The past week reminded me why I love trading Forex.
The geopolitical news events may be dominating price moves at the moment, or to put it another way FUNDAMENTALS trump TECHNICALS (pun intended). Whilst this is the style of market I prefer to trade within; it is tainted with danger signs whichever way you look.
I trade longer-term (or try the best that I can within the market conditions), and within my trade plan, I have three sub trade plans to direct me through three different trade styles within my swing-position trading strategies.
The past two weeks had been mostly just sitting, waiting and mostly planning around my strategy to trade around the CHINA / U.S. trade deal.
Ahead of the meeting, we had the now usual TRUMP theatrics: -
- Chinese diplomatic visas revoked
- Chines companies blacklisted for Human Rights violations
- Limited China stocks to be allowed in US investment plans
Then the Chinese responded with a, we will still come but we only sign a deal on what we have already agreed... nothing more.
Then we heard the Chinses delegation was going to fly home a day early!
A deal (of sorts) was agreed.
- October 15th tariffs to be added by the U.S. now delayed. (I could not see anything to do with the December tariffs)
- China agrees to buy $40Billion of agriculture products
- The deal still requires agreement in writing, which may still NOT happen c.6 weeks to write up
- Agreement on FX transparency
I planned for days, weeks possibly months for this.
What sort of all-embracing deal is this?
TRUMP said he wanted no “fudged” deal. Well this isn’t fudge what the hell is.
Another classic walk back from TRUMP. All the bluster counts for nothing. TRUMP is running scared as the impeachment knot starts to tighten.
Ahead of the trade talks I added trades which gave me plenty of flexibility to add or remove set ups based on current price levels so that upon the deal announcement I am able to trade my plan. Basically, my CHINA trade deal trades are not yet triggered but I have been in nothing other than preparation mode and I expected that this would be a period of non-activity until the hard facts about any deal were known.
However, Thursday and Friday last week were all about BREXIT, which, I thought was dead in the water following Boris Johnson’s phone conversation with Angela Merkel earlier in the week.
I could have added 3 times the number of pips I added but “sticking” to my trade plan surrounding BREXIT until a deal is done and dusted, I added over +1,000 pips in two days.
I am NOT writing to say brilliant, good job and give myself a self-congratulatory pat on the back. BREXIT is such a volatile event, headlines can move price very quickly one way and then even faster offer a reverse, the price moves in the cable and its crosses reflected that last week.
I write this because it is all about discipline; I am trading for the long-haul.
Let me make it clear; I am NOT perfect.
Head Management as I call it, often referred to as Trading Psychology is huge for me and this year I have really taken to lots of Personal Development help, which has without doubt provided me with a Trading Edge”, which has strengthened my belief in my trading conviction. Adapting some Personal Development principles that are called “The Higher Faculties of the Mind” have been extremely useful.
I know many traders believe that “Trading Psychology” is mumbo jumbo, but it is in my opinion a crucial part of understanding how your mind works especially in reaction to negative trades and also managing any trading fears.
GEOPOLITICS CONTINUES TO CALL THE SHOTS, it has often been said that we are in a news driven, or “tweet driven” marketplace.
Key trend lines are NOT all holding, especially with pairs directly associated with the TRADE DEAL outcome and many trend lines have been broken last week. If as I expect these moves are going to be reversed (AUD/USD, EUR/USD and EUR/JPY), the previous moves will be treated as false breakouts and we should see very powerful / strong reversal moves.
Be careful, the market loves getting all the shorts out, getting traders long and then wiping them out with a strong move in the opposite direction.
The details of the TRADE DEAL “Truce Arrangement” were not known at the time I was writing this blog. But I suspect the details when known will not be as all-embracing as first “SPUN” to the markets. History has shown us NOT to believe what TRUMP and his sidekicks especially KUDLOW tell you.
Remember we still have the following geopolitical news events to consider after the TRADE DEAL is signed off: -
- CHINA – ongoing trade spats!
- TURKEY invasion of Northern SYRIA
- HONG KONG civil unrest
- IRAN / SAUDI ARABIA spats re OIL supplies re the Straits of Hormuz
- TRUMP impeachment
- NORTH KOREA posturing vis-à-vis Nuclear tests
- EUROZONE continued poor economic data
- WORLDWIDE ECONOMIC RECESSION
- FED introducing QE4 – USD$60 Billion monthly purchase of T-Bills
CENTRAL BANK race to the bottom on interest rates
There still remains much to chew on.
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:
The single currency has broken out on the long side and is now out of the BEAR CHANNEL on the chart below.
The 38% Fibonacci retracement level at 1.1080 now looks to be a level to take note of. Will it hold and send the pair lower or will the pair plough on higher?
I had a short trade from 1.1000 that I held and did not bank profits from two weeks ago c.1.0950. I took it off the table on Friday last week at 1.1060, losing 60 pips.
My reason for this was the weakness in the USD that was coming through the market.
Moving forward, we can see a trading range of 1.0880 to 1.1080. This 200-pip range has been in place for over a month and frankly because I am not 100% certain of the next move, I decided to cut my losses.
If I was pushed to make a decision, I would say that my bias with this pair would be short. However, nothing is clear cut at the moment.
With the FED now moving into QE4 with US$60 Billion T-Bill purchases a month and rate cuts on the way, maybe we may see a period of USD selling. However, I am at this stage waiting for some confirmation and I will remain sidelined until I have some facts to trade with.
Boris Johnson may have pulled a rabbit from the hat.
Last week following a meeting with Irish leader Leo Varadkar, the joint statement that followed and commentary from the Irish has indicated that there is a pathway forward to get a BREXIT deal done. The details are NOT known. There are heaps of speculation, but the details are being kept secret until more consultation and negotiation takes place, between the EU and UK.
Cable ripped higher 500 pips in two days, taking the crosses with it. On Friday last week just a little bit of profit taking took place.
Where to next?
As I have said on twitter and in this blog, the GBP has a value and we are no way near what the fair value is, which in my opinion is closer to 1.6000 -1.7000 based on the current economic positions. So, if a deal is announced a brisk move to 1.4000 should not be ruled out. The caveat on a move higher is the BOE reaction.
If a deal fails. I see the GBP/USD crashing back down to sub 1.2000. Last time cable hit 1.1950 it was snapped out as that was where traders saw it as a bargain. I am not so sure that the same would happen again.
The DAILY chart below shows two massive green candles from last Thursday and Friday.
As always cable reacts over a weekend, (I wrote this late Friday ADT), it could be out of date when my blog is posted!
So far, no leaks in content of the Johnson / Varadkar discussions from last Thursday morning from the Wirral. If there are leaks over the weekend this will have a huge part to play in any market “GAPS” at the open to this week’s trading.
This pair is breaking out above the trend line from July this year.
I am looking to fade any positive spike from the U.S. / CHINA trade deal.
I see Australia as a loser in any trade deal outcome. This has been my position and thought process for months.
We have an inverted Head and Shoulders pattern on the DAILY chart below. The measured move is to c.0.6450.
In addition, as mentioned last week, there is also a possible DOUBLE BOTTOM pattern in play on a break above 0.6450 (longer-term chart), with a measured move target of 0.6630.
I am looking to fade these moves.
Nothing has changed in the past week.
I still hold a CORE SHORT position.
1.3350 appears to be huge resistance. Blowout job numbers last Friday, for the second month running, has sent this pair finally below 1.3200. Previously, it had been in a tight 1.3200-1.3350 range for what seemed like weeks and weeks.
I was quite happy with the fact that the USMCA deal would soon be ratified, but the TRUMP impeachment process may have delayed this. Once the USMCA is passed my thought process is that this should provide CAD strength.
A messy looking chart from my perspective.
The 14 and 200 DAY SMA are now very compressed.
I want to be long this pair, but I want much lower levels c. 09600 / 0.9720.
No change from last week.
I hold a CORE SHORT position.
Long-term, I am still bearish this pair and my targets are between 100.00 and 102.00.
I am looking to fade a trade deal resolution with more short positions.
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
October 2019 so far: +1,580 net profitable pips.
2019 year to date: +14,926 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: #339 FREE NEWSLETTER
DATE: 13th October 2019