As data goes, last week was a really huge week for top tier data with five Central Banks reporting. I expected to learn a huge amount to set me up for the coming weeks and months based on policies. However, given the “high beta” news releases that took place, I am more or less with just the odd exception none the wiser than I was the week prior.
When one considers we had Central Bank monetary policy announcements from the FED, BOJ, BOE, SNB and the NORGES BANK, given the importance placed on this data and I certainly place a huge amount of faith in these releases I am somewhat bewildered. Five Central Banks updated their Monetary Policies but nothing new really new emanated from the releases.
The current FX market is messy, it seems like the world is waiting on a CHINA / U.S. trade deal or, a war with IRAN.
I had mentioned to FX PREMIUM subscribers that I was holding back on limit orders waiting for these news events to pass through. After the Bank of England released its statement, I started on chart analysis.
I looked at about 35 currency pairs hundreds of charts in total, looking for possible swing trades that could develop, using my high probability trading guidelines that have served me well over the years. Based on my TRADE PLAN rules I was seeing very little, maybe just three or four possibilities but they were not motivational trades to leap into.
In my communication to subscribers, I once again return to my most used word in 2019 that is used to describe the FX market overview.... PATIENCE.
It is much more effective and profitable as a trader to wait for trades to come to your prices to trigger trades. The “algo” traders around the world must be triggering hundreds of trades a day in the current range bound chop fest. Sophisticated algos must be confused over some of the media headlines, I am not sure how that is playing out with broker accounts. Probably some good days followed by bad days.
Whilst trading volumes in FX have been up very recently, the FX moves have not been expansive. Following the FED announcement and subsequent Jerome Powell Press Conference the EUR/USD basically could not break it’s 1.1020 to 1.1100 range. That says it all for me about the current state of play.
Some interesting statistics were published last week from the BIS (Bank of International Settlement) regarding FX trading.
Firstly, FX trading volumes are up from USD$5.1 trillion in April 2016, to USD$6.6 trillion in April 2019. This represents a 30% increase. However, be aware 49% of this volume related to FX swaps, which have increased considerably whilst over the counter (spot) trading has pulled back proportionally.
The UK (London) is still the major world FX hub. London accounts for 50% of all interest rate swaps up from 38% three years ago.
On straight spot trading London has pulled away in volumes from the U.S. which is only marginally up from 2016. Hong Kong is the third place showing a marginal increase over 2016.
Basically, London, New York, Hong Kong, Singapore and Tokyo accounts for 79% of the worlds FX exchange trading.
All this looks bullish for FX trading but remember, many banks have pulled dealing desks and staff out of “spot” FX. At the same time, the number of retail traders has reduced, many have left trading FX for a variety of reasons.
Whilst the BIS report headline numbers looking substantive, which they are, spot trading has dropped considerably in the past 3 years.
Having covered several JPY trades recently for a loss, last week I rebalanced matters and the WEEKLY FX PREMIUM now has a credit pip balance for September.
1. FX - FORWARDS, BACKWARDS & SIDEWAYS:
1.1. THIS WEEK’S ECONOMIC DATA:
Courtesy of Forex Factory.
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:
After a tough week in FX especially with trying to understand the moves with this pair, I often look back at longer-time framed charts.
The WEEKLY chart below: -
- Descending Wedge pattern. Usually the outcome is a strong reversal move higher.
- Base of wedge is at 1.0910.
- WEEKLY chart GAP FILL is at 1.0780.
- Huge support at multi-year trend line from September 2000 is at c.1.0770.
- Top of wedge to confirm any breakout is at 1.1200, confluencing with the 61.8% Fibonacci retracement at 1.1182. (see PALE BLUE) rectangle.
So; what to do?
I am probably going to wait. If you go long at the base of the wedge you know your RISK which, is going to be best lined up with the multi-year trend line being used as support.
We are now in BULL CHANNEL, as you can see on the chart below.
14 DAY SMA = 1.2368
200 DAY SMA = 1.2736
Do not be fooled or suckered into this trade on the long side unless you are going into the trade with your RISK fully understood. BREXIT will continue to create lots of volatility moving forward.
This weekend will bring lots of press releases and TV interviews on the UK media, it will only intensify at we get closer to the “Halloween” BREXIT date.
Without doubt fair value for the GBP/USD is much higher towards 1.7000. Unless you are trading with tight stops any trade must be via very small, very manageable position sizes.
At the moment above 1.2580 is bullish and a move back below the 14 DAY SMA would in my opinion place the bears back in control.
My thoughts over the past couple of weeks are there to see on the DAILY chart below.
It is and my opinion remains the same as it has for several weeks a sell the rips trade. I think to be sensible one should wait until the outcome of the CHINA / U.S. trade deal is concluded. At that time there should be a nice spike to sell into.
This pair is really weak, and I missed my entry at 0.6450 to enter short... argh!
If the 0.6250-60 region holds and we spike higher there is a possible DOUBLE BOTTOM pattern in play on a break above 0.6450 as shown on the chart below in BURGUNDY, with a measured move target of 0.6630.
The measured move target is just below the 200 DAY SMA which is at 0.6657.
This is very much at the moment a wait and see.
I still hold a CORE SHORT position.
1.3300 appears to be the level that sellers like to step in.
This has been a frustrating CORE POSITION to hold of late. The announcement of a Canadian Federal Election has also muddied the waters a little.
I was quite happy with the fact that the USMCA deal would soon be ratified and my thought process was that this should provide CAD strength, however will it be signed off before the Late October election date?
A messy looking chart from my perspective.
We still appear to be trapped between the 14 DAY SMA at 0.9900 and the 200 DAY SMA at 0.9950.
I want to enter long c.0.9720... this will require patience!
I hold a CORE SHORT position.
Long-term, I am still bearish this pair and my targets are between 100.00 and 102.00.
At the moment frustrating to hold as we range between 107.80 and 108.40. We need a break preferably lower!
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
September 2019 so far: +192 net profitable pips.
2019 year to date: +13,188 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 find 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 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:
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: #336 FREE NEWSLETTER
DATE: 22nd September 2019