I am of course referring to the reversal of the market overreaction to the FOMC statement on June 16th. I will give my own slant on things shortly.
Whilst all the shenanigans were going on with the USD last week, one asset, I do not often refer to was on the move. I am of course referring to BITCOIN (BTC/USD), which at the mere mention of its name, evokes so much reaction and over reaction, at times I find this so laughable I need to seriously think about purchasing “Depends”, if I am expecting anything more than a 30 second comment.
I still read and hear people talking about BITCOIN being a store of value... hmmn now you understand the need for “Depends”. In the name of sanity, how can something that can fall 25%-30% in a day be classified a store of value? I mean come on, give me a break.
I lived in Spain when the € (Euro) crossover period from pesetas to euros was approaching its deadline. All ‘n sundry were taking cash from under the mattress, emptying false teapots and doing a Tony Soprano by moving waddies of cash out of the planters dotted around swimming pools etc. Gangsters were hiring Group 4 security vans with armed guards going from bank-to-bank changing pesetas for euros at the maximum rate of 4 million pesetas a time at each bank and collecting €500 notes in exchange. From bank to bank they would go; Southern Spain ran out of €500 notes! This went on for about a month before the deadline right through to the last second of the minute of the hour of the deadline. These €500 notes were well known to be hoarded by criminals.
Along came BITCOIN, untraceable, pay about 15%-20% to have your money cleaned and buy BITCOIN was then flavour of the month. I still firmly believe a huge amount of the initial purchases of BITCOIN emanated from doubtful sources. In Canada, we are targeted with all sorts of scams involving payment in BITCOIN. The Banks and Government together made it virtually impossible through traditional routes to buy any crypto currency. This joint attack stopped the scams; for now, anyhow.
So, as you may note, I have a very poor opinion of BITCOIN as an asset or a store of value. The price action though does attract my attention as remarkable as it is, a worthless coin that you cannot use effectively as a currency does from time to time effect the markets.
A couple of days ago, I listened to a CNBC ASIA interview with Scott Minerd, Guggenheim Global Chief Investment Officer.
I remember him back in February this year stating that BITCOIN could reach a price of USD$600,000.00 a coin. As you could imagine the expletives from my mouth were choice, and, in fact I think that was the first time I said to myself BITCOIN and “Depends” go well together if there are more price quotes like this.
Last week Scott Minerd stated that he now visualized BITCOIN lows of around USD$20k - $30k, with a real base of $10k. He expects a market washout below $30k.
He also stated that the volatility in BITCOIN has scared away many of the Institutional Investors and that failing Central Bank liquidity has a great deal to do with the BITCOIN moves and increasing volatility. Most of what he says now (not in February), I see, and I can agree with him.
I have added a BITCOIN daily chart below.
I have made my views clear on the chart.
- We have a BEAR FLAG pattern in play
- USD$30,000 is huge support. Tested once already.
- Next is USD$19,906.00 ($20,000) the December 2020 breakout level
- The BEAR FLAG measured move is USD$14,649.00, basically USD$15,000.00
Whether you agree with my views on BITCOIN or not. A break thru USD$30,000.00 and a move to USD$20,000.00 will be huge for the market. Just think about retail... Margin Calls... Liquidations.
Talking of Margin Calls and Liquidations...MicroStrategy a software company has over 105,000 BITCOINS with a cost average price of USD$26,080.00 per coin. It added USD$489 million of BITCOIN last week at an average price of USD$37,617.00. The following day BITCOIN dropped to USD$29,000.00... timing is everything!
As we know BITCOIN subsequently recovered but is under pressure once again.
Watch this space as a sub USD$20,000.00 price will cause real issues across the board.
One question that I still have is, does BITCOIN have a real value?
If so at, what level would you step in?
Let me know, use the contact form on my website; https://www.weeklyfxdrivethru.com
1. THE SOAPBOX:
THERE ARE NO HAWKS LEFT!
Holy Mother of God, the entire world of Central Bank officials with just a few, and I mean, with just a few exceptions are ALL DOVISH. Where have all the HAWKS gone?
Feck me, the markets look like bloody idiots for the huge overreaction to the FOMC Monetary Policy Statement and Jerome Powell’s Press Conference on the June 16th. I said at the time, two interest rate rises in 2023 and higher inflation, was hardly USD bullish.
Below, I show two tweets that I posted. The first one after some reflection post FOMC Statement and Press Conference and the second a week later.
Since the FOMC statement and the market reaction, we have seen all ‘n sundry officials from the FED walking back anything that remotely resembled a HAWKISH tone. It took a week, 5 trading days, but they were able to give themselves a good old pat on the back as the markets returned to normal once again striking almost daily new highs across all three major indices, the DOW, S&P and NASDAQ.
I for one cannot wait to see how, the FED gets themselves out of the mess that they have created. At the rate the markets could cope it will take two years to TAPER and probably another two years to get interest rates to 1%. My God, there I go again being way too bullish, way too HAWKISH. It will take a lot longer than that. Do not forget the FED will have tell the markets at least a month or two in advance what step one will be and when to expect it. Then there will always be hesitation in case they move too soon.
This nonsense I was prepared for, and almost every morning at the Wall Street open last week, if it moved it was bought by U.S. equity traders, you could bet your home on what would happen... welcome to the new normal, well one of them. Following the pandemic when it is finally in the rear-view mirror there will be plenty of new normal to deal with and react to.
Last Thursday it was Super Thursday for the Bank of England. I was expecting a HAWKISH surprise based upon recent data. The BOE stood still as DOVISH as they could possibly be. Practically not one jot about anything HAWKISH at all. They are quite prepared to sit tight and wait.
This must be music to the ECB, the pressure is off, the ECB can remain at zero to infinity and it probably won’t be the only Central Bank to adopt this position.
Last week, I talked about
“ALL BETS ARE OFF OR, ARE THEY?
For now, maybe, but I am a believer in common sense. You may ask why do I trade in the FX market, of all markets, if I hold such beliefs? I have often asked myself that question...
I am in a strange predicament.
- Part of me, my right side of the brain (the arty side) thinks that the FED has let the cat out of the bag and now must act. If they thought that there was market pressure before. There certainly will be moving forward.The markets are like a dog with a bone.
- The other part of me, my left side of the brain (the analytical side) tells me this is pure nonsense and the moves in the DXY which has brought about huge USD strength has reacted poorly to last weeks FOMC statement.Everything I was taught in Economics tells me that the move by the FED should NOT be USD positive. It should be USD negative bearish for the USD.
I am just a simple trader, I must react to the hand given, but this will not stop me preparing for a reversal move which, could be wicked”.
Well, the reversal wasn’t wicked BUT we did get the reversal that I had expected.
With some confidence, I feel we have possibly until the start of 2022 before any TAPERING in the U.S. will take place. I remain of the opinion, which I have had for a couple of months, that The Jackson Hole Symposium (late August) and The FOMC Statement due 22nd September, will probably bring the announcement of TAPERING, but it will probably NOT commence until Q1 2022.
Apart from the BOC, which will probably continue to reduce its bond buying amounts through the end of 2021 and into 2022, every other major Central Bank, will let the FED move first.
I think that this could be great for FX traders over the coming months. Whilst I think that volatility will reduce, we could have and should have directional trading at the expense of the USD. The DXY move sub 89.50 is back in play.
After covering some sizeable pip losses after the FOMC, I have started to recover my losses and I am hopeful of having all trade styles close to positive by the month end.
2. WHAT CURRENCY PAIR HAS MY ATTENTION and WHY?
2.1: 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. 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.
2.2: THE POTENTIAL TRADE:
There is no potential trade that I am looking closely at, at the moment.
As we are entering the summer months my focus is on working through existing positions and adding to those already in place.
The exceptions to this are trades that were suggested in previous blogs detailed in the following section, section 3, in which, I am not yet positioned. Any thoughts comments and ideas are listed there.
3. FOLLOW UP ON PREVIOUS TRADING IDEAS:
3.1: CURRENCY PAIR - USD/CAD
TRADE DIRECTION: SHORT
DATE: 16th May 2021
BLOG REFERENCE: #412 FREE NEWSLETTER VERSION
As mentioned last week, I am now back in this short trade from higher levels. I have already banked profits from a couple of trades.
I am viewing the pair for now as a SELL THE RIP pair.
3.2: CURRENCY PAIR – GBP/USD
TRADE DIRECTION: LONG
DATE; 23rd May 2021
BLOG REFERENCE: #413 FREE NEWSLETTER VERSION
I am still BUYING THE DIP with this pair based upon my longer-term views. Currently I have two live trades in play.
3.3: CURRENCY PAIR – EUR/NZD
TRADE DIRECTION: SHORT
“DRIVE THRU” BLOG DATE 6th June 2021
BLOG REFERENCE: #415 FREE NEWSLETTER VERSION
As mentioned last week, I covered two trades for losses, which of course with benefit of hindsight was a stupid move, an overreaction on my part.
I am short once again; new pips are banked. I will be willing to SELL RIPS with this pair.
3.4: CURRENCY PAIR – AUD/USD
TRADE DIRECTION: SHORT
“DRIVE THRU” BLOG DATE 30th May 2021
BLOG REFERENCE: #414 FREE NEWSLETTER VERSION
Nothing happened. My target to enter short never happened. Then we had the FOMC. The rest is history as they say!
3.5: CURRENCY PAIR – NZD/USD
TRADE DIRECTION: LONG
“DRIVE THRU” BLOG DATE 13th June 2021
BLOG REFERENCE: #416 FREE NEWSLETTER VERSION
As mentioned, a couple of weeks ago, I am looking to establish a long position. I have missed three opportunities so far and counting!...
I thankfully do not suffer from FOMO, otherwise what little hair I have would have been pulled out by now. Whilst I have no doubt missed the optimum levels to enter long, I will use this week’s weekly candle to get levels for a potential trade this coming week.
4. THE WEEKLY FX PREMIUM - PERFORMANCE:
4.1: THE WEEKLY FX PREMIUM: MONTHLY PERFORMANCE:
4.2: 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.
5. 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: #418 FREE NEWSLETTER
DATE: 27th June 2021