From 2012 to 2014, Peter Wadkins at Thomson Reuters was allowed wide variations to write FX commentary. But brilliantly expressed and true FX commentary in regards to deep depths to how FX markets operate, central bank longs and shorts, yields, imports and exports. Name it and Peter covered it in detail. Also from 2012 -2014, Peter included me in his commentaries and seen by many hedge funds, central banks, corporate trading departments. Back then I was perfect as demonstrated by Peter for many years.
EUR/USD-BLACK BOX TRADER HAPPY AS A CLAM, MODELS FLIPPED
MAY 31 3:13PM BY PETER WADKINS
As we noted in our piece yesterday “Models long, Black Box traders say watch out below” the market was vulnerable to a sharp reversal and it didn’t take much to eradicate the bullish tone. Just a big fig drop and the momentum models have flipped back from heavy long to neutral (ours as we cautioned from +11 to -1) If we had closed nearer the day’s low (1.2944) our model would have been even shorter (-7 units EUR/USD) This clearly demonstrates how fluid markets are presently and why the volatility is rampant, the confluence of all these moving averages are driving algorithmic trades in a way that exhausts human traders, in today’s technically driven markets headline risk is chopping up momentum systems.
We contacted our friend Brian who was comfortable holding onto his short posis from yesterday, it was more perspiration than inspiration yesterday, but faith in his systems paid off. As Brian works off multi-layered systems (similar to our blended M/A model but tweaked to perfection) He can be long and short at different levels with different targets. His long term shorts remain in place with a target of 1.2820 however profits were booked on the short stuff. He notes…
“EUR/USD overnight target hit for +74 pips, looks like a minor correction on the way to bring us back to 1.3019 then 1.3056 as my targets”… “My intention is to get back long in the low 1.29’s :- 1.2912, 1.2921, 1.2935 are perfect but today’s targets reveal we shouldn’t see lower than 1.2966. A day trade to buy at this low will prove profitable. A break of 1.2982 should see 1.3011 and as long as we stay above 1.2957, corrective longs are safe.”
We marked to market at 1.2955 and we’re 30 pips higher so that’s already sending some individual components back long, which is why it’s best to wait for the close to make corrections to positions (unless you are an algo and it doesn’t matter, just keeps churning) M-to-M at 1.2985 the blended model would be +3 units EUR/USD, pretty flat, which is what it should be with the market in flux. The biggest change in overbought and oversold levels is naturally in the ultra-short term and short term portfolios which now get oversold from 1.2920 to 1.2805 (reflecting increase in volatility) and overbought 1.3055/1.3105 (ultra S/T) 1.3020/35 (S/T)
Once again we’ll leave Brian with the final word as he’s bee “dead reet” as they say in the old country; “My shorter term market scale 1.3063 – 1.2931″; intermediate/longer term 1.3174 – 1.2820. 1. 3200’s and 1.2700’s are not in the forecasts as either side would bring us deeply in either oversold or overbought territory. Averages don’t have the impetus just yet.” That’s how we see it too, it’ll take some serious wood chopping to break this market down or up in any serious way. Thanks Brian, as the Aussie say “Good on ya cobber”. Peter.Wadkins@ThomsonReuters.com