A very quiet week when all said and done. I think it was last Thursday morning when I tweeted out that I had thought my machines / screens had frozen. Trading in the “summer doldrums” is here.
This is the time of year that I review my annual performance so far, look at my TRADE LAN vis-à-vis target currency pairs and objectives, then revise my strategy into the year end.
I have started this process and already I have a huge dilemma with cable (GBP).
- Should I be long or short?
- How will the GBP cross-rate pairs play out given my thoughts on equities?
- How will the GBP cross-rate pairs play out given my thoughts on commodities?
I thought it may be interesting to document some of these later in the blog.
- LAST WEEK – MY TAKE ON SOME KEY EVENTS:
Over the past week or so I have been settling back into a routine in a new time zone, new office and a new desk layout.
It was a light week with regards to activity although a couple of events caught my attention.
Those of you who attended last Monday’s WEEKLY FX DRIVE THRU – LIVE webinar, will recall yet another one of my soapbox rants on OPEC and FRACKERS. I am getting way too predictable albeit, I will say it because no-one else will “I AM RIGHT”.
As mentioned on the webinar my old Economic teachers / professors “Woodsy and McCabe” would be proud of my “SUPPLY & DEMAND” logic. It was relevant 40 years ago and still is today.
Let me be brief and to the point: -
OPEC is not a functioning cartel. It is a collection of self-serving countries still trying to hold the world to ransom on a commodity that is dying. In the good times, the good old days, incomes generated through OIL were more often than not squandered. Now the OIL price in my opinion given the improved technology around the world for extraction techniques is has a price limit ceiling no better than a $60.00 per barrel price at best.
The US “frackers” have benefited the most from extraction economies of scale and this will, in my opinion, keep a lid on price extremes. As soon as prices rise, more frackers enter the marketplace and bring up supply and this keeps prices lower. Costs to produce versus not to produce are now more manageable than ever for “frackers”. No longer are there outrageous costs to open / close production so it is almost getting to the equivalent of flicking a switch.
Into the future OIL is going to become less and less important vis-à-vis cars. The move into Hybrid is here to stay and “self–generated” powered cars are the future.
The OIL market is frankly a corrupt, speculative and manipulative market played in by a few. The penny has dropped for several players of late as the movements in market prices are tighter. Not such a lucrative a playground as it used to be.
Just my thoughts and my view from “THE SOAPBOX”. No doubt this coming Monday if I show a USOIL chart, I won’t be able to stop myself!!
Graeme “fecking” Wheeler. Now the flute has no “fecking” problems with the valuation of the NZD against the USD being at c. 0.7300.
Holy Mother of God, I know he steps down as governor of the RBNZ in September, but to be in holiday mode in June is a little early even by my own playbook. I have stated for years that central banks are like huge oil tankers that take 3 or 4 miles to stop moving forward never mind require a turning circle of a mile or so to reverse course. They are not quick to do anything.
Has the RBNZ decided to change policy?
When reading the statement, it appears not.
I am therefore at a loss as to why he did not jawbone the price lower. Technically 0.7320-0.7350 is a huge / massive level to pass through and should the NZD/USD achieve this, a great deal of my TRADE PLAN for the remainder of 2016 may have to be re-thought.
At the moment, I know that there is a “carry trade” effect in place given the NZD interest rate differential but that is not longer-term sustainable in my opinion. In addition, I know that the cross-rate flows through the AUD/NZD also really pull at this currency.
However, having said all that, the lack of verbal intervention from the RBNZ was a puzzler.
Just to give you full disclosure, Graeme Wheeler is off both my 2017 Christmas Card lists; paper and digital.
Following the comments made by the “Deputy” governor, not “yer man” Poloz the actual governor, this currency has strengthened across the board. The comments indicated that the BOC were close to changing policy and raise interest rates rather than remain dovish.
This week we had Retail Sales which were a beat to add fuel to the move lower in USD/CAD, and the following day CPi missed and the USD/CAD weakened.
So mixed data.
Given the fact that Oil is heading towards $40.00 per barrel, from my perspective I would not be betting my home on the BOC raising rates in the next 3 months or so. If there is one thing that I have learned living in Canada is that it is the most Conservative country that I have lived in, so much so the C in Conservative is font size 72. Canada is a reactive rather than a pro-active country in regard to most aspects of everyday life. The BOC reflects this.
The negotiations have started in Brussels. I believe we must remain alert 24 x 7 for comments made by UK or EU politicians plus the Brussels bureaucrats. Validated or unconfirmed comments will move the markets instantaneously and will affect both the GBP and EUR currency.
As diplomatically as possible:
The current US President is a liability to himself, and the people around him, never mind, world stability and the markets.
His constant tweeting, and I can understand at times why he does this given the biased US TV coverage, creates not only more fuel for the TV networks to debate but has a destabilizing effect and creates uncertainty in the markets. His approval ratings as a result suffer badly fueling the fires that surround him.
From a trading perspective he is a bloody nightmare, totally unpredictable and most of the time his comments in my opinion are ill founded and tantamount to a spoiled child lashing out.
- THE WEEKLY FX DRIVE THRU – LIVE WEBINAR:
My webinar last week did not record and I could not therefore distribute it.
The lesson therefore is, attend live!!
Seriously though, I could not, nor could my software provider give me any reason why it did not record.
The next WEBINAR is on: - Monday 26th 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: -
(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:
The economic data releases this week are minimal once again.
- EUR: Following the PMi releases last week for the EUROZONE as a whole, (Services missed but Manufacturing beat estimates), this week a more favoured barometer by the markets is the “Ifo” data from Germany.
From my perspective this is why the markets, especially in the US do not understand the EUROZONE. They focus on Germany, which is OK but Germany is not 100% what drives the ECB and Mario Draghi. If it were interest rates would be about 3% in Germany right now, but by the same token about minus 2% in Italy!
Nevertheless it is what it is and follow it I must given the position of the EUR/USD closing in on a confirmed break above1.1200.
From a number perspective, above 114.6 which was the previous number and will be viewed by the markets (rightly or wrongly) as an improvement in the EUROZONE.
- USD: Consumer confidence numbers are critical for a consumer driven society like the US. If this number is below 117.9, which was the last level, this will have a negative effect on the USD. Above this level and this could be the catalyst to spark the USD “lack lustre” performance of late despite having increased rates.
Increasing Interest rates can obviously affect this data but more usually this is reflected in CPi rather than confidence data. One could argue that increasing rates shows a strong and resilient economy that should inspire confidence. I cannot believe I just wrote that with “THE DONALD” as president.
- GBP: The current account data is often put to one side as accountant only data. Given BREXIT and its implications this is now most definitely not the case. The capital flows in and out of the UK are mission critical for the BOE and the government.
The City of London moves by banks and other financial institutions away from London and into mainland Europe / Dublin have a direct effect on the current account. Sometimes instant, but mostly gradual and in my opinion should be noted.
- CAD: GDP this week will in my opinion provide the ultimate test of whether the BOC raises interest rates or not. I am highly skeptical based on the falling OIL price but this number could kick start CAD weakness or send it sub 1.3000.
It is a backward looking number and no doubt the BOC know the result, but it still has importance.
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:
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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: +911 pips
YEAR TO DATE: +2,113 pips
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This promotion is now entering its final week.
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.
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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.
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- THE SOAPBOX:
GBP – IS IT A LONG OR A SHORT TRADE?
I have to say, on or about the anniversary of the historic BREXIT referendum vote, I never thought that I would be caught in two minds over the direction to trade the cable.
As PREMIUM SERVICE SUBSCRIBERS are aware I have in play 3 x long GBP commodity cross trades with two more limit orders in place to trigger, plus GBP/USD and EUR/GBP trades as limit orders as well. That is potentially 7 trades in total.
These trades were placed last week or before last week, so why am I now in two minds, what has fundamentally changed to place me in this dilemma?
I do not want to write pages and pages on this, but essentially, I am torn between being either long or short over the following: -
- The overall uncertainty that surrounds BREXIT.
- The MPC vote 5-3.
- UK inflation in the economy at 2.9% (BOE target 2%).
- Carney’s mansion House breakfast speech being so dovish.
- Haldane’s economic based response to Carney.
- The initial EU response from the Brussels bureaucrats who are basically negotiating on behalf of the 27 member countries.
- UK unemployment is low at 4.8%.
- GDP and PMi data very resilient all things considered.
- Theresa May’s long term position looks more and more in doubt. Another general election looks odds on for the Autumn / Fall.
- Wage growth is still a “lagger” at 2% households are being squeezed.
- UK debt to GDP is very high circa. 90%.
Some of the above are positive and some are negative. I was going to list them by positives and negatives, however after some thought I decided just to list them as they came out so that you can appreciate the back and forth thought process!
Up to a few weeks ago, my plan was very much around the fact that BREXIT UNCERTAINTY trumps all other factors. Then we had the MPC vote at 5-3. Did this influence me too far the other way?
As you may know I am a longer-term trader if the truth be told, albeit at the moment, I am having to sit on my hands so as not to exit or take profits on trades too early given the way this market is currently performing. My drawdowns are higher than usual but I have adjusted my TRADE PLAN to accommodate this change.
To help explain my dilemma visually, the following seven charts show the levels that interest me, and my comments / thoughts are contained on the charts. Whilst these may add to the confusion at least they give me levels to watch out for.
Because we have come off the back of a very bearish Mark Carney many of the charts are more bearish now than what they were a few days ago. On all of the charts I have tried to indicate my bull / bear lines in the sand to move forward from.
Whilst these are technical levels and should not be ignored, my overall thoughts are that in times like this with such huge fundamental news, fundamentals trump Technical’s. You may of course not agree with this but the moves on the back of a fundamental shift are potentially massive.
As with all matters Forex, patience will be key here moving forward.
- 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: #242 FREE NEWSLETTER
DATE: 25th June 2017.