Weekly Review

Economic news was dominated this week by the world’s central banks. It began in Australia, with the Reserve Bank deciding that global growth worries, a subsequent weakening in its domestic economy and a diminished outlook warranted a rate cut of 25 basis points. In the days that followed, unexpectedly solid key data releases likely had investors wondering if the RBA decision hadn’t been too hasty. The AUD/USD weakened on the easing, then was strengthened on the improved data. In combination with other factors, the uptrend continues with the AUD/USD pair now trading higher at 0.9946, a gain of 0.27% but well off the day’s high, which breached parity to briefly strike 1.0003.

Draghi To Monitor Economy
In the Eurozone, the outcome of the ECB’s interest rate decision yesterday may have been in line with analysts’ expectations, but let down investors who had hoped for easing to calm market jitters. Despite the many calls for quick action, Mario Draghi said that he would carefully monitor the crisis and would not hesitate to act if needed, but reiterated that E.U. governments should toward a resolution. The EUR/USD pair hardly budged, but did see gains that were attributed to an increase in risk appetite on the Australian data. Currently, the EUR/USD is trading higher at 1.2583, and saw an earlier high of 1.2622.

BoE Stays Course
In the U.K., the Bank of England followed the ECB’s lead, refusing to be swayed by pressure to ease, choosing instead to stay the course. The BoE said that though the future was uncertain, it would not hesitate to respond to a worsening situation and would monitor events in the periphery closely, but they were concerned that additional easing would worsen inflation, which is well over the central bank’s target. The GBP/USD pair was trading higher at 1.5545, off the day’s high of 1.5599.

China Marches To Own Drum
In China, the People’s Bank announced today that it would cut its benchmark interest rate by 25 basis points, which came as a surprise to a majority of investors who expected that at best, the Chinese government would use banks’ reserve requirements to increase liquidity. The news gave a solid boost all around to commodities, commodity-linked assets and equities.

Bernanke Holds Pat
Finally, in the U.S., Federal Reserve Chairman Ben Bernanke testified before the U.S. Senate as markets were anxious to glean the Fed’s intent  regarding a more accommodative stance. In the end, Bernanke said that while the U.S. economic recovery was still subject to significant risks, the Fed would -- much like the ECB and the BoE -- wait, watch and be ready to take needed action.

OpenBook Review
For our OpenBook review portion, we looked to the one-year rankings where we found one guru who may be fairly well known to many OpenBook traders as a contributor to Guru Talk, and another less well known trader who could well be on his way to guru status.

OpenBook guru erohal2009 is listed in position #3 on the 1-year board, just after uber-gurus pawelskrzypek and santoshtiwari; he has a win ratio of 93.8%, gains of 37.2% and a profit days ratio of 50%. At a year out, the guru had allocated 78.8% of his portfolio to currencies, 21.1% to commodities and a small 0.3% to indices. He had his greatest success over that period in trading the Yen crosses, with a 1.4% allocation in the USD/JPY gaining 7.5%, a 0.4% allocation in the AUD/JPY gaining 4.5% and 0.2% allocation in the CHF/JPY gaining 3.8%.

More recently, the guru has moved more heavily into commodity-linked currencies such as the USD/CAD, with a 0.8% allocation providing him and his 106 copiers with a 9.3% gain; while a similarly allocated EUR/AUD returned 6.8%. Gold is now given a prominent place in the portfolio, with a 20.9% allocation and a return of 4.9%. The guru, who pays close attention to the underlying fundamentals, says that traders should show patience with gold, and believes that given the recent unemployment data, QE3 talk is rising.

Portuguese trader nunocarapuca is also on the one-year rankings board, with a win ratio of 93.8%, profit days ratio of 46% and annual gains of more than 300%. Like erohal2009, the trader has a large allocation in commodity-linked currencies, which he has pared down in the last month to just three; namely the AUD/USD, NZD/USD and USD/CAD. Over the last month, the trader’s 73% allocation in the AUD/USD pair has provided him with a gain of 50.8%, while a 12.2% allocation has returned 20% and a 14.8% allocation in USD/CAD has returned 12.9%. Several current open positions are doing a tremendous job in bolstering the trader’s monthly profit; for example a recently opened long position in the AUD/USD is now showing a 90.80% gain. Several other longs are showing gains which range from 20.31% to 77.20%. The trader’s P&L for the last month was 58.6%, for the last quarter 63.9%, and for six months was at 66.5%; for the entire year the trader’s profit was in excess of 300%. As of this writing, the trader has 33 copiers and 533 followers though that number is sure to increase once traders realize that an up-and-coming guru is in their midst.