Great to be back and with a slightly modified format to the DRIVE THRU, I hope that you like it.
Quite a lot to topics to choose from for my opening segment and as you can see I have decided on one of my favourites the GBP.
Over the summer break, the cable looks to have been playing a big boy’s game of snakes and ladders over BREXIT. It was really beaten up badly and then a few positive words vis-à-vis BREXIT and it has sprung to life.
Obviously, there is long way to go on the BREXIT negotiations, but it does finally appear that a compromise of the compromise will be signed off. At the end of the day, the fine details of the eventual agreement are not what I am interested in for the article, more the effects as I see them
Now, before everyone gets over excited, even with BREXIT commentary from the UK BREXIT secretary Dominic Raab being bullish GBP, it is those comments from the EU negotiator Michel Barnier that are more news worthy to trade behind. Having just written that I believe more from the Theresa May and Angela Merkel quotes than I do from the other players.
Any other commentary, such as the recent comments from the French Foreign Minister about the Eurostar train being suspended, are frankly nothing more than scare-mongering and typical comments from a politician looking for a 15-20 sound byte on a TV network.
The cable, whilst I believe is a longer-term directional trade to the upside, nothing is ever so straightforward. In the shorter time frames it will be choppy. As you know, nothing in FX goes in a straight line. Even the bold spikes higher that we have seen recently, retrace a little before a period of consolidation and then a sentiment driven resumption in the trend higher.
The GBP/USD can still be in a chop fest even when it’s in consolidation mode.
- You have to trade cute.
- You have to be savvy; NOT bold; that’s too much RISK in my opinion.
- You have to have your plan formalized and trade your plan.
I am only going to concentrate on the GBP/USD for the purpose of this article. I have positions and limit orders across almost all GBP related currency pairs via POSITION TRADES and subscribers to the WEEKLY FX PREMIUM have these available to them to trade if they so desire.
Let me just note the recent lows and recent highs with GBP/USD:
Low: 14thAugust 2018 - 1.2654.
High: 16thApril 2018 - 1.4373.
= a range of 1,719 pips.
The numbers above are for me, the short to medium term and parameters. Given that current pricing is circa 1.3050, we have roughly 1,300 pips to consider on the positive side.
SHORT-TERM (DAILY CHART):
The chart above shows without doubt a break from the recent bottom of 1.2654. I have also drawn an up-sloping channel on this chart.
From my way of thinking we need to see a break above the channel and keeping things simple 1.3200 is a key level.
Without this initial break higher the chances are we drift, consolidate the recent spike and remain on hold pending the next catalyst for a move.
Looking at the chart it is fairly obvious that the trend is to the downside.
We will, in my opinion, require a significant break higher before I will allow myself to believe that the BULLS are in control.
MEDIUM-TERM (WEEKLY CHART):
The BULLS take control around 1.3500 in my opinion. This coincides with 50% retracement of the highs to the lows of this year at 1.3520
Thinking about timescales.
I would like to think that upon an agreement being signed that this level would come into view fairly quickly. From current pricing its only 350 pips away. The cable could achieve this level in one session without too much difficulty.
A signed agreement and 1.3500 is in the bag, I think that the BULLS would definitely have the upper hand.
LONGER-TERM (MONTHLY CHART):
I have often used the phrase the easy money has been made, now it becomes more of a challenge. To some extent, this would be true for the next move that I believe that the GBP/USD would make. However, sentiment should be behind cable at this stage and momentum and value will be words that I expect to be repeated almost daily for a while.
So far, I have made several assumptions, not least that an agreement would be reached between the UK and EU27!
The initial moves through 1.3200 to 1.3500 should be called the easy money with the probable reversal move with the GBP/USD.
Breaking 1.3500 opens up a much greater potential move of a retracement move.
A number often quoted is the psychological round number of 1.5000. The 50% Fibonacci retracement level of the move from the highs at the end of October 2007 to the post BREXIT lows of 1.1295 in September 2016, is at 1.5050.
How far can cable climb?
The 50% retracement could be it, but I have the belief that by the end of 2019 we could be looking much closer to the 1.7200 level sitting just below the 61.8% retracement level.
The long-term views are very difficult. I strongly believe that the price action with the EUR/GBP will be crucial in all GBP/USD moves. This cross rate is one of the most liquid pairs in the FX market. It will play a major role beyond 2018. This year is easier to take a view on, but 2019 not as straight forward.
ECB policy is in favour of the GBP/USD rising fast and the EUR/GBP dipping lower. FX PREMIUM subscribers know exactly where my targets lie vis-à-vis the EUR/GBP.
Will my views and thoughts play out?
Well without a BREXIT agreement they have no chance! However, of late it is obvious that common sense has played a part as both sides know that compromise is the only route forward.
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 94.00 (38% Fibonacci retracement) and the now multi-touched highs of 95.72 seen in July and throughout August. We do however, close the week with a BULLISH ENGULFING candle on the DAILY chart below. During the summer candle set ups or formations never really had follow through into the next day or week, so, I would not be mortgaging the house on a follow through.
We are waiting on a catalyst and what scares me a little is that I am not so certain that the FED will be that catalyst to break the range. I am now of the opinion that it will be a geopolitical event that drives the DXY either higher or lower through the range parameters.
Until we have the catalyst I think we are just in a trading range. If you enjoy trading ranges or have an automated trading account...happy days!
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 pattern.
Where are my thoughts?
Long term I am sub 1.1500. My year-end target is 1.1500.
I would also argue the point that as the DXY is in a trading range so is the EUR/USD.
Well covered in the opening section of this blog. My DAILY chart is below.
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.
A couple of days ago, I was of the opinion that this level would make an excellent short. It is a level of previous horizontal support and resistance as highlighted by the purple ellipses on the chart. Let’s see what happens.
I have absolutely no doubt that if I was to look at 60 and 240 minute charts I would be shouting “FALSE BREAKOUTS” and retracements are in play.
It’s too early to say at the moment that we have false breakouts but Friday’s late in the days move supports this view. The AUD only really sprung higher off good jobs data, prior to this data it was at best described as being at the precipice of a cliff.
A nice down sloping channel is in play and as long as we are below 0.6660, I remain bearish.
The WEEKLY chart also shows that 0.6660 is a Fibonacci retracement confluence of the 61.8% level and a lot of prior horizontal support and resistance highlighted by the purple ellipse.
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 1.2980 and 1.3200, in my opinion.
The DAILY chart below shows a range measured move lower to 0.9520. I had a short that missed getting triggered by about 8 pips, which was annoying. I am waiting to sell again into strength, but only in the short-term.
Longer-term I see this pair above parity, but my target of 1.0500 by the year end looks ultra-doubtful at the moment.
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.comfor more details under the TAB – “SUBSCRIBE”.
2.2. WEEKLY FX PREMIUM PERFORMANCE HIGHLIGHTS:
Woot Woot... 2018 target achieved already!!
September 2018 so far: 1,404 net profitable pips
2018 to date: 11,426 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. LIVE TRADES, LIMIT ORDERS & BREXIT RELATED TRADES:
3.4.1. LIVE TRADES:
3.4.2. LIMIT ORDER TRADES:
3.4.3. BREXIT RELATED 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: #293 FREE NEWSLETTER
DATE: 15thSeptember 2018