No surprise regarding the topic of choice for the SOAPBOX this weekend. Last week was a big week for Central Bank decisions. The FED, RBA, BANK OF ENGLAND and NORGES BANK all reported.
Following last week’s news from the Central Banks and the NFP Jobs data, the markets are trying to absorb a huge amount of data. As a result, we have seen some bigger moves maybe than expected taking us into some new trading ranges, or as I like to call it opportunities.
From my own trading perspective, I have been adding positions to take advantage of potential reversal moves that I believe will happen soon based upon the CENTRAL BANK DIVERGENCE trading opportunities that are still in front of us.
Moving on...
I am still adding pips via THE WEEKLY FX PREMIUM, as mentioned already and as I have indicated, I have been reducing my RISK exposure. I have just 11 live trades in play.
NOVEMBER 2021 to date:
Total net pips = +295 pips
YEAR TO DATE 2021:
Total net pips = +16,450 pips
(106.27% of my 2021 objective)
Target achieved......
SPECIAL SUBSCRIPTION OFFER:
Just to remind you.
Last month I not only achieved but beat my 2021 pip target of +15,480 net pips
So, for those of you thinking, I want a piece of that for 2022, I offered from last weekend’s blog a “7 DAY ONLY” SPECIAL SUBSCRIPTION for those who want to generate at least +10,000 net pips next year (2022 targets not yet set). This weekend there remains just a day or so left.
Obviously, there are no free lunches and there are no guarantees of performance but given that since 2014 when I first launched my subscription service THE PREMIUM SERVICE now re-branded THE WEEKLY FX PREMIUM, I have never failed to meet my annual pip target (see below).
So, what is the SPECIAL SUBSCRIPTION that is available?
- Available from now until 23:59 Sunday November 7th 2021, New York time.
- Anyone who signs up via my website https://www.weeklyfxdrivethru.com
for a 12 month PLATINUM SUBSCRIPTION at CAD$ 1,500.00, will not only receive all the usual benefits of a PLANTINUM subscription of reduced annual second year subscriptions etc., but they will also receive for this special offer only an extension of the 12 month subscription to complete on 31stDecember 2022. - This means from now to the end of 2021 you can get familiar with my website etc. and take advantage of any set ups I have through to the end of 2021 as a bonus.
- Just sign up before the November 7th The joining instructions emailed to you will reflect the extended bonus subscription period through to 31st December 2022.
This is a great offer to get yourself in position to hit the ground running in 2022.
1: THE SOAPBOX
“IT’S NOT OUR JOB TO GUIDE ON INTEREST RATES”
Let me just get this out there....
“IT’S NOT OUR JOB TO GUIDE ON INTEREST RATES”
This was what Andrew Bailey said to BLOOMBERG reporter and TV Anchor, Francine Lacqua.
FFS, if its not the Bank of England’s job to guide what the f*ck is their role?
Bailey went on to say, comments made by bank officials are NOT CONDITIONAL.
FFS, everything a Central Bank says is CONDITIONAL.
The markets were told that the Bank of England, November meeting was LIVE. The BOE held rates despite all the commentary in the run up to the meeting and then Bailey blames the markets for reading too much into their comments.
- Huge communication breakdown
- Credibility issues now sit with ALL the bank officials who MISLED the markets
What does Bailey say...?
He washes his hands and basically performs a modern-day impression of Pontius Pilate.
Its just NOT good enough.
Welcome to the son of the unreliable boyfriend, the Mark Carney mini-me, unreliable boyfriend 2.0.
Thank God for the SOAPBOX.
Moving on...
In a week that saw the RBA, the FED, NORGES BANK and THE BANK OF ENGLAND announce policy decisions, it may be a good time to step back and review where we are vis-à-vis the Central Banks.
RESERVE BANK OF AUSTRALIA (RBA):
The RBA surprised by removing “Yield Curve” control. It had controls in place targeting the April 2024 bond yield at 0.10%. Last week, the RBA did not buy bonds as part of its QE program as yields rose beyond its target level. The CB also communicated that the 2024 call for interest rates to move higher was also cancelled.
The markets are expecting a 0.80% of tightening over the next 12 months with 0.10% of that inside the next 6 months.
So, the RBA instead of being DOVISH thru 2024, potentially turns HAWKISH in 2022. For the record, RBA Governor, Philip Lowe states that potential tightening could start in 2023.
THE U.S. FEDERAL RESERVE (FED):
No surprises for me with the FOMC statement last week. Tapering at USD$15bn per month for November and December 2021 (USD$ 10trillion in Treasury Bond Purchases and USD$ 5 trillion in Mortgage-Backed Securities). FED Chair, Jerome Powell left the door open from January 2022 to increase or decrease the taper amount. The thoughts are that TAPERING completes by mid 2022.
With regards to interest rate increases Powell, as I had mentioned, pushed back on this subject but did allude to Q2 and Q3 2022 at times when he expects inflation to reduce and then if that happens it would be the time to place interest rate normalisation discussions on the agenda, but NOT before.
The FED is in an awkward place right now: -
- The FED Balance Sheet will hit USD$9 trillion next year
(A move from 18% to a mouth-watering 36% of U.S. GDP thru the pandemic). - USD inflation is set to hit 6% next year.
Powell still talks about the FED 2% target, but I am struggling to see how this will be achieved by Q2 2022, so my thought process remains lower for longer vis-à-vis FED monetary policy regarding interest rates.
Powell still wants an improvement in jobs. The mass resignation movement in the U.S. is a concern, although some who resign from current jobs are switching to new jobs but it’s all very messy, cloudy and unclear. I still believe the FED wants at least 6 months of a positive trend at least.
“Once a DOVE always a DOVE” – Hell will freeze over before this FED moves ahead without clear unambiguous data in print in front of them to dissect before making a move on interest rates... “LOWER FOR LONGER”.
NORGES BANK:
No surprises here at all. The NORGES BANK statement was 100% in line with expectations.
A 0.25% rate hike in December 2022 and 3 x 0.25% expected during 2022.
THE BANK OF ENGLAND (BOE):
Of the four Central Bank announcements last week, this was the biggest surprise even though the RBA did a 180 degree turn, which was huge....but.
Bank of England Governor, Andrew Bailey prepared the market for a 0.10% interest rate hike and held rates unchanged. The MPC voted 7-2 to keep rates on hold. Policymakers decided upon more data first.
So, what now?
No doubt that the GBP enthusiasm that had previously gripped the markets for a series of hikes has now been curbed. I have since read that it does look like the 0.10% move higher will happen in December 2021 and possibly 2 x 0.25% increases in 2022. We shall see.
Andrew Bailey looked stunned by the attack of questioning. He did do an excellent job for the most part on handling the criticism BUT it was all brought on by his own actions prior to the press conference. He looked stunned but he brought all this on himself.
Basically, he shouted his mouth off without support in the MOPC and paid the price with his future market credibility. He had plenty of time to walk back his comments pre decision and prepare the market, but he chose NOT to. .... big mistake.
The Tweet below was typical of those appearing in multitudes on my timeline.
Moving on...
I still believe in THE CENTRAL BANK DIVERGENCE trade. Over the coming days following lots of analysts working thru this weekend, all the news and data from last week should work its way through the markets.
In this interim period, I have been adding to existing trades, “BUYING DIPS and SELLING RIPS”. I have watched many of my trades initially struggle with the news. Look, the markets are very, very complacent, of that there is no doubt.
It is still very much a one-way market in equities with the major indices taking out all-time highs on a repeated basis. A few months ago, I wrote about “BLOW-OFF TOPS”, without wanting to sound over dramatic we have all the pieces of the jigsaw in place for the perfect storm.
We do however have inter-market disconnects. Look, here’s a couple of typical go to trades as equities rise to all-time highs.
USD/CAD - Short: However, on Thursday after the BOE it was at its highest for almost 3 weeks and following NFP it still failed to fall below 1.2440.
AUD/USD - Long: On Thursday after the BOE it was hitting lows not seen for two weeks prior, after NFP with the S&P at all-time highs it dropped below 0.7400 and headed towards 0.7350.
I do NOT like it when we have a lack of key correlations taking place and for me these moves are important to correlate.
What to do next...?
My inbox overflows with opinions, views, analysis and reports. Basically, I see many on Wall Street and beyond on a reset. It’s like as if people have been caught off guard by the FX market reaction. To a large extent it is exaggerated in my opinion, but this only provides me with opportunities for better pricing to add to existing positions and these moves also throw up new opportunities.
So, it’s wait and see for me.
As mentioned, I have been adding and will if the opportunity presents itself, continue to add to existing positions. I have 10 x live positions in play at the moment and to be honest, one cannot be active with every currency pair, there are just potentially two or three additional pairs that have my attention to possibly open positions with.
If you want to know, which pairs and when and where to enter... you need to be a subscriber to the WEEKLY FX PREMIUM.
2: THE EDGE
(This section of the blog is exclusive for WEEKLY FX PREMIUM subscribers)
3: THE MACRO / FUNDAMENTAL VIEW
This short section of the blog looks forward. I share my macro / fundamental thoughts and views for the coming 3-6 months on factors to consider from my Macro, Fundamental and Geo-Political perspective.
Below are a list of bullet points, that are as relevant today as they were a week ago.
- Supply Chain issues
- Shortages risks
- Inflation risks
- Stagflation
- Energy Crisis
- Zero Growth
- Credit Default risks
- Debt issues
- Unemployment / Jobs
- Pandemic cases numbers rising
- Pandemic death rates
- ICU Beds in shorter supply
and - The Chinese Property Market looks screwed....
In addition...
I am 100% of the opinion that THE CENTRAL BANK DIVERGENCE TRADE is the way forward for me as a long-term trader. Central Banks give me focus for my trading conviction and offer me direction from which to concentrate and consider. The differentials that exist between the G7 Central Banks on Monetary Policy, I believe could run in some instances right through most of 2022 and in a couple of cases beyond.
INFLATION and STAGFLATION are possibly the two most popular words along with ENERGY CRISIS and SUPPLY CHAINS throughout business media at the moment. Whilst these are also key considerations for me, they play second fiddle to Central Bank Monetary Policy Statements.
Inflation is a real concern as the supply and demand economic curves are proven to be as relevant today as in the past. Right now, though, we have supply led inflation rather than the usual demand led inflation. This is inflation of a more permanent NOT transitory situation.
Job vacancies are at all-time highs around the globe as social changes take effect, lower paid jobs which in particular are harder to fill, especially in the hospitality industry. To attract workers’ wages offered have been increased. This is wage inflation at the base level and wage inflation is NOT transitory.
If you resonate with my long-term MACRO THOUGHTS and want to get into the trades with me as I develop positions, you will need to subscribe to the WEEKLY FX PREMIUM at https://www.weeklyfxdrivethru.com
4: TRADING PSYCHOLOGY
For me, TRADING PSYCHOLOGY is a very important key aspect of trading that is often misunderstood or just ignored. How we use our conscious and unconscious minds when trading is crucial to our longer-term trading successes.
Over the coming weeks, it is my intention to cover areas and aspects of trading that may be new to many readers. Sometimes things can be right in front of us, and we cannot see it.
HEAD MANAGEMENT and HEAD MANAGEMENT strategies for consistent success in trading is crucial to long-term success.
NOISE AND CONFUSION
NOISE and CONFUSION also play a role in trading psychology. I am of course referring to information overload.
The internet is full of content relating to trading. The amount of information that can be gleaned and the knowledge that can be obtained via the internet is useful... most of the time.
However, the “useful” data, some call a blessing can easily turn into a situation best described as too much of a good thing. The sheer scope and breadth of the information that is available to you makes it easy to lose focus.
As you know as a FUNDAMENTAL long-term POSITION trader, I believe one must keep an eye on the news and use the internet to educate oneself and keep up to date with what is going on and moving markets, but at the same time keep this reasonable.
One thing to avoid is analysis paralysis.
In my commentaries, I often refer to NOISE in a different context.
This reference to NOISE is specific to short-term market volatility. The 30 to 60 minute swings in price are aspects of trading that is not my trading style that I do not want to participate in.
- I have a hot list of which banks, analysists and financial newsletters that I follow and read 100%. This list extends to maybe 15 suppliers. This list is beyond the Central Bank data. Not wanting to sound boring and sad.... as a POSITION trader, my go to reports to read are the Central Bank Monetary Policy statements including all the attachments.
- Below this I have a plethora of data I only scan through by headlines.
- Below this I have 3 or 4 reports that I read to trade the opposite to what is suggested.
The important thing here it to the best of your ability you should narrow down the input quantity of information that you’re receiving to a manageable level. For me, this means that you should ONLY take as much information as you can effectively manage and properly analyze and assess what is in front of you.
Simply soaking up information isn’t enough. You need processing skills to break it down into bite sized chunks that are both actionable and useful. You do NOT have to learn about everything in one go. Trading is a lifelong pursuit, and this should be done at a pace that you are comfortable with.
REMEMBER: “Quality before quantity....”
A couple of reputable sources of information are worth far more than thousands of hours of pages that are unfounded theories and vague.
5: CLOSING THOUGHTS
5.1: THE WEEKLY FX PREMIUM – SUBSCRIPTION INFORMATION
If you like my approach to the market and are wondering what my trades are like from, a live perspective and what is the WEEKLY FX PREMIUM all about, check out my website https://wwww.weeklyfxdrivethru.com
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 via Twitter, TwitLonger and ZOOM.
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.
5.2: THE LAST DROP
Finally,
Always remember longevity in Forex trading can only be achieved through trading with a good MINDSET, 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.
Finally, be GRATEFUL for your wins and COUNT THEM. Keep a POSITIVE MINDSET in play at all times, regardless of the market conditions.
Scott Pickering
The Pip Accumulator
Twitter: @pipaccumulator
https://weeklyfxdrivethru.com/disclaimer/
BLOG VERSION: #430 FREE NEWSLETTER
DATE: 7th November 2021
A ROCK AND A HARD PLACE
GBP/USD – A VERY BULLISH LOOK
IS CABLE HEADING TOWARDS THE ROCKS?
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