It’s been all about cable over the last several days in the FX market and even those FX traders who claim to be quite placid when all around seems to be creating chaos and disorder must have felt some anxiety as the moves and price swings in cable and its crosses lit up the feeds from the brokers.
Being an ex. Brit living in Canada, now a Canadian / British dual citizen, I still have friends in the UK. They range from Exporting Business owners, Senior Directors in large FTSE companies to specialist trades people, who have all voiced their opinions to me about BREXIT over the past two years. I can feel their concerns, worries, nervousness and uncertainties over the telephone or I see it on their faces via SKYPE or FaceTime. To think their immediate futures are now in the hands of some 630+ self-serving UK politicians is very scary.
How has it come to this mess in the UK?
Even my Business friends around London who voted for REMAIN have said a classic EU fudge is just not good enough. The BREXIT vote won. The UK is a democracy and a walk away without trying to cherry pick would have been the best route. Hindsight is a wonderful thing, but I get where they are coming from. Right now, we have a fudge that keeps uncertainty going for the next 3, 5, maybe 10 years that is just not good.
At least with a clean break, you get the reaction over and done with, pick yourself up, dust yourself down and just get on with it. None of the economic numbers produced two years ago and none of the stats produced now especially the by IMF, who are nothing more than scaremongers to the markets. They have never predicted any numbers correctly in the recent years and their predictions should probably just be ignored.
For REMAINERS to have shifted to a CLEAN BREAK BREXIT, cut all ties is quite a remarkable transition. The comments that I have picked up basically can be summarized as follows: -
“Anything is better than this sh*te. It is unrealistic to be expected to run a business without clarity of the future and all that is being put on the table is more uncertainty for an uncertain amount of time”
Theresa May did her best, she was under attack from all sides, the EU, her rebels within the Tory Party, the DUP with ideas and demands way beyond reasonable, the SNP and the Labour Party. Many would have crumbled under such pressure, to her credit she is still hanging “BY A THREAD”although I do feel her days are numbered as the inevitable “chop” is on the way.
The chart below, from the BBC shows the task ahead for Theresa May on numbers she will need in Parliament to get the draft EU /UK agreement passed.
Below is the timeline of the key dates ahead in the BREXIT process.
On October 6th, 2018 my DRIVE THRU heading was:
"THERESA MAY WILL BE RESIGNING IN NOVEMBER 2018”
At that time her position was becoming more frantic by the day and the walls were starting to close in around her. It was obvious to me that crunch time would be around the parliamentary vote on whatever deal was brought back from Brussels.
The vote on the EU/UK deal will now probably take place in December and not November, which was the predicted date back in October, so her resignation may be in December.
I have read the EU/UK all 585 pages of the document, there are wins for UK and one in life must count ones wins but there is also so much vagueness, this is what the EU specializes with and frankly if nothing else the UK likes clarity.
Freedom of movement, out of the CAP and CFP are big wins and frankly the fact that ties to the EU via the customs union should please REMAINERS, in fact the close ties that still remain with the EU are practically what the opposition Labour Party wanted. It begs the question that their total opposition to the EU/UK draft proposal, given it meets most their wishes, cannot be in the national interest?
Nevertheless, it’s not a BREXIT deal that severs ties and that was what the UK voters voted for in June 2016... it’s a simple fact that cannot be ignored.
In the short-term, it would appear, and it is widely expected that before 9:00AM GMT Monday 19thNovember that there will be in excess of 48 letters from Tory Party MP’s in the possession of the chairman of the 1922 committee requesting that Theresa May be ousted from the leadership role and that a vote of “No Confidence” by sitting Tory MP’s will take place.
Over this weekend (17th-18thNovember), probably at the time this blog is posted names of challengers will be announced and the vote will take place in a week or so.
“BY A THREAD”
Theresa May says she will contest the vote and the numbers show that she will probably win, which means that she cannot be challenged again inside 12 months.
It is the parliamentary vote that looks like being a failure at the moment and at that time she may well resign in my opinion.
A new Tory party leader would probably request an extension of the article 50 deadline. If the new leader is a BREXITEER they will then announce a full 100% no ties BREXIT date and work to the date. I just cannot see a second “people’s referendum” being offered.
The crucial date no matter what happens in my opinion is January 21st, 2019. At this time the government “formally” has to advise parliament what it intends to do. It may be obvious closer to that date but for now given that most event decisions are down to the wire, I see no reason why this one should be any different.
From an FX perspective...
Many FX traders have noted the 1.2700 (1.2670 from September this year) level as key to hold and I know of a couple who decided to enter long around 1.2740, with small positions ready to add. One would call it a close your eyes trade and open them in about 3/4 months and one could easily expect to see almost 1.4000.
Just after my blog of 6thOctober I advised my FX PREMIUM subscribers of my trading plan moving forward. I was if you read that blog expecting low 1.20’s from the cable on a Theresa May resignation and I set up my TRADE PLAN accordingly. I funded a broker account specifically to handle my BREXIT related trades and now, I am TRADING MY PLAN in the full knowledge that lows of 1.2000 could be reached.
This coming week will be a difficult one I suspect for both the GBP and Theresa May. I expect fresh lows on increasing uncertainties regarding the political outcome.
Will we get as low as 1.2000 with GBP/USD?
If I knew the answer to this question, I would not be writing this blog on a Saturday morning!
We have seen dips to 1.2200 back in October and November in 2016 and again in February 2017, anything is possible. A dip to 1.1000, I am not so sure about but what a level to get long everything GBP.
We have to remember the UK economy is functioning. Businesses are functioning. People are living. Life goes on in spite of the FX market. Speculators will have their say but at the end of the day, the UK is the 5thlargest economy in the world.
As retail FX traders we have to accommodate the unexpected, the extremes, the craziness, the insane, the ridiculous and tweets from TRUMP. We have to consider the aforementioned and still find a way to see through it all and make a few pips on the coat tails of the major banks. I try to strategize.
Moving on ...
Next year 2019, I am making a FUNDAMENTAL change to the WEEKLY FX PREMIUM subscription service.
I am ditching shorter-term trades. From January 1st, 2019, I will only be trading on longer-term time horizons. The number of live trades I enter will reduce by about 50%-66%.
The main reason for the change is to eliminate the noise, eliminate the chop that now governs the FX market. It is on an hourly basis driven by news events that just chop you up. Moving to longer-term time frames gives a more deliberate macro overview of what is going on.
At the end of the day the Central Banks dictate a countries monetary policy, despite what TRUMP believes, and it is their outlooks that I want to have at the basis of my trade set ups as well as FUNDAMENTAL country specific economic data.
If you want to join me go to the SUBSCRIBE TAB on my home page and sign up now for 2019.
There will be some format changes to this blog and they will be introduced between now and the year end. Most of the changes will be coming in the supporting data inside my secure area of my website for my FX PREMIUM subscribers.
1. FX - FORWARDS, BACKWARDS and SIDEWAYS:
1.1. THIS WEEK’S ECONOMIC DATA:
NOTE: Only the items that interest me are listed here.
1.2. BIAS CHART - USD MAJORS SUPPORT and RESISTANCE:
1.3. USD INDEX (DXY) OVERVIEW – MY THOUGHTS:
Looking at the DXY chart below, we can see a highlighted move to the 127.6% Fibonacci extension, and a very powerful move back to enter the week just under the 50% retracement level at c.96.40.
Looking at the chart there is the potential for a 95.50 trend line support test.
As always reading the moves in the DXY are as closely linked to moves in the EUR/USD as well as the FED and now commentary from TRUMP.
TRUMP is the wildcard, but comments from FED Deputy Chairman, Richard Clarida on Friday last week set the markets going with his comments about FED rates at neutral. He tried about three times as far as I can remember to clarify his comments, but it was too little too late the stable horse had broken out, the USD was being sold off like no-one’s business. It benefitted the AUD and NZD the most as TRUMP also made comments about how great talks were going with CHINA on tariffs and how great a deal he will strike.
If it’s anything as good as the new NAFTA deal, I would not hold your breath. It’s all BS.
The White House is once again in tatters with ritual humiliations and sackings happening from all sides with TRUMP at the heart of it all.
This will add to the DXY/USD uncertainty and keep the sellers in control, in my opinion. It will take a geopolitical event to bring USD buyers back to the front again.
Having written all of the above, I still have a “good” gut feeling that we will see the 100.00 level breached soon. My longer-term thoughts regarding Central Bank divergence are hard to move.
1.4. USD MAJORS - TRADING CHARTS and MY THOUGHTS:
The monthly chart below shows that the EUR/USD is in a down sloping channel.
As I wrote last week, my overall opinions have not changed too much. I listen to and hear several FX traders say that they expect a EUR spike higher even up to as high as 1.1800. In fact, the pair could spike to about 1.2200 and it would still be inside a bearish channel lower, albeit around channel resistance.
The chart does NOT lie.
I have added a very tight piercing wedge pattern (BURGUNDY) to the chart. Both, long and short term we are moving lower. One could argue we are merely consolidating our last move lower before we head lower again. On the chart below, I also highlighted that the last move lower stopped at the 61.8% Fibonacci retracement level at 1.1216 of the June 2008 highs from the September 2000 lows. This is a BIG Fibonacci level hence the bounce. It is quite normal to see this price action. If we do not head lower again early this week, then maybe a move outside of the EUR is driving the price action.
Remember, ITALY, BREXIT and Central Bank divergence continue to weigh in on the EUR never mind the fact that the EUROZONE economic data is at best described as mixed. So, I remain a “SELL THE RIPS” trader.
Last week, I wrote... “As you know, I am expecting quite a sizeable pullback with the cable. 1.2700 was a big level to hold a couple of weeks ago”.
Well we got the pullback, what next?
It all depends on moves early this week in Westminster more than anything else. I have highlighted on the chart a drop to maybe 1.2200 and then a nice spike higher.
It is just impossible to say. But I can tell you it is UK politics that is now driving the price action with cable. Not economic data.
We have broken out of the down sloping channel. It now looks like the 200 DAY SMA is an obvious target at 0.7450. I thought that we would drift lower, but TRUMP has been vocal... not for the first time about how great the new CHINA trade deal will be!
What stands in its way?
Commentary from TRUMP on the CHINA TRADE meeting scheduled at the G20 in Argentina at the end of this month.
Looking back, it has been a nice move off the lows of 0.7000. We are still in an overall downtrend. Above c.0.7600 is required to take us out of a down trend in my opinion.
This move higher looks to now be confirmed. I had my reservations over the CHINA deal, but as mentioned in a few locations in this blog already, the positive comments from TRUMP have boosted the Antipodean currencies.
The 0.7000 / 0.7150 level looks to be a target for this pair.
I would not put your mortgage on this move, there are lots of hurdles to overcome on the way, but the Kiwi looks strong across all currency pairs.
A break of the July 2014 trend line would be big news. We are not there yet and for now the bears are still in control.
This pair is annoying me we are moving sideways, even though 5 out of the past 7 weeks have seen moves higher.
I am not sure how to trade this pair at the moment.
No change, for the past few weeks I am afraid. The BULL FLAG is still in play and it will not be invalidated unless we fall below 0.9945.
A nice bearish engulfing candle on the WEEKLY CHART below. We should see downside momentum this coming week. Of late candle patterns have not had much success with follow throughs. Will this one be different?
It should be given moves in BONDS, GOLD, OIL and EQUITIES, but don’t hold your breath.
I want to be short this pair, with my recent fortunes with the JPY pairs, that comment by itself should be sufficient to see a run at 120.00!
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
2.1. WEEKLY FX PREMIUM PERFORMANCE:
November month so far: 694 net profitable pips
2018 to date: 13,548 net profitable pips.
2.2. WEEKLY FX PREMIUM PERFORMANCE SUMMARY:
(Incorporating the last 5 completed WEEKLY FX PREMIUM TRADES)
2.3. SOME OF THE BENEFITS OF SUBSCRIBING:
2.4. WEEKLY FX PREMIUM SUBSCRIPTION COSTS:
SILVER: 3 months (10 weeks) = CAD350.00
GOLD: 6 months (20 weeks) = CAD$600.00
PLATINUM: 12 months (40 weeks) = CAD$900.00
(Platinum renewal = CAD$750.00)
Go to my websitewww.weeklyfxdrivethru.comfor more details of all the subscription options under the TAB– “SUBSCRIBE”.
3. WEEKLY FX PREMIUM SUBSCRIBERS ONLY:
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: #301 FREE NEWSLETTER
DATE: 18thNovember 2018