#Government Shutdown - a Showdown of #Currencies ?

What it means to me... a #Fundamental Outlook of how I intend to approach the market.

It is no surprise that many traders do realize the actions of the #Federal Reserve can have global repercussions.

Call me a #USD Bull if you have to but that is what the Fundamentals are saying...

here is why I say so...


Three Quarters of 2013 goes by, then suddenly The US #Government Shutdown is the main theme of the Year. As discussions of a potential US default by October 17th gain pace, the market seems relatively calm. USD is sold across the board.

When Bernanke talked about tapering in July, he drove global bond yields higher, creating a problem for many other central banks. Now, his decision to delay tapering poses a problem for #central banks of #Japan, #Australia & #New Zealand (export nations) who have been expecting the USD strength to ease pressure on their currencies. A rise in their currencies would make their goods & services more expensive, which in-turn hurts their economy.

If global currencies continue to strengthen versus the USD, these other central banks will feel the pressure to drag their economy with easier monetary policies. This actions, some feel could plunge the world back into a #Currency War. - who can devalue their currency faster - a race to the bottom!

At the same time, "easy monetary policy should provide underlying support for the U.S. recovery, helping to boost the export activity of other nations".

The US government shutdown is not what primarily worries the markets. The most important question is, how to avoid a US default by October 17th if the debt limit is not increased. The longer a budget agreement is not met; the heavier the speculative fear will become. This pent up fear, becomes stored energy which when released can become pretty explosive.

I feel tapering is inevitable and should occur before mid 2014. The USD strength is sure to return. Question in all our minds are - When to buy the USD? At least, that is the question in my mind and it has been for quite some time now.

Call me a USD Bull if you want to but that is what the Fundamentals are saying...
& it does not mean that the USD will rally tomorrow or the week after

Have a pleasant weekend & a fabulous trading week ahead...
CHEERS !!

What are you thoughts on the upcoming FOMC Taper decision?

my thoughts on the upcoming FOMC's Taper decision...

**Feel free to comment what You think. Which scenarios mentioned below do you think is most likely to happen?**


Finally, the event that most traders have long awaited. Many speculations and rumours regarding this decision has been rampant. I have read a couple of articles and here is what I have understood.

There are expectations and fear surrounding the USD's reaction to this decision.

The FX market, being a forward pricing market, may have already priced in what everyone expects - a $10 billion to $15 billion cut. Meaning to say the Taper is definite. There will be no surprise. However what no one really knows and what everyone is eagerly waiting to hear is... How Much is it gonna be?

Here is what may happen...

First scenario: a cut of $10 billion or Less - USD bearish

This would pave the way for risk-on trades. Aud and Nzd along with Gbp and Euro rallies against the USD.

In my opinion, this is Very Unlikely to happen. The Fed will need to show that they are committed to removing stimulus by mid 2014 just like they said. If the cut is seen as weak and uncommitted, the Fed will loose its credibility.

Therefore, a USD Collapse is Not gonna happen.


Second scenario: a cut between $10 billion to $15 billion as expected and a reassurance that more will come gradually.

This would be the most difficult outcome to account for. Why? Because as mentioned earlier, markets may have already priced this in.

Hence, the immediate reaction to the USD may be muted. After some high volatility, markets may settle but will eventually be USD supportive, in the long-run. The status quo remains and everyone will start guessing what is next?

This outcome would also mean that after the news, markets may drift sideways awaiting the next key catalyst. Risk could also stay supported and Aud, Nzd, Gbp and Eur may trade in a larger range within their prevailing trend.

Nothing major happens in the Market, till the next FOMC meeting.

I feel this scenario is highly probable...


Third scenario: a $15 billion or greater cut along with a firm commitment for more cuts to come every month.

Needless to say, this would be the most supportive scenario for a USD rally across the board.

The 'Moral Hazard' of taking excessive risks with cheap money will come crashing down. This is where the world will see the USD's potential as a safe haven. The USD will rally... at last !


I am hoping for this third scenario. Probably being over ambitious but I am committed.
I will be going into this Event Risk possibly holding onto my Aud/Usd shorts... if I am not stopped out.

Risky, but calculated Risk.

Also looking to Sell some Gbp/Usd soon.

any thoughts?

Weekly Technicals... short & sweet.

the big picture with long-term trade ideas...

Aud/Usd Weekly
Strategy: Pending Long - Staying Bullish as long as 0.8066 support (2010 Low) holds and expecting an eventual break of the 2011 high. On the lookout for signs that signal the end of wave C.

Eur/Usd Weekly
Strategy: Pending Short - Price is in No Man's Land. Key Levels would be 1.3710 & Rising Support Trendline from 2010 Low, somewhere around the 1.20 zone. Till I get a clear signal, I will be staying away from this pair.

Gbp/Usd Weekly
Strategy: Pending Short - Staying Bearish as long as 1.58 resistance is intact. Consolidations to long term down trend from 2.116 could have completed as a triangle, wave 4. Will look to position on the Short side when an opportunity presents itself.

Usd/Jpy Weekly
Strategy: Pending Long but Staying Flat till a deeper pull back presents a better risk/reward.