On Thursday morning last week, I started to think about possible topics for this week’s blog. I had written several tweets and made a few statements during SKYPE meetings that FX was getting really boring. The markets were being held captive by the EUR/USD not being able to break free of its range (1.2085 to 1.2560) that has held it captive for about two months.
I had written to FX PREMIUM subscribers earlier on Thursday that I had isolated three currencies to focus on namely, NZD, CAD and GBP and that I would be looking to add to existing positions whenever possible.
Then we had Thursday afternoon and Mark Carney being interviewed by the BBC in London. Carney like Yellen, when she was FED chair would always look to avoid action on rate hikes at all costs, she would cite something to delay the inevitable, Carney is just the same.
The markets were 81% locked into a rate increase from the BOE in May. Data last week from the UK was poor, many analysts blamed it on the poor weather (a leaf out of the U.S. playbook).
Carney in his Q & A session did NOT rule out a rate hike, but he cited the recent data had been poor and that there would be rate increases over the coming years. The markets read this as “MAY IS OFF” and cable was crushed. It took its cross rates with it and it happened when the USD was strengthening, it was like a double whammy.
Make a note of this because I have never written anything like this before.... “Thank you, Mark Carney,” I got my wish from earlier in the day to load up with more live trades and place more tactical limit orders.
On Thursday last week, I completed what I wanted to do vis-à-vis GBP trades and set-ups. The CAD is partially completed, there are still a few more holes I need to fill, and the NZD was about 33% there already, just some pullbacks required there, and I will have that one completed as well.
So, whilst I still think that the FX market sucks at the moment I was able to use the moment and take advantage of a “BUY THE DIP” strategy to add to my existing positions and build up a CORE once again.
I am now looking for a couple more opportunities with the CAD and NZD then I am in patience mode.
Almost around the same time into the end of the week the USD finally started to come to life once again and flexed its muscles into the close of the week. Having said that we had five strengthening candles last week, but essentially nothing has changed. The DXY is moving basically sideways within a down trend and until we see a break higher above 91.00, I am not getting too excited yet.
The commodity currencies (AUD & NZD) were trading very heavy into the weeks close but on the basis, they have no weighting in the USD basket of currencies inside the DXY they had no effect, it is the EUR/USD moves that really move the DXY if the truth be told. The EUR/USD is despite a lot of huff ‘n puff is still range bound.
The USD index is weighted as follows: -
- EUR 57.6%
- JPY 13.6%
- GBP 11.9%
- CAD 9.1%
- SEK 4.2%
- CHF 3.6%
I have charts for the DXY and EUR/USD later in the blog.
- FX - FORWARDS, BACKWARDS & SIDEWAYS:
1.1. THIS WEEKS TRADE INFORMATION: ECONOMIC DATA:
NOTE: Only the items that interest me are listed here.
1.2. THIS WEEKS TRADE INFORMATION: GEOPOLITICAL EVENTS:
1.3. BIAS CHART - USD MAJORS SUPPORT and RESISTANCE:
1.4. USD INDEX (DXY) OVERVIEW – MY THOUGHTS:
We have had 5 x bullish candles last week, but we are still below the 38% Fibonacci level of 90.91. In my opinion, we need to see this level break and also, we need to see a test of the TRUMP TREND LINE which is basically at the 50% Fibonacci level of 91.75 (RED LINE on chart).
Longer timed charts show “BEAR FLAG” formations with measured moves as low as 82.00.
1.5. USD MAJORS - TRADING CHARTS:
I have read a huge amount of commentary about this pair. For me whilst it has moved lower, it is still inside the trading range within the larger trading range. Not much therefore has changed with my thoughts. We are still waiting for a bolt, a catalyst to get things moving. Perhaps the ECB Press Conference this Thursday will be it?
The Daily chart below highlights the trading range that I believe we are sitting in.
We have two ranges: MAROON Lines 1.2090 to 1.2550 and the BLACK Lines signify a range within a range at 1.2220 to 1.2480. The latter range has been tested twice, but we are just range bound.
As written earlier in this blog, BOE Governor Mark Carney placed a cat amongst the pigeons last week when he cited mixed economic data and the fact that the markets are running away with the idea that interest rates are going to rise as soon as May. He said rates would increase this year if things remained as they are now, but maybe the markets need to think.
Well that's not going to happen!
The upshot was that the GBP fell across the board and for me I treated is a buying opportunity.
Huge failure at the trend line. A false breakout and a strong reversal can be seen on the chart below. It looks to me like a re-test of 0.7640 support is on the cards.
Although not shown here the weekly candle is BEARISH ENGULFING.
I believe that we are in a range, which is clearly defined on the chart of 0.7176 to 0.7435.
We are looking like we are going to test the 0.7176 level. We have had a false breakdown to 0.7150 a couple of weeks ago and the bounce back into the range was strong. Let’s see what happens this time as we approach the support trend line (MAROON).
As you can see on the chart below we are in a DOUBLE TOP potential move with the measured target being 0.6910.
In addition, the weekly closing candle is BEARISH ENGULFING.
A dovish reaction to the BOC and a miss on inflation data at the end of last week has seen this pair spike higher. We are still in a trading range and the Head and Shoulders pattern is still in play.
No change from last week.
As you can see on the Monthly chart below, the triangle pattern is “RIPE” for a breakout. My thought process is a long side breakout towards parity once again.
There is a range in play, which I have been following of late which is from 0.9190 to 0.9850.
We are tightening in the triangle.... something is going to give soon.
No change from last week.
This pair is a little boring at the moment. I think that we are still in the throws, in my opinion of breaking down towards 102.00.
We have broken above 107.00 and I think a short from a little higher would offer greater value, circa. 108.00 would be great. Basically, a re-test of the underside of the 2012 trend line.
The JPY is a very targeted currency at the moment as Bond Yields, RISK and TRADE WARS all play directly into how the JPY is traded.
I am surprised by recent price action with the USD/JPY given all the geopolitical news hanging over the markets. This in itself makes me more cautious in what trades I am considering. This divergence is quite strange.
- THE WEEKLY FX PREMIUM TRADING SUMMARY:
2.1. WEEKLY FX PREMIUM PERFORMANCE YEAR TO DATE:
(Incorporating the last 5 WEEKLY FX PREMIUM TRADES)
You can get on board and join my FX PREMIUM subscribers and subscribe to the “10,000 pips a year” group from as little as CAD$10 for 10 days and then CAD$150.00 per month, currency conversions for CAD$150 are roughly as follows: -
- GBP £90 per month
- EUR €100 per month
- USD $120 per month
- JPY 12,700 per month
- AUD $150 per month
This represents a great value way to subscribe…
Go to my website www.weeklyfxdrivethru.com for more details under the TAB – “SUBSCRIBE HERE”.
- TRADER EDUCATION:
Most weeks, I will add an article in this section based on an area of importance in trading that I feel should be documented. It may not resonate with all traders but for some I hope they find it useful.
TRADING AROUND THE NEWS:
I call myself a FUNDAMENTAL trader, but I am also a TECHNICAL trader at the same time, when it comes to timing my entries, therefore I do not very often place trades based on News Announcements, in fact it is a rare event for me that I would do so.
In fact, I am reluctant to trade around Non-Farm Payrolls and Central Bank Monetary Policy announcements, especially the FOMC and ECB.
I have various beliefs that my experiences have taught me regarding these announcements that have generally taught me the same lesson: Stay Away
I am referring to major news announcements. I don’t really pay attention to the smaller announcements because they usually don’t move the market much. I will go through why I avoid trading during major news events and various strategies for dealing with news announcements.
First off, I believe that news announcements are almost totally unpredictable, I often refer to Non-Farm payrolls as a lottery. As you may know, there is usually a “forecast” and a “previous” number listed before the news announcement is made. The market’s reaction is generally based on whether the actual announcement is higher or lower than the forecast. The problem is that this assumes that most traders react the same way to the relation between the actual number, the forecast and the previous number. Even if we could correctly interpret this information, it is difficult to enter trades during these times because execution suffers within a fast-moving market.
In my opinion, these releases have very few long-term implications and are unpredictable in the short term. Of course, there are traders that may use these numbers to some degree of success, but I have never seen any strong evidence that you can profit while trading those numbers over the long term. The one constant around major news announcements (such as non-farm payroll) is that there are rapid moves with above average magnitude. These moves can be very erratic. Sometimes the move is in one direction. Sometimes the move looks like it will be in one direction, and then moves back to starting point just as rapidly.
Furthermore, these moves can be very irrational. Not only do they often ignore the logic of the news announcement itself, but these moves often ignore the logic of any technical analysis. It would be much easier to trade these announcements if traders were rational, but they are not. Therefore, to me the most useful aspect of these major announcements is the time they take place I use the timing of the announcements to avoid placing trades right before them.
If a pattern has almost completed, there is no advantage to placing a trade immediately before or after a news announcement. Let’s say that this trade is a long opportunity. Let’s also say that the pair is just above the entry. If this is the case and the news makes the pair shoot up, then we never entered and there would be no trade. If the news makes the pair shoot down then we will likely be stopped out. Therefore, we never would take this trade.
If the pattern is farther from completing, we still wait to enter until after the price action due to the news announcement has calmed down. If we already have entered a trade, we may close it before the news announcement comes out. This varies on a ton of different situations, which would be too long to write about here.
- WEEKLY FX PREMIUM SUBSCRIBERS:
(This section is for WEEKLY FX PREMIUM ONLY)
4.1. TRADING REVIEW:
4.2. OPEN TRADES... HOW WILL I TRADE THIS WEEK:
4.3. SENTIMENT,FUNDAMENTAL & MACRO THOUGHTS:
4.3.1. OVERVIEW THOUGHTS (MY MACRO PLAN & IDEAS):
4.3.2. THE MARKET SENTIMENT CHART:
4.4. CURRENT LIVE TRADES & LIMIT ORDERS:
4.4.1. CURRENT LIVE TRADES:
4.4.2. CURRENT LIMIT ORDER TRADES:
4.5. FX BROKER NEWS and MARKET FEEDBACK:
- THE FINAL SHOT:
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: #279 FREE NEWSLETTER
DATE: 21st April 2018