Before letting rip this week.
Last week’s introduction was titled: -
GBP: SHORT, MEDIUM and LONG-TERM
Have I changed my thoughts over the medium and longer-terms?
The answer is NO.
OK, with that out of the way let me move forward....
This week we have a FED meeting, a FED Funds Rate announcement, more dots on the U.S. economy moving forward and a press conference from FED Chair, Jerome Powell.
From a news perspective it looks 99.9999999% certain that interest rates will rise by 0.25% this Wednesday. It is all about December 2018 and the revised “dot plot” for 2019 and beyond. I think that it’s fair to say that Jerome Powell will still be bullish about the U.S. economy and that the FED policy about gradual rate increases still remains the way to go moving forward.
I am a Macro / Fundamental trader at heart and my view concerning the FED interest rate policy still has me believing that Central Bank Policy Divergence will come into play. I have had this belief ever since Janet Yellen started to talk about interest rate normalization and started a slow and steady one rate increase a year policy pre Powell.
Whilst I have had this belief for several years now it has still NOT really come through the markets.
When one looks around the major world central banks, it is still obvious that the U.S. is the only G7 country moving rates upwards consistently, the others that are in the G7 CANADA and the UK are once again on hold: -
Last move was higher and current rate:
Last move was lower and current rate:
NEW ZEALAND 1.75%
When you look at the lists only the U.S. is on an interest rate hiking policy and frankly the divergence within the major G7* economies of the U.S. versus the EUROZONE and JAPAN is tremendous. Neither the ECB or the BOJ look as if they will be increasing interest rates in 2019, despite the projections from Mario Draghi and the ECB. The headline U.S. interest rate at the end of 2019 could be as high as 3.25% versus 0% ECB and (0.10%) BOJ.
With this longer-term view coming ever closer all I can see is USD strength moving forward.
When TRUMP was inaugurated back on 20th January 2017 the USD was at 101.75 just down from its high earlier that month at 103.80. In my opinion, these levels are going to come back into view. Whilst TRUMP may not be an advocate of a strong USD, the basic economics cannot be bullied into submission no matter what he may say. His tantrums may have a short-term effect, but the fundamentals will win the day.
With all being noted, USD strength on Wednesday with an interest rate hike will only happen if the forward guidance into 2019 remains strong and that a hike in December 2018 remains in place. The markets are very fickle at the moment and with emerging market concerns over a strong USD and an on-going TRADE WAR with CHINA, a NAFTA deadline with CANADA and tariff solution with the EUROZONE dragging its feet nothing is a “nail on” certainty anymore. TRUMP can huff ‘n puff all he wants but right now he needs a “win” somewhere to remove market jitters and uncertainty.
Only the stock market appears completely unfazed by events. The DOW, NAZDAQ and S&P seem only to be going in one direction regardless of geopolitical events or worries. Having said that, it is well documented, by me at least! that the equity traders are always the last to realise that something is happening and are always the last group to arrive at the party. Commodity Traders, Bond traders and “us” the currency traders, are far more reactive and move instinctive on economic data and headline news.
So, trading around the FED this week will not be as straightforward as one may think... there’s a surprise.
- A rate hike but looking as if there will be a break in December could see the USD sell off.
- However, a rate hike and a strong bullish outlook by Jerome Powell stating that the plan for continuing with gradual rate hikes until the end of this year and through 2019 in line with the revised “dot plots” should see the DXY move higher.
- Should point 2 NOT mention a continuation of gradual rate hikes into 2019.
What does the DXY do?
I think it will sell -off and we will have a bearish hike on our hands.
There are plenty of scenarios to use based upon the policy options, but the market reaction is key for me when plotting my trades into the end of 2018 and especially for my POSITION trades into the middle of 2019 and beyond.
In my opinion, you must consider the big picture of geopolitical news if you are looking to build long term position trades regardless of the FED. However, this upcoming Jerome Powell press conference, gives us a great opportunity to view the voting members of the FED’s thoughts moving forward which should give us clues to policy in the medium term at least. Look at the dot plots, whilst they are only predictions it gives you an insight into the mindset, this is very important from a strategy perspective.Remember in the past month TRUMP has openly jumped in and criticized the FED on its interest rate policy. Do nerves of moving against TRUMP play a part in 2019?
My longer-term views are written above.
Personally, my initial trading intentions will be based upon the news surrounding the DECEMBER 2018 hike and I will be placing trades into the year-end based upon this information. Into 2019, whilst I will be noting the data for my trading style, I will not look into 2019 in a huge way until the December 2018 FED meeting takes place. You may take a longer or shorter view and that it up to you to decide.
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:
At the beginning of the summer, I was thinking given all the news that was available and the Central Bank comments in particular that the DXY would be sitting close to 100.00, at least above 97.00.
We sit range bound between the mid-July lows of 93.80, just below the 38% Fibonacci retracement and the now multi-touched highs of 95.72 seen in July and throughout August.
In my opinion, until the range is broken the chop fest continues. With a FED meeting this week I think that we have a catalyst to help the DXY break out or break down.
1.5. USD MAJORS - TRADING CHARTS and MY THOUGHTS:
As you can see from the DAILY chart below, I have a BULL FLAG pattern shown with a measured move to 1.1968. As long as we remain above 1.1600 this is in play.
From the rectangular box on the chart we also have a DOUBLE TOP and DOUBLE BOTTOM patterns. Obviously, the break higher will intensify if we leave the box at 1.18500, which looks possible, conversely should we drop lower the move lower will intensify below 1.1500 and the bull flag will no longer be in play.
Where are my thoughts?
Long term I am sub 1.1500. My year-end target is 1.1500.
I think we are at the mercy of Jerome Powell as to which direction the EUR/USD trades into the year end.
Despite the nasty RED (BLACK) candle last Friday to close out last week and wipe out the Monday thru Thursday gains cable is still bullish as long as we are above 1.3000. Some chart technicians may use the 1.2930 area as the “BULL / BEAR line”.
As far as I am concerned, the psychologically round number of 1.3000 is big. With the BREXIT new, it looks like a test of 1.3000 could be on the cards sooner than we think and there are very real possibilities of a move to the mid 1.20’s before value is seen once again.
The MONTHLY chart below is my favourite for this pair at the moment. We have trend line resistance of 0.7330 inside the rectangular trading range box.
CHINA trade news of late has not been having the usual negative effect as before on the AUD currency. Ultimately, I do think this effect returns and the AUD short at the trend line could be a great entry short. Only time will tell on this point, however, looking ahead whilst one could argue that the AUD is due a bounce fundamentally I think any bounces at the present time offer shorting opportunities.
We have broken the down sloping channel (see the red ellipse)
There are two ways I look at this obviously...
Firstly, this pair is the KING OF FALSE BREAKOUTS. We are in an area of lots of previous long wicks which proved to be failures. Will we get the same again? (see the purple ellipse).
Secondly, we could squeeze to 0.6800.
Whichever way this plays out the RBNZ meets this week and frankly if you are not in a position I would wait until post RBNZ to enter.
We are being held captive over a potential NAFTA deal with the U.S., which may be delayed until the end of the month.
The TRUMP ‘bully-boy” tactics have failed with Canada just as they have around the political world. As Canada delays to do a deal the pressure mounts on TRUMP with Mexico and politically inside the U.S.
So where does this pair trade in the interim?
We chop between 1.2900 and 1.3150 between the two down sloping trendlines, in my opinion.
The DAILY chart below shows a range measured move lower to 0.9520. I had a short a while back at 0.9750 that missed getting triggered by about 8 pips, which was annoying.
It looks to me that the TOP pattern wants to play out.
My question now is, is a long at 0.9500 the trade moving forward?, it also coincides with the 61.8% retracement.
No change from last week....
I have no opinions to quote here and absolutely no plans to trade this pair.
My WEEKLY chart shows lots of trend lines, but I do not know which way to trade this pair.
My only thoughts are that maybe a short at the 200 DAY SMA at c.113.30 is an option.
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
2.1. INTRODUCTION...SOMETHING TO CONSIDER:
Trading with me via the FX PREMIUM option is a relative low-cost option to give you some or all of the following: -
Confirmation of what a trader who actually trades his trades, thoughts and ideas is doing and thinking in real time.
I am a long term “POSITION” style trader at heart. I believe in FUNDAMENTALS first. If you are a TECHNICAL trader first this could be a good fit. I have a proven record.
I DO NOT trade if I do NOT see a trade.
I am a disciplined trader. I have my TRADING PLAN, plus my RISK, MONEY and HEAD MANAGEMENT rules that I stick to.
If your trading is NOT as smooth or rewarding as you would like, even if you just captured just 50% of my trades due to geographical location issues, you should still cover the cost of a subscription if you traded single mini lot trades in a year.
I tell it as I see it. I am not interested in bullsh*t.
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 $115 per month
JPY 12,500 per month
AUD $160 per month
NZD $170 per month
CHF 115 per month
Go to my website www.weeklyfxdrivethru.com for more details under the TAB – “SUBSCRIBE”.
2.2. WEEKLY FX PREMIUM PERFORMANCE HIGHLIGHTS:
September 2018 so far: 1,384 net profitable pips
2018 to date: 11,406 net profitable pips
2.3. WEEKLY FX PREMIUM PERFORMANCE SUMMARY:
(Incorporating the last 5 WEEKLY FX PREMIUM TRADES)
3. WEEKLY FX PREMIUM SUBSCRIBERS ONLY:
3.1. TRADING REVIEW:
3.2. OPEN TRADES... HOW WILL I TRADE THIS WEEK:
3.3. MYFUNDAMENTAL & MACRO THOUGHTS THRU THE YEAR:
3.4. BREXIT RELATED TRADES:
3.5. LIVE TRADES and LIMIT ORDERS:
3.5.1. LIVE TRADES:
3.5.2. LIMIT ORDER TRADES:
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: #294 FREE NEWSLETTER
DATE: 23rd September 2018