I mentioned last week with regards to the Omicron variant to be careful trading around sound-bytes of news that are nothing more than opinions. In the past week, even my girl Labrador “Aoife” has had an opinion on Omicron.
Look, no one knows what the story is vis-à-vis Omicron. The facts, the science data and interpretations are still not known. We have had initial lab test results and they are based on theories as opposed to human tests. They mean nothing in the grand scheme.
So, we wait, and we are on hold. My gut feeling, as mentioned before, is that this uncertainty will be transferred into commentary later this week with the ECB, BOE, SNB, BOJ, NORGES BANK and the FED all providing updates on Monetary Policy.
Focussing on the FED; yes, I do expect TAPERING to complete mid Q2 2022, but, as for an insight into FED tightening, and what it can do vis-à-vis what the markets expect... I do NOT expect too much because of the Omicron uncertainty.
I cannot believe that a single Central Banker will want to raise his or her head too high to be exposed until data is in front of them.
Most analysis, reports, commentaries this weekend will be around the FED and what to expect. I have written about this subject in one form or another from several different angles of late, so I wanted to take a different route this week in THE SOAPBOX.
And on again....
From a trading perspective, it was a great week for me, and it reflected a really good start to December. Usually, I have historically had poor run ins to the year-end, but it looks like this year will buck the trend.
At the end of last week, THE WEEKLY FX PREMIUM 2021 update was as follows: -
DECEMBER 2021 to date:
Total net pips = +1,475 pips
YEAR TO DATE 2021:
Total net pips = +19,035 pips
(122.97% of my 2021 objective)
- This is the final DRIVE THRU blog of 2021.
- I will complete an abridged version of the DRIVE THRU between Christmas and New Year, once I have closed off the 2021 trading and completed all the calculations. This DRIVE THRU will only focus on the December 2021 performance.
- I will record a ZOOM PRESENTATION to review the performance of the WEEKLY FX PREMIUM in 2021. This will be released to my YouTube channel. FREE NEWSLETTER subscribers will receive an email link.https://www.youtube.com/c/TheWeeklyFXDriveThru
- I will also complete and record a look forward ZOOM PRESENTATION based upon my GOALS & OBJECTIVES for 2022. This will be released via my YouTube channel. FREE NEWSLETTER subscribers will receive an email link.https://www.youtube.com/c/TheWeeklyFXDriveThru
- I will also be releasing a WEEKLY FX PREMIUM NEW SUBSCRIBER PROMOTION for 2022 in conjunction with the release of the 2022 look forward GOALS & OBJECTIVES presentation.
If you want to trade with my thoughts and ideas for the entire year, this will be best the best opportunity to get set for trading FX in 2022.
If you want to check out the PROMOTION when it is launched register for the FREE NEWSLETTER on my website at https://www.weeklyfxdrivethru.com
1: THE SOAPBOX
CENTRAL BANKS 2022
As this is my last “full” DRIVE THRU of 2021, I thought I would go somewhere other than with “THE HERD” this weekend with regards to my focus of my blog.
I decided to take a look forward into 2022 from a Central Bank perspective rather than what most opinion pieces do, which is, look at the currency pairs. This approach actually sits better based with my trading style based on the fact that as a POSITION TRADER, how Central Banks plan is far more aligned to my way of trading.
I know many traders feel that listening to and reacting to Central Bank language and policy is at times similar to smashing one’s head against the wall (see below).
From my perspective, I actually quite like trying to dig under the written statements and observe the body language at the press conferences to see if truths are being spoken or if it is all a smokescreen of lies and bullshit!
CENTRAL BANKS 2022:
THE FEDERAL RESERVE (FED):
FED Chair, Jerome Powell has come out of his closet and has turned HAWKISH. Recommended for a second term as FED Chair, he delivered practically by a Central Bank leaders’ comparison, a fist pumping speech a couple of weeks ago to the Senate Finance Committee.
- TRANSITORY to be retired from the FED dictionary.
- TAPERING to be speeded up.
- Move to normalisation to be faster.
The man was on acid....
But what’s my take?
I can see TAPERING ending in Q2 2022, to be frank, its no longer of any use given the buoyancy in the U.S. economy and yesterdays CPi print of 6.8% shows that the FED has an issue to address. However, as I have stated before, since the GFC, when push comes to shove the true colours of the FED rise to the top. The FED is fundamentally DOVISH. It always will be. You can bet your homes on the fact that current FED vacancies will be filled by DOVES.
Omicron gives the Fed time to postpone talk of interest rate increases at least until TAPERING has completed. At that time, I feel they will find another reason to be more DOVISH than the market wants, which will be good for Wall Street, which is a major concern to the FED not to piss off.
Without doubt with inflation at 6.8%. Even though the FED has stated that they expect U.S. inflation to decrease in H2 2022, the pressure to hike rates will mean at least one hike in H2 2022, and not the one a quarter most Banks Analysts are expecting.
It’s all a balancing act for the FED. It cannot afford to get it wrong. This is why I think they will be slower to normalise than the markets expect.
2022: TAPERING COMPLETED and 1 x 0.25% interest rate increase.
THE EUROPEAN CENTRAL BANK (ECB):
You guessed it....
I do NOT see the ECB doing anything much vis-à-vis interest rates in 2022.
I think that in Q1 2022 the current Pandemic Emergency Purchase Programme (PEPP) will either be extended for another 3-6 months because of the Omicron variant, or the Asset Purchase Programme (APP) will be increased to accommodate the 4th wave of lockdowns etc., currently in play in the EUROZONE.
Apart from Mario Draghi’s epic “Whatever it takes” when he was ECB President, the ECB has been one big yawn fest.
2022: Robbing Peter to pay Paul on Asset Purchasing Programmes
2022: No interest Rate increases.
THE BANK OF ENGLAND (BOE):
I actually googled “The Unreliable Boyfriend” and there are lots of pictures of Andrew Bailey’s predecessor as Bank of England Governor Mark Carney.
Basically, the Omicron variant has saved Bailey’s bacon by providing a reason of uncertainty for NOT raising this week. The first hike by the BOE is only a token 0.15% to take rates to 0.25% representing emergency powers are now lifted.
The Omicron variant plus Prime Minister Boris Johnsons continually dealing with “TORY SLEAZE” is a sideshow that the markets just do NOT need. All this does is feed uncertainty. Whilst we are led to believe that the Central Bank operation is 100% independent, frankly this backdrop will weigh in. At least it's a pleasant change from BREXIT and FISH.
QE is due to end this month. If that is postponed, all hell will break loose in the financial markets.
2022: 1 x 0.15% and 1x 0.25% rate increase.
THE BANK OF JAPAN (BOJ):
2022: Nothing, Nada, nothing at all.
THE BANK OF CANADA (BOC):
The Canadian economy and employment is in good shape. QE completed in October 2021. Tiff Macklem, the Bank of Canada Governor, and his team appear to have economic matters under control.
2022: 4 x 0.25% interest rate increases.
THE RESERVE BANK OF AUSTRALIA (RBA):
Of late RBA Governor, Philip Lowe has been turning modestly HAWKISH. A couple of months ago, you would have sworn he had been on secondment at the ECB. I am NOT too sure what happened to turn him.
As I see it, basically either he screwed up his calendar and thought he was in pages relating to 2023 when he was in fact looking at 2024. Anyhow, the RBA has pulled forward its thoughts that were 2024 to 2023.
Inflation down-under is NOT a concern so Philip Lowe can feel somewhat blessed.
2022: Nothing at all.
THE RESERVE BANK OF NEW ZEALAND (RBNZ):
QE has ended and tightening via interest rate increases has already started. By its own commentary the New Zealand economy is small and tucked well away.
It is a well-managed economy and is sharp enough to react quickly to whatever is placed before it.
2022: 3 x 0.25% interest rate increases.
SWISS NATIONAL BANK (SNB):
2022: Nothing at all.
The last bank statement noted a small change from prior rhetoric in the sense that they placed a token hike on paper for 2024.
The RIKSBANK hasn’t really tackled QE yet and TAPERING is NOT projected until 2023.
2022: Nothing at all.
The NORGES BANK is already in HAWKISH mode and already hiked once in 2021. A further rate increase was signalled for this month, but I feel that the Omicron variant may have put a hold on this.
2022: 4 x interest rate increases.
Only time will tell if my thoughts play out next year. Doing this projection does help focus the mind on how I will trade next year based on CENTRAL BANK DIVERGENCE. As always, this week’s statements should give an insight, although I expect Omicron to dilute a lot of the commentary.
By the end of February next year, we will have a better idea on all things via-a-vis monetary policy.
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)
2.2: CRUCIAL TIME FOR THE ECB:
2.3: “ITS ALL ABOUT COMMODITIES”:
2.4. U.S. INFLATION – ALMOST AT A 40 YEAR HIGH:
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
Omicron variant potentially exacerbates this issue.
- Shortages risks
- Inflation risks appear far from TRANSITORY
Powell has now deleted TRANSITORY from the FED dictionary.
- Energy Crisis continues
- Zero Growth
- Credit Default risks are rising
- Debt issues are intensifying
- Unemployment / Jobs
- Pandemic 4th wave lockdowns or increased restrictions in Europe
- Compulsory Vaccinations in Austria and soon maybe in Germany.
- Pandemic case numbers rising once again
- Pandemic death rates increasing
- ICU Beds in shorter supply
- Lots of Health Workers leaving industry due to stress issues.
A little more meat to add to the bullet points...
The timetable moving forward looks desperate to get full traction in FX.
- It will take about 2 weeks or so for the WTO and Pharmaceutical Vaccine companies to get the full scope of intensity, transmission ease and efficacy of the Omicron variant.
- This projected timetable coincides with the week commencing December 13th, which has CENTRAL BANK Monetary Policy Statements due from the FOMC, BOE, and the ECB to name just three out of 6 announcements that are scheduled.
- I just can’t see these meetings being as HAWKISH as the markets expect because of Omicron.
- The week after we have the start of the “Silly Season”, Christmas and New Year holidays. Hardly a time for the major financial institutions to get positioned up.
I hate to be a killjoy but there is more to consider.
- What happens if the Omicron variant requires an updated vaccine to maintain a decent efficacy rate?
- I read that will take about 90-100 days to produce and test.
- We are now at best at the middle of Q2 2022
- To get the updated vaccine in “arms” to a number that is adequate for increased protection, given previous rollouts, we are looking at least 9-12 months, maybe longer. At the very best timewise we are now at the end of Q2 2023 to have 3 x revised updated vaccine shots in the arms of those who want them.
Should the above be in play 2022 will be a completely different year to the one that the markets were anticipating from Q3 2021 up to now. In fact, 2022 would be a washout.
The economic consequences would be massive.
Any future increase in lockdowns will only fuel the SUPPLY CHAIN issues and drive-up inflation pressures. The question for me revolves around the consumers desire to spend once the Christmas holidays are gone.
UNEMPLOYMENT, INFLATION, DEBT LEVELS, BANKRUPTCIES, SUPPLY CHAIN ISSUES and ENERGY PRICES will be under intense scrutiny moving forward and will in my opinion drive the media headlines in between the pandemic news.
The Central Bank interest rate hiking cycles that have been the only headline in town over the past few weeks, I think will take a back seat given the pandemic uncertainty.
Although it will be delayed, inflation pressures will intensify however, THE CENTRAL BANK DIVERGENCE TRADE is the way forward for me as a long-term trader. The only issue is, I will now have to face a RACE TO THE TOP, instead of the previous 12 years of the Central Bank interest rate policy competition of THE RACE TO THE BOTTOM?
It is too early to say, but if the recovery stalls, Travel and Hospitality will be hit very hard. Market accommodative policies will be back again. With Job vacancies at all-time highs those who may have to leave hospitality may switch and never go back, which will be a huge problem further down the road.
Markets do overreact.
To quote a phrase well used in the “Wild West” – “Shoot first asked questions later”. The markets feed on FEAR and GREED. Right now, we have a FEAR driven market driven by uncertainty.
The news cycle is moving fast, and many will use the Omicron strain as an excuse to wind back positions and commentaries about both market expectations and possible FED tightening.
So, we will probably be on hold and trade mostly sideways thru the end of the year once the dust settles. BUT, never rule out the BUY THE DIP mentality that exists on Wall Street.
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.
SOME TIPS TO KNOW
Continuing with some tips you should have; I am now at the third one; the prior two being...
- 1. DON’T TRADE WITH MONEY THAT YOU CANNOT AFFORD TO LOSE: (28.11.2021)
- AVERAGE GAINS ARE WHAT MATTERS: (05.12.2021)
It’s very hard when discussing this subject not to be in abstract. To a large extent it is the nature of the beast, when dealing with emotions and irrationality.
However, no knowledge, no matter how abstract, is worth diddly-squat unless it can be broken down into actionable tips.
So, here I go....
3. TAKE A BREAK IF YOU ARE HAVING A RUN OF POOR TRADES:
We all have this, irrespective of whether you are a seasoned trader or new to FX, and that is a rough patch of trading. The bottom line is that no-one can stay indifferent when things start to go wrong. At some point the stress, your MINDSET of the stress of back-to-back poor loss-making trades will get to you.
Last week, I mentioned that AVERAGE GAINS in the long run are what matter, but after a week or so, or a run of poor trades, a losing streak, no-one is going to be sane enough to remember that fact and think about the grand scheme of things. In that state, you’re just bound to make more mistakes, so, what should you do?
For me, I do NOTHING.
I would just NOT be in the right frame of mind with the right MINDSET to make clear rational decisions, so you shouldn’t make any. Take a break, the stress of a losing streak will wear anyone out. Be honest with yourself and take the time you need to reset. A couple of days does it for me, but we are all different. You take the time that you require.
This achieves several things.
- It stops you hemorrhaging money. Stops the losses.
- It allows you to take a step back and calm down, reset the brain cells, and get your HEAD in the right place.
- Get you strategies ready for consistent profitability and get back in the saddle once again.
Do NOT let pride get in the way of making the decision that is right for you. As I mention at the end of every DRIVE THRU blog....
“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.”
Once you have decided to take a break, do NOT do it half-heartedly, walk away from screens, do NOT watch Financial news, do NOT keep checking prices, walk away means walk away.
Once you have returned to calm, with the correct MINDSET, then you can figure out what your next moves should be.
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.
Below are the dates for the DRIVE THRU blog in 2022.
5.3: THE LAST GASP:
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.
To all readers whether you celebrate Christmas and / or New Year at this time, I wish everyone a Happy Christmas and New Year or Happy Holidays.
2022 promises to be a much different year in many ways....
From a FX Trading perspective, with good reason for hope, I see directional trading as something to get used to once again. It could be a great journey next year, if you are thinking about joining me on the trip register for the FREE NEWSLETTER on my website homepage https://www.weeklyfxdrivethru.com and you will get an email as soon as my PROMOTIONAL OFFER to join the WEEKLY FX PREMIUM is launched.
All that is left to say is that the WEEKLY FX DRIVVE THRU blog returns on January 9th 2022.
The Pip Accumulator
BLOG VERSION: #435 FREE NEWSLETTER
DATE: 12th December 2021