A Contrarian Trader's 2 pips on EMFX

As a starters EUR/HUF has traded 310 as highlighted in my Nov 13 issue (Dec15 post) . Even if you managed to pick EUR/HUF on Dec15 you would have been sitting comfortable 4% higher as of now. So basically job done on EUR/TRY and EUR/HUF and the last pair which is still lagging is INR . I am going  to stop mentioning how TRY is getting hammered day by day as its pointless. Twitter will do that for you!

Lets  focus on TCMB, I expressed concerns about how the bank may hesitate to raise rates which could put their credibility to threat. This week they did it but as you would expect market saw this signs of desperation and weakness and local Turkish traders saw this opportunity to bank as much Dollars they could. Then came  SARB raising rates on ZAR. At this very point I was not aware they had a policy meeting until one of my good trader mate actually made me aware. The very first words which came out of my mouth were " I hope SARB doesn't do anything absurd by raising rates" They actually raised rates and the price action post rate hike was horrible.

Personally think emergency rate hikes do not pan out well when  slow growth,debt issues and political risks are looming in near term. Take an example of the brave attempt taken by MNB in Oct 2008' by raising 300bp on Forint.  Post rate hike EUR/HUF lost approx 10% and in the next few months carried with the overall bullish trend and made new highs erasing all the gains post rate hike. Of course some may argue it was a totally different situation, but does it really matter ? Looking at how market has reacted to ZAR and TRY it is very similar to how market reacted to HUF in the past. Infact in the case of USD/ZAR it made a new high post rate hike right away. Charts below Weekly EURHUF, 4H EUTRY and 1H USDZAR

For now I have shifted my focus on Scandies and CE4 and by the way HUF traders were clueless yesterday. Again a classic example of fundamentals and sentiment reflect in charts if interpreted correctly.

Best of luck traders!

DX outlook 2014

Just finished creating my 2014 outlook for Dollar . The report is bearish Dollar at least going into Q1 and Q2 and is path dependent into Q3.

Also added a bullish AUD cross note in my report and I expect AUD crosses to remain bid or find interest atleast till Feb end in Q1. This is inline with my tweet on 6th Jan where I highlighted AUDUSD,AUDCNY,AUDCAD AND AUDNZD weekly stat arb is exhaused or in other words Aussie selling is overdone and expect short covering in AUD.

I will publish my report here when time is ripe.