- THE OPENING SHOT:
It’s back (THE DRIVE THRU) and I am back!
Welcome to the first “DRIVE THRU” blog of 2018.
I have been at my screens for about the last 6/7 trading days and although I am “full-time”, I am gradually easing myself back to full speed.
Over the Christmas break, in addition to TV bingeing, the odd drop of wine, Jack Daniels and entertaining guests, I spent time looking at my screens checking levels on both weekly and monthly charts so that I could formulate my Q1 and Q2 longer-term position trades into my H1 TRADE PLAN.
Of mice and men all the best laid plans
(My mother was Scottish and she would often say “The best laid schemes o’ Mice an” Men…quoting Rabbie Burns, The Baird of Ayrshire).
Good God, education in my blog…..!
Anyway, of mice and men etc…
Last Wednesday was a big day for FX from my perspective, there was a lot to take in and digest.
However, on Friday…
“Oops I Did It Again”, another heavily witnessed TRUMP gaffe.
Despite his claims, you just know he said what he is quoted as saying because following the headlines he selected an area he didn’t say it about and focusses on that. Let me elaborate….
He singled out African countries and Africa as a SHITHOLE. He then tweets about it by saying I never said that or used that language about Haiti. He picks a different area to focus on. Now, I wasn’t there but this defence he uses is standard deflection from the narrative to try and take the heat off. He must think we are all a gang of fecking idiots not to see he does the same thing over and over again. Will he get a censure? God knows. Will it stop him? God knows. In the grand scheme of things, he probably couldn’t give a rat’s ass.
Anyhow the “SHITHOLE” comments just encouraged more sellers of the USD into the market and on Friday afternoon there was basically an exodus. The USD is in the “SHITHOLE” never mind anything else. Next week will be very interesting.
However, prior to this which took place on Friday last week…
Last Wednesday, some macro news involving China reviewing its policy of holding US Debt, certainly placed the cat amongst the pigeons, or as my wife and I prefer as an alternative, it’s like placing Ozzy (Our boy Labrador almost 7 years old, but still a puppy) in a Pet Shop with dog treats on low level shelving. Give him 5 minutes alone, and brace yourself for the outcome - if you have a Labrador, you will understand.
Back on track…
The move by China, was in fact maybe NOT 100% accurate. Was it all nothing more than posturing?
The State Administration of Foreign Exchange (SAFE), which is China’s FX Manager, 24 hours after BLOOMBERG news broke the headline, retorted;” In our opinion, the news may have quoted the wrong source of information, or it may be false news”
Well there you have it… clear as fecking mud. “Maybe this, maybe that, maybe my fecking arse!!”
However, the news was believed and still is today to some extent by the markets. For good measure on the same day we also had a JPY short squeeze. This was on the back of the BOJ making a change in its monetary policy, by announcing that it is reducing the amount of long-term bonds it is buying.
The upshot of this was, it affected a lot of my open trades. You can imagine my thoughts… here we go again etc.
So, mid-morning last Wednesday I started to look at my H1 strategy looking to re-think my attitude to RISK moving forward. Not a major re-think but a bit more thought on the amount I want to have at RISK.
Did it end there last Wednesday?
Of course, not… in for a penny in for a pound!
One of my CORE POSITIONS for 2018 was blown out of the water with a 400-pip loss across 4 trades; the CAD.
The same day, but now my afternoon, a Canadian source close to the CAD negotiators was quoted as stating that the CAD negotiators felt that the TRUMP administration were about to withdraw from the NAFTA agreement. Jesus, Mary and Joseph another damn vicious spike and drop. Luckily, I only took a 400-pip hit it could have been much worse. I was on a webinar at the time and saw the move light up. I exited everything CAD in a matter of moments.
At the time, I wondered had I been too hasty closing all trades. Had I not intervened, stops with USD/CAD trades would have been taken, but CAD/CHF and CAD/JPY I could have left. I reacted very fast and quickly took the view that as the CAD/JPY was upside down anyhow as a result of the BOJ change in policy, and that was my biggest loss to cover my entire CAD exposure. I saw the words NAFTA on Tweet deck. The move for a NAFTA withdraw could be 200-300 pips of CAD weakness in my opinion… cut and run, head for the hills for me.
So; it felt as if my turkey hadn’t even fully digested and we were off again, with more FX volatility over “FAKE NEWS!” 2018 started where 2017 had left off.
NAFTA news DENIED by the White House. China news gets a guarded DENIAL from the Chinese authorities. What can you do? All I could do was focus on the JPY strength as that was REAL BOJ NEWS!
Ironically, my iTunes was playing a Neil Young song from the album Time Fades Away, titled “Don’t Be Denied”. How fitting given all the denials!
I never had the BOJ changing monetary policy in my plans for 2018 at all. My initial thoughts in hearing the change of policy were: -
- The “BUY THE DIP” mentality with equities may not be a full-time feature of US equities moving forward, especially with an ever-closer looming trade war with China.
- USD/JPY below 108.00.
- Sell JPY across the board especially AUD/JPY and EUR/JPY.
In the first week of trading in 2018, FX traders were thrown 3 curve balls. If I had any thoughts it would be a sleepy city start to 2018, dream on.
If that was not enough to contend with, TRUMP did it again.
I have updated a few sections within this blog and once again had a review of the content and my focus group on exactly what I want to deliver via this blog.
Very simply put, it is Market commentary on the FX market, from mostly a Fundamental viewpoint and of course it is delivered in my own words, my own thoughts and my own views in my own style.
My goal is to hope that readers who are not subscribers to the PREMIUM SERVICE like my approach and make the leap of faith and subscribe. The blog is a selling tool but it is also a vehicle that that allows me to take a step back and focus in a structured way on what is on the horizon.
To complete this section, this week…
“BUY ONE GET ONE FREE”
With a new trading year just starting, there is another target of 10,000 pips for me to beat in 2018. I have launched a PREMIUM SERVICE promotion called, “BUY ONE GET ONE FREE” which is available until January 31st, 2018.
The details of the “BUY ONE GET ONE FREE” promotion can be found on my home page under the TAB “PROMOTIONS”.
I would point out that with the PROMOTION for CAD$800.00 you will have a one year complete subscription and hopefully be part of the 10,000 pips haul this year.
- THE PREMIUM SERVICE TRADING LAST WEEK:
PREMIUM SERVICE PERFORMANCE YEAR TO DATE:
- THIS WEEK’S OVERVIEW and OPPORTUNITIES:
3:1. THIS WEEK’S ECONOMIC DATA RELEASES:
3:2. MY THOUGHTS ON HOW TO TRADE THIS WEEK:
The prime piece of data on the agenda this week that has caught my eye, from a MUST TRADE perspective:
CAD: BOC Interest Rate Decision and the Stephen Poloz Press Conference:
Make no mistake about it, this is a biggie.
We have most if not all of the Canadian Banks looking for an interest rate hike this week. Not for one minute do I believe their interest is based around the Canadian Economy. These institutions in Canada are NOT like what they are around the rest of the globe. They couldn’t give a crap about responsibility they are “FEE INCOME” focused and a rate hike loosens the strings to enable them to get more creative in fees and in so doing enhance their bottom lines.
You also have to consider from the BOC perspective that they must keep a margin in interest rate policy in line with of the USA. The FED are raising perhaps 3 times in 2018, Poloz cannot afford for the gap to widen.
The curve ball of NAFTA has been thrown on the table. If the US decides to withdraw they have to give six months’ notice in writing despite what TRUMP says. Even then, the negotiations can still go on. So, it’s not as black and white as TRUMP would have us all believe.
Canadian Household debt is the highest of the G10 and at record levels. Banks in Canada have said its nothing to worry about, well they would say that wouldn’t they!
The BOC do NOT like this.
Given interest rate margins vis-à-vis the US and Household Debt, I can see the BOC raising, killing two birds with one stone, so to speak.
It will be about the language in the statement regarding clues on more rate hikes in 2018 that will really set the fire under the CAD. We have a Press Conference as well. It is a bit of “A Chaps In The City” approach, not as bad as the RBNZ, but Poloz is not as guarded on language as Mario Draghi so we will need to follow this as well.
If they (BOC) do not raise rates the USD/CAD will be back at 1.2900 very quickly. If they do raise rates, the BOC has gotten great bang for its buck in the past on rate hikes in 2017, circa. $0.04 cents per 0.25% hike!
So, with that said what I am thinking…?
The first issue is the “SHITHOLE” fallout. Buckets load of USD were sold on Friday afternoon into the close of the week. Usually, I would say that there should be a pullback because across many, many pair we are grossly over bought / oversold and the DXY is oversold.
So, at the start of the trading week be prepared. It all depends on how this story progresses over the weekend. The DXY could go extreme lower and then the snap back could be vicious.
It is impossible to say what the reaction will be at next week’s open and trading will be very thin.
Obviously, the CAD will be a currency to focus on. My hopes are that we get a spike that I can short into. I will probably layer in limit orders for spikes on USD/CAD.
Given the BOJ news I am not going to look to trade the CAD/JPY even though there is a nice potentially well-paying Head and Shoulders pattern available. I am set up with NZD/CAD already and if I were to add another pair to the suggested ones it would be either EUR/CAD or GBP/CAD. I will decide nearer to Wednesday.
AUD jobs data is the same day as the BOC therefore I would probably not consider the AUD on the back of the CAD data.
I think the currency to focus on this week is probably the JPY. We have actually confirmed news from the BOJ that affects their monetary policy stance moving forward.
The USD itself, I have been shying away from a little given TRUMP and his nonsense. When you have the USD weakening across the board it does make it harder to choose the JPY cross to single out apart from the USD/JPY itself.
I would be looking at the commodity crosses especially the AUD/JPY, NOK/JPY and NZD/JPY. In addition, the EUR/JPY should NOT be ignored.
My initial thoughts on the back of the BOJ starting to move away from an accommodative approach is USD/JPY to 108.00, probably even a greater unwind.
So, selling JPY strength is the trade maybe to focus on this week.
On an associated point. Volumes / liquidity are still not brilliant at certain times. The market is transitional at the moment for a variety of reasons.
I am NOT a believer that the Asian market is good for FX. Liquidity is just getting lower and lower, year by year and the vast majority of times, Asian moves are reversed in Europe if liquidity is poor. European trading offers much better liquidity to give moves that stick and are directional.
Therefore, here’s a tip. If you are trading, trade only the following times when liquidity will be at its highest: 8.00AM EST to NOON EST. This may not always be possible but it is without doubt the best time to trade.
In addition, be extremely careful with cross rates as they will be the first to suffer from the lower liquidity periods in the market.
3:3. USD MAJORS – SUPPORT & RESISTANCE with MY BIAS:
3:4. USD – TRADING CHARTS:
More often than not I will use DAILY CHARTS for my analysis. My commentary and thoughts for each trading pair are above the charts.
Looks bullish to me, but with a caveat.
Some major moves took place last Friday in particular. Two pieces of news. The rather HAWKISH ECB minutes last Thursday followed by Merkel progressing well in Germany vis-à-vis her coalition formation.
Wiedmann tried his best to halt the single currencies strength by stating that the path to normalization will be a long, long road. After quoting Tom Petty, the EUR/USD sank a little. I think what we must consider here is that ALL the crosses are moving in tandem.
Obviously looking forward there is strong support at 1.1915 and for me we have to break 1.2200 convincingly to see the bulls get a grip. Maybe the “STITHOLE” comments are that catalyst?
Looking forward, I think that the EUR/USD will strengthen in 2018, but to quote Tom Petty it will be “A long, long road”, and I do not see too much Free Fallin’ in 2018!
Thunderbirds are go!
The Spanish and the Dutch have somewhat broken ranks with the EU27 by stating they think the Brits should have a soft BREXIT.
Good Lord how much dosh was in that brown paper bag that changed hands? But hang on it was later DENIED!... more FAKE NEWS. The damage was already done as the already perky GBP remained perky.
This is a “BUY THE DIP” currency trade in my opinion. The only caveat I have is that always remember as well as good BREXIT news, this pair is always seconds away from a 100 drop on bad BREXIT news.
The Cup and Handle pattern on the chart below is in play.
We are in triangle pattern and this pair is up against trend line resistance. My thoughts are that it will push stops and then fall back.
At the moment, this pair is screwing with longer-term strategy. It is in an ascending wedge pattern it has exposed itself beyond trend line resistance and fell back. But, it has not fallen back as strongly as I had thought it would. This probably has more to do with a weak USD than it has with a strong NZD.
That aside, it is well over bought and I think it will eventually turn lower.
I have written a lot about this pair. Fundamentally I believe its path is lower towards 1.2000 and even lower this year.
I can see this pair at 0.9450 or even lower if the single currency really breaks higher towards 1.3000.
For now, we should look at trend lows of circa.9700, maybe back to the 61.8% Fibonacci level at 0.9650.
The JPY is the currency to keep a close eye on moving forward. Below 110.80 it could turn nasty for this pair and cascade lower towards my initial target of 108.00.
The BOJ adjusting monetary policy is huge and definitive news not FAKE that we as traders can work with. There is no need to rush at this as 2018 could be the year that the BOJ starts a lot of unwinding. Very interesting times and lots of pips up for grabs in my opinion.
I am viewing this currency as a bonus in 2018. As far as I was concerned trading the JPY in 2018 was going to be a none event. That plan has now changed.
- PREMIUM SERVICE SUBSCRIBERS ONLY:
(Only SUBSCRIBERS to the PREMIUM SERVICE can view this section of the BLOG)
4:1. TRADING REVIEW:
4:2. SENTIMENT CHART, FUNDAMENTAL & MACRO THOUGHTS:
4:3. TRADING PLANS and LONGER-TERM TRADE SUMMARIES:
4:3.1. MY TRADING PLAN OVERVIEW THIS WEEK:
4:3.2. LONG TERM CORE TRADES SUMMARIES:
4:4. CURRENT LIVE TRADES & LIMIT ORDERS:
4:5. FX BROKER NEWS and MARKET FEEDBACK:
- THE FINAL SHOTS:
5:1. WANT A FREE PREMIUM SERVICE SUBSCRIPTION:
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5:2. CLOSING THOUGHTS:
Nothing more to add here, I have said enough except,
Always remember longevity in Forex trading can only be achieved through trading with good RISK and MONEY MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility.
The Pip Accumulator
BLOG VERSION: #265 FREE NEWSLETTER
DATE: 13th January 2018