In my last blog I started by saying that I woke up in a cold sweat from not being able to reconcile FX issues in my head and just could not sleep.
There is so much going on, not just with FX but every market at the moment, we are witnessing a paradigm shift in the ways that markets are functioning. FX in particular is stifled and basically caught in very tight ranges, volatility is limited. The reasons for this, in my opinion are a combination of the following: - Central Bank easing policies, Trade and Tariff uncertainties and the usual batch of geopolitical issues (IRAN, OIL, NORTH KOREA, BREXIT, WORLD ECONOMIC SLOWDOWN and EMERGING MARKETS).
It is not helped by all of these factors coming together during the summer months, which are quiet and historically have much lower trading volumes.
In a “normal world” in the past, we would work through these issues and whilst we might never come out the other side the same way we went in, at least it was a course that was tested. Today, we have TRUMP who revels in the fact he likes to bully and marginalize and manipulate. His style is confrontation based on little to no facts, he epitomizes the definition of a bully. Since being elected many of his associates have been found guilty of lying to the courts and some are now in prison. He obviously operated in a very shady world where brown paper bags of cash appeared to be quite the usual way to get a deal over the line.
This style of approach, is perhaps now being applied to manage the largest economy in the world.
Concerned? ... you should be.
Prior to being elected U.S. President, TRUMP was a reality TV game host. That line in itself says so much about the USA.
Now the following are my thoughts and views only...
It’s a very scary thought, but, when all is said and done, the recent quotes from the FED, the TRUMP tweets and Institutional market analyst opinions have me believing that we are witnessing the ultimate reality TV show live before our eyes. It is the biggest game show on the planet managed and manipulated by TRUMP.
What I really struggle with is that the U.S. economy is in good shape. I do agree with TRUMP in this regard, see a recent TRUMP tweet below
When you go beyond the TRUMP spin, he’s actually making a valid claim. The insert below highlights the key U.S. data that has been posted since the last FED meeting in June.
I am NOT an accountant nevertheless I am utterly confused BUT, mostly I am hugely suspicious of the way the markets are being led, or without being paranoid, the way the markets appear to be leading the FED! Without doubt, TRUMP is “Teflon coated”, or at least he thinks he is and it appears he has been so far.
There are a number of points / facts, not “FAKE NEWS” that concern me.
With the economy being in good shape, why is the FED even considering cutting rates? It has taken the FED 10 years to get a 2.50% FED funds rate behind the clock for a rainy day, only for it to be cut up in a time when everything is pretty much moving forward in an orderly fashion.
Who is leading who here? The market will take as much as it thinks it can get by way of interest rate reduction. Why is the FED bowing to market pressure?
Which begs the question: - Has the FED been bought?
- It appears like it has to me, I just cannot reconcile its actions any other way.
- The FED is now political rather than independent.
- This has huge ramifications worldwide.
As I have mentioned already, TRUMP is a bully and his dealings in the past have been dubious to say the least. I would NOT be surprised to hear he has bought off parts of Wall Street to place pressure on the FED for a rate cut. TRUMP wantszero interest rates to help him win the 2020 presidential election, he does not care what feathers he ruffles or what mess he creates on the way to his objective, it is simply not on his agenda.
On Wall Street what institutional business would not want zero interest rates or thereabouts. With clients hunting yield, bonds are no good and banks cannot compete, so equities are the only game in town.
This all fits with the TRUMP belief that the S&P index is a true barometer of the US economy. He misleads the market on a regular basis if he feels it supports the S&P index. His immediate economic team do likewise. Manipulation is a critical part of his “modus operandi”, this is a critical feature for a controlling bully. Facts are irrelevant, it is all about control.
I wrote last year (March 10th, 2018) about the TRUMP approach for control of the narrative and likened this to the fictional James Bond character Elliot Carver.
I am starting to really believe it’s all a game...
What if it all goes belly up?
TRUMP has already positioned the FED as the fall guys should it all go belly up. For his base, he has crafted a series of tweets over the recent period claiming that the FED does not know what it is doing. His base will believe him and so it goes on.
The TRUMP approach of tariffs being the way to bring other countries in line hurts everyday Americans. The spat with CHINA is a classic and the EUROPEAN UNION is next on the list.
With regards to CHINA tariffs, it is NOT the Chinese exporter that pays the tariffs. It is the US importer who pays, and a proportion if not all, is passed on to U.S. consumers when they buy affected products. It is a stealth tax, nothing less.
You have to ask yourself...
- The best economy ever....
- The best jobs data ever....
- The biggest economy ever....
- The strongest economy ever....
Yet, according to TRUMP it requires low interest rates and immediate Quantitative Easing (QE).
If, the FED cuts interest rates on 31stJuly 2019, the FED will have started a race to the bottom on Central Bank interest rates... who will be the winner? Central Banks will soon be chasing rainbows. History shows one move cancels out another. ALL this will do is bring recession closer.
Let me try to restore a balance.
What are the reasons for the FED to possibly consider that the U.S. economy requires an interest rate cut or a series of cuts.
- CAPITAL EXPENDITURE:
This is an area that is not moving forward under a growing economy. Anyone who believes that businesses are going to run into the high street spending like crazy on a 0.25% rate cut, even a 0.50% rate cut has lost the plot. It is just not going to happen.
Here’s what will happen: - Any savings seen by businesses will be used to buy back more stock to improve the share price and satisfy investors. Do not fool yourself otherwise.
This feeds the S&P and TRUMP philosophy of the S&P being the way to measure the economic performance.
- BORROWING MONEY:
Is it hard to borrow money in the U.S.?
Government borrowing = $22 trillion.
Corporate borrowing = $15 trillion.
Private Individuals = $13 trillion.
So I would say not.... far from it.
The U.S. economy is so good it is burning cash left right and centre and the debt ceiling just seems to go higher and higher.
- DEBT REPAYMENTS / DEFAULTS:
(This is my conspiracy theory)
Debt in the U.S. has been created at the lowest interest rate levels ever. Any increases no matter how small makes repayments harder.
Maybe the FED can see a bubble?
Maybe this potential bubble is enough for them to mask the real reasons behind a rate cut or series of rate cuts?
It looks like the FED will cut later this month by 0.25% and possibly not the initial 0.50% because of the good data since the last FED meeting. TRUMP has been rumoured to want to intervene directly in the markets to weaken the USD if the FED does NOT cut rates on an ongoing basis.
There are constraints within which even TRUMP has to operate, but I would not be surprised to see a tweet storm following the FED’s decision at the end of the month because whatever the FED does will NOT be enough.
From my perspective the FED is on the verge of losing both its credibility and independence. Jerome Powell and his team are under intense pressure not just from TRUMP but also (what I believe) paid heavy hitters on Wall Street with a bias that supports the TRUMP agenda.
Nothing stacks up...
I just cannot see the benefits other than political for a FED rate cut or a series of rate cuts at this point in time. The whole basis for anything TRUMP has no solid base of thought behind it. It is a NETFLIX Keven Spacey / Robin Wright episode of the acclaimed series.
It is going to be a very interesting summer in which to trade. As mentioned before, FX is almost void of volatility as the markets come to terms with tariffs and Central Bank policies to name but two factors nullify any moves.
In my opinion,at this point in time I believe that that U.S. ECONOMIC POLICY IS BEING BUILT ON A HOUSE OF CARDS and many people are burying their heads in the sand.
Moving on ...
Last Thursday evening after I had pulled my information together for the above section, we had a remarkable speech by New York FED President John Williams after some impressive Philly Fed manufacturing data earlier in the day.
Quotes from his speech such as: -
- First, take swift action when faced with adverse economic conditions
- Second, keep interest rates lower for longer
- Thirdly, adapt monetary policy strategies to succeed in the context of lower rates
- Plus, should not keep powder dry when rates are low and better to take preventative measures than wait too long
These comments sent the USD tumbling lower.
After the NY session was completed and prior to the Tokyo open all of Williams’s comments were walked back. The claim was, it was an academic speech based on 20 years of research and was no way to be assumed to be connected to the upcoming FED meeting policy and rate decision on July 31st, 2019.
What utter boll**ks and bulls**t!
Below are some Tweets that I noticed on my timeline.
Frankly, all this episode does is reinforce my previous commentary. This is all a game, it has to be. In the name of sanity, why would a FED official be so bloody stupid as to make such a speech ahead of a really important FED announcement less than two weeks away.
Mario Draghi had this issue when he first became ECB President. It took time but he got the likes of Nowotny, Wiedmann and Schaeuble to “Zip It” on policy and within a specific time period ahead of a meeting.
Jerome Powell needs to do a similar thing. The speech by Williams was totally irresponsible, does he not have the brain power to understand how nervous the markets are? If he doesn’t, he should NOT be in the position he is in.
Jerome Powell needs to fix this issue, there are too many FED Presidents who love the sound of their own voices... Bullard is a classic example as well.
Moving on once again....
It may be crazy in the U.S., but it is outright bloody mad in the UK.
In a fictional but close to reality comedy TV series in the UK called “Yes, Minister”, we had an episode about the “Euro Sausage” as the content definition of the British sausage causing issues in Brussels.
Boris Johnson in a primetime speech waved a kipper in the air to those attending claiming that Brussels required packaging upgrades to enable these to be shipped.
FAKE NEWS: - it was UK regulations that made the changes NOT the EU.
If I see politics as a reality TV show in the USA, I see it as a comedy show in the UK.
Finally in this section....
Next weekend is my last blog before my summer break.
Whilst the blog takes a break, I continue to trade.
I have a very special subscription offer in place, if you are looking for additional trading support moving forward. My offer is in section 2 below.
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:
I still have my CORE SHORT position listed although at this moment in time, I have taken profits and now I am waiting for my next limit order to trigger.
Going forward this pair will come under extreme scrutiny. Next week we have an ECB meeting and Press Conference and the week following that the eagerly awaited FED meeting.
I expect the pair to “lock up” tightly over the next week or so, which, it has been doing of late anyway. It has been operating in a very tight trading range.
I think Draghi will hedge his bets by waiting to see what the FED does first before reacting with a policy change. I think he will basically say we move in September and thus keep the options open.
On the chart below, I have identified a trading range of 1.1180 to 1.1.1300. I expect this 120-pip range to contain prices for the coming period. Only a major geopolitical event or ECB torpedo would have a chance of breaking this range in the interim in my opinion.
This coming Tuesday the next UK Conservative Party leader and by default the next UK Prime Minister will be announced and the winner between Johnson and Hunt will take up office on the following day.
Last week, the UK Parliament passed a motion making it virtually impossible for a no deal BREXIT to occur on 31stOctober 2019 by having this amendment agree to prevent any suspension of Parliament to force a no deal through.
Basically, there will be a new leader but back to square one vis-à-vis getting things BREXIT related progressed.
Interesting times ahead.
We are basically holding the trading range on the chart below, but we are ready for a severe dip lower. I believe we could see a 1.2000 test if things get really tetchy.
We need to see a break above 1.2750-70 in my opinion to give the GBP bulls a chance to regain control.
The next price level that interests me is 0.7090 which is the 200 DAY SMA level. A FED rate cut and, please don't laugh, a CHINA trade deal could see this pair blast higher.
I am looking to short from higher levels. I think we could spike as high as 0.7200 or a shade further. I want to short up there!
I have the RBA behind me with that trade and I still maintain when the details of any CHINA / US trade deal are examined the only winner will be the U.S.
0.6800 I think will be broken this time around on the back of a CHINA / US trade deal and then 0.7000 a nice big round number comes into play.
I am remaining sidelined until much higher levels are achieved.
In my TRADE PLAN relating to future potential CORE POSITIONS both the NZD and AUD feature prominently.
I hold a CORE SHORT position and today since its inception I have generated well over +400 pips from my trades.
This is a pair that is confusing to follow, it behaves irrationally at times but once it is in a direction it does trend most of the time and has the ability to shrug off data that hits the market against the trend that is in place.
1.3150 is now a big resistance in my eyes and 1.3000 is a big number to break on the short side. I wait patiently looking for sub 1.3000.
I am waiting patiently to enter long at lower levels, close to the trend line support on the chart below.
This pair is subject to the whims of the EUR, GOLD and a flight to safety move, in addition moves in EUR/CHF are one of the key drivers of this pair.
The EUR/CHF will come under intense pressure lower should the ECB introduce another round of QE in September and then the markets will be looking to see how the SNB react. Will they start intervening?
Whilst I am trading the USD/CHF, you always have to have one eye on the EUR/CHF.
I maintain a CORE SHORT position. I am looking for the “Flight to Safety” move to dominate Q2 and Q3 moving forward.
I am happy to stay short and will be looking to add to my longer-term CORE SHORT position.
There is now big resistance building around 109.50, trend line resistance as seen on the chart below.
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
July2019 so far: +680 net profitable pips.
2019 year to date: +9,326 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.
FINALLY: I have just recently launched CORE POSITION trades. These segregate my longer-term trades into a category that may appeal to part-time traders and those who cannot access to their trading screens more than two or three times a day.
This year I am now operating within my TRADE PLAN three categories of longer-term position trades: -
- CORE POSITION TRADES*
- NON-BREXIT POSITION TRADES*
- BREXIT RELATED TRADES*
*All categories have specific goals and objectives and vary on position sizes, RISK and RISK TOLERANCE.
THE WEEKLY FX PREMIUM: SUMMER PROMOTION 2019
3. WEEKLY FX PREMIUM SUBSCRIBERS ONLY:
3.1: MY TRADING REVIEW & GENERAL THOUGHTS ON THE FX MARKET:
3.2: LOOKING AHEAD – TRADING THOUGHTS FOR THE COMING WEEK:
3.3: POSITION TRADES (NON-BREXIT):
3.4: POSITION TRADES (BREXIT RELATED):
3.5: EXISTING CORE POSITIONS – UP TO DATE EXCEL SPREADSHEETS:
3.6: POTENTIAL CORE POSITIONS:
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: #330 FREE NEWSLETTER
DATE: 21st July 2019