Here we are at the end of the first two weeks of real trading this year.
Even in my wildest predictive mood, I could NOT have come close to what has transpired so far in 2021, and we are only 50% of the way through month one!
To a large extent I am still coming to terms with the fact that as a retail FX trader I am making my income in a 100% completely rigged and manipulated marketplace.
The aggressive FED Quantitative Easing (QE) policy of bond purchases has driven institutions in search of yield to equities as being the only asset class available to provide yields to meet the goals and aspirations of investors. In carrying out the policy the FED knew that the USD would be sacrificed as a result. Would I call this currency manipulation? Damn right I would. Most of the other G10 Central Banks followed suit, in a move often called a race to the bottom.
Several major banks pulled the plug in 2020 on the FX trading arms, resulting in less players and less liquidity. At the same time, the evolving automated trading algorithms became more sophisticated. Their increasing influence pushing prices and then letting them go especially on the back of TRUMP tweets in 2020 was an annoyance to shorter time framed traders (At least the TRUMP nonsense will NOT be with us in 2021).
Nevertheless, it looks like 2021 will be as controlled, rigged and manipulated as 2020. Several Central Banks have already indicated their willingness to continue on with ultra-accommodative policies.
Sitting back on a Friday evening with a glass of Red or a Jack and Diet, reflecting on what has been over the previous week, my thinking is, as long as we all remember we are trading in “Fixed” and “Manipulated” markets, all will be good.
As retail traders our goals remain: -
- Shorter-term traders pick up on the moves of the big banks getting in just after the moves start and getting out just before they end... these I call “On the coat tail moves”.
- Managing our RISK. Keep positions well under the limits of the size you can trade based upon your broker account balance
As a longer-term trader the entry and exit levels I use are based on longer term fundamental levels, confluences, key Fibonacci levels often initiated under chart patterns based on what I call “High Probability” trades.
FOREX TRADING... MY WAY – IT COULD ALSO WORK FOR YOU
THE WEEKLY FX PREMIUM...
TRADING GOALS & OBJECTIVES 2021
E BOOK 2021 LINK:
ZOOM VIDEO LINK:
Moving on and in summary as long as we trade with our eyes “WIDE OPEN” we can better assess our RISKS.
1. THE SOAPBOX
THE GATES OF DELIRIUM
The violence of last week’s events in Washington overshadowed all else that was newsworthy on the planet, possibly with the exception of the Covid-19 pandemic, and what seems like rather futile attempts by governments, to try and stem the increased widespread infections, through new highly infectious strains, that have appeared and gathered serious momentum.
On several fundamental issues we are at a crossroads and all of these fundamentals have an effect on the USD (DXY).
- BIDENS USD$1.9 trillion Covid-19 Relief Plan
- TRUMP and the U.S. Civil Unrest
- COVID-19 Vaccine Rollouts very mixed
- CHINA and HONG KONG
- NORTH KOREA
With almost every news headline I read or listen to on TV, the first thing that flashes through my brain is how is this going to be paid for?
The U.S. Budget deficit January 2020 = USD$ 13.3 Billion
and in January 2021 = USD$143.6 Billion
Just a small increase!
Now, I know something has to be done, one cannot procrastinate, but I do get the recurring feeling that planning, and science are often relegated as emotion and reactivity by politicians appears to be the go to approach to look decisive and look as if they are in control, when it has been (granted with a great deal of hindsight) simply not the case. Most governments have just failed to grasp how to control the Codid-19 pandemic.
The only truly effective way to STOP the spread of Covid-19 is to stay in and do NOT go out for a period of 42 days to be 100% certain. No mixing, no nothing. Every variation away from this brings in RISK of infection.
Every government without exception ignored the science is favour of allowing movement and movement = infection. I totally 100% get the fact that you cannot shut down an economy for 42 days. But, looking back (with the benefit of hindsight, of course) had we closed down totally for 42 days in March / April 2020 we would in better shape now. The constant throwing of money at the problem that we see now over and over again would probably NOT be required.
Now, within all of this you have factor the worldwide response to the pandemic, some countries like the U.S. just could not get its act together because there was no leader, TRUMP was missing in action, asleep at the wheel, just incapable of leading, it came at the wrong time, he was only interested in being re-elected and that didn’t work out too well either. Third world countries were always going to suffer and would have required help, still at a lesser cost back then than the overall cost that is still on the meter today! Asian countries reacted better as mask wearing was socially more accepted and Europe simply came out of the initial lockdown a week or two too soon.... politicians played follow my leader to exit lockdowns so as not to look weak vis-à-vis their counterparts.
The upshot of all this is that social support is NOT yet done, or dusted JOE BIDEN’S stimulus package announced last Thursday will NOT be the last. Europe just cannot re-open and more and more accommodative measures will be required over the coming weeks.
TRUMP failed because he did not lead, yet over 70 million Americans voted for him. This, however, reflects a typical two-party electoral system and the vote tally should NOT be taken too literally. However, one just simply cannot forgive his antics to promote anti-democratic civil unrest. This will roll on as TRUMP uses mouth then engages brain. Instead of apologies he just jumps in his JCB and keeps digging. This is a major human failing on his behalf and his children mirror him as they believe it to be acceptable behaviour.
The Covid-19 vaccine rollout, and let me be brutal here, every government on this planet has had sufficient time to formulate a distribution plan to get the vaccine in our arms has failed.
U.S. has over 30 million doses, yet only 12 million have been used... why?
Very simple NO leadership.
In the UK and across Europe getting the vaccines distributed seemed to come as a surprise. France and Germany floundered the UK faired better.
My fear, if I have one is can supply meet demand as countries across the world get more efficient in administering the vaccine? As some stage countries will as “they say” get their shit together!
One point I would like to make here is that both Canada and the UK have ordered and reserved over 3 times what’s required by vaccines to inoculate their populations.
This was due to either: -
- They expected a degree of spoilt transmission.
- They wanted to over-supply areas to ensure that there were no demand weaknesses.
- They wanted to have a reserve for Winter 2021/2022.
- Or the official who ordered the vaccines was dyslexic.
What of TRUMP moving forward?
- Impeachment does NOT prevent him running for office again. That's simply down to the voters.
- Can he pardon himself? That surely opens up grounds for federal prosecution.
Then we have CHINA, HONG KONG, NORTH KOREA and IRAN. These are all factors that the incoming BIDEN administration will have to deal with in 2021.
All of the above factors will pull and push the USD (DXY) as we move thru 2021.
As I see it, the world following the pandemic has unprecedented debt levels that will require paying back.... It’s not FREE, we all may joke about printing presses working 24 x 7.
Nearly all Financial Institutions are providing the same outlook for 2021; that is that the USD is going to weaken further.
I want to be a little contrarian here and whilst I do see the USD weakening it may NOT be just a visit to the woodshed like most are saying.
- Debt needs to be repaid.
- To repay debt taxes will increase.
- Taxes increase = equities move lower = USD strength... not weakness.
- Investment in property with a ZIRP (Zero Interest Rate Policy) has been record breaking.
- Taxes go up and then at some point so does inflation and Interest Rates = property prices come under pressure.
So, from my perspective it may not all be one way traffic.
The USD (DXY) charts below contain my thoughts and comments for the medium and longer-term outlooks.
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Firstly, before finally...
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Why not get positioned at the front of the line!
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.
Stay safe and wear a mask.
The Pip Accumulator
BLOG VERSION: #397 FREE NEWSLETTER
DATE: 17th January 2021