Although my “DRIVE THRU” blog does not return until September 15th, life still goes on and during the blog absence WEEKLY FX PREMIUM subscribers receive what I call an FX review plus information on trades specifically related to my LIVE TRADES and LIMIT ORDERS currently in play.
In view of my comments last week, in the FX review,
EUR/USD – WHAT NEXT?
I thought it would be good to follow these up and with it being the end of the month, the month’s review would also seem appropriate.
I initially mentioned last week that the EUR/USD was caught between a “Rock and a Hard Place” in the sense that it was being pushed and pulled in both directions.
- TRUMP – general uncertainties and confusion. Now exacerbated with his BLOOMBERG TV interview.
- CHINA trade war and now accused as a currency manipulator.
- ITALIAN bond yields.
- ITALIAN government mis-communications and stance with Brussels.
- BREXIT – fear of contagion.
- TARIFFS on EU cars at 0% - now not enough.
- NAFTA agreement.
- WTO agreement - worst agreement ever!
- U.S. Yield curve between 2 and 10 year Treasuries.
- U.S. Mid-term elections.
All of the above affect the EUR/USD whether directly or indirectly related. There is always a DOMINO EFFECT in the FX market. When you look at the above bullet points it is obvious that there is a mixture of USD positives and negatives.
I inserted in the FX review a series of EUR/USD charts. Basically, in my opinion, the EUR/USD is operating in two ranges. Firstly, 1.1300 to 1.1850 and, secondly in 1.1850 to 1.2560.
Last week the pair broke lower, yet it remained inside the lower range. It has been chopping around 1.1700 on its bounce off the lows but it has failed to break into the higher trading range as seen on the chart below. In fact, except for end of month institutional window-dressing the pair has really only just chopped around.
Last week I showed specific high probability bullish patterns such as: -
- BULL FLAG
- CUP and HANDLE
- MORNING STAR candle formation from a weekly chart that was very powerful.
The “technicals” were very bullish showing a potential extended move higher but there was no momentum to support this move.
The “fundamentals” were mixed, probably to such an extent that uncertainty ruled over the thoughts of the buyers and sellers of the EUR/USD trade.
More often than not you will hear traders talk in terms of the technicals ruling fundamentals but here is a classic example that technical traders need to look at.
I am a fundamental trader first, but I do like the technicals to line up. Last week I traded the EUR/USD to the long side based on technicals only and I lost money. The breakout higher based on “high probability trading” failed.
What did I learn?
Stick to my approach, fundamentals first 100% in place then look at the technicals to confirm the trade.
With all that being said; what next?...
I think that ITALY will cause a lot of concern inside the EUROZONE. ITALY is NOT GREECE.
The EUR/USD heads lower as far as I am concerned.
Moving on to trading...
Looking back at August from a trading perspective I can only say I found it extremely difficult to trade shorter time framed trades, in fact, my trades with longer-term horizons were very successful. My MOMENTUM trades based on momentum were just awful.
What does this tell me?
It confirms what I have been saying for the past two years.
Smaller positioned trades with wider stops allow you to trade through the chop and ignore the noise that the FX market generates and as long as fundamentally and technically you are set up correctly more times than not you will have profitable trades.
Summer trading is mostly a chop fest trading within ranges. This summer has been no different. I have noticed though that even trades based on momentum, have also failed to gain traction, which is a little surprising. My MOMENTUM style trades mostly failed in epic proportions. Thankfully, because they are based on BUY and SELL STOP orders my stops are tighter than other trade styles. But lesson learned in the summer. It is without doubt the winning formula of smaller position sizes and wider stops that succeed.
As you can see from the excel sheet below THE WEEKLY FX PREMIUM added a net 1,440 pips in August, which has taken the year to date number of pips passed my 10,000-pip annual objective.
YEAR TO DATE: 10,022 pips have been generated.
To say that I am delighted would be an understatement. This is the first year since the start of my PREMIUM subscriber service that I have achieved the years goal before the start of the September. There are still 4 months left of trading in 2018.
1. TRADING REVIEW:
2. HOW I WILL TRADE THIS WEEK:
The above sections of the summer review is for WEEKLY FX PREMIUM subscribers only.
The Pip Accumulator
BLOG VERSION: #292 FREE NEWSLETTER