Things are now starting to take shape in 2017, I am still in transition with trades and this will continue throughout Q1 but as things stand today the losses incurred in January are now almost gone as February has progressed.
The markets are still skittish towards whatever “THE DONALD” says, factual or not and despite some blow out U.S. data the USD is still somewhat on the back foot. My only thoughts to support this are; uncertainty about the TRUMP policies and the administration’s abilities to see them through and possibly the bulls**t that Yellen spouts time after time about all FOMC meetings “LIVE EVENTS”. We all know that she is ultra-dovish and she has strung along the markets for month after month to retain credibility, I think that now with such good undeniable data in front of her, it is time to walk the walk and not just talk the talk. Therefore, I hate to say this, but I think that the DXY will range until the March FED meeting… sorry to be the bearer of possible frustrating news.
Janet Yellen’s testimony to both house committees last week was hawkish in both tone of comments and in the main with her answers to some tough, but mainly routine stupid questions that she was asked (Yes, you do not have to be the brightest button to get elected in the U.S. There are examples at every level!).
Logically speaking and I know that one cannot apply logic to the Forex market, the USD (DXY) should have been blasting through towards 103.00. It reached a high of 101.72 on day two of Yellen’s testimony than started to fall back through 101.00 towards initial support at 99.77.
As stated earlier I do now think it's a walk the walk time for the FOMC.
Other news during last week was as usual focused on the EUROZONE and BREXIT.
I remain bearish on both. I do believe it will be a choppy affair moving forward. Every now and then we will see a dive lower in price. It all depends on what event triggers the move lower to see if there are buyers available that see a value in either EUR or the GBP at new lower levels. So far moves lower have found support at 1.0350 for the EUR/USD and just below 1.2000 in the GBP/USD. Whilst I think these levels will both the broken, normal price action at the moment is not having the impact to send prices lower. I had thought that Yellen’s testimony would have been an initial push but alas not.
If you are short like myself, you must be frugal and patient; managing your RISK at all times.
UK and AUD jobs disappointed the markets when the numbers were dissected and analyzed in detail. Of annoyance to me was the Aussie jobs data. I was expecting a blowout number to take my AUD/NZD trades towards 1.0800. Thankfully I removed with the PREMIUM SERVICE a AUD/CAD long trade earlier in the day, so as not to have too much AUD exposure heading into the news. It was removed with $$$ on the table so at least that was something, given the fact it pulled back to around my initial entry point.
Perhaps “being an ex Brit”, the strangest event last week for me was the astonishing speech given by ex UK Prime Minister Tony Blair on Bloomberg TV. It was quite bizarre; given his failings on WMD (Weapons of Mass Destruction) taking UK troops to their death in Iraq, his failings as a UN peace envoy in the Middle East, I wouldn’t say that the UK Population have him on the top of their Christmas Card lists. Tony Blair was so far up George W. Bush’s ar*e, he was solely responsible for Bush not being able to walk in a straight line!
Back to the point…
Basically, Tony Blair was saying that the UK could still avoid a BREXIT. At the 23rd hour, 59 minutes, 59.9 seconds through the process he now decides to speak out…why now?
Blair is a career politician. He tried this ploy just after the BREXIT result came through. He was removed from the spotlight because the UK economic data continued to remain good and, in fact, following the devaluation of sterling in the currency markets in some areas it improved. He waited for the wash through of data to occur and on the day that UK Retail Sales dipped after the Christmas rush and increasing prices hitting households following currency re-valuations and small inflation signs, he decided now was the time.
He wants another referendum based upon the terms of the BREXIT. This is never going to happen, because the EUROPEAN UNION has made it clear that A50 needs to be triggered first before any BREXIT negotiations can begin. This makes sense. Therefore a referendum based on the “Blair” idea, is a non-runner.
Blair is therefore merely an ex failed politician, given airtime because he is an ex. Prime Minister, his speech is just an unnecessary distraction given current UK Prime Minister’s Theresa May’s BREXIT timetable, which if still on schedule means that A50 could be triggered as early as March 9th.
If Blair believes that people will rebel en mass and demand a wait and hold and then a re-vote on EU membership he must be smoking something illegal in my eyes given the timetable of events.
It was as bizarre a media event as “THE DONALD’S” press conference the day earlier last week.
I have mentioned for the past two weeks that I was going to focus in this week’s blog about my transition trades as I adapt to these changing markets. I am not ready. This will appear when I have the total plan in place.
I tried looking for factual follow-ups on FXCM, but I drew a blank, maybe I was just not looking in the right places. I, like a lot of people are fascinated to see did FXCM have the equivalent of a “run on the bank” worldwide, after the U.S. termination?
Still some more…
THE WEEKLY FX DRIVE THRU – LIVE webinars.
Now up to #5 this Monday. The software still gives me the creeps at times but I am now more comfortable with the content and the time 30-35 minutes in length. This is long enough for me and probably too long for you guys with my Liverpool accent.
#5 is on Monday 20th February at 5:30PM
- To attend live - you need Google Chrome as a browser.
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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.
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Finally, in this section…
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- THE FX MARKET PLACE – LOOKING FORWARD:
NOTE: This year, 2017, I am not going to look backwards in this section only forwards. News items / points of interest from the prior week will be covered in the introduction.
ECONOMIC DATA RELEASES:
MY THOUGHTS ON THE WEEK AHEAD:
Just a couple of items catch my eye this week: -
- USD: FOMC Meeting Minutes – these should be hawkish. Given the statement at the time plus Janet Yellen’s recent testimony to both houses re the “Humphrey Hawkins”.As long as we can start to see a consistency this should be good for both market confidence and sentiment. It is the one step forwards two steps back approach that has often confused and created uncertainty. The markets are like 4-year-old children; small words, clear, no grey just black and white.
- AUD: I am looking for consistency and confirmations of policy from the RBA. Philip Lowe (Governor) speaks twice this week and we also have the release of the minutes from the last RBA meeting.
As always bear in mind it has been news rather than economic data moving the markets so check twitter for tweets from “THE DONALD” and be aware of the BREXIT and EUROZONE possibility to deliver geopolitical news at any time totally unannounced.
USD MAJORS – “IMMEDIATE” SUPPORT & RESISTANCE with TREND:
No charts this week, I am travelling and do not have the technology.
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- THE SOAPBOX:
THE FED HAS “TALKED THE TALK”
NOW IT’S TIME TO “WALK THAT WALK”
Regular readers and followers will know that over recent years following Bernanke, I have at times been critical of Janet Yellen’s chair at the FED
She is “ultra-dovish” and in my eyes, she always will be. As I have written on many occasions it is much easier and somewhat safer to be a DOVE rather than a HAWK. This is fine when an economy is in poor shape and requires support.
However, in transition, a central bank does NOT want to get behind the various economic curves. It is a science beyond my pay grade knowing when to press the button to move. As a trader, I take a simple view based upon data sentiment over a 3-month period.
I know that Central Bank’s operate in much larger time-scales, but this is in respect to longer-term goals, perspectives based upon their mandates set out by their governments. Central Bank governors, do have huge power, some of them also have huge egos to match the power but we should not lose sight of the fact that they are employed to manage and maintain economic stability, remove uncertainty and provide the markets with a clear monetary policy moving forward based upon key success factors upon which they are measured.
I can go deeper but the nuts and bolts of the job are quite straightforward. Policy, stability, no uncertainties, clear projections and no bullsh*t. Sadly the bullsh*t is part of the job and we can all smell it, at times it is an insult to our intelligence that central bankers believe that they can pull the wool over our eyes.
Back to the FED…
For months, the U.S. economic data has been generally good, the odd blip here and there but really good overall. If we are to believe the unemployment data, the U.S. is almost at full employment. Inflation had started to murmur ahead of “THE DONALDS” arrival in the White House.
For the past two years, the FED have only raised rates once a year in December 2015 and 2016. In 2016 the infamous “Dot plots” were signaling two, maybe three rate hikes, but we only saw a single rise in December.
In December 2016, the FED “dot plots” for 2017 showed their economic projections signaling 3 rate hikes in 2017. Within a month of the data release for 2017, the FED were down-playing three hikes to two or maybe just one!
Since then we have had continual blow out numbers, jobs, confidence, sentiment, sales etc. I asked myself what the feck is going on at the FED what the hell are they looking at? Are they going to use the BREXIT or EUROZONE headwinds as an excuse not to raise? Will they find other geopolitical news to promote a hold back?
With such good data and Ben Bernanke’s last words in my ears “The FED will now revert to normalization in the markets” had Janet Yellen showed any hesitance at all in acknowledging bloody good data, I was going to exit all USD long positions and only trade cross rates for the remainder of 2017.
As we know… she delivered.
But this is only part one of the story.
OK, we get it every FED/FOMC meeting is LIVE. But it’s now about time to lead the markets, stay ahead of the curve and deliver rather than keep stringing the markets along for a year with a rate hike at the last possible moment which looks more like saving face than anything else.
Credibility is a vital trait for a Central Bank to have. Without market credibility, they are not taken seriously. Look at the BOJ for example. The SNB is getting the same way Thomas Jordan needs to show muscle.
Do I think that the FED is losing credibility?
I do think it’s come close on occasion but we are now at limits never seen before, the data is so good. We have a TRUMP administration hell bent on a spend, spend, spend campaign which should produce inflation over the next 12-18 months. The FED needs to be ahead of the curve.
Will Yellen deliver a rate hike on March 15th 2017?
If she does, it places 3 x rate hikes on the table for this year and shows that there is central bank confidence in the U.S. economy. At the moment, the neigh-sayers have had the opportunity to allow doom and gloom to hang over events by stating that the FED is looking at something that we cannot see. A rate rise removes this.
From a trading perspective, a FED rate hike should initiate the fact that two more are on the way and that central bank monetary policy divergence is now in place across the major central banks.
This gives us a USD long trade. A sell the rips approach or buy the dips approach to the USD. Combine this with the EUROZONE headwinds and BREXIT uncertainties and we have parity calls in place for the single currency and sub 1.2000 for the cable.
I know that I am early to the party with this article but the testimony last week has really focused my mind and broadened my awareness and horizons for my TRADE PLAN beyond Q1.
It sounds simple. But trading will still be difficult, although we should have direction. Remember, nothing goes in a straight line it will be choppy inside new ranges until they are broken and new ranges established. I do see us stepping lower in EUR and GBP currencies and the DXY moving above 103.00 and maybe with severe traction looking at the 115.00 –120.00 area once again.
The one currency pair that I am not so sure how it will react is the USD/JPY. That is for another day.
- 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.
Take care, have a great trading week.
The Pip Accumulator
BLOG VERSION: #232 FREE NEWSLETTER
DATE: 19th February 2017.