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Technical Analysis

USDCHF Leads USD Oversold Bounce Gaining 150 Pips


The USDCHF rocketed roughly 150 pips yesterday, leading the US dollar oversold bounce.  The continued strength early in today's Asia morning saw the USDCHF break above a gently downsloping resistance line (on the 4hr chart).  Significantly, this past week's bounce occurred off just below the key .95 round figure, and has allowed the USDCHF to re-enter a downchannel (on the weekly chart) after being briefly below its support line.  The weekly, daily and 4hr RSI, Stochastics and MACD are rallying, consolidating recent gains or bottomish.  I will look to enter long intraday today in the green zone (of the daily chart), targeting the red zone for early next week.  The amber/yellow zone is where I might place a stop if I was a swing trader (although in my personal account with which I seldom hold overnight I set my stops tighter).

 

USDCHF Weekly/Daily/4hr/Hourly

 

Click here for today's technical analysis on Raw Sugar, Cocoa

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures and spot FX markets can be analyzed to enhance trading performance. Tradable Patterns’ daily newsletter provides technical analysis on a subset of three CME/ICE/Eurex futures (commodities, equity indices, and interest rates), spot FX and cryptocurrency markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 

 


13996




Macro

GUOSEN Closing Bell (July 28)


MARKET

Chinese stocks closed mixed, with the benchmark Shanghai Composite Index ended at 3253.24 points. The A-shares stocks mainly fluctuated around all day with decreasing turnover, as the market expected fund injection from national pension funds and first resistance should be 3250 to 3260 points level. Non-ferrous Metal and Food& Beverage sectors led the gains; while Military and Non-bank Financial sectors led the falls. Combined turnover for both markets was CNY 458.5bn, down 16.96% dod.

 

Close

% Change

Vol (bn CNY)

%YTD

Shanghai

3253.24

0.11

198.43

4.82

Shenzhen

10437.94

0.41

260.55

2.56

CSI 300

3721.89

0.26

125.82

12.44

ChiNext

1734.07

-0.47

70.05

-11.62

 

Sector

Top 1

Led by

Top 2

Led by

Upward-leading

Non-ferrous Metal

002460

Food& Beverage

600779

Downward-leading

Military

300252

Non-bank Financial

601878

 

NEWS

*Eight provinces entrust National Social Security Fund with 410 billion Yuan in pension funds. The National Social Security Fund (NSSF), which manages a portion of local pension funds, has already received and invested 172 billion yuan from local governments. The fund saw meagre returns of 1.73% last year, which some analysts attributed to poor performance by its stock market investments. (Caixin)

*The electronic manufacturing sector led China's industrial upgrade in the first half of the year, expanding 13.9 percent year-on-year in terms of industrial output, official data showed Thursday. The growth rate was 7 percentage points higher than the country's average growth of industrial production. (Xinhua)

*China reports lowest urban unemployment rate in recent years. The registered unemployment rate in Chinese cities stood at 3.95 percent at the end of the second quarter, the lowest level in recent years, official data showed. China created 7.35 million jobs in the first half of the year, 180,000 more than that in the same period last year, the Ministry of Human Resources and Social Security announced on Friday. (Xinhua)

 

FUND FLOW

 

Click here for more information about Guosen.

This article is from Guosen Securities Co., Ltd. and is being posted with Guosen Securities Co., Ltd.’s permission. The views expressed in this article are solely those of the author and/or Guosen Securities Co., Ltd. and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


13995




Macro

EUROPEAN MARKET OUTLOOK: CHF Weakens, Stocks Struggle on Earnings and US Politics


Morning Briefing July 28th 2017


There is a packed data docket to finish off the week. First up are French Q2 advance GDP figures at 0630GMT, swiftly followed by French Housing Starts/Permits, Consumer Spending and HICP data at 0645GMT.

Spain release their GDP figures for Q2 and June HICP data at 0700GMT, markets will get Swiss KOF Economic Barometer at the same time.

At 0900GMT comes the EU Economic Sentiment and Business Climate Indicators along with Consumer Confidence and Industrial Sentiment.

During the morning regional German CPI figures will be released and the aggregate German HICP data is released at 1200GMT.

Across the Atlantic things get underway with the main release of the day, advance US Q2 GDP figures at 1230GMT. GDP is expected to rise 2.7% after a 1.4%   increase in the previous quarter. The key factors are expected to be stronger PCE growth and inventory accumulation and slightly improved  nonresidential fixed investment, offset by softer residential fixed investment growth and modestly wider trade gap.

Also at 1230GMT is the release of US Employment Cost Index as well as Canadian GDP by Industry.

At 1400GMT the release of the final University of Michigan Sentiment Index is scheduled. The index is expected to be revised up slightly to 93.2 in July, still down from 95.1 in June.

Scheduled for release at 1500GMT is the St. Louis Fed Real GDP Nowcast, swiftly followed by NY Fed GDP Nowcast at 1515GMT.

At 1720GMT Minneapolis Federal Reserve Bank President Neel Kashkari to speak at a moderated Q&A at the Woodbury Area/St. Paul Chamber of Commerce event.

Rounding off the day is the CFTC COT

Global Economic Trading Calendar


Markets


SNAPSHOT: Below gives key levels of markets in the second half of the Asia-Pac session: - Nikkei 225 down 99.25 points at 19980.19 - ASX 200 down 79.408 points at 5705.6 - Shanghai Comp. down 2.417 points at 3247.24 - JGB 10-Yr future down 3 ticks at 150.18, JGB 10-Yr yield flat at 0.073% - Aussie 3-Yr future flat at 98.02, Aussie 3-Yr yield up 0.4bp at 1.987% - Aussie 10-Yr future down 0.5 ticks at 97.305, Aussie 10-Yr yield up 0.5bp at 2.694% - US 10-Yr future up 0.5ticks at 125.27, US 10-Yr yield down 0.89bp at 2.3014

US TSY/RECAP: US Tsys ended Thurs lower as market digesting heavy US$ high-grade corporate bond supply and decent $28B 7Y note auction. AT&T sold a $22.5B seven-part debt deal, which has launched; pricing later Thurs. Yields mostly higher across the curve, seeing some steepening, 5-30 Year yields up 1.bp-3bp. T-Notes open Asia at 125.26, 10-Year yield last 2.310%.

JGBS: JGB's have largely ignored the Japanese data dump earlier in the session. The CPI data was always going to be a damp squib with the BoJ recently pushing back estimates of when the 2% inflation target would be hit and acknowledgement of a weak inflation trend. - Markets also chose to ignore the strong Household Spending data (2.3% vs 0.5% estimate and -0.1% in May) and a jobless rate that matches a multi-year low at (2.8% vs 3.0% estimate and 3.1% in May). - The BoJ Summary of Opinions from the July meeting also seems to have been ignored. This was the last meeting with Kiuchi and Sato (only hawkish dissenters) on the BoJ board, so the scope of policy debate will likely change significantly at the next meeting in September.

AUSSIE BONDS: The Australian Office of Financial Management (AOFM) sells A$700mln of 2.25% May 2028 bonds, issue #TB149. - Average Yield: 2.7266% (prev. 2.4988%)  - High Yield: 2.7275% (prev. 2.50%) - Bid/Cover: 3.8429 (prev. 3.2563) - 38 bids (prev. 33), 11 successful (prev. 12), 4 allocated in full (prev. 5)

US STOCKS: US stock futures continue to slide as the Asia-Pac session progresses. Nasdaq leads the way lower, Amazon reported after market and while sales rose, profits dropped and the miss against estimates saw shares plunge in after market trade. - Equities also being pressured by reports that the future of the Healthcare Bill remains in question, 2 GOP Senators have cast doubt on the bill saying that the latest statement from US House Speaker Ryan of skinny repeal are insufficient. The skinny repeal was seen as a last resort for Republicans in a bid to trigger negotiations in the House and get the bill to Trump. - Weakness in equities is supporting US tsys, T-Notes last up 1 tick at 125.27+ in Asia.

US EURODLR FUTURES: Mostly lower across the strip in quiet trade, markets await the advance US GDP print in the upcoming session. Within late ranges from yesterday's session. Volumes thin overall, some decent action in the Z8 contract, paying the 10.5 on the Z8/M9 spread for 2k.

OIL: Oil is flat in Asia-Pac trade, WTI last down $0.04 at $49.00 declining slightly from the highs of $49.24 hit on Thursday late in the US. WTI is now holding near the highest levels in 2-months and up almost 7% this week, on track for the biggest weekly rise in 2017 so far.

GOLD: Gold is unchanged in Asia-Pac trade, last up $0.04 a $1,259.19 having seen rangebound trade so far in Asia. The yellow metal is still holding gains made post FOMC on Wednesday and is only slightly lower than the high at $1,265.38 made on Thursday ahead of US GDP figures in the upcoming session, political wrangling in Washington is also likely to continue to support gold

FOREX: Ahead of key-economic data (US GDP), the dollar mostly consolidated against its peers during the Asia-Pacific session, with one notable exception. Dollar-Swiss rose from $0.9634 to $0.9721, the move was cross related and thought to be Swiss-yen related to an M&A deal. Dollar-Swiss was last at $0.9703. Dollar-yen held a Y110.93 to Y111.33 range, the pair held hostage to some large option strikes for today. Dollar-yen was last at Y111.09. Aussie-dollar carved out a tepid $0.7953 to $0.7980 range, last at $0.7966. Meanwhile, Euro-dollar is currently trading at $1.1685 and Cable at $1.3082, after trading in respective ranges of $1.1671 to $1.1694 and $1.3062 to $1.3090.

Technical Analysis


BUND: (U17) 161.56 Support Remains Key

*RES 4: 162.97 Daily Bull channel top
*RES 3: 162.67 High July 24
*RES 2: 162.50 High July 27
*RES 1: 162.33 Hourly resistance July 27

*PREVIOUS CLOSE: 162.14

*SUP 1: 161.93 Hourly resistance July 26 now support
*SUP 2: 161.59 21-DMA
*SUP 3: 161.56 Low July 25
*SUP 4: 161.02 Low July 13    

*COMMENTARY: The 161.56 support remains key with bears unable to break lower following the bearish close Tuesday and the recovery buying bulls breathing space. Bulls continue to look for a close above 162.67 to shift immediate focus to 162.97-163.31 and overall focus back to 164.04-13. The Bollinger top (162.64) is the key concern for bulls with potential to limit follow through. Bears still need a close below 161.56 to shift focus back to July lows so far at 160.31.

EUROSTOXX50: Resistance 3515.84-3555.37 Key

*RES 4: 3537.62 55-DMA
*RES 3: 3529.99 High July 20
*RES 2: 3515.84 100-DMA
*RES 1: 3508.90 Hourly support July 20 now resistance

*PREVIOUS CLOSE: 3493.14

*SUP 1: 3480.78 Hourly support July 26
*SUP 2: 3472.07 Low July 26
*SUP 3: 3463.74 Hourly resistance July 24 now support
*SUP 4: 3431.19 Low July 24

*COMMENTARY: The recovery from Monday’s low is gaining traction with immediate focus on key layers of resistance 3515.84-3555.37 where 55 & 100-DMAs and the bear channel top are situated. Bulls need a close above 3555.37 to confirm a bullish bias and above 3615.06 to target 2017 highs. Layers of support are accumulating with bears needing a close below 3463.74 to ease bullish pressure and return initial focus to 3431.19.

Eurex Futures Market Close


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This article is from Eurex Exchange and is being posted with Eurex Exchange’s permission. The views expressed in this article are solely those of the author and/or Eurex Exchange and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 


13994




Options

Volatility 411: Large VIX Aug. & Sept. Trades


CBOETV - Jamie Tyrrell, Group One Trading, discusses the VIX at all-time lows, and big trades in Aug. / Sep. calls.

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies are available from your broker, or at www.theocc.com. The information in this program is provided solely for general education and information purposes. No statement within the program should be construed as a recommendation to buy or sell a security or to provide investment advice. The opinions expressed in this program are solely the opinions of the participants, and do not necessarily reflect the opinions of CBOE or any of its subsidiaries or affiliates. You agree that under no circumstances will CBOE or its affiliates, or their respective directors, officers, trading permit holders, employees, and agents, be liable for any loss or damage caused by your reliance on information obtained from the program.

Copyright © 2016 Chicago Board Options Exchange, Incorporated.   All rights reserved.

This video is from CBOE and is being posted with CBOE’s permission. The views expressed in this article are solely those of the author and/or CBOE and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


13993




Macro

Lower Volatility Forever? Don't Bet on It


Volatility continues to reside at perplexingly low levels. The Chicago Board Options Exchange (CBOE) Volatility Index – better known as the VIX – recently experienced its longest streak of consecutive trading days below 10, which is well below its long-term average of roughly 19. Investors seem to assume that “lower for longer” or even “lower forever” is the new normal when it comes to volatility and may be complacent about the potential risks surrounding this assumption.

However, it’s questionable whether low volatility is indeed the “new normal.” Is this a permanent shift, or actually an unsustainable environment? Is easy money creating low realized volatility as investors buy the dips? What could be a catalyst for volatility to spike? An overvalued market? An exogenous shock? The removal of accommodative monetary policy? And, most importantly, what can investors do to help protect themselves from the potential ramifications of this “new normal” unwinding?

VIX: January 2007 through June 2017

Lower Volatility Forever? Don't Bet on It | Janus Henderson Blog

Source: Bloomberg

Selling volatility: A primer

Low volatility is perpetuated by stubbornly low global interest rates. More and more yield-hungry investors sell volatility (i.e., selling options, VIX futures or variance swaps) as a way to earn sufficient yield. Being short volatility can be seen as the ultimate carry trade, as investors capture the difference between implied volatility and the realized volatility of the market.

The non-options traders among us can understand selling an option as something similar to selling an insurance policy on the market. One of the most common trades is to sell a “straddle.” In this scenario, the sellers of volatility can profit as long as volatility stays within a defined range or decreases. The “insurance” aspect comes into play if volatility goes outside that range, in which case the buyer of the option would be paid. If, however, volatility stays within the range, the seller simply collects the carry (i.e., a premium). Since realized volatility is currently at such a low level, the boundaries of these positions need to stay in a tight range in order to be profitable.

Two sides of the same coin

Another way in which investors participate in the trend of selling volatility is by increasing the leverage in their portfolios (e.g., by taking on more equity exposure) in order to increase a portfolio’s risk. This may be done for a variety of reasons, including the need to meet risk targets or to increase return. Within this dynamic, if risk in the market (i.e., realized volatility) decreases, leverage must be increased in order to hit targets, which is what we believe we’re seeing playing out now. The other side of this dynamic, however, is more concerning: If the risk in markets increases, losses will be magnified due to high leverage.

Is this the new normal?

What’s puzzling about the current environment is that as soon as there has been any uptick in volatility, rather than seeing a “risk-off” reaction – which was typical in the past – more people are instead choosing to sell volatility. It appears investors are lured by the attractiveness of slightly higher premiums rather than interpreting an uptick in volatility as a harbinger of risky situations. Events that previously caused a sustained elevation in the VIX have instead barely caused a momentary spike, if anything.

While certain factors in the market are likely contributing to this dynamic (e.g., systematic trading, a low-yield environment, central banks’ desire to suppress volatility market risk), low volatility may not be the new normal. Indeed, the process of central banks normalizing monetary policy by unwinding quantitative easing measures may lead to an unwinding of this dynamic. If they are successful and investors can once again generate yield in less risky ways than by selling volatility (e.g. earn sufficient returns in cash-based securities), selling volatility may not continue to be as popular a trade.

The potential impact

If volatility were to spike and remain elevated, I fear it would have a huge impact on the markets. Since the consequences of being caught on the wrong side of this trade are dire, caution may be in the investor’s best approach to this dynamic.

Herding into this trade may be akin to picking up pennies in front of a steamroller. While investors may be able to capture returns in the form of premiums in the short term, at current levels it may not be sufficient compensation for the asymmetric risk they have agreed to cover. This trade is starting to be – or perhaps already is – crowded at levels where the risk/reward prospect is not attractive.

Given these risks, investors should be extremely conscious of how they’re exposed to market volatility and systematic risk, and consider the following:

  • Mind your correlations: shorting volatility has a high correlation to the equity market
  • Limit your leverage: only a small uptick in risk will cause “forced” selling
  • Maintain your flexibility to go long and short to capture opportunity
  • Adopt a “risk aware” mentality

To learn more about how our team manages exposure to volatility, please see our recent paper, A New Take on Traditional Alternatives.

 

CBOE Volatility Index®  or VIX® Index® shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500® Index options and is a widely used measure of market risk. The VIX Index methodology is the property of Chicago Board of Options Exchange, which is not affiliated with Janus Henderson.

Options (calls and puts) involve risks. Option trading can be speculative in nature and carries a substantial risk of loss.

Volatility management may result in underperformance during up markets, and may not mitigate losses as desired during down markets.

Any risk management process discussed includes an effort to monitor and manage risk which should not be confused with and does not imply low risk or the ability to control certain risk factors.

Correlation measures the degree to which two variables move in relation to each other. A value of 1.0 implies movement in parallel, -1.0 implies movement in opposite directions, and 0.0 implies no relationship.

 

The views presented are as of the date published. They are for information purposes only and should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security or market sector. No forecasts can be guaranteed. The opinions and examples are meant as an illustration of broader themes, are not an indication of trading intent, and are subject to change at any time due to changes in market or economic conditions. There is no guarantee that the information supplied is accurate, complete, or timely, nor are there any warranties with regards to the results obtained from its use. It is not intended to indicate or imply in any manner that any illustration/example mentioned is now or was ever held in any Janus Henderson portfolio, or that current or past results are indicative of future profitability or expectations. As with all investments, there are inherent risks to be considered.

This article is from Janus Henderson Investors and is being posted with Janus Henderson Investors’ permission. The views expressed in this article are solely those of the author and/or Janus Henderson Investors and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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