Are you still managing to keep your head above water?

If you are, without wanting to sound condescending... well done. It is difficult out there at the moment. Headline news driven markets are a pain to work inside. They are nothing more than yo-yo markets. FX is pushed and pulled, and inter-market correlations start to dis-connect which just adds additional spice to the trading experience.

I am trading at about 50% of my usual activity and with much smaller position sizes, yet I am STILL getting chopped up at times. It’s a “win some – lose some” trading operational scenario and, at times, I wonder why get involved, why NOT just stay sidelined? I do NOT suffer FOMO (Fear of Missing Out), but there are times some commentaries lead you to believe that it’s all very straightforward to dip one’s toe into the market and get going as usual. This market is NOT normal at all.

Moving on...

At the end of last week, THE WEEKLY FX PREMIUM 2022 current position was as follows: -

MARCH 2022 to date:
Total net pips = +735 pips

YEAR TO DATE 2022:
Total net pips = +3,316 pips
2022 pip objective = +14,920 pips
(22.23% of 2022 objective achieved)

 

 

If you would like to see more information on how I trade etc., check out the link below that will connect you to my video presentation, which is on my YouTube channel: -

THE WEEKLY FX PREMIUM REVIEW OF 2021 & LOOK FORWARD INTO 2022

https://bit.ly/review2021look2022

 

1: THE SOAPBOX:

PERCEPTION versus REALITY

 

 

A difficult week to pick from although I think I am able to roll everything into one short (ish) piece.

• THE RUSSIAN INVASION OF UKRAINE - (The spillover effects)
• THE EUROPEAN CENTRAL BANK (ECB)
• THE FEDERAL RESERVE (FED)
• THE BANK OF ENGLAND (BOE)
• CENTRAL BANK INTEREST RATE HIKES
• INFLATION
• STAGFLATION
• RECCESSION

(For FX PREMIUM subscribers I have elaborated on the points of STAGFLATION / RECCESSION / INTEREST RATE HIKES in section 2 later).

In a week when my trading activity was down about 50% it has given me time to look around charts in great detail. I was very surprised that when looking at my TRADE PLAN guidelines to enter trades very little actually hit the criteria.

We have seen institutions rotating investments, moving RISK out of one area into another trying to locate and add yield. In FX, we have really just been consolidating.

Look at the EUR/USD weekly chart below, following last week’s huge sell off we are doing nothing more than simply consolidating the move lower. We are in a Bearish Consolidation move (The range is 1.0805 thru to 1.1125).

 

 

Here are some thoughts I have about the EUR/USD and ECB moving forward.

Despite the ECB announcement and commentary during the press conference last week, in my opinion, there is STILL no good news for the single currency.

1. The FED and ECB are divergent.
2. The EU is too reliant on Russian energy. A move away will take years to transition.
3. STAGFLATION in the EU is probably now "when rather than if"
4. The ECB will remain accommodative despite portraying a policy adjustment of ultimate flexibility.... this is PURE SPIN nothing else.

Central Banks have it hard at the moment. For months if not years they have portrayed an image and commentary of “all is good, we are in control”. This was the PERCEPTION; the REALITY however was something completely different.

All I have to do is write the word TRANSITORY......

Like lemmings jumping off a cliff every Central Bank leader echoed the same noises that emanated out of the FED.

Let’s go right back to March 2020.

How does a Central Bank fight a health issue?

It’s 100% obvious the only way they know how.... print money!

How does a Central Bank fight Supply Chain issues?

It’s 100% obvious the only way they know how.... print money!

There is NOTHING... absolutely NOTHING that a Central Bank can do to fight a virus or control supply chain issues.

How could we be so naïve to believe this but more importantly governments thought it was a great way, the best way to combat these issues.  Now, we are collectively up shit creek without paddle.
The UKRAINE invasion was just the icing on the cake. An opportunist move by the Russian President Vladimir Putin to take advantage of the west being asleep at the wheel. I am gob-smacked that Chinese President Xi has not gone after TAIWAN just to place a cherry on top of the icing on the cake!

We have INFLATION... but that’s not all...

The G10 is heading towards STAGFLATION and then RECCESSION over the next 12-24 months. If this were NOT enough to contend with, we are going to get kicked in the balls by interest rate increases. The cost of living has already skyrocketed and it’s only going one way, and that is up. If you have disposable income, you will surely see this erode over the coming months. If you run a motor vehicle regardless of petrol, diesel or electric, costs have gone up and in the case of petrol and diesel the short to medium-terms ahead look bleak.

Are you feeling good now?

What we all need is: -

1. A job working from home
2. Go on diets so we don’t eat
3. Stay in at home so we don’t go anywhere and use fuel
4. We will be buying cycles with baskets to go to shops for food, or just walking.
5. Bulk buying will be a thing of the past. Local, corner shops will thrive, and the likes of Costco will suffer!
6. Wear a jacket or long sleeves to keep warm to keep the thermostats low
7. Have a pet Labrador that you can hug and cuddle to keep warm

(I am being tongue in cheek here, but there is the basis of a Hollywood blockbuster here!)

Moving on...

The PERCEPTION and REALITY will plague us for the coming months. CPi data does NOT accurately measure true INFLATION so when you hear 7.9% or 5.9% the true number after the seasonally adjusted loading is removed, in Canada and the UK for example you can add a full 2% on top of the published data and then I have read that may STILL not accurately reflect the true level.

IDEA: List out a short shopping list that is completed weekly and measure the prices. I can virtually guarantee 100% of the readers of this blog the increase week to week may be minimal but monthly you will see a difference. Over recent weeks it has been increasing at better than 5.1% which we are told is the Canadian CPi rate.

OK...

Economically most countries around the globe face huge issues. The uncertainty levels are huge. Trading through this will be difficult. There is light at the end of the tunnel. The issue I have at the moment is how long is the tunnel?

We are currently in HEADLINE DRIVEN MARKETS. They are not good to trade in. Trying to establish a core position directionally is NOT hard but why risk an entry level today that could be 200 pips off in 2 or 3 days time. You may have the right direction but even as a long-term trader I like to get as best an entry as I can. The EUR/USD chart earlier typifies everything. It's a 300-pip range (give or take) but the moves in this market are exacerbated and reflect the RISK and the uncertainty of outcomes.

The future out of global STAGFLATION, global RECCESSION, and global INFLATION is through commodities as governments spend to get infrastructure projects that are labour intensive started. Building feeds everything in the economic cycle, it has the ultimate trickle-down effect.

It’s all about timing, but the following currencies (AUD, NZD, CAD, and NOK) are on my target list.  Some are there already with “LIVE” trades within (CORE) POSITIONS, and I am looking for additional entry opportunities to add for the long term now.

In my opinion, you should use the current market conditions as opportunities to get positioned for the future. At the very least have your TRADE PLAN within your overall TRADING PLAN in place ready with chart analysis done, with a series of potential entry levels.

Finally...

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

 

2: THE EDGE
(This section of the blog is exclusive for WEEKLY FX PREMIUM subscribers. It is combination of Charts, News, Central Bank oddities, Clarification points and general issues we face as FX Traders).

2.1: CHINA LOOKS VERY MIXED

2.2: U.S. INFLATION HITS 40 YEAR HIGH:

2.3: “THE DEVIL & THE DEEP BLUE SEA”
STAGFLATION / RECESSION... INTEREST RATE HIKES:

 

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)

The Ukraine / Russia conflict now into its third week and despite headline news at times to the contrary, it looks like it could be a long war, or as Putin would say an extensive military manoeuvre.

It is very difficult to predict moves as we are swinging one way then another based on a mixture of geopolitical news, war headline news, sanctions against Russia headlines and finally the favourite of Financial markets what is the current story vis-à-vis interest rate hikes.

In this environment, FX has reacted strongly in favour of the flight to safety currencies; USD, JPY and CHF are all beneficiaries.

Financially, despite still a lot of talk, sometimes to the contrary we are in a huge period of uncertainty once again as both the Markets and Central Banks come to terms with what’s next.

INFLATION, which almost every country wanted and fought to try and achieve is now here in what appears a stubborn level egged on by wage inflation, which is permanent.

The lesson here is: BE CAREFUL WHAT YOU WISH FOR...

I am looking at potential STAGFLATION being the issue that Central Banks and governments are potentially going to have to deal with moving forward. Both Russia and Ukraine are important to the supply of commodities into Europe (there are miles upon miles of pipelines running underground through Ukraine).

There are an increasing number of factors to consider.

1. Despite the fact it appears that most countries have increasing health controls, we STILL have a Global Health Pandemic. It has NOT yet completely disappeared into the distance when looking through the rearview mirror, despite all political unwinding.There will be more mutations, as we enter what the politicians maybe naively call the home straight.
2. There are STILL SUPPLY CHAIN issues and despite what Central Bank officials think they are, they have ZERO influence in connection with supply chains. In fact, their actions can create more INFLATION (The Assassin of Hope).
3. The RUSSIA/ UKRAINE conflict has severe ramifications for European energy costs etc. This cannot be underestimated.
4. RUSSIAN sanctions have gone down a path that isolates Putin and his policies. They are now affecting day-to-day activities with the Russian population. Unfortunately, Putin is only interested in Putin. It will be interesting to see does the backlash against Putin’s policies grow as time moves forward.
5. The world DEBT burden is huge. We face RECCESSION conditions ahead as we are taxed to high heaven to steady a very rocky ship.
6. Do not lose sight of CHINA / TAIWAN. The South China Sea issue and the continual military “cat and dog” maneuvers between China and the S., I believe will only intensify.

Timing is everything... do NOT rule out CHINA being another piece in the jigsaw.

There are other pieces in the BIG PICTURE jigsaw moving forward to slot into position. There will be plenty of trading opportunities this year as Politician’s dither and fumble their way forward aided by Central Bank leaders who frankly are trying to navigate unchartered waters, that most if not all would say, they did NOT sign up for.

I am trading but at about 50% of my normal trading activity. The RISKS associated with trading in a headline news environment do NOT align with my trading principles.

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: HEAD and RISK MANAGEMENT:

 

 

This section will return in a few weeks’ time.

 

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.

 

5.2: THE FINAL CUT:

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: @weeklyfxpremium (Restricted feed - FX PREMIUM Trade Information)
Twitter: @theanalogtrader (Restricted feed - FX PREMIUM Market Commentaries & Views)
Twitter: @thepipaccumulator (Open feed)
https://weeklyfxdrivethru.com/disclaimer/

BLOG VERSION: #447 FREE NEWSLETTER
DATE: 13^th March 2022