Last week was a shortened week in the U.S. and that reflected across most trading activity. From Wednesday lunchtime last week thru to this coming Tuesday (allowing for long weekend holidays etc.) the market liquidity was and will be reduced from the norm. This down time has allowed me to re-evaluate my existing longer-term core positions and review my exit strategies where applicable.... never a dull moment!
The same geopolitical events that were present a week ago are still there today; U.S. / CHINA trade war, BREXIT with the Theresa May leadership issues and the ITALIAN budget excesses.
It seems like I have been referring to these issues for months and although we are looking like we are in the final straight of getting towards the end to these news items I am not so sure we really are. I think that when carving the Christmas turkey this year these issues will STILL be rumbling on.
However, I do feel that ...
DOMINOES ARE IN A LINE...
I headed up my blog on October 6thwith the title “THERESA MAY WILL BE RESIGNING IN NOVEMBER”, I now cannot see this happening. The timelines that were in the calendar at the beginning of October have been stretched out.
Do I still think she will resign?
I am now not so sure as the “Vote of Confidence” in her leadership never took place. That factor was to all intense and purposes a damp squib, and for possibly a number of reasons, the Tory rebels pulled back. Perhaps it was nothing more than the reason they could let Jeremy Corbyn in as a new UK Prime Minister through the back door. The feeling was that for the UK economy that would be the equivalent of a HARD BREXIT x 2.
So, Theresa May still fights on. However, despite meetings in Brussels with lots of handshakes, the parliamentary vote still looks to be a bridge too far.
In addition, we appear, at the time of writing this blog to have Spain flexing its political position looking to link Gibraltar to the BREXIT deal. In the name of sanity, it was never a consideration before when the UK first entered the EEC, why should it be an issue now. This is where you need Juncker to sit down a give Pedro Sanchez (Spanish PM) a slapping and pull him in line.
From a squeezing the lemon dry perspective there comes a point when you just walk away and never come back regardless of how determined you may be as a negotiator. Given the number of Spanish residents that cross the border into Gibraltar on a daily basis to work, Sanchez would do well to “zip it”.
Trading the GBP is still somewhat dangerous as the movement in the cable can be sudden and very volatile. However, having said that, given all the news about how difficult it would be to get a vote through the UK parliament on the Theresa May / EU deal as it stands, is so poor, and with most commentators saying it will never pass, the cable is very resilient.
I would have expected the cable to be around 1.2500 at the moment, definitely sub 1.2700. At the close last week, we were hovering around 1.2800. Fair-value is in my opinion beyond 1.5000, but real news is required to get things moving.
POINT TO NOTE: This blog was written early morning 24thNovember and will be posted over the weekend on 24thand 25th November. The EU Summit meeting on the 25thNovember should have completed just before the FX weekly open on Sunday 25thNovember at 5PM EST.
TRUMP is a bloody idiot. He basically tweeted out last week that CHINA need to do a trade deal as they are suffering and we (the U.S.) are very happy about that. That will just get CHINA to dig in their heels and push TRUMP who needs to make a deal just as much as it’s his base vote that is suffering and so far, he has NOT really had any major win’s vis-a-vis “DEALS” that he claims he is great at.
The long-awaited meeting between TRUMP and XI in Argentina happens at the conclusion of this coming week, so expect market volatility.
It is not a given that a deal will be struck. At best an agreement to keep talking at a lower level and an agreement for another TRUMP / XI summit soon after is where I would be placing my bet.
From an FX perspective watch the usual suspects, the EUR/USD and USD/JPY.
And then there was ITALY...
The head on confrontation between the “pen pushers” in Brussels and the Italian government is now in play. The Italian government are standing firm. My take on this is once again pointing out the obvious who are not familiar with geography.
This is cultural.
Let me elaborate just a little...
The split between the Mediterranean countries and those in Northern European by culture is huge. The Arab and African influences are very apparent when you travel in Southern Europe, these influences are simply NOT there the further away from the Mediterranean you travel. Along with these differences comes a culture that is not understood in Northern Europe.
In a one size fits all EUROPEAN UNION and EUROZONE the mix of cultures is never understood. We have seen it with GREECE in the past and now the ITALIAN government are prepared to go head to head with Brussels.
One has to question the brains in the EU if they fine ITALY for a breach with their budget submission. A populist government being told what it can and can’t do? The EU has used language such as “Sleepwalking into instability”, which would go down like a lead balloon in all the Italian coffee shops and bars. The Italian government faces a fine of 0.2% of GDP, which would be billions of euros, plus a halt on any development funds.
All the EU needs right now are the Italians saying the words “Referendum on EU membership”, the contagion risk Brussels has to deal with here is quite high.
I am not going to list out debt ratios etc. or other economic data. The simple fact is the Five Star League was elected on a series of promises and they want to fulfil those promises. The fact they could not price the effect of their proposals is nothing new but they are committed to delivering the promises.
This one has legs and the uncertainty is starting to weigh in on the EUR/USD.
For more bad news and increased pressure on the single currency, the EUROZONE has also had another set of poor PMi composite data flush through the markets last Friday. Looking forward all is NOT rosy in mainland Europe and the ECB and Draghi have to start owning up rather than using language as transitory. IT is no longer transitory. Data is poor and moving lower.
Finally, in this section,
As mentioned last week, 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.
I am going to offer a special subscription deal from now until the end of 2018.
Anyone that signs up for next years’ service between now and the end of the year will receive whatever period in 2018 that is left FREE.
Therefore, your subscription period will start on January 1st2019, although you will have immediate access to the WEEKLY FX PREMIUM data from the time of joining.
Whatever happens, website changes, trades etc... You will see and be able to participate if you choose. The new approach to my trading will be eased in during mid to late December and website updates are planned early December.
The bottom line...
If you are thinking of joining do it now, get familiar and have a few weeks of adjustment and understanding under your belt before January 1st2019. If you want to join me go to the SUBSCRIBE area under the HISTORY / PERFORMANCE TAB the on my home page.
1. FX - FORWARDS, BACKWARDS & 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:
The weekly DXY chart is below.
I have annotated on the chart my thoughts via-a-vis what I believe to be the current DXY trading range of 96.05 to 97.60.
You will also see on the chart below that I have highlighted by BLUE trend lines an upward sloping channel.
Basically, we are range bound within an upward directional trend. In my opinion, I see the DXY bouncing around into the year end. There are two pieces of news that can have a major influence on the USD into the year end: -
- The G20 meeting in Argentina at the end of next week when TRUMP and XI are scheduled to meet to discuss the on-going trade wars. I am not expecting a resolution to take place. I suspect more talks about talks but the fact a dialogue is taking place is positive.
In my opinion TRUMP and his team underestimate the CHINESE and believe in the principle that if the U.S. says jump then CHINA should respond with how high and where to!
Under TRUMP as President, I think the whole world knows how to play him now. TRUMP needs wins. He said he was great and the best. On the worlds stage he has yet to prove this. Bullying Americans is one thing. As we all know, bully’s never win through in the end. International policy based on bullying is NOT sustainable, as we are now seeing.
Nevertheless the USD will react to the G20 news flow. Will it be enough to break the range? If a full, 100% resolve is found yes, in this instance the USD will weaken considerably in my opinion.
- The FED will be (by all accounts), raising U.S. interest rates again next month.
To a large extent I believe this is somewhat priced in and whilst I expect the USD to strengthen would that create a breakout higher in the DXY. I don't think so.
It’s all to do with the vocabulary in the Monetary Policy Statement itself. A continuation of rate hikes, or, a slowing down.
Next month it's the words that will speak louder than the actions....
The DXY (USD) reaction to the statement will be key. It's a “wee bit away”, but we need to bear this very important meeting in mind.
In summary, we range I think unless we have crystal clear news upon which to trade.
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.
We are now respecting descending channel parameters (BURGUNDY), within the larger down sloping channel (BLACK).
Many pundits (analysts) consider 1.1300 the “Be all and end all”. For me, the recent low of 1.1216 is key.
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.
With that in mind I suspect a re-test of the recent lows could be on the cards. A break lower through 1.1216 opens up 1.1000 and below in my opinion.
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”.
I see 1.2670 as key, a fall through this level opens up much lower levels.
There are always deadlines, meetings and news flows about BREXIT. It is tough to trade. I am though very tempted to enter long sub 1.2700 should we get there, with two very small positions, one to hold and the other to take profits in.
As mentioned last week, it is UK politics and EU soundbytes that are now driving the price action with cable. Not economic data.
I am such a chicken with the pair.
I posted for my subscribers last week the following trade: -
(RISK 50%)We saw a little AUD strength coming through and I decided to exit at 0.7270 for a loss of 30 pips.
Great entry and well executed BUT poorly traded. What a dip-stick!
I may revisit the trade again this week ahead of the G20.
As you can see from the chart below, I pretty much nailed the high, given the fact the pair was trading very strongly at the time.
Trend line support around 0.7180 is now key. Will we bounce off this level or drop through? There is no meaningful AUD data until PCE on Wednesday night (for me).
At the end of next week of course the G20 fallout will have direction for this pair.
The well published move higher lost legs and we can see on the chart below a big reversal RED bar lower.
Trend line support around 0.6740 is key for me regarding the future direction of this pair.
Obviously, the G20 fallout will have some weighting on the future direction of this pair.
Despite the OIL price falling through the floor, this pair has surprised me by the fact it is not at 1.3400 by now.
The market expects the BOC Governor, Stephen Poloz to announce rate hikes this year and early next year as part of the “catch up” with the U.S. Maybe this is the sole reason that this pair is not as well elevated.
I am short this pair at the moment, I have been out of the money, in the money and then back out again. Longer term, I am happy to trade with CAD strength, but I have a feeling the loonie will live up to its name and patience will be required.
A bit cheeky, but I am considering playing the BULL FLAG on the chart below. It has a measured move of 1.0440, which is almost what my thoughts were earlier this year for a year end USD/CHF target level.
We have to be careful with this pair. It is very responsive to “FLIGHT TO SAFETY” moves and with its proximity to the EU (in the heart), moves with the EUR/CHF weigh heavily across all CHF pairs.
Nevertheless, the BULL FLAG trade is tempting....
Finally, I am short this pair, but once again currently just out of the money!
I am of the opinion that a move lower brought on by falling stock prices and a falling U.S. 10-year yield should see this pair lower towards 108.00. We shall see.
For the immediate time, trend line support at 112.40 has to break for my trade to grab traction lower.
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
2.1. WEEKLY FX PREMIUM PERFORMANCE:
November month so far: 829 net profitable pips
2018 to date: 13,783 net profitable pips.
2.2. WEEKLY FX PREMIUM PERFORMANCE SUMMARY:
(Incorporating the last 5 completed WEEKLY FX PREMIUM TRADES)
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)
There is currently a “PROMOTION” in place, to view the promotion you will find it on my home page under the HISTORY / PERFORMANCE TAB.
Go to my website www.weeklyfxdrivethru.comfor more details of all the subscription options under the “SUBSCRIBE TAB.
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: #302 FREE NEWSLETTER
DATE: 25thNovember 2018