US GDP Shrank Less than Estimates

(to be written)

Japan Industrial Production Fell to Record Low

Industrial production in Japan fell 9.6 percent just in December. Jobless rate also rose to 4.4 percent, a three years high. The U.S. Q4 GDP was ahead and investors expected a 5.5 percent contraction.

U.K. GfK consumer confidence also fell as the Britain become increasingly worried about job security and the prospect of the economy. I made 41 pips of profit by selling gbpjpy before the reports. I had also a short position on usdjpy which closed in 51 pips of profit.

The House Passed $816 bln Stimulus; No Republican Support

On Jan 28, Obama's stimulus package passed by the House but without any support from the Republicans. It needs the Senate's passage where the lawmakers seem to be even more divided. Republicans say that the plan is ineffective because the tax cuts are relatively small and most of the spending plans would not stimulus the economy until 2010. The positive effects on the market sentiment started to fade much sooner than I was expected; however I made profit by selling usdjpy ahead of jobless claims and Friday's U.S. GDP.

Profit from the RBNZ Rate Reduction

On Jan 28, the Reserve Bank of New Zealand (RBNZ) cut the cash rate by 1.5 percent to 3.5 percent. It was 0.5 percent more than average estimates. I made 84 pips of profit by selling nzdjpy after the FOMC announcement and less than 30 minutes before the RBNZ rate decision (I closed it about 15 minutes after the announcement). I made also profit from selling audusd but the position closed before the announcement.

FOMC Becomes Less Understandable

Federal Open Market Committee leaved its target for the federal fund rate unchanged. However it seems that investors found it difficult to anticipate the future actions. Quantitative easing policies were expected, especially buying the treasuries, but the statement gave no clues about when it would be started. Dollar and yen pared their earlier losses as the uncertainty started to dominate the financial markets.

Australian CPI Overshadowed by the Weak Dollar

Australian forth quarter CPI fell sharply but the negative effect on the Aussie was limited. U.S. dollar was generally weak since the FOMC meeting was ahead and more aggressive measures by the Fed were expected. I had a short position on audusd which closed in 29 pips of loss.

German IFO Rose on Optimism about Spending Plans

eurusd was affected on Jan. 27 by the following factors:

- A better than expected reading of German IFO, thanks to optimism about the spending plans by the government to stimulate the Europe's largest economy.

- A comment from the ECB President Jean Claude Trichet, saying that the next important meeting will be in March, has a mixed reaction. First by raising speculations that the bank may not reduce its benchmark next week and second by making some investors worried about the negative effects of being reluctant to ease the policy and support the economy.

- Euro-zone current account deficit widened.

- German import prices fell

EURUSD A Day before the FOMC Meeting

The chart shows reactions from the eurusd on Jan 27.
- German import prices fell more than estimates
- IFO survey came better than expected, thank to the optimism about newly announced German spending plans.
- Euro-zone current account deficit widened in November.

FOMC will probably leave the target rate unchanged (zero to 0.25). But I think playing the FOMC rate decision is not an easy game; because:

- It is not a rate cut meeting
- Investors know the most probable message which the FOMC is likely to send (aggressive easing)
- German CPI figures will be released gradually before the meeting
- Obama's stimulus package would be discussed in the Congress as soon as tomorrow

For now, I think it may be better to wait for managing the U.S. GDP data on Friday.

10 Percent Profit on UK GDP Contraction

UK GDP (A) Contracted 1.5 percent, a little more than estimates. I made 10 percent profit with selling gbpusd three times before the GDP announcement. Pound was under pressure from the start of the week and I was asking myself that to what degree the negative news were priced.


1 - Opening the first position

2 - Opening the second position (with a conservative stop loss)

3 - One position automatically closed with 147 pips profit

4 - I closed the other with 124 pips profit

5 - Another position opened latter

6 - I closed it just minutes before the announcement with 105 pips profit

7 - End of the day

8 - GBPUSD in week

Profit from Rising Unemployment in Britain

Ahead of UK GDP, I made 107 pips profit by selling gbpusd betting on the pressure from the UK unemployment report on the sterling. I had also an order at 1.4030 for the time I was asleep but it never triggered as the price didn't go beyond 1.4019.

ECB Rate Decision and China's GDP Revision

China's GDP revised to 13.0 percent (I think from 11.9 percent). Yen was weaker in Asia in response to the news. I had a short position on eurjpy which was in loss in early European session while the ECB was going to cut the benchmark interest rate. I decided to close the position in the correction when the loss significantly declined.

Profit from the BOE Rate Decision

The Bank of England was expected to cut rate on Jan8. However, British pound was rising in all days before the rate decision, mostly because of the weakness in Euro and Dollar. I sold GBPJPY in late American session and the position automatically closed with more than 200 pips of profit well before the rate decision announcement (BoE cut rate by 0.5 percent; in line with expectations).

Profit on U.K. Purchasing Manager Index

UK PMI (service) was expected to show contraction, and it was just two days before the BOE rate decision. I made profit by selling GBPJPY and the position closed automatically on the pivot with nearly 100 pips profit.

Fast Profit from the New Zealand CPI

(no comment)

Dollar Fell Sharply Against the Yen on Options Expiration

On Jan 21, expiration of the option contracts at 10:00 CET sent usdjpy close to 87 (I think the lowest since 1995). It was apparently because the investors avoided betting that the Dollar would not fall below 90 against the yen. I had a long position on usdjpy, ahead of the Japanese Merchandise Trade Balance, which unfortunately closed in loss automatically.

Writing the Diaries Halted because of Time Limitations

I have stopped writing since December 2008, because of very limited time I had in recent months. I hope to resume it again, may be in a different format.