Another week forward into 2019 and I am still no clearer on several issues:
BREXIT – from both the UK and EU sides.
U.S. / CHINA – trade talks what’s truth and what’s fabrication?
CENTRAL BANKS – Turn dovish again but where can some of them go next?
In spite of all these factors in the background, my trading moves forward and January 2019 was a record month for net pips generated and all my targets were beaten. There is still a long, long way to go in 2019 but it's a great start nevertheless.
Now I move into patience mode. The initial easy money in 2019 has been made, the next moves are a little trickier and given my longer-term views most of them require recent medium-term directional reversals. So, it is NOT easy, nor is it straightforward. None the less I approach this new month with a positive mindset.
In section 2, I will elaborate a little more on the January 2019 statistics, but, for me I have now moved on... its February.
CENTRAL BANKS ARE MOVING BACK INTO THE LIMELIGHT:
(MIND YOU DID THEY EVER MOVE AWAY?)
I do not want to come over all dramatic, but I think we are once again at another set of crossroads. Those who have followed me over the past few years will know how much Creedence I place vis-à-vis Central Bank statements and other related news events. The bottom line is the Central bank holds the purse strings and to put it bluntly has more money than we do and can influence price.
One of my longer-term trades still to activate is short EUR/USD.
I am waiting for my level to be hit to activate my short trade, which could be a 3- or 4-month trade to complete once or if it gathers traction.
I have been waiting and waiting for the correct climate.
Whilst waiting I have witnessed the following: -
The FED has turned quite dovish on its policy of raising interest rates. It is a massive about face. Is it because of TRUMP?
Both the FED and TRUMP state that the U.S. economy is both strong and resilient. It is in great shape according to TRUMP, but it cannot stomach a 0.25% interest rate increase. It cannot stomach a move back to levels that one would call normalization.
Jerome Powell (FED Chair) has turned, and I believe it is political pressure that is at the root of pressure placed towards members of the FOMC. At the last FED press conference Powell stated that he wants to step back and basically verify data and moving forward moves would be date dependent. Aren’t they always?
It is what it is and now the FED is dovish at least for Q1 and Q2 2019. Never rule out the FED I still believe the US data and I can see 2 more interest rate moves in 2019 if things remain as they are or improve further.
The current overnight Interest rate from the FED are at 2.50%.
Italy is in recession.
Germany (the power house of Europe) is on its way there too.
BREXIT will only add to the EUROZONE and EUROPEAN UNION woes.
Brussels has dug its feet in and is in denial. From the EUROPEAN UNION viewpoint Brussels represents a bureaucratic viewpoint on economic matters, it is non-democratic and un-elected in the main. It’s not ideal.
At the last ECB press conference, Mario Draghi (ECB President), basically skated around the subject of the EUROZONE economy once again using words such as “transitional”, “transitory”, “under-currents” and the like. Basically, the EUROZONE economy is poor, no longer weak, and is at the precipice.
The current overnight Interest rate from the ECB are at 0.00%.
The options available to stimulate are extremely limited.
All other Central Banks of the majors are on hold for now, with no changes to policy; BOJ, BOE, SNB, RBA and RBNZ. Only the BOC offers any real chance of an interest rate move in the short-term.
My EUR/USD looks good being short just being based off interest rate differentials FED v ECB. Looking forward, at least the FED will be raising again, the ECB on the other hand was supposed to begin a gradual move back to normalization in Q3 2019. Right now, I just cannot see that happening given the present economic climate in the EUROZONE.
After the GFC the Central Bank Governors and Presidents became virtually household names overnight. It was so simple back then, interest rates were normal back then. A 1% cut here and there and a dovish policy that flooded the markets “printed notes” from a never-ending supply, it was easy and straightforward. The major policy that followed was to eradicate the “Too Big to Fail” scenario to ensure another Lehman Brothers failure never happened and banks had to capitalize, build up reserves large enough so that for the next GFC equivalent the Financial markets were better positioned.
After 9 years following the GFC, the ECB is still at 0.0%. Only the FED is above 2%. There is little sign of inflation in the U.S., across mainland Europe and as for Japan, well I still think it’s closer to recession and this has been the case for as long as I have been trading FX.
What I am saying is that the Central Banks know how to print cash and lower rates to support economies. However, when it comes to moving in the opposite direction they are about as useful a chocolate teapot. They are scared to move. Hesitant to sound bullish. Basically, it is easier to be dovish than it is to be hawkish.
We are moving towards a slowdown around the globe, CHINA, JAPAN and EUROPE are all slowing, and Central Banks are now caught between a rock and a hard place. With zero / low rate interest policy the toolbox is empty. So, when I said a few paragraphs ago that we are at a crossroads, I really believe that we are and at the moment I am really unclear what is going to happen apart from potentially falling off the cliff.
This is my dilemma.
Should I just go short now and close my eyes, open them in 4 months’ time and will the EUR/USD be much lower than current prices?
I feel that the single currency is about to cave in. I also feel that GOLD could be in for a very good 2019 as the flight to safety trade will be huge. When you add “flight to safety” thoughts into the melting pot this also supports USD strength.
I have my TRADE PLAN in place for the EUR/USD. As WEEKLY FX PREMIUM subscribers know, I trade my plan.
With reference to the wider issue of the Central Banks, I do think that with the FED essentially going into hold mode for at least Q1 and Q2 this year, we are open to drifting. It may allow for less developed markets to stabilize and in so doing allow consolidation in emerging markets, but they simply do not have the deep foundations to turn things around quickly. Their economies are just NOT as robust.
I know several market makers are talking us into a recession and I can see why as growth is suffering through uncertainties in so many areas of the globe. A recession under usual conditions can usually be managed through Central Bank monetary policy intervention. It’s just not the same in 2019.
The next 6 months I will reading the Monetary Policy Statements closely to see does the language being used reflect the current conditions or are the Central Bankers burying their heads in the sand in a display of denial.
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 Daily DXY chart is below and my thoughts, ideas and comments regarding the DXY are contained on the chart.
1.4. USD MAJORS - TRADING CHARTS and MY THOUGHTS:
This pair is basically moving sideways. Both the FED and ECB are on hold and this pair seems to have decided that stagnation is the best policy.
I mentioned earlier in the blog that my preference is to be short. I see King$ returning before too long and when you add that thought to a floundering ECB with no tools in the toolbox there can be only one result in my opinion.
As mentioned last week, to short around 1.1570 may seem a long way away and it is, but it looks like a great shorting start point in my opinion if we can get there.
Nothing to do here pre-BREXIT.
I am more interested in placing ARMAGEDDON trades in position to take advantage of DIPS in price. For now, 1.2950 looks to be a good support area.
I am looking to enter short this pair. I am hunting for the best level for a longer-term trade. I expect another push higher first into the 0.7350 area.
We have the RBA this coming week, so I may have my head in the clouds vis-à-vis that move.
I wrote the following last week and DID NOT heed my own thoughts about getting short at 0.7300,
“The BLACK rectangle 0.7230 resistance looks like a possible shorting opportunity however, if you think that the ENGULFING CANDLE will really drive higher this week maybe you should be looking at c.0.7300 to short.”
My thoughts are that maybe a move back towards 0.6970 could be on the cards once again.
My bias is to trade short, from a higher level than current pricing.
I have completely screwed up this trade. I sat back three times waiting for optimistic pullbacks in price.
I am NOT a happy puppy as a result.
My plan moving forward therefore, is to be patient and wait to sell into a RIP higher. But at least 200-300 pips higher from current pricing.
Ultimately this year to keep pace with the FED, the BOC will have to raise interest rates. BOC Governor, Stephen Poloz has stated that interest rate increases will be data dependent.
Not sure what to do with this pair until I am aggressively short the EUR/USD.
I have lost my mojo with this pair, a few years ago I was always in a CHF position whether this pair or the EUR/CHF. At the moment I am long GBP/CHF on the back of being short EUR/GBP, so I am not directly interested in the CHF.
I am waiting but believe this pair will be back towards 1.0500 by the year end.
I have just played the JPY pairs very poorly of late. That is a huge understatement... poorly = crap.
I have missed in the past 6 months or so going back over my trades over 1,000 pips on poorly executed JPY related trades.
I do want to be short but now I have to wait. I think I may look elsewhere for JPY trades, playing either EUR/JPY, AUD/JPY or NZD/JPY short and leave the USD/JPY pair well alone. I still see 104.00 on the cards but for me to get involved being short USD/JPY I will need a move back to at least 110.50.
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
2.1. WEEKLY FX PREMIUM PERFORMANCE:
January 2019: +2,245 net profitable pips.
2019 year to date: +2,245 net profitable pips.
The WEEKLY FX PREMIUM is my subscribed based FX support option, which offers, subscribers’ full access to my suggested trade set-ups and my market commentaries.
If you go to my website you will see more information about the WEEKLY FX PREMIUM, including the “SUBSCRIBE” tab at the top of my welcome page.
I include this month in this section of the blog the details of all the completed trades in January 2019 and following these excel spreadsheets a copy of my “Twit Longer” post via twitter with my supporting comments about the January 2019 performance.
2.3. WEEKLY FX PREMIUM – TRADING PROJECTION 2019:
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 website www.weeklyfxdrivethru.comfor more details of all the subscription options under the “SUBSCRIBE TAB.
To subscribe to the WEEKLY FX PREMIUM, you will require a valid credit card.
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: #311 FREE NEWSLETTER
DATE: 3rdFebruary 2019