AUTOREFRESH 
Following the money; in this case the Petrodollar
For the greater part, the FX market is made up of thousands of daily transactions with speculators being the biggest players followed by corporate and real money trades. Just occasionally there are some big flows which persist for days, weeks and even months and it is usually a losing battle to try and fight such flows.
For the past 18 months, as we’ve mentioned many times, we have witnessed some massive flows in USD/CHF where long-term petrodollar accounts in Switzerland have moved out of the USD and into the CHF. I first heard of these flows when USD/CHF was at 1.12/1.13 and now look at it. In more recent days what we have been seeing is fresh ‘petrodollar’ money moving immediately out of USD and into EUR in particular. This might be only a very temporary phenomenon or there could be something more to it. The volumes we are talking about are quite huge so if you really feel like selling the EUR/USD, wait until you’re pretty sure this buying has stopped.
One source tells me that if the buying persists, EUR/USD will be trading above 1.50 inside 3 months. Certainly something to bear in mind.
Sean, when these accounts flow through the market, what time of day does it normally happen? I’m sure it’s during the European session, but is it normally at the open or later in the session? Or does it just depend on whomever is executing it?
Friday in Saudi Arabia will tell all!
Very nice info Sean.
Hi Cole, normally the big Middle Eastern players are at their busiest during early London trade
Cole, I wake up at 5amEST and I see most heavy action in between when London opens and NY morning.
Great info, Sean
What’s your take on market today
Hi Sean, what about the European debt worries? Are they really over? Won’t this affect the euro?
I understood the need to diversify away from USD reserves before but into a currency which arguably might not be here in a few years? Different dog same amount of flees!!! However these players can very well remain solvent and irrational for longer than market can be rational (if it turns)….. rational for me is euro weakness:-)
No way Nick, the debt worries are still very real imho but the money doesn’t seem to care, it’s all flowing towards the EUR
Hi Luiz. After hearing this and reports overnight of Middle East bids near 13950, I’d prefer to be long with a tight stop
sean, do u know whats the reason for the flow frm usd to chf in the past year?
dont give me false hopes sean..lol. everytime i see EU go above 1.4, i go long and it turns back. maybe this time its different
Hi Sean,
How is the strong EUR expected to play out in PMs? Any thoughts on that?
Thanks and Good day to you
Hi Sean, what’s the best time to trade in your opinion? As far as I’m concerned, early London has some very nice moves but my work prevent me to enter the market during early London. LD/US overlap is usually mixed with news, not easy to trade tho.
The site is great, the info is great. Thx Sean.
Hi Luiz, I’d say early London into the NY open is the best time by far. The news events are a problem but the moves are usually v juicy
Hi J, if the USD weakens I guess that Gold and Silver will continue on their merry way higher
Leo, I wasn’t bullish at 130 EUR/USD so I’m not going to jump on board at 140, regardless of how strong it looks. If we get a pullback then I might consider joining in but I’m not very good at joining a trend mid-stream
I’m on board with you Sean for hopefully a quick scalp…long 1.3976, targeting 1.4026 and stop at 1.3939…lets hope it happens!
Good luck Cole. Light offers reported near 14020 says a US bank
Thanks Sean.
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I was looking at the possible impact by EuroGold. It has not made new highs, unlike $Gold has. So, if EUR really runs up a lot, PMs could come under pressure. However, $Gold may continue to rally. Right?
OR EuroGold may continue to new highs, which (in above scenario) could mean a $Gold spike.
{See how confused I am! LOL
Your thoughts on this?
Sean, is it just me or does anyone else get the feeling that the USD will continue to see weakeness across the board. However, another “event,” (Spain/Italy coming out to say they need a bailout, Greece/Ireland flat out defaulting on their debt, or even worse yet, a Chinese housing bubble burst), would trigger a VERY strong USD rally.
I keep thinking of cycles and flows. We’ve seen a lot of great progress on the Euro, but nothing lasts forever and between the EUR/USD, USD is the less ugly of the two, IMO.
What I can’t pin down is the timing…. I’m sure it’s technical, but the skill required to forecast is beyond my capability.
Thoughts?
-Mike
Cheers!
$gold is hard enough J without making it even more complicated
Gold will probably outpace everything imho
Mike, that timing thing you’re after is the traders Holy Grail. I don’t think the answer is purely technical, but I do think if we listen closely enough that the mkt will give us a few clues before it turns; just depends whether we’re listening or not
what about xag? What a joke that is!
Your xau trade has much longer legs than Silver. Well done Sean .
Very nice info here… Many thanks Sean.
Oh ya… $Gold is hard enough!
Sean, great post and lots of very nice Q&A here. One thing I notice is that most posters are more keen to understand the whys of the market than to trade it. When the tide is moving in, the sailor does not ask why but concentrates on negotiating it. It is futile to try and understand the REASONS behind every move of the market, and equally futile to try and predict future events, like the bursting of the China housing bubble, or a debt crisis in Portugal or Ireland. Imho, it is much better to see the info the market is showing us and navigate it accordingly. At the moment it looks to me that the EU is heading up, PMs are strong, CHF is strong (i.e. $ is weak). And until the market shows otherwise, this is what I will trade.
Thanks for the great posts everyday, fxlive is the best site for serious traders.
Pandu you know me. I’m the sup/res level calling SOB. I hope you are well and safe. What is your trade this fine day?
hI QA, keep the posts coming, i am a regular reader of your posts. I too am a simple kind of trader – sup/res, trends, MA and Fib levels. The charts are saying very loudly that EU wants a crack at 1.41, but its not succeeding. So what can’t go up must go down, as Jamie says. Therefore range trade – 1.3950 – 1.4050 for now. I’m long EU and EJ. euroCHF also looks good for a long, but I am maxed out.
All the best to you.
Sweet!(Pandu) Hello Mr. Davies! I trust your day is perfect!
This guy thinks it most likely dollar weakness as it loses its world reserve currency status?
http://www.thetradingarcade.com/fx/a-modicum-of-sense-from-the-basket-case-sheep/
Sean,
How long do you normally hold on to a position?
Hi Merlin. I will stick with good strategies for months on end. I’ve been long cable since mid-December but I add and reduce when I think the time is right. I reduced last week at 16280 thankfully but may look to buy back depending on how the mkt develops. I’m presently long USD/CHF as well and a lot depends on how a trade develops; I might be long this strategy for months as well or I might be out tomorrow- it’s always dependent on what the mkt decides to do