The combination of the technical and fundamental...

[dukeofdents]

Hi folks,

I'm fixing to watch things on this Friday, 3/6, and also Monday, 3/9, because these are market holidays for most of the Western markets because of Easter. Notice U.S. Thanksgiving last year on GBP/USD, Christmas time, etc., major moves have a tendency to happen during times when certain markets are on holiday and others are not. This is fundamental, but not based on Econ releases. However, we do have a Non-Farm Friday on Good Friday and it's a U.S. bond market half-holiday, which makes it even better...

Fundamental analysis is not based entirely on Economic reports, and should never be. Just last fall, the Thai government was overthrown, and I made a lot of money on Bhat just because I heard the news early, not because I could predict it. I never trade Bhat and most brokers don't even offer it, but I was on OANDA so I had the opportunity. North Korea exploded a nuclear weapon, albeit a weak one. It was enough to send Yen into a tailspin for a few days. Technicals come into play in order to determine entries and exits, however, but these things also move this market. Wait until we have this big Easter market Holiday, watch what goes where, and use the low liquidity situation to your advantage. I don't know which way things will go, but usually they go somewhere. That's what technicals are for, to figure out which way to go...

Duke

[SIMBA]

fundamentals and technicals

Hi Duke,

Nice and interesting thread you have started..I would like to give my 2 cents

FUNDAMENTAL FORCES AT WORK:Basically we are at several market crossroads due to potential reallocation of global portfolios in different assett classes..what are the catalyzers?

1-CARRY TRADE:Unwinding,rewinding..? Or more probably..unwinding at the bid..basically ..

1A-Global fund managers allocation of funds decide the fate of investment assett classes,be them stocks,bonds,commodities or currencies..

1B-Currency games are played , by these portfolio managers,by using mainly 2 year bonds..on leverage,3 to 1 and 10 to 1 being the ranges of acceptable leverage

1C-Until a couple of months ago the game was basically to finance themselves in JPY at near 0% interest rate to invest in 2 year bonds denominated in high yielding currencies,ie:AUD,NZD,ZAR,GBP and USD...with yields ranging from 5% to near 10%

1D-The continuous conversion of JPY into this high yielding currencies has produced an added profitability factor by what de facto was perceived as a negative currency exchange risk..no risk

1F-The fairy tale has ended since we have been on the brink of a meltdown in assett values,produced by a "liquidity needed" and "let`s ALL go for the exit" cascade effect...

PERCEPTION OF CARRY TRADE RISK HAS SHIFTED..AND THIS WILL AFFECT CURRENCY EXCHANGE RATES..AND BY CASCADE GLOBAL ASSETT CLASSES REALLOCATION..HOW ?..I will give my opinion in a new post..;),since I would like to post the basics of my reasoning first

2-GLOBAL LIQUIDITY REDUCTION:

2A-2 years ago we had JPY at near zero interest,EURO at near 2% interest,CHF in between..and USD was around 3.75%..

2B-Now we have EUR near 4%,Jpy near 1%,CHF in between,and USD,GBP in the 5%,5.25% area..

2C-Perceptions,regarding this year int rates, are that EUR will slightly increase,Jpy the same..and that GBP and USD STILL HAVEN`T SHOWN ANY SIGN OF DECREASING

2D-Housing market in USA is melting,you can buy a house in Detroit for less than the price of a new car,defaults on mortgage payments are on the increase..something similar,though more contained, is expected to happen in Spain(did you know that approx 40% of all new "building business" in the EEC,in the past 2 years,has been done in Spain..and around 25% in UK?) and UK

2F-2D plusThe "almost" meltdown in stock indexes,and in the high yielding currencies has increased the perceived risk levels used by financial institutions when deciding about investment or credit allocations

PRICE OF MONEY INCREASES..MEANS DECREASE IN DEMAND OF CREDIT..RISK PERCEPTION INCREASES..MEANS CREDIT SUPPLY DECREASES..so,if both credit demand and credit supply decrease we have NET EFFECT=GLOBAL LIQUIDITY REDUCTION...and Global liquidity reduction means assett classes prices NET price reduction

So,what assett classes,and specifically regarding currencies are going to be the most damaged?

Regards

Simba

[dukeofdents]

Thanks for the analysis, Simba, I like to view the mid-term and short-term fundamental situation in order to attempt to exploit market overreactions to news that is percieved to be disastrous, that's really how our 4 hour chart mini-trend moves occur, and that's what I like to exploit. In the shorter term, I will really be watching U.S. housing data, since the bubble burst, the mortgage fraud has been exposed, and all major markets will be hyper-sensitive to US existing home sales. Believe it or not, if this number goes up it's bad for perceptions right now, because of foreclosures and short sales (selling a home for less than the mortgage value through agreement with the bank as an alternative to foreclosure).

I'm waiting to see how the holiday play moves on Friday right now, NFP with the European and UK floors closed should be interesting, it might cause enough havoc to carry through next week...