Another week completed, and the FX market was basically in a chop fest at times over speculation about whether Jerome Powell be given a second term at FED Chair or would he be replaced by existing FOMC board member since 2014, Lael Brainard.
A few short weeks ago, Powell was seen basically as a shoo-in for renomination but now speculations are running wild. Will Brainard be more dovish? The markets are speculating on this fact, which means USD interest rate hikes would be slower and FED policy would remain accommodative longer.
Would there really be a huge difference in approach whether it was Powell or Brainard at the helm?
One argument that I would note is that Powell has the trust of the market and Brainard would create greater volatility as an unknown. It’s basically a Political Decision as far as I am concerned.
Moving on...
From a trading perspective, given the FUNDAMENTALS hanging over the markets it was a rather difficult week to describe in a couple of sentences, except that it was a market in which to exercise patience.
I added trades where I thought levels were good, some of those performed better than others...
I added pips, lost a few pips; that would be my way to sum up last week.
At the end of last week, THE WEEKLY FX PREMIUM 2021 update was as follows: -
NOVEMBER 2021 to date:
Total net pips = +1,460 pips
YEAR TO DATE 2021:
Total net pips = +17,615 pips
(113.79% of my 2021 objective)
1: THE SOAPBOX
NO CONSENSUS JUST OPINIONS
When I write NO CONSENSUS JUST OPINIONS, I am of course referring to FED interest rate hikes based upon the opinions and forecasts from the major U.S. banks.
Basically, at the time of putting the blog together opinions were quite diverse: -
- FED FUNDS FUTURES:June 2022 = 58% probability
December 2022 = 73% probability
2023 = 1 additional hike - GENERAL WALL STREET (FLOOR) TRADERS:
June 2022 = 65% chance
September 2022 = 51% chance
February 2023 = 51% chance - GOLDMAN SACHS GROUP:Interest Rate hikes as follows:July 2022
November 2022
2 x hikes in 2023 - MORGAN STANLEY:2 x hikes in 2022
2 x hikes in 2023
plus 6 more by the end of 2025 - TD BANK / SECURITIES:
First Hike December 2023
- WELLS FARGO:
2 x hikes in H2 2022
More importantly, over the past month, with all the FED SPEAK that we are so grateful for, there has been a general move towards one possible interest move higher in 2022. WE must however bear in mind all of talk is NOT the stated FED position. Right now, we have zero rate increases in 2022 but the first scheduled in H1 2023. This 2023 hike is based off the current “FED DOT PLOT”. Basically, let’s see what happens at the December 15th meeting and subsequent Press Conference.
The bottom line is how do we as traders trade this?
Carefully....
Look, there are trades out there in the FX market, there always are. From now thru December 15th the USD could be a bit of a chop fest as institutions position themselves ahead of the decision. More importantly, many may reduce a lot of FX exposure prior to the FOMC meeting based upon the fact that it is so close to Christmas.
It would NOT surprise me to see the larger institutions wind down positions after the Thanksgiving holiday and let the markets wash out the news and start again in 2022 with a fresh outlook.
We are so close to the silly season. In the week prior to the markets in real holiday mood we have: -
DECEMBER 15th – FOMC
DECEMBER 16th – SNB, BOE, ECB and NORGES BANK
DECEMBER 17th – BOJ
A lot is expected from the FED, BOE and ECB and I think many may have their books 90% closed by this week in December leaving well alone until 2022.
What am I looking for out of this cluster of Central Bank meetings?
Very simply... clarification nothing more is required. I am, as you know if you follow me, looking to trade the CENTRAL BANK DIVERGENCE trade. Via the NORGES BANK, BOC, RBNZ, ECB and BOE I have the basis of my longer-term trades planned for H1 2022. Confirmation of the FED policy is the icing on the cake that I require in order to have a greater trading conviction for those trades already in my mind or already in start-up positions in already.
From an administrative point of view, I will only need to switch some existing trades from RADAR into (CORE) POSITION trades.
I seek clarity in December. The Financial Markets lack consensus, it is just a random set of opinions to go with views that we all have on what might or might not be the case.
Whilst many of my trades will NOT involve the USD, the simple truth is the influence of the USD across many pairs that it is NOT party to is still there and that is why FED clarity is important to me.
If you want to find what I am trading, you will need to subscribe to the WEEKLY FX PREMIUM. I will be giving nothing away in this forum. (https://wwww.weeklyfxdrivethru.com)
2: THE EDGE
(This section of the blog is exclusive for WEEKLY FX PREMIUM subscribers)
2.1: AUD/USD:
2.2: RBNZ TO HIKE THIS WEEK:
2.3: UK INFLATION:
2.3.1: (CP23) GBP/USD - DAILY CHART:
2.3.2: (CP21) EUR/GBP - WEEKLY CHART:
2.3.3: (CP22) GBP/CHF – WEEKLY CHART:
2.3.4: GBP/AUD – WEEKLY CHART:
2.3.5: GBP/CAD – WEEKLY CHART:
2.3.6: GBP/NZD – WEEKLY CHART:
2.3.7: GBP/JPY – WEEKLY CHART:
2.4: EUROPE - COVID RESURCHANGE:
2.5: BIDEN’S SPENDING BILLS:
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 several weeks ago.
- Supply Chain issues continue – no end in sight soon
- Shortages risks
- Inflation risks appear far from TRANSITORY
- Energy Crisis
- Zero Growth
- Credit Default risks
- Debt issues
- Unemployment / Jobs
- Pandemic 4th wave lockdowns in Europe
- Pandemic cases numbers rising once again
- Pandemic death rates increasing
- ICU Beds in shorter supply
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.
Over past weeks INFLATION has become the number one popular word on financial programming, in fact many could argue that it has been number one for some time already. INFLATION concerns along with an ENERGY CRISIS and SUPPLY CHAIN problems, are occupying most of the written and airtime throughout business media. Whilst these are key considerations for me, they play second fiddle to Central Bank Monetary Policy Statements, which is what ultimately drives market reaction, direction, and sentiment.
Record recent inflation prints in the U.S. (6.2%), UK (4.2%) and New Zealand (3.7%), for example are causing jitters in markets. Without doubt inflation being referred to as TRANSITORY seems well off the mark.
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 not by any stretch of the imagination.
A 4th COVID WAVE is spreading through EUROPE causing lockdowns and now compulsory vaccinations in Austria. This is now a new and some would say dangerous approach to tackling the pandemic. How this plays out who knows. You can bet that human rights organizations will be up in arms at proposals being made to tackle Covid-19. This is going to have far reaching ramifications.
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.
THE IMPORTANCE OF SETTING RULES
AKA
HAVING A TRADE PLAN
When trading from time to time especially with new traders to Forex, the whirlwind of emotions that you’ll run into while trading is complicated, sometimes difficult to understand and at times the emotions can never fully be explained using reason. However, in my experience, the solution to the problems that those emotions pose is rather simple.
Just as you must develop a trading strategy in order to know when to trade, you also need to develop a system of rules for dealing with emotional turbulence when trading. There are huge benefits in setting rules, and I encompass all of this in my TRADE PLAN.
Unlike emotions, both positive and negative, rules are set in stone. They don’t sway and change with your mood or your trading success or failure via performance. In real terms they are something that you can always fall back on and rely on.
When it comes to the whole subject of trading with emotions in the air, reflection is key. Try to practice a little mindfulness before you make an important decision, try to ascertain your emotional state, and verify whether you are acting from a rational, level-headed place, or simply reacting to a form of emotional stimuli.
Most of the rules in your TRADE PLAN are NOT as wooly (abstract). Setting reasonable profit goals and making good use of advanced LIMIT ORDERS can take a huge amount of guesswork and uncertainty out of your trading process.
Of course...
All of this requires a certain level of discipline and with practice, you can achieve it. Managing your POSITION SIZES through effective RISK MANAGEMENT strategies not only allows you to sleep at night and remain cool-headed, but they will also spare you from both psychological and financial damage.
If you are a WEEKLY FX PREMIUM subscriber you have access lots of information about TRADE PLANS in the subscriber area of the website.
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 DRIVE THRU BLOG – DISTRIBUTION and TIMINGS:
Over the past few weeks the number of questions asked about timing and distribution of this blog have increased, so I thought it prudent to clarify.
DISTRIBUTION and TIMINGS:
- WEEKLY FX PREMIUM (Full Version) subscribers:
Saturday before 5PM New York Time - FREE NEWSLETTER (Restricted Version) subscribers:
Sunday before Noon PM New York Time - SOCIAL MEDIA and COFFEE SHOP
FREE NEWSLETTER (Restricted Versions):
Sunday before 3PM New York Time
Finally, putting this blog together prior to distribution takes many hours each week. There may be occasions that news jumps ahead of some of the content, so please excuse my commentary should that situation occur.
5.3: 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: #432 FREE NEWSLETTER
DATE: 21st November 2021
INFLATION, INFLATION and INFLATION
THE WEEKLY FX PREMIUM: REVIEW MARCH 2021
THE WEEKLY FX PREMIUM: REVIEW OF PERFORMANCE – JULY 2021
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