This is my final blog for a few weeks. I will be trading but not blogging again until the weekend of April 13th.
My timing for my trip could not be any better, my favourite subject... “BREXIT” hits the headlines this week with the usual cocktail of side deals, rumours, parliamentary defeats and votes on the agenda. I will be glued to Parliament.tv and SKY NEWS, as I feed my habit of all news and “fake news” BREXIT.
Last week saw the U.S. trade gap widen over a $100 Billion to over $620 Billion ... wow. As this is a key measurement for TRUMP “the tariff man”, being one of his key metrics upon which to be measured, it's a disaster as a number. God only knows who he is going to blame for this number. I can guarantee you, that it will not be himself or his policies that are attached to this increase. I think I read earlier in the week that the U.S. is 20% worse off than it was at the end of 2016, just before TRUMP took the oath.
At the end of the week we also saw a 20,000 headline print regards U.S. Non- Farm Payrolls. You have to go back a little for such a low number. The other constituents were not bad and the monthly and quarterly averages still look good. I was listening and watching BLOOMBERG ahead of the numbers and the 180,000 to 250,000 range was being touted. The printed number makes these people look like clowns, but they are never held accountable.
What about me?
The day before NFP, I removed trades and banked $$$ and pips. I told my WEEKLY FX PREMIUM to take the day (NFP) off. I have often called NFP to be similar to a lottery with the caveat being at least with a lottery you stand a chance of winning.
Moving across the pond...
The ECB finally decided that all in the garden was NOT rosy and that a dovish approach with stimulus to support the market was required.
- A new TLTRO (Targeted Long-Term Refinancing Operation) is starting in September to support the banks. The existing program ends in June 2019. The new loans are 2-year maturity replacing those soon to end which were of a 12-month duration.
It is worth noting that since the GFC the European Banks never got back to their market valuation high’s pre-crash. It has been a long, long road for Europe’s banks and it’s still not over.
- GDP was revised down again for 2019, 2020 and 2021.
2019 was 1.7% now 1.1%
2020 and 2021 were also marked down.
- CPi (Inflation) data was also revised lower but not at the same gusto as GDP.
But here is “The biggie”, inflation projected for 2021 is at 1.6%. This is still way below the 2% objective. This says to me low rates, accommodation and stimulus from the Central Bank to practically infinity.
- The proposed interest rate increase for the Q3 this year, is off the table. It’s a case of low rates to infinity.
It is also worth noting that for his 8-year tenure as ECB President, Mario Draghi has never raised interest rates at all.
The EU economic picture has been dire for quite some time. Thankfully, the ECB board have lifted their heads out of buckets of sand, finally deciding that the wait and do-nothing approach, except maybe pray for miracles, has been a full-on failure.
Last Thursday’s move certainly puts the ECB back ahead of the curve. My question is, will we see Quantitative Easing (QE) once again before the end of 2019?
Looking at the EUROZONE from a higher level...
Nothing looks good for mainland Europe, ITALY is in recession, GERMANY is flirting with recession. FRANCE is holding steady and SPAIN, rather surprisingly is the best of the big four at the moment.
But with European Parliament elections and general elections in SPAIN and probably ITALY once again on the horizon, the European mess continues, and I have not even mentioned the BREXIT effect on the EUROPEAN UNION and the EUROZONE.
From a trading perspective, one has to look once again at the Central Bank divergence trade. The U.S. outlook it just way better and even as the FED is on hold right now for interest rate increases there is a belief that probably one further, maybe two moves higher could occur latest this year in Q3 and Q4. This is at the other end of the spectrum vis-à-vis the ECB position.
From an FX perspective, my fundamental EUR/USD trade outlook for 2019 looks “spot on” when all influences are considered.
GET READY: “DIVISION... CLEAR THE LOBBY”
This week sees another round, maybe the final round (yeah right!), but I doubt that with BREXIT. As a spectacle to observe it’s been a bloody disaster. The UK voters were and are continually being told lies because no-one knows the answers. Politicians fear being weak so rather than say I do not know they lie. One side of the BREXIT debate is as guilty as the other.
Nevertheless, here we are; Politicians in a democracy now fear democracy itself and are prepared to vote the way they want, rather than uphold the wishes of their respective constituencies.
It was rumoured that Theresa May had taken a quote from “Black Adder”, when discussing her strategy ahead of this week’s voting, by telling a close aide that “She had a plan so cunning you could put a tail on it and call it a weasel”. I am not sure about that, but she has been vocal in telling the EU that the fate of the meaningful vote is in their hands.... mind games are at play.
Discussing BREXIT, I am running out of angles on the outcome itself. However, from a trading perspective it is the gift that keeps on giving. From BREXIT related trades in 2018 and this year at least 5,000 pips have been generated. I go into next week’s market with 4 x LIVE trades and 21 LIMIT ORDERS stacked ready.
Regarding the voting options, I have a feeling we will see some surprises, something akin to “Turkeys voting for Christmas”. The tough stances taken by the ERG, DUP and sections of both the Labour and Government back benches have the problem that they could be left behind if all they do is moan and continue to look at the negative and ignore the positives.
Compromise is required across the board because the house is united to some extent on what it doesn’t want rather than accepting the existing positives in the current deal and trying to move forward. The danger is a huge own goal that could “kill” the UK economy.
Currently many MP’s are in their swan song period as they are preparing to ignore the people they represent and vote against their wishes. It is a bloody disgrace to put it mildly.
Plus, we now have a breakaway group of about a dozen dis-enfranchised Labour and Conservative MP’s sitting together in the house of commons who have nothing fundamentally in common. I believe that they are planning to abstain from any voting this week.
Will Theresa May suffer another massive defeat on the meaningful vote?
Probably, but it could be closer on this occasion and if the various factions do not shift position and soften their so far rigid positions.
Then we enter back up votes to keep the UK from crashing out, which will ensure a softer BREXIT... which I believe is the Theresa May masterplan. A dangerous plan but as I have written before in this blog, “once a REMAINER always a REMAINER”, the closer the ties to the EU even if the UK is out of the EU to satisfy the electorate, the better it would be for REMAINERS pretending to be BREXITEERS.
Enough of my conspiracy beliefs and cynical views....
The bottom line, from a FX perspective is that in my opinion: -
- Anything that wins a parliamentary vote that keeps the UK more closely tied to the EU will be GBP positive.
- Conversely anything that separates the UK from the EU will be seen by the markets as GBP negative.
It is as simple as the above. We can complicate it as much as we want but fundamentally the above is the guideline for trading from a macro level.
I think that we should be prepared for GBP/USD as low as 1.2000, although I think that a HARD BREXIT will be removed as an option. If as the EU have intimated that an A50 extension should be for a longer period of time and the commons will remove a hard BREXIT option I could see the GBP/USD heading towards 1.3500.
It is a very wide trading range to consider and of course the cross-rates will have even wider ranges especially GBP/AUD and GBP/NZD.
So, next week when speaker of the house, John Bercow shouts “DIVISION... CLEAR THE LOBBY” that’s the equivalent of ready, set, go.
Remember, whatever happens it is not going to be over from a trading perspective in the first 5 minutes. The ramifications of whatever happens will be medium to long term, wait confirm the move and try and enter on pullbacks from areas that held up prices for a while, these will yield the best returns.
For me as a reborn POSITION TRADER the entry price does NOT have to be too precise although I still measure myself this way, it’s the direction and trend which are key.
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:
Draghi and the ECB hit the single currency really hard following the ECB Press Conference last Thursday when it was announced that interest rates would not be increasing this year, growth projections for the EURO area were significantly reduced along with inflation expectations. A replacement TLTRO for Banks was announced as well, basically placing the ECB in an extremely dovish position vis-à-vis the EUROZONE economies.
The single currency tanked on the news. It bounced off the 61.8% support at 1.1185, which was from the December 2016 low to the January 2018 high.
The future looks bleak for the single currency. I am bearish and have been for some time. Even looking beyond 2019, it looks bleak.
This is without doubt in my mind a SELL THE RIPS pair.
In my opinion, there is not a lot to do here with this pair pre-BREXIT.
We are now entering another week of crucial votes in the House of Commons, more votes, more upsets and no doubt surprises.
The safe trade is to wait and see, rather than second guess the UK political scene.
The pair looks to some extent constructive, but it is a very high-risk trade.
Very weak as a currency and in my opinion, I see the AUD currency as the major loser in any U.S. / CHINA trade deal being announced.
This is a SELL THE RIPS pair selling into strength is the way to play this one.
Very similar to the AUD. The NZD would also be a loser, maybe not quite on the same scale as the AUD, but definitely a loser on any U.S. / CHINA trade deal.
As you can see on the chart below, we are in a trading range and one could use the trend line as part of any short position.
I remain bearish the NZD.
Wow. I have been playing the inverted head and shoulders pattern on the chart below. I took a lot of pips off the table Thursday ahead of NFP last week... that was a great decision.
I am looking to re-enter long once again. Looking for a nice pullback to BUY A DIP. I was looking around 1.3380 for the break out point to be re-tested but following excellent employment numbers from Canada this level was not hit, in fact on good numbers the USD/CAD weakened... argh!
I do not want to chase, I will have to be patient.
I am not playing this currency well at all this year. It used to be one of my go to currencies. Since we have had the “flight to safety” trade hovering most of the time over the FX market for the past 12 months or so, I have tended to ignore this pair.
I am so bearish the EUR/USD, I should be bullish this pair.
There is strong support at 0.9970, that would seem a reasonable level to look at entering long.
My thoughts longer term are that this pair will be closer to 105.00 at the end of 2019.
Historically, I am a poor JPY trader. I have very mixed success with this pair and the JPY crosses. I watched but failed to act to enter short around 112.40. I was waiting for 112.50 but sellers stepped in ahead of me and that was that.
Price action has been a little difficult to predict and high probability trades just haven’t been too successful over the recent months. I remain bearish this pair, a re-test of c.112.40-50 area once again, would re-kindle my interest to enter short.
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
March 2019 so far: +445 net profitable pips.
2019 year to date: +4,955 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.
My website www.weeklyfxdrivethru.com has full details of my trade projection for 2019 along with reasons why you should consider joining my other subscribers at the WEEKLY FX PREMIUM. You will this information under the “History and Performance “tab
Plus, my website also contains full details of the subscription options available. You will find this under the “Subscriptions” 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: #316 FREE NEWSLETTER
DATE: 10thMarch 2019