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Tuesday, 24 April 2018

Dollar, euro hold after U.S. 10-year yield hits 3 percent


NEW YORK (Reuters) - The U.S. dollar and euro were largely unchanged on Tuesday morning as the 10-year Treasury yield broke through the psychologically significant barrier of 3 percent.

The dollar index hit a three-month high of 90.985 against a basket of six currencies in morning trade, though the big gains on rising U.S. government bond yields mostly occurred yesterday.

“Yesterday was a big day in terms of Treasury yields impacting currencies. Today, the 10-year did claw its way up to 3 percent to no big effect as far as currencies are concerned,” said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York.

Greenback gains on Tuesday drove the euro down slightly past the two-month low hit yesterday, on growing concerns that firmer U.S. Treasury yields would reduce incremental demand for the region’s bonds and stocks at a time when hedge funds have amassed record long bets in the single currency.


But after Monday’s sizeable fall, the euro looked buoyant on Tuesday, remaining well above the annual low reached in early January.

“Today we stalled at key levels, most obviously vis-à-vis the euro, which looks relatively resilient,” said Ruskin.

The U.S. 10-year Treasury yield rose above 3 percent on Tuesday for the first time in more than four years as investors reduced their U.S. bond holdings on worries about rising inflation and growing government debt supply. The 10-year reached a top of 3.003 percent, above yesterday’s close at 2.973 percent.

Some lingering worries that European Central Bank policymakers may signal a more cautious stance at a policy meeting on Thursday also pulled the single currency lower.

“We think the euro’s weakness may be overdone as despite the U.S. Treasury yield spike theme reverberating in the markets over the last 24 hours, the U.S. economy is very much in the late stages of its economic cycle and a cautious ECB meeting is baked into markets,” said Christin Tuxen, an FX strategist at Danske Bank in Copenhagen.

The single currency EUR= stabilized around $1.22 on Tuesday after having plumbed to a low of $1.2185 in the Asian session, its lowest since March 1. It has fallen 3 percent from a 2018 high above $1.2550 in mid-February.

The dollar set a 2-and-a-1/2 month high of 109.17 yen JPY= and was holding near those levels.

The rise in U.S. bond yields has dented emerging market currencies and bond markets, including those in Asia.

Higher U.S. yields can put pressure on the currencies of emerging market countries that run current account deficits such as Indonesia and India, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

A stronger dollar also intensified pressure on some commodity-linked currencies such as the Australian dollar AUD= which tumbled 0.4 percent to 0.7577 per dollar, its lowest since Dec. 13.

Reporting by Kate Duguid and Saikat Chatterjee

Scalping: Small Quick Profits Can Add Up


An Educational article

Scalping is a trading style specializing in taking profits on small price changes, generally soon after a trade has been entered and has become profitable. It requires a trader to have a strict exit strategy because one large loss could eliminate the many small gains that the trader has worked to obtain. Having the right tools, such as a live feed, a direct-access broker and the stamina to place many trades is required for this strategy to be successful.

Scalping is based on an assumption that most stocks will complete the first stage of a movement (a stock will move in the desired direction for a brief time but where it goes from there is uncertain); some of the stocks will cease to advance and others will continue. A scalper intends to take as many small profits as possible, not allowing them to evaporate. Such an approach is the opposite of the "let your profits run" mind-set, which attempts to optimize positive trading results by increasing the size of winning trades while letting others reverse.

 Scalping achieves results by increasing the number of winners and sacrificing the size of the wins. It's not uncommon for a trader of a longer time frame to achieve positive results by winning only half or even less of his or her trades - it's just that the wins are much bigger than the losses. A successful scalper, however, will have a much higher ratio of winning trades versus losing while keeping profits roughly equal or slightly bigger than losses.

The main premises of scalping are:
Lessened exposure limits risk - A brief exposure to the market diminishes the probability of running into an adverse event.
Smaller moves are easier to obtain - A bigger imbalance of supply and demand is needed to warrant bigger price changes. It is easier for a stock to make a 10 cents move than it is to make a $1 move.
Smaller moves are more frequent than larger ones - Even during relatively quiet markets there are many small movements that a scalper can exploit.
Scalping can be adopted as a primary or supplementary style of trading.

Primary Style
A pure scalper will make a number of trades a day, between five and 10 to hundreds. A scalper will mostly utilize one-minute charts since the time frame is small and he or she needs to see the setups as they shape up as close to real time as possible. Quote systems Nasdaq Level II, Total View and/or Times and Sales are essential tools for this type of trading. Automatic instant execution of orders is crucial to a scalper, so a direct-access broker is the preferred weapon of choice.

Supplementary Style
Traders of other time frames can use scalping as a supplementary approach in several ways. The most obvious way is to use it when the market is choppy or locked in a narrow range. When there are no trends in a longer time frame, going to a shorter time frame can reveal visible and exploitable trends, which can lead a trader to scalp.

Another way to add scalping to longer time-frame trades is through the so-called "umbrella" concept. This approach allows a trader to improve his or her cost basis and maximize a profit.

Umbrella trades are done in the following way:
A trader initiates a position for a longer time-frame trade.
While the main trade develops, a trader identifies new setups in a shorter time frame in the direction of the main trade, entering and exiting them by the principles of scalping.

Practically any trading system, based on particular setups, can be used for the purposes of scalping. In this regard, scalping can be seen as a kind of method of risk management. Basically, any trade can be turned into a scalp by taking a profit near the 1:1 risk/reward ratio. This means that the size of the profit taken equals the size of a stop dictated by the setup. If, for instance, a trader enters his or her position for a scalp trade at $20 with an initial stop at $19.90, then the risk is 10 cents; this means a 1:1 risk/reward ratio will be reached at $20.10.

Scalp trades can be executed on both long and short sides. They can be done on breakouts or in range-bound trading. Many traditional chart formations, such as a cups and handles or triangles, can be used for scalping. The same can be said about technical indicators if a trader bases decisions on them.

Three Types of Scalping
The first type of scalping is referred to as "market making," whereby a scalper tries to capitalize on the spread by simultaneously posting a bid and an offer for a specific stock. Obviously, this strategy can succeed only on mostly immobile stocks that trade big volumes without any real price changes. This kind of scalping is immensely hard to do successfully as a trader must compete with market makers for the shares on both bids and offers. Also, the profit is so small that any stock movement against the trader's position warrants a loss exceeding his or her original profit target.

The other two styles are based on a more traditional approach and require a moving stock where prices change rapidly. These two styles also require a sound strategy and method of reading the movement.

The second type of scalping is done by purchasing a large number of shares that are sold for a gain on a very small price movement. A trader of this style will enter into positions for several thousand shares and wait for a small move, which is usually measured in cents. Such an approach requires highly liquid stock to allow for entering and exiting 3,000 to 10,000 shares easily.

The third type of scalping is the closest to the traditional methods of trading. A trader enters an amount of shares on any setup or signal from his or her system, and closes the position as soon as the first exit signal is generated near the 1:1 risk/reward ratio, calculated as described earlier.

The Bottom Line
Scalping can be very profitable for traders who decide to use it as a primary strategy, or even those who use it to supplement other types of trading. Adhering to the strict exit strategy is the key to making small profits compound into large gains. The brief amount of market exposure and the frequency of small moves are key attributes that are the reasons why this strategy is popular among many types of traders.


Reference:  Vadim Graifer

Monday, 23 April 2018

Sterling stuck at two-week low as investors cautious over May rate hike


LONDON (Reuters) - Sterling slipped to a two-week low against the dollar on Monday as investors questioned whether the Bank of England would raise interest rates in May following weaker-than-expected economic data and cautious comments from governor Mark Carney.

The pound has been one of the best performing major currencies in 2018 and last week surged to its highest level since the Brexit referendum in June 2016.

But weaker-than-expected wage growth and inflation, and comments by Carney that the data was “mixed” hit the currency hard, sending it down almost 1.7 percent for the week as investors rushed to price in the possibility the BoE could delay raising rates until later in the year.

Analysts on Monday said they would watch gross domestic product figures due later in the week for signs of how the economy was holding up and whether it pointed to a BoE ready to hike rates.

“We think the UK data this week may be enough to rekindle rate hike expectations,” said ING FX analyst Viraj Patel.

But he cautioned that politics could impact sterling this week if a cross-party and non-binding technical vote on Brexit on Thursday threatened Prime Minister Theresa May’s leadership.


The pound traded flat at $1.3997, after earlier hitting a 2-1/2 week low of $1.3984, as broad dollar strength kept the pound under pressure.

Against the euro, the pound recovered and rose 0.3 percent to 87.515 pence.

A seasonal rise in capital inflows into Britain from foreign companies paying UK shareholders dividends has boosted sterling during April in recent years.

Economists, almost all of whom had predicted the BoE would act in May before Carney’s Thursday interview, believe the central bank’s vote on rates next month will now be very close.

Berenberg economists said that because of an acceleration in nominal wages and above-trend real GDP growth they expected four 25 basis point hikes over the next two years, with two increases each in 2018 and 2019.

Reporting by Tom Finn

Wall Street set to open higher despite rising U.S. yields


(Reuters) - Wall Street was set for gains on Monday as optimism about the strong earnings season helped ease concerns on rising U.S. bond yields.

The yield on 10-year U.S. Treasuries, the benchmark for global borrowing costs, hit 2.9980 percent, its highest since January 2014. The U.S. five-year inflation swap, a key market gauge of long-term U.S. inflation, hit its highest level in 3-1/2 years.

The last time 10-year Treasury yields neared 3 percent, in 2013, it rocked risk appetite and sent stocks sliding and was shortly before oil prices went on a mighty 75 percent tumble. More recently, the stock market sold off in February as inflation expectations sent treasury yields surging.

But analysts say that strong earnings could help investors overlook such concerns at least for the moment.


“Earnings are going to be the bigger factor, the increase in yields isn’t too excessive just yet and investors maybe willing to take it in stride,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“We came into the earnings season with pretty lofty expectations and the earnings have been relatively strong.”

The prospect of rising inflation comes as U.S. companies are reporting results for what is turning out to be a much stronger-than-expected first quarter.

Profits at S&P 500 companies are expected to have risen 20 percent in the quarter, according to Thomson Reuters I/B/E/S, making it the strongest quarter in seven years.

At 8:44 a.m. ET, Dow e-minis1 were up 47 points, or 0.19 percent. S&P 500 e-minis  were up 5.75 points, or 0.22 percent. Nasdaq 100 e-minis were up 27.75 points, or 0.42 percent.

This week, 181 S&P 500 companies are scheduled to report including some of the technology heavy-hitters like Facebook, Microsoft, Amazon and Intel . Alphabet reports after markets close on Monday.

Shares of Hasbro fell 5.9 percent in premarket trading after the toymaker reported a bigger-than-expected drop in quarterly revenue, blaming the liquidation of Toys ‘R’ Us.

Caterpillar rose 1.4 percent Citigroup upgraded to “buy”, saying the stock could outperform over the next six to 12 months.

In a move that could ease tensions between the United States and China, U.S. Treasury Secretary Steven Mnuchin said on Saturday he may travel to China to try to resolve the differences over trade.

Reporting by Sruthi Shankar

Crypto trading tumbles as investment scramble unwinds


LONDON (Reuters) - Trading activity on cryptocurrency exchanges has halved from its December peak, industry data shows, as retail interest in the virtual coins declines and the prices of many remain far below their recent highs.

Average daily traded volumes across cryptocurrency exchanges fell to $9.1 billion in March and to $7.4 billion in the first half of April, compared to almost $17 billion in December, according to data compiled by crypto analysis website CryptoCompare.

Rocketing prices of digital currencies such as bitcoin fueled a mania in the sector towards the end of 2017 as retail investors across the globe scrambled to get a piece of the action. That triggered regulatory warnings and threats to crack down on the market.

China, a major market, has shut down local cryptocurrency trading exchanges.

Since peaking in December and January, bitcoin's price has more than halved, while the second and third largest cryptocurrencies, ethereum .MVETH and Ripple's have lost even more of their value.

But crypto-trading volumes in March and April have only fallen back to their levels of November. They remain as much as 25 times above their levels of March-April last year.

“Volumes are down because there was a hype cycle in December on the back of futures products coming to market. You’ll find that most of that was retail-driven, with Korea and Japan as major instigators,” said Charles Hayter, London-based CryptoCompare’s co-founder.

“The governments have now dampened some of that irrational exuberance.”

People involved in the industry say trading activity outside of exchanges, on over-the-counter markets, where larger institutional investors tend to trade, has held up far better.

Major exchanges with drops of more than half in daily traded volumes between December and March include Bitfinex, San Fransisco-based Coinbase, Luxembourg-based Bitstamp and Poloniex, which was recently bought by Goldman Sachs-backed cryptocurrency start-up Circle.

A person close to Bitstamp said volumes were directly related to overall interest in cryptocurrencies, but that the exchange had maintained its market share between December and April. The other exchanges did not respond to requests for comment.


TRUE BELIEVERS
The slump in trading volumes will be seized on by critics of digital currencies as a further indication they are a giant Ponzi scheme that is now unravelling.


But people active in the industry say short-term price and trading swings are to be expected for a highly disruptive technology, and that true believers in the power of digital currencies will remain invested for the long-haul.

“The crypto market ... is set to soar over the next few years and beyond, as more and more investors appreciate the fundamentals,” said Nigel Green, CEO of deVere, a financial consultancy which operates a crypto exchange app.

“Whether traditionalists like it or not, the clock on digital currencies isn’t going to be turned back.”

Not all of the falls in trading volumes can be explained by weaker investor appetite.

Restrictions in countries like China will have hit exchanges used heavily by Chinese investors disproportionately, while other trading platforms may have been given a boost by the listing of new cryptocurrencies during the year.

Many new exchanges have also opened, taking market share from older platforms.

Some like OKEx and Huobi have grown their volumes since December despite the broader decline, with March among their strongest months to date.

The data compiled by CryptoCompare covers most of the biggest exchanges and the company said it added new exchanges to its database as and when their volumes hit significant levels.

Other data providers may have slightly different ways of calculating volumes, particularly when one cryptocurrency is traded against another rather than against government-backed fiat currencies like the U.S. dollar.

Some exchanges in Japan, one of the biggest markets for crypto investment, do not provide trading volume data.


Reporting by Tommy Wilkes

Wall Street falls on investor nerves about interest rates, tech


NEW YORK (Reuters) - Wall Street’s three major indexes declined on Friday as investors worried about a jump in U.S. bond yields, with technology stocks leading the decline on nerves about upcoming earnings reports and iPhone demand.

The technology index was the biggest drag on the S&P 500 with a 1.5 percent drop after registering three straight days of losses ahead of a key earnings week for the sector.

“There continues to be some concern over interest rates and their potential impact on equities. There’s also been a little bit of a lack of momentum in this earnings period,” said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

“It’s not that earnings weren’t good enough but company forecasts often weren’t strong enough to make the market continue to rise,” he said.

The Dow Jones Industrial Average fell 202.09 points, or 0.82 percent, to 24,462.8, the S&P 500 lost 22.98 points, or 0.85 percent, to 2,670.15 and the Nasdaq Composite dropped 91.93 points, or 1.27 percent, to 7,146.13.

Despite Friday’s decline the S&P eked out a gain of 0.5 percent for the week to show its second weekly gain in a row.

Equity investors were jittery as the 10-year Treasury yield reached its highest level since January 2014 as a bond selloff continued for a second day, driving the yield curve steeper after two weeks of flattening.

Benchmark 10-year notes last fell 12/32 in price to yield 2.9583 percent, from 2.914 percent Thursday.


When yields are high, investors favor bonds over equities including sectors such as consumer staples and real estate, which promise high dividends and slow, predictable growth. But high interest rates can boost bank profits so the financial sector managed to show a 0.05 percent gain, making it the best performer out of the S&P’s 11 industry sectors.

The consumer staples sector .SPLRCS was the biggest percentage decliner with a 1.7 percent fall, led by PepsiCo.

“We’re seeing a follow through from yesterday’s action when the key was weakness in consumer staples. We came to this earnings season with very optimistic expectations and we’re seeing some very fundamental bottoms up issues at these companies,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

Procter & Gamble fell 2.9 percent on top of a 4.2 percent drop the day before when it said shrinking retailer inventories and higher costs squeezed its margins.

Philip Morris International also had a second day of declines after getting crushed due to weak shipment volumes in its quarterly report.

Apple fell 4.1 percent, making it the biggest drag on the major indexes after Morgan Stanley estimated weak demand for its latest iPhones, a day after Taiwan Semiconductor raised fears of softer smartphone sales.

Alphabet, Facebook, Intel and Microsoft are among the major technology companies reporting next week.

S&P 500 companies are expected to report their strongest first-quarter profit gains in seven years. Of the 87 companies that have reported so far, 79.3 percent have topped profit expectations, according to Thomson Reuters I/B/E/S.

Declining issues outnumbered advancing ones on the NYSE by a 2.05-to-1 ratio; on Nasdaq, a 1.68-to-1 ratio favored decliners.

The S&P 500 posted 12 new 52-week highs and 22 new lows; the Nasdaq Composite recorded 54 new highs and 51 new lows.

On U.S. exchanges 6.45 billion shares changed hands compared to the 6.92 billion average for the last 20 trading days.

Reporting by April Sinéad Carew and April Joyner

Sunday, 22 April 2018

Swiss franc dips to three-year low, more losses seen


LONDON/ZURICH (Reuters) - The Swiss franc fell to a three-year low of 1.20 against the euro on Thursday as a revival in risk appetite encouraged investors to use it to buy higher yielding assets elsewhere, betting on loose monetary policy keeping the currency weak.

The currency weakened past the level which was defended by the Swiss National Bank (SNB) during the brief era of its currency peg with the euro, which was abandoned in January 2015.

There is little expectation, that Switzerland will follow its European counterparts in tightening monetary policy, and hence boost the franc, anytime soon.

“The franc remains overvalued even by the SNB’s measures, and we are seeing an extended compression of peripheral bond yields to core European debt, signalling that risk appetite remains strong, which is pressuring the franc lower,” said Luc Luyet, currency strategist at Pictet Wealth Management.

This year the franc has weakened more than 2.5 percent, with much of the decline coming in April.

Some traders cited Russian tycoons targeted in new U.S. sanctions pulling money out of Switzerland to send it home as another factor pressuring the franc.

And as policymakers have signalled more comfort with the currency’s weakness, investors have taken to ramping up bets against the franc with the size of such trades swelling to $1.4 billion (986.61 million pounds), according to positioning data from CFTC.

Morgan Stanley strategists expect the franc to trade below 1.20 in the coming days as the SNB will remain “accommodative” with inflation still far below a 2 percent target.

SNB Chairman Thomas Jordan has said it is too early to change course and the currency situation remained “fragile”. The bank declined to comment on Thursday’s fall.

Investors are using the franc as a borrowing currency to buy into higher yielding assets. The gap between peripheral bonds spreads and benchmark issuer Germany has tightened significantly this year amid ratings upgrades and brighter growth prospects.

The Italian/German 10-year yield gap was at 117 basis points on Thursday – its tightest since August 2016 while the Spanish/German yield spread is close to its tightest in a decade.

Even on a long term historical average, the Swiss franc remained at the upper ranges on trade-weighted valuation metrics despite its recent fall, according to Thomson Reuters data.

The drop in the franc pushed bond yields higher as investors anticipated likely higher inflationary pressures emerging from the feedback from a weaker currency.

Benchmark 10-year yields rose to 0.12 percent – their highest since mid March while two-year bond yields rose to their highest levels since the start of the year, rising to minus 0.767 percent.

A strong franc weighs on Switzerland’s export-reliant economy, so the drop was welcomed by business leaders.

“The weakening of the franc to 1.20 is very welcome,” said Hans Hess, president of industry association Swissmem.

“This is extremely helpful for the bottom line of companies who export into the euro zone. They have had a really tough time in the last few years, and a lot of them have cut their costs and investments to the bone to remain competitive.”


Reporting by Tom Finn