Not wanting to wish one’s life away but I am glad that June 2021 is finished, over, complete and behind me.
I was caught at the FOMC release, I read the statement as bearish the USD and the markets read the statement bullish for the USD. I waited for the knee-jerk reaction to reverse which as we know with the benefit of hindsight never happened. By the time I got my act together, I made the decision to close live positions with the USD/CAD and EUR/NZD resulting in almost 1,500 pips of losses.
I will go deeper and beneath the numbers later in the blog, but for now the headline stats for THE WEEKLY FX PREMIUM 2021 is as follows: -
THE WEEKLY FX PREMIUM:
June 2021: +310 net pips generated
Year to Date: + 8,264 net pips generated
2021 Objective: = +15,480 pips
53.39% of annual target achieved
As mentioned over the past month or so, I am still reducing my RISK EXPOSURE as we head into the summer. There are several analysts and several theories as to why we may see increased volatility through the summer, but in my opinion, it looks like we are all waiting on the Fed to move. There is a FED meeting scheduled for July 28th, I would be surprised to see any FED decisions announced then. I have stated for some time now that both the Jackson Hole Symposium and the FED meeting on September 22nd both have the right timeframes to announce a policy move with an action plan through the end of 2021, with possibly a Tapering start Q1 2022. Therefore, I see low volatility throughout the summer.
Remember, JEROME POWELL from about two months ago: -
“IF WE CAN’T SEE IT, WE DON’T BELIEVE IT”
in Powell’s own words regarding the U.S. economic recovery
“IT IS UNEVEN AND INCOMPLETE AND THERE IS A LONG WAY TO GO”
Employment data is not as envisaged, as a worker, especially in the lower paid jobs where this does apply, it still pays to remain at home rather than work because of the government covid benefits. Until this scenario changes, we remain as we are currently.
On Friday last week we saw better than expected frontline U.S. job data, with Non-Farm Payrolls producing +850k jobs against the expected 706k jobs. The unemployment rate increased from 5.8% to 5.9%, but this can be attributed to the participation rate, which stubbornly remained unchanged at 61.6%. Average Hourly Earnings dropped from 0.4% to 0.3%. Behind the numbers, the purists who examine the make up of how the figures are calculated are not too enamored with the data by category of employment. Therefore, not to put too fine a point on matters, I would say NOT what the FED was looking for. The U.S. jobs data therefore remains mixed.
I have not added any fresh trade ideas into this blog for a few weeks. The reasons for this are very simple.
- Following the FOMC statement on June 16th, the market reacted strongly and have retraced only slightly across most pairs.
- We are consolidating the FOMC move but there is hesitancy.
- The hesitancy / uncertainty means, as far as I am concerned, that there is little point creating new longer-term positions into the summer. Historically we will be in a period of low volatility and basically trading within quite tight ranges, this is not really suited to my style of trading at all.
In section 2, I have updated the additional actions, if any, that I have taken recently regarding the trades that have been featured. Therefore, this week, instead of a trade suggestion, I have added an opinion piece in section 1 (The Soapbox), based around what interests me currently in the market.
1. THE SOAPBOX:
ARE WE NOW ANY CLEARER ON THE FED’S NEXT MOVE?
One of the most eagerly awaited Non-Farm Payroll numbers has now come and gone and the big question that I as a Forex trader ask myself is... ARE WE NOW ANY CLEARER ON THE FED’S NEXT MOVE?
To be frank, I am a little unsure that the markets know how to react, sure we got a pop that remained with us for the day on the back of the headline numbers.
- Non-Farm payrolls increased by 850,000 jobs in June
Estimate was 706,000.
- The Unemployment Rate rose to 5.8%
The estimate was 5.6%
- Wages (Average Hourly) were at 3.0% monthly and 3.6% year on year
- Labour Participation Rate = 61.6%
- Part-Time jobs fell 9.8%
Probably due to stimulus cheques
- Compared to February 2020; 7.13 million more Americans were employed.
- The Hospitality industry showed the largest growth in numbers, up 343,000, although this remains a whopping 2.2 million shy of February 2020 and the sector’s unemployment rate increased to 10.9%
Is this what the FED wanted to see by way of hard data?
That is a question that I have no doubt many have asked.
So, from my perspective, I look at tit his way.
- Over the past months, May, and June the NFP numbers disappointed. One could understand the FED’s position.
- One month does NOT make a trend.
- Without doubt the headlines are positive. However, I listened to several analysts looking deeper under the hood of the numbers stating it was mixed. They are much better equipped than I to make these claims. One was Mohamed El-Erian, Chief Economic Advisor at Allianz. I really rate his views and commentary.If he is thinking mixed, I have no doubt that the FED under JEROME POWELL will be thinking similar.
- I still believe the earliest we will see any details on TAPERING will be August at the Jackson Hole Symposium or the FOMC meeting, September 22nd, with TAPERING to start either late Q4 2021 or Q1 2022. These have been my views for over two months now and today’s numbers have not changed my opinion.
- Between now and the Jackson Hole Symposium, we have:FOMC Meeting: July 28th 2021
Non-Farm Payrolls data release: August 6th 2021
Non-Farm Payrolls data release: September 3rd 2021
- The FED has a dual mandate; Inflation and Employment. It has stated clearly inflation can run hot and they believe it to be TRANSITORY.If we see continued improvements in headline NFP data and lower skilled workers returning to work after the stimulus cheques cease will this be enough to allow the FED to act in September?It’s like trying to push a piece of string or herd cats!
- I know of well-respected analysts / traders in FX, who believe that the FED will disappoint the markets because of the Bernanke TAPER TANTRUM effect when the FED tried to normalize monetary policy years following the GFC.
They believe that the FEAR of a F**k up is so strong they are well prepared to sit behind the curve on a change in FED Monetary Policy.
So, to answer my question, ARE WE NOW ANY CLEARER ON THE FED’S NEXT MOVE? ...
I wish I knew!
I feel that the FED will take NO RISKS at all.
Listening to Bank of England Governor Andrew Bailey, making his Mansion House speech last week in London, he sounded both HAWKISH and DOVISH to me during his speech. The market read DOVISH, and the GBP sold off. This is the FED’s fear in my opinion. They want to make certain 100% that the markets will NOT react incorrectly like they did following the June FOMC statement, which required FED board member after board member for a week or so following to walk back the market view on the comments made.
It’s becoming obvious that the major G7 countries are waiting on the FED to move first (Only the BOC and RBNZ are the exceptions they will tighten ahead of the FED, in the case of the BOC it is already tightening).
A NO RISK environment leads me to think that September could be the time to say that they are opening a meaningful dialogue about TAPERING and that they will confirm timetable and bond purchasing reduction amounts at the November 3rd meeting with a view to start late Q4 2021 or early Q1 2022, assuming the trends in jobs are good.
This route provides additional NFP releases early October and November, which will provide 5 additional month’s reports after two poor reports. If they require more than this, I am baffled.
It is however all conjecture, my thoughts, my views, and they count for diddley squat in the grand scheme. I am trying to be logical, given the commentary that I have heard.
If I am right, we will drift through the summer, and I am almost set up already. If I am wrong, I will have to take course correct.
2. FOLLOW UPS ON RECENT TRADE IDEAS FROM THIS BLOG:
2.1: CURRENCY PAIR - USD/CAD
TRADE DIRECTION: SHORT
DATE: 16th May 2021
BLOG REFERENCE: #412 FREE NEWSLETTER VERSION
Basically, my bias longer-term into the year end is to be short this pair. I am selling rips higher.
My (core) short position trade is still live.
2.2: CURRENCY PAIR – GBP/USD
TRADE DIRECTION: LONG
DATE; 23rd May 2021
BLOG REFERENCE: #413 FREE NEWSLETTER VERSION
I remain in the camp that we will see a move higher in the cable, which will pull up most of the GBP crosses as well. I see a move to c.1.5000, which I view as fair value on the cards longer-term.
My (core) long position trade is still live, and I am a buyer of dips.
2.3: CURRENCY PAIR – EUR/NZD
TRADE DIRECTION: SHORT
“DRIVE THRU” BLOG DATE 6th June 2021
BLOG REFERENCE: #415 FREE NEWSLETTER VERSION
This trade was based upon conflicting Central Bank Monetary Policy. I removed my initial trades after the FOMC June statement but have now added back.
I remain in the camp of the RBNZ is hawkish and the ECB dovish (to eternity).
I am looking to sell rips higher.
2.4: CURRENCY PAIR – AUD/USD
TRADE DIRECTION: SHORT
“DRIVE THRU” BLOG DATE 30th May 2021
BLOG REFERENCE: #414 FREE NEWSLETTER VERSION
I traded this pair for only a few days last week and banked a nice +75 pips. However, the trade set up that I was originally looking for did not happen. Price did not meet my entry level.
I am now no longer interested in the pair based upon my original trade idea.
2.5: CURRENCY PAIR – NZD/USD
TRADE DIRECTION: LONG
“DRIVE THRU” BLOG DATE 13th June 2021
BLOG REFERENCE: #416 FREE NEWSLETTER VERSION
Following NFP, I am now long this pair. As originally stated, I am looking at trading this pair long through to the end of August / September in correlation with the Jackson Hole Symposium / FOMC Monetary Policy Statement due September 22nd.
This trade is based upon Central bank divergence like the EUR/NZD short trade, this time the RBNZ hawkish approach compared to the FED dovish approach.
3. WEEKLY FX PREMIUM: JUNE 2021 PERFORMANCE:
The complete set of spreadsheets relating to my monthly performance can be found on my homepage at https://www.weeklyfxdrivethru.com under the “History / Performance” tab, sub section “This Year’s Performance”.
3.1: JUNE 2021 OVERVIEW:
3.2: MONTHLY PERFORMANCE SUMMARY:
3.3: YEAR TO DATE PERFORMANCE SUMMARIES:
3.4: MY THOUGHTS ON THE MONTH and YEAR TO DATE:
3.4.1: THE NUMBERS:
I took a few hits in June around the FOMC Monetary Policy Statement release and Press Conference. I reacted too late and paid the price.
I took the decision to cover open positions with my short USD/CAD (Core) Position trade. This represented over 66% of my losses and looking at the squeeze to 1.2500 that followed a couple of days post FOMC, I am happy that I took my positions off the table. However, I missed the opportunity to short after the squeeze and re-build my short position once again from higher levels. I say this because I still hold conviction that this pair will be much lower into the year end 2021.
I also removed two short trades EUR/NZD, which upon reflection, I could have held onto. The pip loss associated with these trades was high but in $$$ the cost was low. I believe that I may have overreacted. However, I can short this pair once again, when ready from higher levels.
In total I booked about c.1,500 pips of losses around FOMC.
Given the market consolidation, my ability to jump back in and recover my losses has been limited. However, I am grateful for the fact that I ended the month with a positive pips total.
Look; we can all be very hyper-critical about our pip returns. At the end of the day and I close each blog with the same statement: -
“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”.
All that being said I am delighted and grateful for the positive month.
- Monthly pips of +310 pips.
- Year to Date now at +8,264 pips basically 53% of my annual objective, leave me on target.
- Pips per completed trade:
My objective monthly and year to date is 40 pips
June = 7.21 pips
Year to date = 35.47 pips
- Ratio of Positive to Losing trades
My objectives monthly and year to date is 80% (positive) / 20% (negative)
June = 75% / 25%
Year to Date = 80% / 20%
3.4.2: THE TRADES:
4. WEEKLY FX PREMIUM SUBSCRIPTION INFORMATION:
Information about how to subscribe to the WEEKLY FX PREMIUM is located on my website at the top of my welcome page at https://www.weeklyfxdrivethru.com under the “SUBSCRIBE” tab.
4.1: WEEKLY FX PREMIUM OVERALL PERFORMANCE:
5. MY FINAL 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.
Remember when you are trading you are on your own. It is you and you alone who presses the execute button.
“Coming second only means that you are first of those who lose” – Ayrton Senna
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: #419 FREE NEWSLETTER
DATE: 4th July 2021