Geopolitical news is dominating the media in most parts of the world. From a FX trader perspective, we are operating in a news driven, sound-byte environment.
News driven markets in my opinion, can often be the most dangerous in which to trade for several reasons, one of which is often the news released may NOT actually be accurate but the markets whip-saw around nevertheless.
For this past week and into the week coming I have scaled back my trading activity, in fact I have only been trading longer-term TRADE STYLES, which, for me are FUNDAMENTAL and POSITION trades (my website contains the definitions of my TRADE STYLES).
Market positioning is off, hence the volatility. There are conviction issues, sentiment issues and an overall complacency and skittishness feel to the way the markets are reacting. Without doubt huge uncertainty rules and hangs over the markets like the Sword of Damocles.
FEAR and GREED are in complete control.
Trump is at the centre of all of this, and, although I have no doubt he would deny this, I think he loves it.
He is, and whilst I am not a fan of the character at all, the first politician that I can remember in a long time that is doing what he said he would do. He is carrying out, regardless of who or what he pisses off, his mandate that he was elected on and is up against more to be honest that he did not bargain for; North Korea.
With regards to trade, he was scoffed at during the primaries by his Republican competitors, the hierarchy of the GOP ignored him as their candidate to a large extent, he delivered a victory no one thought possible. CNN despite losing viewership are still trying to fight a losing battle on TV night after night pummeling TRUMP and his policies, yet his popularity has now started to grow on his “America first” approach.
He beat Hillary Clinton, who lost the plot near to voting day by showing herself and wealthy democratic party supporters to be elitist. This obviously turned voters off.
TRUMP is awkward, confrontational, argumentative, non-apologetic and non- Presidential in all aspects on how he approaches his job. Yet he is growing popularity. He plays to his now growing base. He has weaknesses on policy judgement in my opinion but at the end of the day he is the leader of the biggest economy in the FREE WORLD.
I move on...
TRUMP is in the centre of a global diplomatic meltdown. He is not a politician he doesn’t care. This weekend’s G7 meeting in Charlevoix, Quebec, which has been called the G6 plus 1, has the other G6 members having nose-bleeds because they cannot reconcile the fact that normal diplomatic language is not working. TRUMP could not give a rat’s ass on diplomacy.
TRUMP’S goal, which he outlined months ago was if not FREE TRADE, FAIR TRADE with RECIPROCITY.
There was a twitter storm and sound-byte blitz ahead of the G7 meeting, with TRUMP, TRUDEAU and MACRON at full pelt. Proposed side meetings at the G7 may not go ahead, final communique summarizing meeting agreements and objectives may not be signed by all.
TRUMP’S position on trade is clear. I am NOT seeing much pushback at all on the percentage (of tariff’s) numbers that TRUMP quotes.
TRUMP has loaded tariffs on steel and aluminum imports. There is a cost if the approach does not pay off. There are thousands of potential job losses in the U.S. The tariff is component based and not finished goods based, which means that assembly costs and therefore finished goods costs will increase. This potentially could cause a sales slowdown and place pressure on jobs as a result.
TRUMP is insistent that right now the U.S. is better off, it’s a win, win situation.
Something has got to give, it's a matter of when NOT if....
The world economy needs “FREE TRADE” or as close as it can be RECIPROCITY. Clearly at the moment, the G7 members are unhappy because instead of action on solving an issue, traditional politicians rely on supporting bureaucrats to work out a solution. This could take years, just look at the EUROPEAN UNION deal with Canada.
A solution will be found, it just means that the pen pushing, desk sucking jotter blotters will have to extract the digit and focus.
Looking from on high, its easy, match tariffs, remove tariffs without exception as every G7 member says they want as close to FREE TRADE as possible. Is this not the case?
The reality is; every country is a protectionist in one guise or another. Trying to level the playing field appears so difficult.
This story will plough on and on and on and on.......................
From an FX position, as I noted earlier, it is a very difficult environment within which to trade. Last week, I wrote to my FX PREMIUM subscribers outlining why I was reducing my trading activity.
I show my market commentary update via “Twit Longer” to my subscribers below.
Therefore, if I say trading around TRADE WARS is hard, look at my list of geopolitical events in the above tweet.
What do we do?
We trade smaller position sizes if we trade at all, and, we place stops out of the noise. Take a look at 240M charts get ranges or 120M charts depending upon your RISK TOLERANCE.
I am NOT convinced that this type of trading environment will disappear. As long as TRUMP has a wish list, confrontational and international disputes will continue.
- Trading cross-rates is one option.
- Looking at JPY crosses in isolation is a great option if you are a short-term trader.
- The USD/JPY being very responsive to bonds.
- The AUD/JPY being responsive to the S&P.
- Trading USD majors gives you liquidity and for most of the time better traction through two-way price action, but that is NOT always guaranteed.
My thought process is play to your CORE STRENGTHS as a trader do NOT try anything new but in all cases scale back.
If you do not scale back, you could be putting your account at risk
1. 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:
Looking at the chart below: -
- We appear to have peaked at 95.00.
- We are now range trading almost in the middle of the range on the chart below halfway between 92.25 to 95.00. I said last week that given the geopolitical risk in the market, to enter a period of range trading is not surprising.
- Having written about range trading above, there is also a BULL FLAG pattern still in play.
Time will tell what the next big move will be for the USD, but without doubt there is much to consider. Technically we should move lower and whilst I would not disagree with that view my thoughts are just that we consolidate.
1.5. USD MAJORS - TRADING CHARTS:
Geopolitical events are starting to take their toll on the single currency. Whilst several traders are writing about the single currency still being constructive to the long side, I am still of the opinion that this is simply a SELL THE RIPS trade.
As you can see on the chart below we had a bounce off the lows to the 38% Fibonacci level and then we resumed the move lower.
No change in thoughts from last week.
My DOUBLE TOP pattern is in play as you can see on the chart below. The 200 DAY SMA (Green line) should now act as resistance and the downside move should see an attack on 1.3300 and if the double top plays out the measured move is to 1.3030.
My chart may look a little complicated but entry levels at the DOUBLE TOP breakdown (1.3700), the 200 SMA (1.3580) and at previous support (1.3450) all offer reasonable entry levels.
As you can see we had a very shallow 23.6% Fibonacci retracement from the lows. From my perspective, I see more downside with the DOUBLE TOP playing out.
This is a very difficult pair to trade as many people think it’s going to move much higher before it resumes its downtrend. The chart can be interpreted as constructive to the long side. For now, I would be very careful trading the GBP based upon the fact that Theresa May has a BREXIT House of Commons vote to contend with this week and the rhetoric between the UK and EU is going to ramp up.
We are popping above the trend line but not able to stay above 0.7650.
As I see it; above say, 0.7700 the bulls have it!
Whilst we are below 0.7700 it is “SELL THE RIPS”.
A nice bounce off the low to a pin point 38% retracement level, which has held pricing. We should head lower from here, but one can never be certain.
NAFTA is off; a potential bi-lateral route is preferred by TRUMP.
Not really sure how to trade this pair, although my brain tells me it is eventually going to be a great short because the U.S. and Canada will sign some sort of agreement. They have to, I would have thought given the Ontario car production implications.
The February 2016 trendline resistance is basically containing price for now.
Looks like a nice potential BULL FLAG being formed.
The issue with this pair is that even with the EUR/USD falling and this pair having an inverse relationship to the EUR/USD, that is NOT in play at the moment. All of the geopolitical issues are weighing in on the CHF as a FLIGHT TO SAFETY trade.
Given its bullish run of late a good pullback would not go amiss given the longer-term opportunities that possibly lie with this pair should the EUR/USD continue to fall.
The 200 DAY SMA is containing the bulls at the moment. The obvious trade for now is to short against level of c.110.20.
This is a hard pair to gauge at the moment we also have a BOJ meeting soon. Geopolitical events, Flights to Safety, Gold, Bonds and OIL all weigh in on the pair to larger or lesser extents.
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
2.1. WEEKLY FX PREMIUM PERFORMANCE HIGHLIGHTS:
June so far: 225 net profitable pips
2018 TOTAL: 6,637 net profitable pips
2.2. WEEKLY FX PREMIUM PERFORMANCE SUMMARY:
(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 the first 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
Go to my website www.weeklyfxdrivethru.comfor more details under the TAB – “SUBSCRIBE”.
3. WEEKLY FX PREMIUM SUBSCRIBERS ONLY:
3.1. TRADING REVIEW:
3.2. OPEN TRADES... HOW WILL I TRADE THIS WEEK:
3.3. SENTIMENT,FUNDAMENTAL & MACRO THOUGHTS:
3.3.1. OVERVIEW OF MY MACRO THOUGHTS & IDEAS:
3.3.2. THE MARKET SENTIMENT CHART:
3.4. CURRENT LIVE TRADES & LIMIT ORDERS:
3.4.1. CURRENT LIVE TRADES:
3.4.2. CURRENT LIMIT ORDER TRADES:
3.4.3. SPECIFIC TRADES RELATED TO BREXIT:
3.5. FX BROKER NEWS:
4. 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: #285 FREE NEWSLETTER
DATE: 9th June 2018