After a great month of pip gathering and $$$ in September, I think that as we are now within a few weeks of the U.S. Presidential election we are starting to see FX slowly but surely come to a volatility crossroads. We are in basically an FX LOCKDOWN; Average True Ranges are contracting, and we are becoming increasingly range bound. Yes; TRUMP can still have an effect on price, at least in the short-term, and by that, I mean an hour or so, maybe a little more.
I was going to write this week about TRUMP: -
- his super-spreader meeting inside and outside the White House
- his hospitalization
- his media reactions following being infected with Covid-19
- his basic ignorance of CDC rules
- his reaction to the next Presidential debate being made into a virtual event
- his cancellation of talks over a bi-partisan stimulus deal
- his walk back of that decision
- his decision to hold a campaign rally whilst infected with Covid-19
I just couldn’t do it; it would be so damning of TRUMP as a person never mind the President of the United States and the “so-called” leader of the FREE WORLD.
By ignoring CDC guidance on health and safety, I am not concerned or worried about his health, I am concerned that an infectious TRUMP will infect those around him. Surely, we must have reached the stage of TRUMP being a National Security concern?
This entire issue highlights how poor politics is in America. Not one Republican senator has spoken out about TRUMP’s recent behavior which is placing 100’s, if not 1,000’s of people’s lives at RISK. The silence is deafening emanating out of Capitol Hill.
This is 2020 not 1850... I would have thought that someone would have reminded TRUMP of his duties by now.
TRUMP really has gone beyond the boundaries of acceptable behavior by a President and the fact that NOTHING has been done to curtail his uncontrolled actions says more about American politics and society than I could place in a few paragraphs here.
I believe that “WE AIN’T SEEN NOTHING YET”, there is more to come, lower we go with, lack of ethics, lack of decency and most of all lack of leadership, nothing is off limits with TRUMP.
Enough of that idiot...
1. THE SOAPBOX:
IS THE FX MARKET APPROACHING A LOCKDOWN
AHEAD OF THE U.S. PRESIDENTIAL ELECTION?
There are a number of factors to consider. But I am of the opinion that assuming this latest round of PANDEMIC STIMULUS is added, we will see a slowdown in the FX market.
The first matter to consider is the actual size of the stimulus itself. I am thinking that we are possibly going to witness a “BUY THE RUMOUR / SELL THE NEWS” event when a deal between PELOSI & MNUCHIN is finally agreed. Of course, we also have to consider an unhinged TRUMP response as well. There are NO guarantees surrounding his rather obtuse, erratic behavior, he so unstable at the moment.
Assuming STIMULUS passes, I see a few factors to slow FX volatility down.
- The U.S. election takes place on November 3rd, 2020.
- In the U.S., Covid-19 cases are rising out of control not just from those who visit super spreader events at the White House, which has NO protocols in place, but across the country as over 25+ states are seeing record cases being classified on a daily basis.In the U.S. over 218,000 deaths
The U.S. has 4% of the world’s population and has had 20% of the world’s deaths from the virus.
- The Covid-19 cases are rising out of control in most countries across Europe.Europe as a whole has had over 230,000 deaths
The European area has 6% of the world’s population and has had 21% of the world’s deaths from the virus.
- Major cities like Paris and Madrid are in “lockdown mode”. London is NOT far behind. The old Russian eastern bloc in Europe showing significant increases in daily counts as well as Russia itself.
The above is just not a pretty picture.
With regards to the pandemic, in the main, politicians have just screwed it all up. Despite assurances from the get-go that health advice would be adhered to, the lockdowns that were put in place just did NOT go far enough or last for long enough.
Whilst, I can poke a huge amount of distaste over how the TRUMP administration has dealt with the pandemic from day one, Europe based on numbers is NOT far behind.
The costs of an economic disaster and a visit into the political wilderness over-ruled health issues in so many countries. Now all those initial costs will pale into insignificance as we move forward as the costs of the pandemic will be felt for generations.
Not wanting to sound like a “Debbie Downer” but we should prepare for no cure.... just like the flu and the common cold we may just end up with suppressants.
Anyhow, what about the FX market?
In times like these I look at the USD/JPY and EUR/USD. The two largest traded currencies in the market and also the EUR/JPY for obvious cross interests.
These are my critical factors that I am looking at: -
- Based on recent U.S. polls.
A decisive BIDEN victory that will be non-contested.
- The ECB will be stepping up again with another anacronym package of stimulus.
- Both sides of the “pond” there will be unprecedented unemployment levels that economies have NOT faced since WWII.
- Trade will suffer worldwide as we re-enter recessions or remain there possibly being re-branded as a depression.
- The FED will step up again. But I do not believe they will wait until after we see what the DC Lawmakers can provide.
- There are NO PLANS from any government right now on how to deal with the aftermath other than it will take generations to pay back.
- My timescales are wide.
I do NOT believe we will have a simple vaccine cure for Covid-19 this year. I believe we will live with Covid-19 and its mutation thru 2021 into 2022 before enough disease suppressants are available to administer.
For the above reasons I do believe that the FX MARKET IS APPROACHING A LOCKDOWN and given the points raised above, it would be very easy to say that the FED will continue to sacrifice the USD. Whilst, I believe this to be so I do believe that the ECB will jawbone EUR strength circa. 1.2000. Then of course the trade relationships between Japan and the EUROPE are huge. There will no doubt be trade disputes ahead to facilitate cheaper exports, hence my interest with the EUR/JPY.
Over the coming weeks I will be laying out my plans for 2021 regarding the EUR/USD, USD/JPY and EUR/JPY. To receive more information, you will need to be a subscriber to THE WEEKLY FX PREMIUM.
One thing that I am confident in saying is nothing is going to be the same as it was in 2019.
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- CLOSING THOUGHTS:
Finally, as usual…
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. Keep a POSITIVE MINDSET in play at all times, regardless of the market conditions.
The Pip Accumulator
BLOG VERSION: #384 FREE NEWSLETTER
DATE: 11th October 2020