In real terms, with one or two minor exceptions, the FX market has been very docile, flat, boring and lacking in consistent volatility over recent times. In fact, I believe I wrote several weeks ago about “THE NEW NORMAL” with regards to FX trading, and these extended periods of tight ranged FX currency pairs is really making me believe that we are in “THE NEW NORMAL” when it comes to FX trading.
In writing the above, I fully accept that the market will “free-up” at some stage. In FX we live by trading cycles and at some stage we will see market volatility return, but I feel that the moves in FX that we saw as commonplace two / three years ago have gone.
What has changed?
It’s not as simple as picking an apple from a tree.
My main reason for believing this is quite simple; I believe the continued concept of basically “Free Money” to borrow with low rates across the globe, continual Central Bank forced liquidity and negative Bond rates rapidly becoming the new norm, has meant that in my opinion, the face of market volatility has fundamentally shifted.
We see a lot more “rotation” from one asset to another (en masse), and from my perspective it appears to be likened of late to everyone on a boat moving at the same time from the port to starboard side all at the same moment. Whilst this move creates a market move it’s not really the volatility we want.
This opens up a new debate... “Good Volatility versus Bad Volatility”, if there is such a thing!
Looking at this another way.
The old days of “push ‘n pull” of inter-market connectivity has diminished somewhat recently, and currency manipulation is now a given with Central Bank monetary policy. This is the case despite the denials that such a policy is being used. Control of currency volatility is a massive stabilizer for a country’s economy, no Central Banker wants volatility, they measure themselves by stability. Movements in exchange have diminished considerably this year, in particular, as active controls, stealth or otherwise, are in place. The backdrop of all these controls is to boost a country’s economic performance as the expectations of worldwide growth pulls back.
So, as an FX trader of over 10 years what do I do? It is very easy to keep bitching about the market and lower liquidity and lack of volume. At the end of the day all that approach does is bring your personal vibration lower. That is not good for a trader.
- As a trader you should take stock...
- Research and Examine opportunities...
- Plan; Test and Strategize your options...
- (For me as holder of FX PREMIUM subscribers) Communicate...
- Finally, ...
So, with the above uppermost in my mind....
Not wanting to standstill and bury my head in the sand regarding my trading I have decided to amend my approach for 2020 to reflect this change in trading that I believe is happening right now / or it’s already happened.
For FX PREMIUM subscribers only, later in this blog I will be sharing my ideas for trading next year in 2020. Adapting to the market is nothing new, it’s just a case of picking out from the changes the pieces that suit your own style of trading and implementing them. I have done this basically every year since 2010.
- I have spent a lot of time over the past 2/3 weeks speaking with subscribers, my trading groups and my peer group about the current market.
- I have attended several of my competitor webinars to see is it just me, is my head in wrong place?
- I have listened to bravado on webinars about how good “we are”, “professional traders in competition listen to us, can you guess why?” There is no “Holy Grail”, there is no secret sauce.
- I have heard many statements such as “I would not want to be short here”. 30 minutes later we move lower to take out support levels.
- The USD is heading much, much lower. I am positioning myself short the USD etc...
The bottom line is – no-one who trades with longer-term trading time horizons can really make money at the moment. If you trade longer-term positions, you can at best only be moving sideways. If you are in the $$$ kudos to you.
Basically, most traders that I am speaking to are guilty of the following more often than not at the moment: -
- They identify an opportunity.
- They open a Trade.
- Bury themselves in a hole
- Then spend the next few sessions trying to dig themselves out!
The overwhelming feeling about FX at the moment is “yuck!!”
So, if you are on your own struggling it is NOT just you.
Moving on once again...
Apart from the trading of insults and some historic retro rhetoric in the UK, as the General Election campaign for the vote on December 12th the other piece of high beta fundamental news last week was the announcement from Beijing that the U.S. and CHINA had agreed to roll back tariff increases set to implement in the remaining weeks of this year as Phase 1 trade deal talks continue.
But then wait; Let’s do the timeline...
As always with regards to the TRUMP White House no-one really knows what is going on. The following day after the CHINA announcement KUDLOW said tariffs would come off as the Phases of the trade deal get signed off. Then, 24 hours later, NAVARRO said... HOLD THE PRESSES. Only TRUMP can sanction changes in the tariffs, and TRUMP had gone really quiet on the whole subject... I wonder why?
After 3 days TRUMP then announced that he has NOT yet decided to rollback tariffs with CHINA.
Here’s a few thoughts...
Given that the “deal” as we know of it, at the moment appears to be a watered-down version of what TRUMP, KUDLOW and MNUCHIN stated they would only accept, it does to me look like a TRUMP walk-back once again will happen despite his announcement last Friday. TRUMP needs a deal; and he will act tough and SPIN. Even if he agrees to remove tariffs, this would mean CHINA would have won the trade war.... awesome.
The master of the “DEAL” (TRUMP), the best negotiator in the world, so he self-proclaims, would have shown capitulation in the negotiations and basically raised the white flag. Make no mistake the deal, any deal, even if CHINA just buys fecking peanuts will be SPUN as the best trade deal since the invention of powdered milk.
For the sake of brevity, I will leave this here.
Moving on once more...
For FX this means JPY pairs should shoot higher along with AUD and NZD pairs on a deal being signed off. Even a crappy deal that Phase 1 looks like being.
What would I do?
Fade the crap out of the JPY, AUD and NZD pairs.
But, we have to consider how much of Phase 1 is already baked in?
Given what happened with Mexico after agreeing USMCA, there are no guarantees that TRUMP would keep up his side of the deal even it is signed. When the details of the signed deal are disclosed in full, the markets will see it for what it is... low on substance and just a political stunt for TRUMP. At the moment it heavily favours CHINA.
This would cause the market to reverse the spike higher. However, please note; the markets reaction to good news is an over-stated spike and the reaction to bad news is an under-stated dip. What I am saying is that the markets only want to go one way and the FX moves of late have all be stunted by equities.
Therefore, be very careful, DO NOT expect a corresponding move lower to equate the spike higher.
FX - FORWARDS, BACKWARDS & SIDEWAYS:
1: - THIS WEEK’S ECONOMIC DATA:
(Courtesy of Forex Factory)
2: - BIAS CHART - USD MAJORS SUPPORT and RESISTANCE:
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)
4: - USD MAJORS - TRADING CHARTS and MY THOUGHTS:
The chart below I posted on November 5th to twitter stating the DOUBLE TOP would be in play on a break thru 1.1075. We are now in the middle of that pattern playing out down to 1.0980.
There are big items to consider this week trading the EUR in general.
- German GDP numbers are due. This is the data that determines whether Germany is in recession or not?
- TRUMP to decide whether or not he adds tariffs re European motor vehicles. Juncker has been out saying that this will NOT happen.
- If 1.0980 does not hold, I see the 88.6% Fibonacci retracement of 1.0915, possibly being the next objective.
- Always remember. The WEEKLY chart GAP FILL at 1.0780 is a number I have repeatedly quoted in this blog over the past three / four months. This could be the ultimate destination if data is weak. This number would also meet with my DXY TRIPLE BOTTOM measured move!
The 14 DAY SMA = 1.1104
The 200 DAY SMA = 1.1887
We have a BULL FLAG still in play with a measured move of 1.3560. A break of 1.3020 in my opinion sets this up.
Despite quite a large 200 pip sell off from the recent highs, the DAILY Chart below still looks bullish.
The UK General Election is not until December 12th. We therefore have about 4/5 weeks of fun ahead. The cable I think will be a prisoner of the process through to the ballots being counted.
I think we will move sideways in the range of 1.2750 to 1.3000.
The range is set in my opinion from 0.6670 to 0.6930.
The 200 DAY SMA is at 0.6945.
The 14 DAY SMA is at 0.6868
The last move upwards basically stopped at the 61.8% retracement of 0.6926.
We since pushed lower, even though we are allegedly on the brink of a TRADE DEAL being signed. Confused? – Join the club!
Has the Phase 1 deal been baked into current pricing?
I thought on a TRADE DEAL we would see maybe 0.7100 – 0.7200, maybe higher. Great areas of opportunity to short from.
I am sidelined on the AUD/USD at the moment.
The Head and Shoulders pattern (BLACK DOTS) has played out. 0.6465 looks to have been not just the Head and Shoulders measured move objective, but also the top of the recent RIP higher.
This pair has dropped over +100 pips from the recent Head and Shoulders highs.
This is the $64,000.00 question. I had expected with a Phase 1 TRADE DEAL announcement that this pair would have re-tested the highs and moved beyond, upwards towards the 200 DAY SMA just short of 0.6600.
I am currently sidelined this pair.
I traded it short earlier in the week for 10-15 pips profit and removed the trade as CHINA announced a roll back with the tariff implementation. Maybe I was too early with that move?
I still hold my CORE SHORT position.
This pair is as always, a bit of a frustration.
I see looking forward, well at least I thought that this was the case: -
- USMCA deal signed off = CAD strength.
- Phase 1 TRADE DEAL signed off = strength for commodity currencies.
Longer-term and a bit away from current prices, I see 1.3014 is a key level for me. The range is STILL 1.3014 to 1.3350.
Call me Diana Ross – “I’m Still Waiting”.
Longer-term, I am looking to go long in the area of 1.9720. 1.9600 would be even better.
At the moment we are in a triangle pattern and large range of 0.9650 to 1.0240.
I STILL hold a CORE SHORT position, although I brought in my wide stops to be quite tight to current prices. I did this the day of the CHINA rollback of tariffs announcement. I have two x live trades and at the close of last week, both were still in play although both under water.
Long-term, I am still bearish this pair and my targets are between 100.00 and 102.00.
5: - THE WEEKLY FX PREMIUM TRADING SUMMARY:
November 2019 so far: +322 net profitable pips.
2019 year to date: +16,743 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.
Next year in 2020, there will be a revision of my TRADE STYLES, but I will still be retaining my macro views as a longer-term POSITION STYLE trader.
6: - WEEKLY FX PREMIUM SUBSCRIBERS ONLY:
6.1: MY TRADING REVIEW & GENERAL THOUGHTS ON THE FX MARKET:
6.2: LOOKING AHEAD – TRADING THOUGHTS FOR THE COMING WEEK:
6.3: PERFORMANCE SUMMARY REVIEW OF EXISTING CORE POSITIONS:
7: - 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.
Finally, Be GRATEFUL for your wins and COUNT THEM. Be positive, keep a POSITIVE MINDSET in play at all times, regardless of the market conditions.
The Pip Accumulator
BLOG VERSION: #343 WEEKLY FX DRIVE THRU - FREE NEWSLETTER
DATE: 10th November 2019