It is great to be back trading again. Apart from my summer breaks I have never taken what really amounted to a six week break before. Not that it was a break, moving home and then being on a vacation some 35+ hours traveling time away is nothing to be sneezed at.
You will notice as well, that I have once again changed the running order and format of the blog around… eventually I will settle on a format that I am comfortable with. I have been writing these blogs for five years now and I am still not 100% happy. I live in hope that I will produce a format as smooth a Knob Creek bourbon!
It would be wrong of me not to mention Mary, Mark, David, Tom, Joel and Anna from my recent journey to Australia and New Zealand. Meeting fellow traders and PREMIUM SERVICE subscribers was a real buzz for me and the time that they set to one side for lunches, dinners, drinks and tour guide duties were greatly appreciated by my wife and myself. We have great memories and pictures of the occasions to keep. Many thanks guys Breda and I had a blast.
- LAST WEEK – MY TAKE ON SOME KEY EVENTS:
Last week, I started back at my screens on Tuesday basically catching up with administration matters and re-familiarization of charts etc. Then I announced to subscribers that I would start the next day on Wednesday, back in at the deep end, with a plethora of data releases and of course the FOMC rate announcement and press conference. Yup… I pick the days!!
Although I have been away for about six weeks, nothing much has changed.
However, two key situations are in play that I should address here: -
- USA – DONALD TRUMP PRESIDENCY:
The dysfunctional politicians in Washington are hell bent on ensuring that the GOP is distracted from all policy initiatives by initially stalling on cabinet appointments and now the Russian enquiry has superseded all other events with President Trump’s naivety in politics being exposed by career politicians. From the outside looking in the Democrats have decided the best policy is stall and then look for enquiry after enquiry to distract. I must admit Trump may have been able to lie and get away with matters in the TRUMP organization but he cannot do the same as President. He appears to stumble into one elephant trap after another and now he looks clumsy and inefficient. The twitter rants from my perspective does his defence no good it just makes him look childish.
I am absolutely convinced had HILLARY been victorious the GOP would apply the same tactics to the Democrats as they currently apply to the GOP and TRUMP.
So whatever your political persuasion in the “states” you must be frustrated if GOP and delighted if a Democrat supporter. Should “THE DONALD” be impeached or whatever (and that looks a long shot at the moment) and subsequently over time a Democrat returns to the White House., I have no doubt the GOP will frustrate the crap out of the Democrats and the new Democratic President would feel like they were in a log job. Basically; a role reversal.
A great example of democracy in action for the less well off in the world to gaze on at and laugh at.
From a trading perspective, so much has been promised and moves have happened based upon scenarios that look like a pipe dream at the moment.
The attention had been taken off the FED for some time and attention placed at the door of “THE DONALD”. Uncertainty lies ahead; BIG uncertainties. I do however believe we have a small window in 2017 to make pips before Central Bank normalization spreads. I tackle this later on in section 8 of the blog.
- THE UK – SNAP GENERAL ELECTION:
In the UK. Theresa May the UK Prime Minister bet on increasing her majority in the House of Commons to strengthen her position through the BREXIT negotiations by calling a snap general election. She failed. While she still has the largest party in the House she does not have a working majority. She is forming a strategic voting alliance with the Northern Ireland Democratic Unionist party, which Sinn Fein leader Gerry Adams has already said that such an alliance is in breach of the “Good Friday” agreement between the IRELAND and the North. Deep joy. This has legs and frankly, like it or not I can see another UK election in 2017.
From a trading perspective, the cable is rather difficult to really be convinced one way or the other 100%. I talk a little more about this towards the end of this section of the blog.
So back to last week, in particular Wednesday…
The equity markets appear to be in denial over TRUMP. Now we have consumers weighing in. Sales and CPi numbers were a disaster and the USD was taken to the woodshed.
Later in the day, Janet Yellen held a press conference after a well predicted and baked in 0.25% rise in FED funds rate was announced. The Yellen press conference was a HAWKISH AFFAIR, the FOMC appear hell bent on raising rates and have “something behind the clock” in the event that the TRUMP administration collapses on the back of an impeachment trial, resignation or US recession or the like of something similar that would cause markets to jitter.
From my perspective; data dependency and how the rest of the world looks economically are now both out of the window as reasons not to hike anymore. Even Janet Yellen who sounds DOVISH when delivering HAWKISH sentiments put all that behind her and went for the HAWKISH tone right through the statement, opening remarks to the press conference and basically when answering questions afterwards.
The result of this break from normality, especially when she talked openly about reducing the FED‘s balance sheet, sent the USD higher reversing the losses resulting from poor sales data.
Following this rate hike and confirmation that the FOMC want at least one more this year plus the balance sheet reduction and proposed further rate hikes in 2018, does this mean that Central Bank convergence trade is now on?
Read my thoughts on this later in THE SOAPBOX.
Then Thursday brought in Mark Carney with the latest BOE policy summary, MPC vote and Bank rate announcement.
No surprises with the interest rate remaining at 0.25%, but the vote to remain unchanged instead of being 7-1 as usual was now 5-3. This caused cable to rally 100 pips in a matter of seconds. During the day, it gave back 50% of these gains but the card is now marked. My thoughts on cable are changing. I am like a child on Christmas morning with two toys I want to play with but I can only play with one at a time. I want to be both short and long cable.
BREXIT has not yet started and part of me things that cable still has a lower level to test first. My other side tells me to buy a dip and get long because there are thousands of pips across the cable crosses to be made.
- THE WEEKLY FX DRIVE THRU – LIVE WEBINAR:
I am happy to announce that the WEEKLY LIVE WEBINAR series will start again on: -
Monday 19th June at 5:30PM EST
- To attend live - you need Google Chrome as a browser.
- You cannot view on smart phones or tablets, only Laptops and Desktops.
The “LIVE WEBINAR” link is below: -
If you cannot listen live you can check out my You Tube channel,
Scott Pickering Weekly FX Drive Thru for a freshly posted copy of the webinar, usually, within a couple of hours of its completion.
Here is the link for my you tube channel, when I get to 100 subscribers (if I get there) I can have my own personalized shortened link. If you like the style of my webinar, please subscribe. The benefits are that as soon as a new webinar is posted you are emailed.: -
- THE FX MARKET PLACE:
THIS WEEK’S ECONOMIC DATA RELEASES:
MY THOUGHTS ON THE ECONOMIC DATA EVENTS THIS WEEK:
Looking at what is on the timetable this week really has me focused on just two currencies, Cable and the Kiwi dollar.
- NZD: I am not expecting the RBNZ to move on interest rates but the comments from Graeme Wheeler (CB Governor) will be interesting to follow.
In the past Wheeler has eluded to the fact that about 80% of the movement in the NZD/USD exchange rate is out of the control of the RBNZ.
My problem with Wheeler is that his press conferences remind me of my banker’s days of old when the chaps would just sit around and see who could load the most plums into their mouths and talk with a “lardy-da” accent to try and sound the most upper class as possible. (BOC meetings are very similar). These thoughts deflect my attention… However, when I read any of the statements they are so low on content anyhow maybe they are loading up the plums!!
Bottom line; if Wheeler wants the exchange rate of the NZD/USD closer to 0.6500 than 0.7500, which he has said is preferred, he needs to deliver an unequivocal without possible mis-interpretation language to the chaps in the room knocking back either a Central Otago Pinot Noir or Marlborough Sauvignon Blanc. If previous meetings are anything to go on, he seems unable to deliver on this. He may be a great host on the vino but communicating his policy not so good.
Let’s see what happens this time.
- CAD: Both Retail Sales and CPi this week.
The word on the street is that the BOC could be raising rates. This is not surprising given the geographical proximity to the USA.
Is the Canadian economy ready for a rate hike, that is the question?
It may do something to slow down the housing squeeze but 0.25% is feck all in the grand scheme of things in my opinion.
Certainly the CAD economic data appears to moving in the right direction, although one should not get carried away. Only four months ago Stephen Poloz the BOC Governor was talking about rate cuts!
Should WTi drop below $40.00 a barrel rate hikes will be off and the BOC will have to re-think its strategy away from saying everything is transitory!
If these numbers miss. The CAD will weaken a great deal as the markets will rule out a rate hike. However, strong data opens up a whole new ball game for BOC especially if OIL falls through $40.00.
USD MAJORS – SUPPORT & RESISTANCE LEVELS TO NOTE THIS WEEK:
The charts below contain commentary (my thoughts and views), these are the USD major charts that are reflected in the spreadsheet above.
- THE PREMIUM SERVICE:
WHAT IS THE PREMIUM SERVICE?
The PREMIUM SERVICE is a subscriber based Forex support service offering not just trade set-ups, but a bunch of different support services that differentiates the PREMIUM SERVICE from other providers, my competitors, that operate in the same space.
Full details of the PREMIUM SERVICE and costs to subscribe plus the various trade styles and how suggested trade set-ups are communicated can be found on my website landing page at www.weeklyfxdrivethru.com by selecting THE PREMIUM SERVICE tab.
Further information can be found by clicking TESTIMONIALS, PART-TIME TRADERS and FX PROMOTIONS tabs. To subscribe to THE PREMIUM SERVICE, you will require a valid credit card.
PREMIUM SERVICE PERFORMANCE YEAR TO DATE:
So; if nothing else, I tell it how it is. I am only currently at about 30% of my target for this time of the year. I had a poor start to the year and I have yet to recover.
In 2014, 2015 and 2016 I beat my 10,000 pip per annum objective. There is nothing stopping me doing the same this year as my house move and vacation are both behind me. I will be trading pretty much full time from now on through to the end of 2017. The opportunity to make pips with me is there and as you will see later in this section and on my webpage, I have a special promotion that expires at the end of June called “DOUBLE IT UP”. If you want to be a part of what I hope will be a storming end to 2017, look at my promotion and website and get subscribed. I mean business from here on in.
CURRENT PREMIUM SERVICE PERFORMANCE:
MONTH TO DATE: +515 pips
YEAR TO DATE: +1,717 pips
If you would like to know a little more visually about THE PREMIUM SERVICE please feel free to watch the following 40-minute video via the link below:
PLEASE NOTE: the above video is best viewed using a Google Chrome browser.
DO YOU WANT TO JOIN THE PREMIUM SERVICE?
There has never been a better time.
PREMIUM SERVICE – SUBSCRIBER PROMOTION:
“DOUBLE IT UP”
I usually run a PREMIUM SERVICE subscriber promotion at the end of the old year /start of a new year.
Because I knew that this year I would be moving home and traveling in Q2, I deliberately decided to wait, to launch a promotion around the time my trading activity would be at its lowest.
This is the biggest and I believe the best subscriber promotion that I have ever offered.
What is “DOUBLE IT UP” all about…
Basically, from now until June 30th, 2017 anyone who subscribes to the PREMIUM SERVICE through my “SUBSCRIBE HERE” tab at the top of my welcome page will have their subscription period doubled at no extra cost.
In addition, all subscriptions regardless of the date of subscribing will not start until June 30th 2017.
This means that from the day of joining the PREMIUM SERVICE you will have 100% access. This could give you up to an additional 12 weeks of membership to the PREMIUM SERVICE depending upon the date you subscribe.
This 12-week period covers the period that I am moving home and traveling, and therefore there may be days at a time with zero activity, and there will be some because I will be out of coverage and simply on vacation, but it’s all “FREE” in any case, so whatever happens, it is all a bonus anyhow as your subscription period will officially commence June 30th 2017.
Confirmation of the “DOUBLE IT UP” will be contained in the “welcome on board documents” the accompanies your subscription confirmation.
This is the best and most generous promotion that I have ever offered since starting the PREMIUM SERVICE and I hope that many of you take advantage.
IMPORTANT TO NOTE: Joining the PREMIUM SERVICE now on a 10-week subscription gives you a 20-week subscription period with THE DOUBLE IT UP promotion. This basically covers 2017 in total when you allow for the summer break and the delayed promotional start of your subscription period. At CAD$1,000 this is a great opportunity and fantastic value.
Below are the dates of the DRIVE THRU blog for the remainder of this year, 2018 and 2019.
- WANT A FREE PREMIUM SERVICE SUBSCRIPTION?
If you would like to be in the monthly draw to win a “FREE 10-WEEK SUBSCRIPTION” to the PREMIUM SERVICE, valued at CAD$1,000.00, all you should do is subscribe to receive this FREE NEWSLETTER on my website www.weeklyfxdrivethru.com
This can be done as follows: -
On my welcome page just below my cube logo is where you complete your subscription.
- PREMIUM SERVICE – SUBSCRIBER CONTENT AREA:
(Only SUBSCRIBERS to the PREMIUM SERVICE can view this section of the BLOG)
- THE SOAPBOX:
IS THE CENTRAL BANK DIVERGENCE TRADE FINALLY IN PLAY?
Before starting this piece I thought that I would look back over all the previous blogs and establish the period that I first started talking about Central Bank divergence. Firstly, it was in the time that Ben Bernanke was FED chairman and it was in Q2 2013, I got serious about it Q4 2013 leading into 2014 and the same again in Q4 leading into 2015 and again Q4 2015 leading into 2016. I am nothing but consistent.
So; here I am again Q2/Q3 2017 what has rattled my cage this time?
It is quite simple really, well I think it is. Here is my logic.
- The FED is normalizing and looks hell bent on continuing to do so for the remainder of 2017 and into 2018. By the end of 2018 the FED funds rate should be closer to 2% maybe 2.5%.
- At the FOMC press conference last week, the “UBER DOVE”, Janet Yellen even openly discussed reducing the size of the FED’s balance sheet. She talked about an approximate start date and how it would proceed over the coming two/three years.
- Economically from an inflation perspective the UK, Canada, Australia and New Zealand are all moving upwards.
The Deputy governor of the BOC announced that the BOC are looking to raise rates sometime later this year.
Last week the BOE MPC announced that the vote on maintaining interest rates steady at 0.25% was 5-3 in favour. The market was expecting 7-1. The pressure on the UK to raise rates is therefore growing.
In Australia the economy is booming. The pressure to start raising rates is increasing and one could argue a similar case for New Zealand.
It is all about the timing.
- The exceptions at the moment are the ECB, BOJ and SNB.
Firstly, the ECB is a complicated beast. One could argue interest rates in Germany should now be at 2.5% - 3%. However, you could also argue at the same time rates for the like of Italy, Greece and Cyprus should be 0%.
Here lies the fundamental problem of the EUROZONE.
Mario Draghi (ECB President) has virtually an impossible conundrum to deal with trying to balance the needs and requirements of the 19 countries that make up the single currency block. He has stated that nothing will change on monetary policy until the end of 2017 at the very earliest.
With regards to the BOJ and SNB both central banks are not looking to amend interest rates this year.
Therefore, as the second and third largest central banks (ECB and BOJ) behind the FED will not be changing their policy on interest rates any time soon, we could have a window of opportunity. How long in time is this window? I believe up to the time that the FED starts to reduce its balance sheet size. Conservatively between 4 -6 months in my opinion.
As soon as the FED really kicks into its normalization policy the pressure on the BOE, BOC, RBA and maybe the RBNZ to act will grow. Having said this, as the USD strengthens because of FED policy, the other cross currencies will weaken and this will help economies in the short term but inflationary pressures will grow because of currency weakness and will need to be addressed when levels more than 2% are reached. In fact, prior to 2% most Central banks would want to act.
The BOE has inflation at 2.6% currently in the UK to cope with, hence the MPC votes 5-3 on the current 0.25% interest rate. But given the BREXIT uncertainties Governor Carney does not want to interfere anymore until greater clarity on the negotiation process is known.
I believe in the short- term governments and central banks will welcome divergence from the FED, but into the medium-term they would be forced to act and normalize themselves.
Therefore, assuming my thought process is correct, we should see the DXY move back towards and above the psychological level of 100.00.
It will not be a straight line there will be twists and turns along the way as economic data is released.
The obvious trade is short EUR/USD. Initially to give me confidence we need to see support 1.1100 broken. This should lead lower to 1.0950. This would be a correction that breaks the recent series of higher lows that we have seen the low of 1.0340 was hit in late 2016.
I am expecting a pullback in equities to coincide with moves in the USD and when you add in the TRUMP policy uncertainties I am not certain at this stage how the USD/JPY would react. There are plenty of other pairs and cross- rate pairs that would be attractive moving forward.
So as you can see we need to see a move in the DXY and EUR/USD to trigger my plan on divergence. Over the coming few days I will have my TRADE PLAN revised ready to go.
- CLOSING THOUGHTS:
Nothing more to add here, I have said enough except,
Always remember longevity in Forex trading can only be achieved through trading with good RISK and MONEY MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility.
The Pip Accumulator
BLOG VERSION: #241 FREE NEWSLETTER
DATE: 18th June 2017.