Like many people, sometimes when in a deep sleep something suddenly awakens you in what is often described as a cold sweat. I had one of those moments last week when, from the darkest depths of my brain I sat up with the following thoughts...
It was a combination of TRUMP and RISK exposure prior to summer months; let me elaborate...
The world appears to be talking itself from a global economic slowdown into a full-on worldwide recession and we have TRUMP to deal with who believes everything in the garden is rosy, provided the S&P index is on the increase.
Last week chatter was on the increase about TRUMP using the US Treasury to directly intervene in the FX market to weaken the USD. This could be just another ploy by TRUMP in an attempt to push the FED further to cut interest rates at the FED meeting scheduled for 31stJuly. However, I think TRUMP is looking for a full 0.50% cut otherwise his personal attack on Jerome Powell will no doubt just escalate.
This begs the question, does Powell really need to deal with this crap from a unilateralist bully who does not understand the difference between the economy and the stock market? As we now know, TRUMP believes that the S&P index is a representation of the state of the US economy, misguided bloody idiot.
TRUMP is an entire RISK to all markets when he opens his mouth. Below is the latest tweet storm before writing this blog vis-à-vis TRUMP and the FED.
The whole cold sweat incident really left its mark with me for several days, enough to prompt me to write about it here.
It’s not just a TRUMP bashing...
In the UK, we are watching the final stages of the election within the Conservative Party to elect a new party leader and in so doing by default becomes the next UK Prime Minister, replacing Theresa May.
There is NO EUROPEAN UNION commission in place yet and won’t be until November 2019 after the latest BREXIT deadline date of 31stOctober 2019. Yet, both candidates, Boris Johnson and Jeremy Hunt talk about negotiations with the EU.
Who the hell are they going to talk to, the office cleaners... RISK?
It’s cuckoo land... and there’s more...
In Germany, the rainbow coalition that Angela Merkel leads, is in tatters. Her coalition partners are enraged over the recent EU appointments to the top jobs in Brussels.
For example, Ursula Von Der Leyen, the ex. German Defence Minister, seen by many in Germany as a 100% failure has been selected for the top job as President of the European Commission. The coalition expected more German prominence and well-respected German’s in the high-profile roles.... RISK?
German Factory orders last Friday were -2.2%... down from +0.4%... all is NOT good in Germany....
Are we in a recession in the EUROZONE already? ... RISK?
Then, it’s also all change at the ECB...
The ECB can no longer be called an independent Central Bank with the appointment of Christine Lagarde to replace Mario Draghi as President. The ex. French Finance minister found guilty of negligence in 2016, avoided fines and porridge. She then moved on to become Managing Director of the International Monetary Fund. She’s not an economist her background is a lawyer and politician.... RISK?
Welcome to the new world... it’s all quite depressing?
On a positive point as a Forex trader, all of the above = opportunity.
Having the 4thJuly holiday last week gave me the ideal time and opportunity to review my trading strategies, within my overall TRADE PLAN. This was a good discipline to undertake. As we head into the summer doldrums, there is no better time than now to review and maybe revise to be ready for Q3 and Q4.
Below are some of the things I looked at and considered.
As you are probably aware, I am a FUNDAMENTAL trader first, so all the geopolitical news fascinates me and keeps me au fait with what is happening globally and then as it drills down into currency movement, I start looking at the TECHNICALS and chart patterns, support and resistance etc.
Even though I only trade FX, not crypto, metals, indices or commodities I do have to keep one eye on the other markets for inter-market correlations.
Since before the G20, in fact, when Powell turned sissy and offered up a 0.50% interest rate cut at his last press conference, GOLD has been on a march upwards thru $1,400.00. We have since had a price level check and re-test of key levels, but GOLD is on the move.
It is a flight to safety move.
Markets despite flying high on the thoughts of a FED rate cut and a CHINA / U.S. trade deal and nuclear peace on the Korean peninsula are still uncertain about the future. Over 60% of S&P companies have now wound back profit expectations for the next quarter. Then, add into all of this the increasing chatter about TRUMP considering direct FX intervention by the treasury to weaken the USD if the FED does not act significantly in the July FOMC rate decision meeting scheduled for the 31stJuly.
Then just to really mix things up, last Friday, U.S. Non-Farm payroll data was up at +224,000 jobs. This should have gotten the markets to reduce their desire for FED interest rate cuts. However, it did little to change the outlook, the market still expects 2+ rate cuts in 2019, and frankly the markets have been bought by TRUMP. By this I do mean crooked deals have been done to keep pressure on the FED from all possible angles. Just think about it, what fund manager would not want zero interest rates. As investors hunt for yield there is only one place to go.
The FED is in an awkward position. In a “TRUMP FREE” world I would say categorically that there would be NO cut at the end of this month. However, TRUMP is basically mad, stupid or both; and he will do whatever to have interest rates lower.... RISK?
Wow... that is a whole bunch of things in the melting pot.
As a precaution I removed some open trades, which to be honest I had already announced that I was doing ahead of the NFP data, which would have added spice as not many institutional traders would be around on the day following the 4thof July holiday in the USA.
GOLD, OIL, the DXY, US TREASURIES and the fact we are now heading into the summer, it was a good time to review.
Is the U.S. economy in a bubble that is about to burst? I think that there is a bursting bubble on the way, possibly faster than we all think. TRUMP who believes he has the power to stop most things has help orchestrate this one, he simply does NOT understand how his unilateral actions have had a domino effect and he certainly does NOT understand impact management.
His whole focus has been on a lower USD (It now appears by one way or another, by hook or crook he achieves this) and stock market (S&P) at highs. He does NOT understand economics and it is frightening to think he can bully everyone around him to fall in line.
The one fact we all know is that the fall guys will be the FED, Jerome Powell in particular. The blame for any faltering stock market leading to a U.S. recession will be laid by TRUMP at the foot of the FED’s door. The subject of tariffs, and a review of TRUMP’s actions will be ignored, it’s all about interest rates and the S&P as far as TRUMP is concerned, those are his simple measuring tools vis-à-vis the U.S. economy.
So, RISK is about to get worse in my opinion, as we enter into the sleepy summer doldrums of FX trading. Thinner markets, lower liquidity, it all adds up to potential flash crashes etc.
The U.S. position is incredible. In the background, the greatest economy of all-time, according to TRUMP, has produced the largest Federal deficit in history. TRUMP demanding the FED to slash interest rates and re-introduce Quantitative Easing (QE), just doesn’t add up. Why would the best, biggest and strongest U.S. economy of all time require massive fiscal and monetary stimulus?
Employment data is strong. OK, I will concede that inflation like everywhere on the planet is simply 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, they could see signs of improvement?
As I said a couple of weeks ago....
The one black spot that I can see vis-à-vis the US economy is that Business spending is pulling back.
Are we being led to believe that a 0.25% interest rate cut, even a 0.50% 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. Big U.S. companies will do as they always do, bank the money, and improve the stock price. TRUMP’s economy is flawed. I think a huge bubble will burst sooner rather than later.
PLEASE NOTE: There will be no DRIVE THRU blog next weekend in any of the published formats.
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 am in a CORE SHORT position with this pair. I just see the EUROZONE economics so poor regardless of whether the FED cuts 0.25% or 0.50% any USD weakness will be short lived as the ECB needs multiple levels of stimulus to help get the blocout of recession, which I think they are teetering on the brink of.
This pair looked very bullish two weeks ago, but in all honesty, it NEVER delivered despite many analysts getting “BULLED UP” for a run at 1.1500 or higher. It just DID NOT happen.
1.1223 = the 61.8% Fibonacci retracement of the move of the lows in May 2019 of 1.1106 to the very recent highs of 1.1411.
1.1223 is a big level, however, I prefer the 1.1260 level and the area just around it highlighted by the BURGUNDY rectangle on the chart below. From my perspective this is the level from which BEARS or BULLS will be deemed to be in control.
No change with my thoughts on this pair from the last time, however, the GBP continues to drift lower with USD weakness and poor economic data does not stop the bleeding lower.
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, but now reaching lower towards support around 1.2420.
Following the FED this pair was capped at 0.7050.
Right now, the 14 DAY SMA is holding up price levels around 0.6960.
The RBA is still dovish and commodity prices for Australian core businesses have softened placing more pressure on the AUD.
I am basically neutral with this currency at the moment. 0.6940 is a level that interests me. A break below this level will get me interested on the short side. My fear is that this pair could just “Flip-Flop” around.
There is no denying however that last Friday’s candle was bearish.
This pair is on my RADAR.
I am usually nearly always bearish this pair. Recent attempts to break out have been thwarted at 0.6730 resistance.
Very similar with my views to the AUD/NZD. This pair is on my RADAR, last Friday’s candle was bearish, but I am still probably neutral until we see a break lower through previous horizontal support and resistance levels of say 0.6580.
The BOC are on the agenda this week.
I hold a CORE SHORT position with this pair. I see this pair moving lower through H2 2019.
For now; poor jobs data has weakened the CAD and stopped this pair challenging 1.3000.
Poloz next week will be pivotal.
If ever there was a currency pair to get wrong this year, for me it’s this one.
In the last full DRIVE THRU blog, I had a buy zone target that was never hit. On the chart below I have a triangle pattern that looks like we are about to attempt a break out of.
I may be looking at this again next week to place a trade and establish a position.
I maintain a CORE SHORT position. I am looking for the “Flight to Safety” move to dominate Q2 and Q3 moving forward.
Treasuries bounced last Friday following NFP, but I expect this bounce to be shorted into. This pair spiked on the treasury yields on USD strength and we are now up against TL resistance.
I am happy to stay short and will be looking to add to my longer-term CORE SHORT position.
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
July2019 so far: +200 net profitable pips.
2019 year to date: +8,846 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.
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: #329 FREE NEWSLETTER
DATE: 7thJuly 2019