Zak Mir – “Billion Dollar FX Trades” and AAA curries!

It has been an intriguing past 24 hours for this financial markets blogger. Thursday witnessed my first ever trip to the fine city is that is Leeds, Yorkshire, the heartland of the editor of Spreadbet Magazine. The itinerary consisted of a trip to a very traditional cosy pub (suitably cold weather was all enveloping) followed by some equally “traditional” English food at the Bengal Brasserie, Wetherby (chicken tikka!) – both of which I would certainly recommend! Here, wide ranging discussions were held until it was back to the Hotel for a 4.30am wake up (the work never stops), followed by a speedy return to London, Olympia for the London Investor Show. This was an FX trading based event and so I served up the biggest offering I could muster on the subject in my 30 minute speaking slot entitled, “Thr Soros Yen Trade, And How To Find The Next Billion Dollar Winner.” The “Billion Dollar Winner” refers to how much Soros was reported to have made by buying Dollar / Yen.

What I pointed out to the assembled audience was that you are unlikely to be the next George Soros by trading one hundred times a week. Even better you can spend most of your time chilling out, biding your time until both news-flow and technical’s coincide.

On this basis, it would appear that in the past year you could have jumped on three proper forex trades. The first was to buy the Euro around $1.22 when Mario Draghi told the market not be short of the single currency in July. This was a trade that was backed by the technical’s at the time as, among other triggers, an inverted head & shoulders pattern was being formed, running in parallel with bullish RSI divergence between the June and July price lows.

The second was to go short of the Yen (long U.S. Dollar) around the 80 Yen mark in November when it was announced that the new Japanese Government was looking to deliver enough QE to target a 2% inflation rate when it was elected in December.  Once again, the technicals over November for the Yen echoed those of the Euro earlier in the summer in the sense that there was a price reversal indicated – a clear September bear trap followed by a higher October low, plus positive RSI divergence through this period.

Last, but not least, was effectively pushing on an open door event – shorting Sterling ahead of the latest AAA Credit Rating downgrade by Moody’s just last night.  The move here was relatively straightforward in terms of the loss of the 200 day moving – just above $1.5800 and leading to a dive towards the 2 year support line projection at $1.5050. Presumably, unless or until something very special happens to start next week, not only will $1.5050 be hit, but probably $1.50 itself broken.

In fact, without wishing to appear unpatriotic given the plunging Pound, I would say that the loss of AAA has already had a positive effect, making our fiscal guardians wake up from their years of slumber . Clearly, the powers at the Bank of England had been given a heads up, or had worked out earlier this month (as seen in the minutes of their meeting) that a credit ratings agency downgrade was imminent. This is why suddenly, in schizoid fashion, it went all accommodative and proactive in terms of the possibility of more QE and even lower interest rates. Unfortunately, like everything else in recent UK economic policy is concerned we are looking at a case of too much, too little, too late.