What goes around comes around

Pubblicato il 28 Maggio 2019 da Veronica Baker

What goes around comes around
What goes up must come down
Now who’s cryin’, desirin’ to come back to me
What goes around comes around
What goes up must come down
Now who’s cryin, desirin’, to come back

Bob Marley – What goes around comes around”


Trend Following rules.
Ed un ciclo che si chiude.


Giugno 12, 2012


What goes around comes around

I’m long1 CHF/EUR despite the peg, and incidentally in this moment 99.9% of the ForEx traders are short.
I believe there is insufficient margin in customer accounts to cover their market exposure : too many huge stops immediately below 1.20, on my opinion.

Why ?

The Swiss National Bank (SNB) intervened in support of its 1.2000 currency peg against the Euro to the tune of CHF 60 billion ($66B) in the month of May.

The vast majority of this intervention occurred during European trading hours.
That means that the SNB bought, on average, the equivalent of $7 millions of Euros every minute during the month.
That’s a staggering number to me.

Could the SNB continue to intervene at this pace ?
My answer : absolutely not.

What goes around comes around
That’s a 3.300 Pips drop…

The risks to the country of accumulating reserves at this rate are very high.

I believe that the US Fed/Treasury, the Bank of Japan and the ECB have been making calls to the SNB and the President of Switzerland to lay off the intervention and the diversification.

The only option left for the Swiss is exchange controls.
They will make it very expensive to own Swiss Francs.

Negative interest rates (currently -75BP) will get more negative.

“SNB chief opposed CHF/EUR peg in 1999 article”. (Reuters)
In an academic article, he wrote “a peg would prompt more speculation and a concomitant rise in capital inflows into Switzerland…”

…exactly what it is happening now…

I repeat again : the peg at 1.20 is not sustainable because they couldn’t absorb all the stop losses below the level.
Let’s go free fall !


Gennaio 16, 2015


What goes up must come down

The Swiss National Bank (SNB)2 shocked the market with its decision to remove its peg of 1.20 CHF per EUR, which had been in place for the past 3 years.

On top of that the SNB lowered the benchmark deposit rate to negative 0.75%, effectively abandoning a currency floor for the CHF.

This news was totally unexpected and instantly the price dropped from 1.2000 to 0.8700 in less than three bars on the 5-minute chart.
That’s a 3.300 Pips drop.

Of course, you’d think that the Stop Loss would have not let the trade accumulate such a massive loss.
The problem is that when a volatile movement like this happens there is just not enough liquidity on the market for the Stop Loss to be fulfilled.

A good illustration of this is the gap you see in the chart.
The gap shows that there between 1.10 and 0.98 there simply were no available prices. At all.


Now who’s cryin’, desirin’ to come back


Destino e Karma

Non ci sono prove che supportino l’esistenza del Destino.
Ma è davvero difficile non pensare che non esista un Karma.

Le buone azioni portano sempre al bene.
Le cattive azioni al male.
Tutte le azioni (volute) dell’uomo avranno sempre inesorabilmente conseguenze.


Note

1 Breaking the Peg ? Veronica Baker, Sound of silence

2 Alpari UK Insolvent, Kirill Ermenko, Forexboat



Veronica


You cannot copy content of this page