At the end of Powell’s Press Conference last Wednesday, I said under my breath “well there you go... WTF”.
The way Powell never even pushed back on a question about a 0.50% interest cut in July was telling. I was educated on the basis that Central Bank policy is like trying to turn around one of the world’s gigantic oil tankers. It takes about 2/3 miles just to slow them down to enable a full turn in the reverse direction.
The U.S. economy is in relatively good shape... according to TRUMP it’s the greatest in history.
There are so many undercurrents leading up to the FED statement. In my eyes, it was a pure reactive move regarding it’s verbage last Wednesday. It is no secret that TRUMP has been using pressure directly and indirectly to send a message to the markets and the FED that he wants lower interest rates and that he thinks that the FED have it all wrong, in fact his attacks have been solely at Jerome Powell, FED chair.I think that this pressure has caused Powell to buckle under.
In the background, the greatest economy of all-time, has produced the largest Federal deficit in history. Trump demanding the FED to slash interest rates and re-introduce Quantitative Easing (QE), doesn’t add up. Why would the best, biggest and strongest U.S. economy of all time require massive fiscal and monetary stimulus?
Employments are really strong. OK inflation is not there but that is not primary at this stage in my opinion, did the FED not say only a month ago that they had looked closely at inflation and that it was transitory?
The only weakness that I can see is that Business spending is pulling back. Are we being led to believe that a 0.25% interest rate cut is going to have CEO’s and CFO’s running out with cheque books ready to spend, spend, spend... my arse ...? this is utter bollocks.
Ahead of the curve / Behind the curve – I think that this economic narrative is irrelevant at the moment.
Let me quickly give my takeaways from the FED last week: -
- “Patient” removed from statement = move on the way. Markets need to be prepared.
- The Dot Plot – 8 out of 17 FED members favour an interest rate cut in 2019. However, 9 out of 17 FED members either want to hold or INCREASE interest rates.
- Trade and Business investment to fall further = TRUMP is to blame here providing market uncertainty with his Tariff approach by introducing an increased tax burden on buyers.
- Job creation and Consumer Spending will not compensate for down side risks in market. = TRUMP tariffs are to blame here.
- Powell did leave the door open to reverse his dovish stance should data surprise to the upside or consolidate around present levels.
My bottom line is that TRUMP’s failure to grasp basic economic strategies has created the upswell of market uncertainty.
If you listen to CNBC and BLOOMBERG, they are only ever going to wheel out on their TV programs guests who sell their own books. There isn’t a market maker, bank analyst, fund manager or investment manager who would NOT want zero interest rates because investors only have one vehicle to use to get any yield and that is equities.
TRUMP measures the U.S. economy by how good the S&P level is.
WALL STREET is NOT the U.S. economy ....
This entire fiasco is engineered by TRUMP to have a zero-interest rate policy.
How this plays out is anyone’s guess and at some stage equities will drop back on market correction. You can bury your head in the sand but a 25%-33% correction will be coming.
An equity market where over 75% of all shares purchased are companies buying back their own stock is not just a false economy, it is unsustainable and frankly part of a “House of Cards”.
The more I read, the more time I have to reflect and digest the Press Conference, I really feel that Jerome Powell caved in way too easy last week.
I cannot think of another occasion since I started traded when a Bank Governor, President or Chairman has shuffled his or her position to accommodate political and market expectational pressure. The overall independence of the FED has to be called into question.
There was no backbone at all with Powell’s speech it was amazing he could stand up unsupported.
It has sent a shiver through other Central Banks, and the “Race to the Bottom” is now on. Powell’s Press Conference last week was so weak, that in my opinion, he COULDN’T PULL THE SKIN OFF A RICE PUDDING.
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:
The FED prepares the markets for interest rate cuts and true to form there was and still is a rush to dump the USD.
We have huge uncertainty around the globe, and I am not so certain that the USD will continue to drop.
The 200 DAY SMA is c.1.1350. This is an important gauge upside level in my opinion. We pushed through this level last Friday. After this the 61.8% Fibonacci retracement of the move from the highs of 1.1570 (09.01.2019) to the low of
1.1105 (22.05.2019) is next at 1.1394.
It is a very, very powerful bullish chart pattern that is in play right now following the FED. I know when it comes to the FED versus the ECB, the FED should win out every time regardless of how accommodative the ECB is. This time I am not so sure.
There are U.S. Bank calls now in play for EUR/USD to be at 1.2000 by the year end. In normal circumstances, one could NOT argue with this thought process, but we are not in times when normal circumstances apply.
I am neutral this pair at the moment. I do not have belief at the moment that the move higher will persist for as long as some analysts are predicting.
The chart below does have a very bullish set up though!
The Tory leadership campaigns continue. The run off between Boris Johnson and Jeremy Hunt now goes to the Conservative Party membership around the country.
I still hold GBP long positions through GBP/USD and cross rates. My BREXIT trades TRADE PLAN has been very successful so far, although at the moment I am holding several positions that are under water, although inside my TRADE PLAN guidelines.
For now I am neutral GBP/USD.
From the BURGUNDY rectangle on the chart below as you can see, we are still in a trading range.
Following the FED this pair was capped at 0.6940.
Many analysts and “experts” in my twitter feed are projecting a test of 0.7000 and beyond.
For now, I am neutral awaiting further news. We have G20 meetings this week and I can imagine that the AUD will remain fairly static until we see some news on how the TRUMP / XI meeting on the U.S. / CHINA trade deal worked out.
For now 0.6840 to 0.6940 is capping moves. It is not a wide range all things considered, this shows how much the CHINA trade uncertainty is weighing on the AUD currency, plus the RBA is very dovish which will also be having an effect on prices not rising too far.
For now, 0.6600 is capping gains.
The RBNZ releases its latest Monetary Policy Statement this week and until this data release I expect the NZD to move in a tight range.
Longer-term, I am bearish this pair and the NZD currency in general.
Should 0.6600 hold as resistance moving forward, bears will still be in control. The longer-term trend with this pair is lower.
A huge breakdown below the support trend line on the chart below is now in play. This trend line should now act as resistance moving forward.
I have established a CORE SHORT POSITION with this pair for Q2, Q3 (H2) this year and so far, it has produced +240 pips of banked $$$.
I see this pair structurally moving considerably lower, my initial targets I feel are under-evaluated for the bigger picture. Targets can be updated and moved though!
I have revised my entry zone following the FED announcement last week.
For now I am on hold waiting.
The only other factor to consider with this pair is the flight to safety move and also the GOLD effect. The CHF has a close relationship with GOLD. This usually strengthens the CHF.
Around 0.9540 looks a great level to enter long in my opinion, but that looks very ambitious.
I am short and holding for a much larger move lower. I have a CORE SHORT position. I am looking for the “Flight to Safety” move to dominate Q2 and Q3 moving forward.
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
June 2019 so far: +660 net profitable pips.
2019 year to date: +8,566 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.comhas 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:
3.1: TRADING REVIEW:
3.2: LOOKING AHEAD - IDEAS FOR THE COMING WEEK:
3.3: CORE POSITIONS – ADDITIONAL THOUGHTS:
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: #327 FREE NEWSLETTER
DATE: 23rd June 2019