. They are waiting that some of the economic indicators will improve, as soon it happened, they would rise the interest rates. The Greek outcome is a high risk, the doubts about the Eurozone. In Asia, China has created a bubble in the stock market, it has raised 145% since the last year. Also the geopolitical problems around the glove obstuct this decision.
UK released an improvement on the wages which is really important to increase the demand and boost the investments and GDP.
Greece, once again, borrowed €2.9 billion with the ELA program. All people are scared about what can happen on monday. J. P. Morgan signaled that tomorrow is the day in which the ECB should take a decision. There are more cash than deposists, they have broken the Target2 credit limit imposed by the ECB. How will the markets react if a Greece leaves the Eurozone?  What will the markets reaction be if a Greece leaves the Eurozone?

Relationship between US 10Y T-Note, Euro Bund and EURUSD

If you trade fx, what you are really trading are interest rates. Your trading can be based on future expectations about how the different economies will behave. Sadly to do that, you need a really big amount of money. Anyway, it's good to have in mind.

                    Relationship between bonds and fx market.     Source: self made.

As you can see, each time that the spread between US 10Y T-Note and Euro Bund increases the EURUSD decreases. The EUR has strenghten since mid-April because the spread has reduced.
We will see what happen in the next week, thank you for visiting Fx and Fixed Income Trading Blog.


Wednesday 17 June 2015

Outstanding UK data, doubts about Greece and the FOMC meeting

UK data

Early this morning, UK has released a really good figures:
          -Average Earnings Index + Bonus (2.7% vs 2.1% expected)
          -Average Earnings Index Ex Bonus (2.7% vs 2.5% expected)
          -Claimant Count Change (-6.5k vs -12.3k expected)

BoE MPC voted 9-0 to keep interest rates unchanged. It didn´t surprise me, because if we think carefully it is not the appropriate moment to do it. One of the reason is the disorderly outcome on Greece is a significant risk. Another task is the fiscal consolidation in order to weigh on growth. . Let´s see how the UK officials resolve the housing risks. The best new is the increase of salaries because it can boost the demand and consumption.

what was the impact of these news on the fx markets?

 EURGBP 5Min 17/06/2015


 GBPUSD 5Min 17/06/2015

As you can see in both charts the Sterling Pound (GBP) has strenghtened versus the other currencies.
Short-Sterling curve steepened aggressively following the good figures about the UK wages.


Doubts  about Greece

Greece is the biggest concern in the market. After the IMF broke the talks with Greece, all people are concern about how can affect to the different assets in the market. It was clear that the Greek government would decline the troika proposals. It's really difficult to know the consequences of a Grexit. I guess it would be a political mess. In the short term it can affect the financial markets, but not in the long term if Europe become strong.


FOMC minutes

The analyst don't expect a interest rate hike decision. The US macroeconomic data is really good. The US economy is improving. A lot of banks criticise the quantitative easings, because they have increased the inequality and they are creating a bubble in the housing market. They wont raise the interest rate in this occasion because the disorderly outcome on Greece is a significant risk, the geopolitical riots in Ukraine, the doubts of the corporate debt in China. The decision of raising the interest rates is quite tricky at the moment. The Fed has to be sure about the impacts of a interest rate hike.

#trading #fx #US #UK #Europe #FOMC #investments #FED #BoE

Tuesday 16 June 2015

Market Update 16/06/2015

What is the real situation?

It's common to see bad data during these period of the year. The market is concerned about Greece. it´s not an economical problem, it´s a huge political problem. Eurozone officials are discussing holding an emergency summit on Sunday. "If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem" J. Paul Getty. In this case, the IMF, ECB, the Eurozone and all Greek Creditors have the problem. The credibility of the Eurozone plays an important role in this kind of siuations. Allowing this kind of behaviour is not tolerable for the countries that have implemented the policies which Europe imposed. Anyway I don't like talking about politics.
We haven´t seen big movements in the fx markets these days because the traders are waiting the FOMC minutes meeting. Maybe Janet Yellen can give us a clue about the interest rate hike.

Europe dissapointing data

          -German CPI CPI (MoM) (0.1% vs 0.1% expected)
          -German CPI CPI (MoM) (0.7% vs 0.7% expected)
          -European Employment Change (QoQ) (0.1% vs 0.1% expected)
          -European Employment Change (YoY) (0.8%)
          -German ZEW Current Conditions (62.9 vs 63 expected)
          -German ZEW Economic Sentiment (31.5 vs 37.1 expected)
          -European ZEW Economic Sentiment (31.5 vs 37.1 expected)

The EURUSD is down 0.49% (1.1237)

UK Bad Data

          -UK CPI (MoM) (0.2% vs 0.2% expected)
          -UK CPI (YoY) (0.1% vs 0.1% expected)
          -UK Core CPI (YoY) (0.9% vs 1.0% expected)
          -UK  House Price Index (5.5% vs 10.2% expected)
          -UK  PPI Input (MoM) (-0.9% vs 0.4% expected)
          -UK  PPI Input (YoY) (-12.0% vs -11.4% expected)

GBPUSD 15 Min 10:15 16/06/2015

We can see after the dissapointing data the GBP fell down aggresively.

GBPUSD 16/06/2015

As I said in the article called the "Analysis of GBPUSD", this pair is really volatile and difficult to trade. We can see how the USD has weakened after the bad UK data.


US Mixed Data

          -US Building Permits (1.275M vs 1100M expected)
          -US Building Permits (MoM) (11.8% vs -3.5% expected)
          -US Housing Starts (1.036M vs 1165M expected)
          -US Housing Starts (MoM) (-11.1% vs -3.1% expected)        


Greetings

Thank you for visiting FX and Fixed Income Trading. Don´t hesitate to ask if you have doubts or if you are interested in some analysis. Have a good trading, keep on the rules of your trading strategy and be aware of Greece updates and FOMC minutes.

Important UK data, German ZEW, US Building Permits

Talks between Grecce and creditors collapsed on the last Sunday. The  Greek government declined to modify the pensions and hike the VAT. There are a lot of doubts in the market. The probability of Grexit is higher. The equity markets are down, and yesterday they open 1% lower.
The Euro bund future is up 0.45% (151.875). If it brokes the 151.87 level it could go up to the 154.88. We have to be aware about the news because the market can move a lot during these periods of doubts.

Euro Bund Future 15/06/2015

Macroeconomic Data

          -UK CPI (MoM)
          -UK CPI (YoY)
          -UK Core CPI (YoY)
          -UK PPI Input (MoM)
          -European Employment Change (QoQ)
          -European Employment Change (YoY)
          -German ZEW Economic Sentiment
          -German ZEW Current Conditions
          -European ZEW Economic Sentiment
          -US Building Permits
          -US Building Permits (MoM)
          -US Housing Stars
          -US Housing Stars (MoM)

Saturday 13 June 2015

GBPUSD Daily Analysis

I'm really happy to analyse the GBPUSD. This rate is known by "Cable". It's really difficult to trade this rate, because the volatility of this currency pair is higher than others. Both regions have their own central bank, so you should be aware about the macroeconomic figures, the policies of the different central Banks (Fed and BoE in this study), the aim of the central Banks.

 GBPUSD Daily 2Years

This chart shows the evolution of the cable during the last 2 years. As you can see it has moved between 1.46000 and 1.72000. One of the most important level to have in mind is the 1.57700, because it is an important level. I would like to mark that the USD has strenghtened since the last August for the rumors of the US interest rate rise. But if we compare the economic situation of both economic areas, they are doing well. They boosted the economy at the right time. In UK, the people are concern about the future of the Eurozone and they prefer to leave Europe but they are currently studying the impact of a theorical Brexit.


GBPUSD Daily 1Year with MACD and RSI
 
This chart shows the 1 year history of GBPUSD with daily candles. You can see a MACD and RSI, it seems that it can go up a bit, but the main trend durind the last year is bear. We should have in mind the upcoming rise of US interest rates. It's probable that UK will raise rates after US.

The Exponential Moving Averages are the following:
          -EMA 200 1.55186
          -EMA 100 1.53199
          -EMA 50   1.53233
          -EMA 20   1.54098


Analysis of GBPUSD Daily
 
Table 1: Statistics                                   
 
 
As we can see in the table the range is really big. Even the standard deviation is higher than EURUSD. Also we have long tails, it means that we should take care and use always stop loss.
 

Table 2: Intervals, frecuencies, probabilities                             
 
 
 

 Charts about the Statistical Studio

I hope you had enjoyed with this article and this blog. I'm opened to receive suggestions or doubts, also if you are interested in some currency pair or bond future I will be really happy to share my perspective.

Friday 12 June 2015

Short Review of the Trading Session

As I expected and I said the EURUSD is down -0.67%, it´s trading right now at 1.1185. Yesterday US released a better than expected Retail Sales (1.2% vs 1.1% expected), Core Retail Sales (1.0% vs 0.7% expected). Also the Export Price Index and Import Price index was better than the forecast of the market. US Initial Jobless Claims figure was worse than expected but more or less in line with the forecast. Today the European Industrial Production has been released with bad news for Eupean economy, both MoM and YoY were worse than expected. The IMF broke off talks in Greek debt negotiations. Having in mind all these things, it seems normal than the EU will weaken even more. It´s only my opinion, don´t tale it as a trading decision.

EURUSD 4Hour 12/06/2015

In this chart you can see the EURUSD with 4 hours candles. The levels to have in mind today are 1.12717 and 1.10961. During the afternoon the US PPI will be released, the forecasted US PPI is 0.4%.
The US Dollar Index is up +0.47% (95.41), which means that today the USD is getting stronger.

USDJPY 1Hour 12/06/2015

More analysis will be available soon

Tomorrow I'm going to upload a GBPUSD analysis. I appreciate your time, I hope you had enjoyed reading this blog. I'm working hard in order to offer more things and better analysis. Feel free to ask questions and comments. Have a good trading, keep on the rules of your trading strategy. I hope to see you soon here.



Thursday 11 June 2015

Analysis of Euro Bund Future

As I promised some days ago, I've done the analysis of Euro Bund Future. During the last days the Bund Future has fallen according to the rumors of the deal with Greece, the good European inflation data. Right now the Euro Bund Future is up 0.96% (+1.410) (150.510).

Euro Bund Future 11/06/2015

The bund future has been falling since April. At the same time the yield of the German bund has been raising. The German yield curve has steepened.

German yield curve. Source: Jamie McGeever's twitter 
 
 
Analysis of Euro Bund Future
 
 
Euro Bund Daily Statistics
 
 
As you can see I've used 639 days. The main problem of trading Euro Bund Future is that it has long tails so if you don´t protect yourself with a stop loss, you can lose a lot of money.
 



Intervals, frecuencies, accumulative frecuencies, probabilities

Charts about the distribution of returns, the distribution of the probabilities of returns, daily %change and Accum. Frecuency.

I hope you had enjoyed with this article. Have a good trading.

Wednesday 10 June 2015

Jittery Market, doubts and rumors

The EUR went up early in the morning but then the rationality came back to the market. To sum up the trading day, the EURUSD has moved in a range between 1.12716 and 1.13675. Right now (18:53) the EURUSD is up a shy 0.26%. The EUR is strenghtening these days because the German intrerest rates curve is steepening.

EURUSD 5Min 10/06/2015
 
There are a lot of rumors in the market about a Greek deal with Germany. I think there are jitters in the market. I'm bear for the reason I explained in my article Why the EURUSD should go down? 
The most important resistance is 1.14790
 
EURUSD Daily with EMA's 07/06/015
 
We will see what happen tomorrow. The exponential moving averages in the chart are the following:
          -EMA (12)   1.11532
          -EMA (20)   1.11278
          -EMA (50)   1.10882
          -EMA (100) 1.12371
          -EMA (200) 1.16934
 
EURUSD Daily Triangle 09/06/2015
 
The purpose of this chart is let you see the triangle.
 
Today's figures
 
Bad Italian data (industrial production MoM and YoY). UK keeps releasing good figures:
          -UK industrial Production (MoM) 0.4% instead of 0.1% expected.
          -UK industrial Production (YoY) 1.2% versus 0.6% expected.
          -UK Manufacturing Production (MoM) -0.4% versus 0.1% expected.
          -UK Manufacturing Production (YoY) 0.2% versus 0.4% expected.    
 
Movements of the bond futures
 
           -Euro Bund Future    -0.440 (-0.29%)
           -10Y T-Note Future  -0.39   (-0.31%)
           -UK Gilt Future         -0.03   (-0.03%)
 
Key events for tomorrow
 
           -China Industrial Production (YoY)
           -French CPI
           -French HICP
           -US Core Retail Sales (MoM)
           -US Export Price (MoM)
           -US Import Price (MoM)
           -US Initial Jobless Claims
           -US Retail Sales
           -US Business Inventories
 
Greetings
 
Thank you for reading my Blog. I'm preparing new analysis that I will upload as soon as possible. In the following days I will analyse the cable (GBP/USD). I will keep analysing EURUSD. If you are interested in some special analysis let me know and I will try to cover it. I hope you had enjoyed. Have a good trading and keep on with the rules of your trading strategy.

Tuesday 9 June 2015

Which are the most important macroeconomic indicators for the evolution of Swaps?

I'm going to talk about my thesis because it's related. To sum up, I studied the relationship of the 5 year US Interest Rate Swap with a range of macroeconomic indicators.(Non Farm Payrolls, ISM PMI, CPI, GDP, Unemployment, Retail Sales, Commercial Balance and Consumer Confidence ) I did an statistical analysis, factor analysis in order to know which indicators explained better the evolution of the US IRS. The purposes of this project were:
           -Know better the credit market.
           -Identify the most important macroeconomic indicators and measure its mathematical meaning
           -Know in which occasions I should hedge the portfolio.
           -Identify investment opportunities.

Firstly I talked about the how the crisis was originated and its repercussion to other assets. Then I talked about the US IRS evolution. In the next part I explained the macroeconomic indicators and its evolution.
 5Y US IRS. Source: Bloomberg

As we can see in the chart the yield of the 5year US IRS began to fall down. Signals of the precedent crisis. In this period of time the yields of the IRS' were affected by the policy of the FED.

5Y US IRS. Source: Bloomberg
 
This chart is more or less the same but the period is shorter, because it´s the period I used to do my research. We can see the improvement of the US economy from 2013.

Factor Analysis


Statistics
 
Mean
Standard Deviation
N
Unemployment
8,1655%
1,11226%
55
CPI
2,0327%
,80991%
55
GDP
3,8927%
,76154%
55
Retail Sales
,4345%
,60682%
55
Commercial Balance
,4869%
8,39500%
55
ISM PMI
,3186%
2,19658%
55
Consumer Confidence
1,4162%
10,15852%
55
Non Farm Payrolls
-15,6283%
114,71298%
55
Personal Income change
,3600%
,88936%
55
Source: IBM SPSS


Table correlations between the different indicators. Source: IBM SPSS



Comunalities
 
Initial
Extration
Unemployment
1,000
0,794
CPI
1,000
0,754
GDP
1,000
0,772
Retail Sales
1,000
0,750
Commercial Balance
1,000
0,726
ISM PMI
1,000
0,816
Consumer Confidence
1,000
0,606
Non Farm Payrolls
1,000
0,841
Personal Income change
1,000
0,740
Extraction Method: principal components

Table: Comunalities of the macroeconomic indicators

Table: Explained total variance of the US IRS by the different indicators


Conclusion

The 5year US IRS has been affected by the FED interventions. It was a difficult period to try to predict which of the macroeconomic indicators used in my research was better. The moves are closely linked with the movements of the FED. Having that in mind, you can think that all aspects are interrelated. After my study I can affirm that the more important ones are the following:
          -Non Farm Payrolls
          -ISM PMI
          -Unemployment
          -CPI
          -GDP

5Y US IRS with the FED interventions. Source: own elaboration with Bloomberg

I would like to apply this kind of research to different assets. I hope you have enjoyed. If you have doubts, leave a comment.

#Swaps  #interestrates  #US  #FED  #macroeconomics

Monday 8 June 2015

Multi-period Analysis of EURUSD

As I promised, here it is the analysis of EURUSD. I wanted to do a special analysis this time. I don´t know if the audience of this blog do intra-day trading or they use a different timing. If you are interested in something special, you should write a comment. I will be happy to help you.

What has happened these days?

As you know, our rate went down on Friday. The oustanding US figures and the new Greek proposal drove down the EURUSD. But today the rate has covered the gap that was created by the US Non Farm Payrolls. Also Germany has released good figures in the morning:
            -German Exports 1.9% instead of 0.1% expected
            -German Imports worse than expected -1.3%
            -German Industrial Production (MoM) 0.9% vs 0.5% expected
            -German Trade Balance 22.3B vs 19.4B expected

EURUSD daily

The article of EURUSD was ok but a bit short, I mean, it could be more detailed. I can't upload the spreadsheet. I only do this blog because I love  Financial Markets. I would like to upload even more analysis. Maybe I will do in the future, because right now I look for the data on Internet. If I had a special platform, it would be different, but step by step.

EURUSD Daily with some technical indicators

This chart show the evolution of the EURUSD. The technical indicators that appear in the chart are:
        -EMA (20, 50, 100, 200)
        -Stochastic 
        -ADX
I like the Exponential Moving Averages because they fit better than other kind of moving averages. If the price brokes one of the biggest moving averages, it will be a big movement. In my humble opinion it's good to have mind the moving averages.
The stochatic is a momentum indicator that shows the location of the close relative to the high-low range over a set number of periods. I really like the stochastic, if you are a day trader it can be useful.
The Average Directional Index measures the trend strength without regard the trend direction. It's useful to determine the direction and strength of the trend.
A lot of people follow MACD, RSI ... if you are interested in these indicators I would be happy to explain them. Personally I don't use technical indicators, but they are useful to make a point of view. If you use more than one indicator, you will trade less. If you add more indicators you are incrementing the degress of freedom, it means that you have less probability to get the signal to trade. If you prefer to use some indicators, I recommend you to backtest your strategy. Like I'm always saying it's better to have all the things in mind.

Where is the EURUSD going?

Like I wrote in one of my last articles. I think that the EUR should weaken versus the USD. The causes are:
         1º The upcoming rise in the US interest rates.
         2º The European QE should weaken the EUR.
         3º The doubts about Greece.
         4º The outstanding US employment data.

If you like technical analysis I see a triangle that it could drive this rate down.

EURUSD Daily triangle

EURUSD Daily triangle

We have to look every day because if the 1.14624 is broken this rate will go up.

Multi-Period Analysis of EURUSD

Let me show you the study I've done. I've compared the daily data, 4 hours data, 1 hour data and 30 minutes data.

Daily 4 Hours 1 Hour 30 Min
Min Yield -2,73% -1,43% -1,18% -1,12%
Max Yield 3,44% 1,39% 0,95% 1,15%
Range 6,17% 2,82% 2,13% 2,27%
Intervals 28 28 28 28
intervals var 0,22% 0,10% 0,08% 0,08%
Mean -0,0030% -0,0060% -0,0035% 0,0008%
Variance 0,0034% 0,0004% 0,0002% 0,0002%
Std Deviation 0,5858% 0,2061% 0,1567% 0,1254%
Variation Coef -0,0050 -0,0290 -0,0223 0,0062
Asymetric Coef 0,0553 -0,0428 0,0117 0,2095
kurtosis 2,7918 8,5480 6,4267 11,3306
Excess of kurtosis -0,2082 5,5480 3,4267 8,3306

This table shows the summary of the data. As we can see all the means are around 0. The standard deviation increments because in long periods the price moves more. One of the most important statistical figure is the excess of kurtosis because it measures the the excess of data that are in the tails. In order to do that we should do the kurtosis minus 3. As we can see in 30min period study there are a lot of outliers.



I hope you have enjoyed this article. I am open to receive questions and suggestions.
































 



 





















 


 

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