Well from my trading perspective last week can be summed up as... WTF. It was from my personal trading perspective a non-event.
The major news events BOC / ECB / U.S. CPi gave me some volatility BUT let’s face facts, the flashing lights on my screens flattered to deceive and basically moves were one way then the other, then back again... rinse ‘n repeat stuff, just NOT my cup of tea, or as I prefer, just not my Jack and Diet. Look we are rangebound not even a huge upside in U.S. CPi data could break us out of ranges.
Basically as ‘they” say... I took profits on a couple of trades and took losses on a couple more; the net outcome was +207 pips for the week (see section 3 for more WEEKLY FX PREMIUM data).
I made a really poor decision on the following trade:
FLASH TRADE: FLA025
END RESULT: Loss 50 pips
During the ECB Press Conference, which coincided with U.S. weekly jobs data and the CPi data, this pair spiked higher, and I was stopped out. The move higher went as far as 133.76 and then the pair reversed lower below my entry level after the London Fix. Usually, with “RED” news events like these I would either extend the stop to cope with the noise or simply remove the trade. It was flat just prior to the news, in fact it dipped 10 pips before the spike. A basic poor judgment call on my behalf... argh! Obviously since my f*ck up, it has broken to new lows!
If the above small trade was a “low-point” it gives you the complete view of how exciting I thought last week was!
It is humbling to note that I still make errors that frankly I thought that I was beyond. Maybe I am just human! Seriously though, no matter how much I plan, how much self-discipline I think I have installed, no matter how much energy I deploy, I am still open to human frailty and errors will manifest themselves in areas that I thought I had well boxed off.
On a positive note, the weather was good, many BBQ’s took place, I made several enhancements to my website speed and sorted out my filing system on my main Desktop. I have heard many traders I respect saying that the summer doldrums are not yet here. I am in the minority, on the basis that I believe we are moving into the summer FX doldrums earlier than usual this year, in the sense that ranges remain intact, breakouts or breakdowns look just not to be on the table at all until the FED makes it’s move on TAPERING. Last Thursday the inflation data alone should have broken the EUR/USD one way, or the other combined with the ECB Press Conference... nada. Quite remarkable when you think that the CPi print of a 5% increase was the biggest year-over-year increase since 2008, much higher than the figures most economists had predicted. Given this reaction, hence my doldrum views. I still believe that the August Jackson Hole symposium and the FOMC September 22nd meetings will give us a lead on FED policy but unfortunately until then I believe we will mainly drift.
Just to make it really painful...
I have read some analysts now believe it could be Q1 2022, in fact I heard one on BLOOMBERG tell Tom Keane why he felt 2022 was more realistic based upon the Job’s data and inflation. It was plausible... Holy Mother of God, what am I saying; am I wishing away 2021?
If that timescale was the case, my vibration levels would be at crisis point possibly around Thanksgiving....
I know we have an FOMC meeting on June 16th, and I think the BOC meeting on July 14th may provide CAD strength again as the BOC may possibly taper again. But, beyond these Central Bank meetings I am not getting too excited. Let us all hope that the weather is good because we will be out there soaking up the sun between now and possibly September 22nd. For once, I hope that I am wrong.
1. WHAT CURRENCY PAIR HAS MY ATTENTION and WHY?
1.1: BACKGROUND TO MY TRADING STYLES:
Over the past few weeks I have received several emails etc. asking me what my process is for posting a trade. With this feedback in mind, over the coming weeks I am going to run through my process with a particular currency pair in mind, looking at all the stages I take into consideration.
Please bear in mind, I am a long-term trader with longer-term horizons so my process will be completely different to scalpers, range traders and some day traders.
Essentially, I am a “Swing Trader” looking for trades to develop. This style of trade for me I refer to as “Radar Trades”, with a time horizon of hopefully a few days or weeks, to a few months.
However, currently, I am looking deeper and looking to trade over a longer period of time. This type of trade style I call “(Core) Position Trades” and depending upon my conviction and market conditions, trades that I believe are longer-term over 9-12 months duration, these trades become a multi-positional (Core) Position trade.
1.2: THE POTENTIAL TRADE:
NZD/USD: PRIME FOR A BOUNCE?
I mentioned a couple of weeks ago that commodity related currencies were my favourite pairs historically to trade. Over the past few weeks, I have looked at the USD/CAD, AUD/USD and EUR/NZD and today I am adding the NZD/USD to that list. PRIME FOR A BOUNCE; I think that really depends on the FED.
As mainly a longer-term Position Trader, the market Fundamentals matter to me alongside the views of the Central Banks.
This pair is set up nicely for a long trade based upon the views of the Central Banks. The caveat at the moment is, I think we need to see this months FOMC meeting due this coming week on the 16th June pass in order to have greater clarification on the intentions of the FED. The views of the RBNZ are straightforward and do NOT require the same intensity or scrutiny of those of the FED. Should, the FED change monetary policy this coming week, this trade idea is cancelled.
However, if the FED continues with its policy of “No Change” waiting for unemployment levels to improve, still leaving inflation to run hot and NOT introducing TAPERING until they have the hard trending facts and figures in front of them, then this trade idea remains in play.
Remember, the FED’s position is fairly straightforward supporting equities and the stock market, which in so doing sacrifices the USD.
Late last week we saw a distinct move lower in US10YR bonds and this created USD strength at the same time that the USD index was close to breaking down. From my perspective this should hopefully just give me better prices from which to enter long with for the summer months.
The US10YR and DXY daily charts are below with my thoughts and comments contained on the charts.
DAILY CHART - USD10YR:
DAILY CHART – USD INDEX (DXY):
The New Zealand economy has performed much better than most G10 economies during the COVID-19 pandemic and is positioned well as a commodity currency as the pandemic moves to the rearview mirror. As a major trading partner with CHINA, it is ideally positioned both geographically and economically to move quickly as the world supply and demand chains come back in line in the years ahead.
The U.S. economy, the ultimate consumer demand economy on the planet, will obviously see huge growth as the pandemic issues move behind us, but the subtle difference will be how the ultra-low-rate FED juggles unemployment, inflation, future interest rate policies and tapering whilst maintaining a stable market in what could be a volatile NOT stable transition period, which could be 2/3 years in duration.
From my perspective, I am only initially looking at a 3-to-4-month trade, maybe not even that long, therefore from that time perspective a long NZD/USD trade fits my fundamental; and macro views for the next 90 days without issue.
The only caveat is a disruptive FED changing monetary policy now before the fall.
We have to break the triangle range of 0.7110 through to 0.7290. The FED should be instrumental in having something to say about that.
Whilst my preferred trade based upon the fundamental above is LONG, we have to wait to see what the FOMC meeting produces. We have the 61.8% Fibonacci retracement of the 1st April 2021 lows at 0.6943 through to the highs of 0.7310 on the 26th May 2021 sitting at 0.7086 and that must be a level to look at if the triangle support comes under pressure.
The shaded rectangle shows how rangebound we have been (DAILY CHART), and whilst we have seen a dive lower and a spike higher this pair has very quickly returned to the range area.
There is a trade here it's a question of being patient.
1.5: THE MACRO CENTRAL BANK PERSPECTIVE:
RESERVE BANK OF NEW ZEALAND (RBNZ) & FEDERAL RESERVE (FED):
Subscribers to THE WEEKLY FX PREMIUM will know I place a lot of thought with my trading about how Central Banks review moves in their currencies.
The RBNZ is HAWKISH on interest rates moving forward and following the last statement on the 26th May, the RBNZ Governor, Adrian Orr was talking about an interest rate increase mid 2022. Whilst that date is a long way away, the intention has been set.
On the other hand, the FED Chair, Jerome Powell has been promoting ultra-caution. Whilst there is no doubt in mind that the FED may possibly raise first in early 2022, the rhetoric is completely different.
In any event it is psychological for my trade idea. Right now, the RBNZ is “Hawkish” in outlook whilst the FED remains accommodative and very much “Dovish”. Nothing has been set in tablets of stone, this is purely intention.
1.6: THE CHARTS:
On the charts below, I have added my thoughts and additional comments about the potential trade.
WEEKLY CHART – NZD/USD:
DAILY CHART – NZD/USD:
My thought process with this pair is quite clear and I have alluded to it a couple of times already.
- My BIAS to trade is BULLISH but....
I do need to see the FOMC meeting this coming Wednesday 16th June play through, in case there is a change in rhetoric from the FED.
- This wait will be a little painful given the USD strength last Friday. In the simplest of terms, this is looking like a “BUY THE DIP” trade to range trade the summer.
The most used word in FOREX TRADING at the moment... PATIENCE. I know my PLAN, I have my PLAN in mind, now I wait to TRADE MY PLAN.
Will the FED help deliver my PLAN?
Sorry everyone, but that is between my WEEKLY FX PREMIUM subscribers and me. If you want to know subscribe and join.
2. FOLLOW UP ON PREVIOUS TRADING IDEAS FROM RECENT DRIVE THRU BLOGS:
2.1: CURRENCY PAIR - USD/CAD:
TRADE DIRECTION: SHORT
DATE: 16th May 2021
BLOG REFERENCE: #412 FREE NEWSLETTER VERSION
Nothing new to add since my update last week.
I am still holding a short CORE POSITION with just one live trade currently that is showing a loss.
2.2: CURRENCY PAIR – GBP/USD:
TRADE DIRECTION: LONG
DATE; 23rd May 2021
BLOG REFERENCE: #413 FREE NEWSLETTER VERSION
I have had a CORE LONG POSITION in play since 5th January 2021, so far with 21 completed trades providing +1,451 pips for average pip return per trade of +69 pips.
I still see fair value well beyond the current price and, therefore, I am happy to hold. I remain BULLISH on the GBP as a whole and I am happy to continue to buy dips.
2.3: CURRENCY PAIR – AUD/USD:
TRADE DIRECTION: SHORT
“DRIVE THRU” BLOG DATE 30th May 2021
BLOG REFERENCE: #414 FREE NEWSLETTER VERSION
This trade remains a non-event for me. My LIMIT ORDER entry remains in place, but it is yet to trigger.
I am waiting patiently....
2.4: CURRENCY PAIR – EUR/NZD
TRADE DIRECTION: SHORT:
“DRIVE THRU” BLOG DATE 6th June 2021
BLOG REFERENCE: #415 FREE NEWSLETTER VERSION
Better news with this pair from the point of view trades have triggered.
To date, one completed trade with profits and two further live trades are under water as we saw USD strength accompanying RISK OFF into the weekend.
I am approaching this pair as a SELL THE RIPS trade for the moment, and I am close to adding another live trade.
3. THE WEEKLY FX PREMIUM - PERFORMANCE:
3.1: THE WEEKLY FX PREMIUM: MONTHLY PERFORMANCE:
3.2: THE WEEKLY FX PREMIUM: SUBSCRIPTION INFORMATION:
The WEEKLY FX PREMIUM is my subscriber-based FX support option, which offers, subscribers’ full access to my suggested trade set-ups and my market commentaries.
Further information about how to subscribe to the WEEKLY FX PREMIUM is also located at the top of my welcome page at https://www.weeklyfxdrivethru.com under the “SUBSCRIBE” tab.
4. CLOSING THOUGHTS:
Always remember longevity in Forex trading can only be achieved through trading with good RISK, TRADE and HEAD MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility. Trade with a TRADE PLAN, basically, plan your trades and Trade your Plan.
Mental toughness is key, and this is all about emotional control. Your mind can do amazing things, but only when it wants to, threat and alert will get your mind’s attention.
“Everyone has ability. It always comes down to mind games. Whoever is more mentally strong, wins” – Mohammed Ali.
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: #416 FREE NEWSLETTER
DATE: 13th June 2021