Back at it with some off-beat forecasts

It's been a while!

With the present economic situation I thought it would be timely to scribble some thoughts together about some upcoming economic events.

A quick catch up: since my last post, Trump has been elected president (and begun filling his cabinet with what can best be described as the seal team 6 for eliminating clean energy regulation....), stocks are at all time highs, India made a large percentage of its in-ciruclation cash illegal, venezuela inflation is still out of control, and the fed is expected to raise rates from a half percent to 0.75% next week.

Focussing on the rate expectation going forward... most "likely" scenarios involve raising rates in december by a quarter percent and holding for at least six months. Here are a few bold predictions for next year if that plays out:

• We will add more to the national debt in 2017 than ever in history
  
• SDRs become a legitimate option for bailing out foreign governments... discussions and contingency plans for this put in place.
  
• oil up, gold up, Russian economy up. The cards are really stacking up in favor for these outcomes...
  
• US leaves treaty of Paris.... This has already been predicted, but I don't think it's a bluff!
  
• Bad year for china: yuan crashes to record lows.
  
• EUR/GBP hits new all time high! I think the BoE has a long and dreadful decade ahead of them.

Three simple, short, reasons why Trump will be the next president

1. The enemy of my enemy is my friend. Chances are everyone in Washington you hate is outraged by Trump's momentum. The stops the establishment is pulling out in attempt to destroy the Trump campaign are set up to backfire: As a whole, the establishment is a greater evil to the american voter than a billionaire with bad hair.

2. America is not ready for a female president. It isn't fair, it isn't right, but the reality is that the instinctive and primal nature of human beings still gravitates towards a male leader. Advantage Trump.

3. Publicity. Trump is controversial and dominates airtime. He was recently featured on the cover of time magazine and the election is still half a year away. From start to finish, Trump will continue to dominate all forms of publicity.


I am not a Trump fan, but as a gambler these are the three points that keep me from putting any money down on a Clinton victory.

Many global currencies are slowly but surely realizing their demise, what now?

The board is full of chess pieces and there are a lot of winning moves. Here are a few of my thoughts.

1. Short CNH. The "house of cards" is not going away and they will stop at nothing to improve measures of the economy (stocks). They recently extended the short sale ban for 6 months and have been active with monetary intervention, depreciating the yuan significantly over the last couple months. This is not the end this is the beginning, now that the yuan is allowed to trade more freely everyone can take advantage of this opportunity.
   
2. Long ZAR. Oversold and hit hard by the commodity downturn. If there is one bright spot in the south african economy it's the prospect of a stronger currency, even though the monetary policy remains in uncertain turmoil. This is one to keep an eye on.

Just another doomsday rant

China has been tanking hard lately.

This is quite obviously the product of a ludicrous monetary policy coupled with falsified information.  When you build houses of cards, they eventually collapse. China will continue to have a series of such collapses as long as they maintain the peg.

Surely the US will have its moment as well soon enough. Debt cannot be infinitely refinanced at these levels unless we find a larger pool of fools.

Patience, patience is key

Closed NZD/USD today 200+ pips in the money as it stretches further into oversold territory.  I'd like to see a little consolidation and look for opportunities to re-enter the trade as they present itself.  Rinse and repeat.

Still holding GBP/EUR short.  All other trades on hold, patience is key.

EUR/GBP, NZD/USD

My USD/JPY position poked up through the aforementioned stop in my last post but I didn't have any entry orders in to take advantage and re-open a sell order.  Since then its been oscillating a bit and I re-assert that USD/JPY in the short term is a sell above 124 with a key point of resistance being 124.5, so i'm sticking to my guns and selling at the upper ranges of the oscillation as opportunities permit. It should be noted that in the long term USD/JPY fundamentals remain bullish as the Japanese economic policy continues the attempt to stop an immovable object (deflation) with an unstoppable train (inflationary economic policy).

As far as open positions go, I'm holding short NZD/USD and EUR/GBP.  Both of these trades are fundamentally driven and i'm looking to hold them for the medium to long term. Current expectations aside, there is a very chilling reason why we can rest assured that being short NZD is a wise decision in the long run. It is not that we necessarily expect them to cut interest rates, it is merely that they can.  Their rate (3.25%) is much higher than any other major central banks', and very importantly more than 125 basis points higher than Australia's rate. New Zealand is without a doubt losing the currency war among major central banks and the pressure is increasingly on for them to get back in the race to the bottom. This has been the driver behind the current downtrend and I would expect it to continue until other major central banks begin to reverse policy and a balance returns to the force, so to speak.

Looking to sell EUR/CAD, holding short USD/JPY

I opened a short UY position a day ago just in time to catch koruda's early 6/10/15 remarks that sent it crashing.  Now 100 pips in the money i've moved my stop to lie in the money between the .382 and and .236 Fibonacci levels of the larger retracement from 125.8 down to 122.5, which incidentally lies between the 0.5 and 0.382 Fibonacci levels of the smaller retracement that began overnight.

One might ask: why would I put a stop in between resistance levels instead of just above resistance? Simply put, its a position I would re-enter if it reversed back up towards the upper resistance band. Strategically a good point to cut the losses on this position is where there is little resistance, somewhere in between pivot points and other heavy resistance levels, so that if I get stopped out it blows through the stop instead of meandering around it. I then can re-enter the position at a better level, essentially saving myself the difference between my stop and new entry position.

In other pairs, EUR/CAD looks technically and fundamentally like a sell right now, so i'm hoping for a small rebound to give me a good entry point, somewhere into the yellow area below: