A nice start back to full-time trading and this is my 250th WEEKLY FX DRIVE THRU blog. Holy Feck…I never thought I’d still be alive never mind reach 250 posts!
It was a great first week back with +325 pips being banked. What is annoying is that I let over 150 pips or so fall through my fingers…argh!!
Like every trader, you try your best to leave the woulda, coulda and shoulda’s behind. Hindsight is just a wonderful thing. Nevertheless, I think it was Bernard Baruch who said, “Nobody ever lost money taking a profit”; so with those words fresh in my mind, I will shut up.
The pips are starting to accumulate as I head towards my annual net 10,000 pips target. My house move, a month’s vacation to Australia and New Zealand plus my summer break are all in the rear-view mirror now. If you are considering joining the PREMIUM SERVICE no better time than the present.
- I am on my charge to reaching 10,000 pips before the year end. There are risks attached but I beat my 10,000 pips target in 2014, 2015 and 2016, no reason why I can’t do it again to make 4 years in a row (Check it all out on my website weeklyfxdrivethru.com under the tab HISTORY & PERFORMANCE).
- I have a great new subscriber promotion to the PREMIUM SERVICE offer available (Full details in Section 4 of this blog and on my website weeklyfxdrivethru.com under the FX PROMOTIONS tab).
- My buddies at VANTAGE FX are ready for you if you don't have a great broker or you want to add a separate broker for PREMIUM SERVICE trades (Just click the link to VANTAGE FX on my website weeklyfxdrivethru.com ).
Geopolitical themes still rule like an iron fist hovering over the markets. Kim Jong-Un has still not bent the knee, although “THE DONALD” has wound back his rhetoric thank God. Speaking last week after visiting the devastation caused by “HARVEY” he appears to have pushed China to act to give North Korea a good slapping.
Two visits into Texas, however, I am not sure we will see “THE DONALD” down in Florida for a while at least until after the winds of hurricane “IRMA” have died down and moved off to sea. Could you imagine the cost of the US Navy trying to locate his syrup somewhere in the Atlantic?
Joking aside and not ignoring the tragic human costs of these storms, the financial cost coupled with basic turmoil within the TRUMP administration, the lack of relationship between the White House and Republicans and now deals being done between the White House and the Democrats feed a giant WTF in BOLD font size 144.
Do we have a “FREELANCE” presidency in the U.S.?
Think about it.
The Republicans in Washington have been in opposition for 8 years. They control both houses of legislature, yet they so in dispute with each other they cannot organize themselves to pass a single election promised piece of law. Republicans appear to be nothing more than self-serving career politicians that cannot unite on a single policy and they have control of both houses… they could really motor on.
The Democrats are not much better. Still whining on about losing the election to TRUMP. They have adopted a policy of non- agreement, zero partisanship. They have not sought out a leader to challenge at the next election. All they do is moan TRUMP this and TRUMP that. When the next election comes around they will have no one effective to stand because of their blinkered approach on disruption rather than being solution focused. I see this all-over Facebook and Twitter. Nothing has been learned since the Hillary Clinton elitist approach near the end of the 2016 campaign was poo-pooed by the unsullied.
So, TRUMP’S move to by-pass the Republican shambles and do a deal with the Democrats over linking the debt ceiling to the Hurricane costs was either a brilliant strategic manoeuvre and a clear demonstration of his will to get things done and by-pass the party machines, or, it was a nail in the coffin for all his election promises ever being fulfilled.
What it has done in my opinion is solidify his base support. It shows a clear desire to get stuff done.
Will this be the first of many such moves?
The American system encourages dysfunctionality and that it basically what we have seen since 9-11 in American politics. Watch this space.
Janet Yellen’s deputy at the FED, Stanley Fischer is stepping down next month for personal reasons. If Yellen decides enough is enough and does not carry on next January, we could have a new look FED in place…. a TRUMP FED.
My thoughts are mixed for the markets, could this mean any year end hike is off based upon the fact the “old guard” would step aside and let the “New kids on the block” decide upon future policy? This point will no doubt be debated heavily in the coming weeks.
- LAST WEEK – MY TAKE ON SOME KEY EVENTS:
In no particular order, here is what floated my boat last week.
EUR: ECB PRESS CONFERENCE.
Mario Draghi, God love the poor fecker… He tried his best with a straight face to try and convince the markets that he could sell them a DOVISH MONETARY POLICY STANCE, whilst at the same time PURSUE A TIGHTER MONETARY POLICY… yup, good luck with that. The ECB Press Conference was billed as being a circus act and Barnum’s and Billy Smart’s would have been delighted as it ticked all the boxes.
So, what were the takeaways from Draghi?
QE to run at €60B per month until December meeting or beyond if required.
Economic outlook broadly unchanged.
Expansion solid. Broad-based.
FX volatility is a source of uncertainty and requires monitoring.
Expansion not yet translated in Inflation trend.
Inflation modest tick-up but still subdued.
Substantial accommodation still needed.
Ready to increase QE if outlook not favourable.
2017 GDP now at 2.2% versus 1.9% seen in June.
2018 GDP unchanged at 1.8%.
Headline inflation to dip into the year end 2017.
Underlying inflation to rise gradually over the medium-term.
Recovery is base for confidence that inflation will gradually rise.
Recovery remains dependent on Monetary policy.
Consumption good because disposable income is rising.
Exchange Rate not a policy target
Will have to take FX into account in future policy decisions.
Yada, yada, yada, blah, blah and bollocks ….. believe what you want from the above list of bullets I scribed from his speech and Q&A session.
Most of the above points are open to interpretation to be frank with you, and, it very much depends upon which side of the fence one sits.
Draghi had a job to do, which was basically put off the markets until October when more data is available and the normalization including Tapering timetable will be discussed. The ECB has an annoying and frustrating habit of “can kicking issues down the road”. Do NOT be surprised if in October we get 50% of the story and a delay to December.
In addition, and in true ECB style, on Friday last week the day after the “circus”, lesser known Governing Council member Philip Lane, Governor of the Irish Central Bank stated the following: - “The accommodative stance will remain until convincing evidence of inflation is seen”. This could be 2018 in full as the strengthening single currency is taking inflation out of the system. Draghi and governing council want the single currency on its arse. Let me re-iterate here lies the problem facing the ECB.
Meanwhile back in the real world…
I need to pick a level to enter long the EUR/USD in the coming days. Draghi said / did nothing to stop me thinking 1.3000 is on the way. My big question is how will he tackle zero inflation because the strengthening single currency will cancel out inflation inside the EUROZONE, well a great deal of it anyway.
CAD: BOC RATE ANNOUNCEMENT and EMPLOYMENT DATA.
Holy Mother of God; I never thought that BOC Governor, Stephen Poloz had it in him. Two interest rate hikes back to back. The CAD interest rate now stands at 1.00%.
That took the market completely by surprise. The market is obsessed and focused on rate movement’s when there is a press conference. The CAD was absolutely demolished by over 220 pips (USD/CAD), it bounced back across all pairs but frankly it looks doomed to a sub 1.2000 level soon.
Out of the last rate increase the BOC got some $0.11 cents move lower in USD/CAD, even if they only achieve a $0.05 move this time the pair would fall to 1.1900. My goal and target is much less than this level.
Just stepping sideways for a moment vis-à-vis the Canadian Jobs data. It was an overall beat, but the mix between Full and Part-time jobs was very disappointing and the USD/CAD initially weakened on the news. Basically, it remained unchanged. The 1.2000 level remains intact for now. It is however WHEN rather than IF, in my opinion, that this psychological round number will be crushed.
GBP: BREXIT and MANUFACTURING PRODUCTION DATA.
BREXIT negotiations appear to be STILL moving along the lines of a west-end farce.
I am NOT surprised, and neither should you be, we are watching career politicians at work. They only know how to attribute blame; they are simply NOT negotiators or problem solvers. This hangs over the UK like the “Sword of Damocles”.
The shambles continues; last week, Theresa May must have had a late-night party with her hangers on, and some numpty must have suggested writing to the FTSE Top 100 companies to ask them to get on board with Tory plans on BREXIT…. WTF. That goes down in the history books as another seemed like a good idea at the time moments. For God’s sake give me a break, even my Labrador Ozzy has more brains than that. Makes you think… doesn't it?
This letter comes on the back of a piece I read on BLOOMBERG about the UK negotiators perhaps looking for time to conclude the negotiations. What can I say here that even I could be happy with from a controlled language expletive perspective?
What a f**king load of f**king bollocks, these tossers are paid a s**t load of people’s hard earned cash to do a f**king job. They have known the f**king timetable for f**king months. It’s about time they took their heads out of their arses, grew a pair, man up and get the job done to the best of their ability and let the population decide if they are a load of ineffective wan**rs or not when the f**king negotiations are finished. The people voted over a year ago and f**k all has been done.
One Prozac later…
This past week or so UK economic data has been very mixed. Markets being markets, experts being experts and analyst’s being analyst’, they are all looking to be “Billy’s” and pick the bottom. If you pick bottoms all you get are smelly fingers. Manufacturing Production numbers came out last Friday morning, it was a beat at 0.5% versus market expectations of 0.3%. The Cable leaped up like a salmon on the good news and this move was exacerbated by continued USD weakness.
However, as I wrote last week despite the bounce in the GBP/USD, which in my opinion is more about USD weakness than cable strength, I remain bearish cable longer-term and I stand by everything I have written in earlier blogs about timings and FX targets. I am still to this day astonished by the continual reference to “HARD or SOFT BREXIT”. For crying out loud; there is NO SOFT BREXIT. The EUROZONE cannot afford a SOFT BREXIT because it could potentially create a CONTAGION.
I am STILL in the camp that there is a better than 50% probability that NO BREXIT deal will be achieved.
- THE FX MARKET PLACE:
3.1: THIS WEEK’S ECONOMIC DATA RELEASES:
3.2: USD MAJORS – MY SUPPORT & RESISTANCE LEVELS:
3.3: MY THOUGHTS ON THIS WEEK’S ECONOMIC DATA:
Economic data releases this week are a bit thin on the ground but nevertheless I am sure that there will be plenty of fun for those who want to get involved.
Here are my picks of the upcoming week.
AUD: Jobs data this week for the Australian Economy. This has been a hit and miss number of late. Either a blowout or a bit weird number is produced. I am therefore on the fence here. We have seen big numbers posted for new jobs only to find that the mix of full and part time positions was skewed in favour of part-time.
Last week on poor data the AUD/USD broke 0.8000 and then 0.8100. So why am I debating the response to good or bad data?
Basically, the AUD looks a strong currency at the moment and a bigger upside break looks more on the cards than a move lower. This looks on the cards despite the RBA remaining neutral. I must only imagine RBA Governor Lowe is grateful he remained neutral, if he was HAWKISH I think we would be looking closer to 0.8500 at the moment given the way that the DXY has been behaving.
GBP: CPi, Retail Sales, Average Earnings Index and the MPC vote with the interest rate announcement. I am in the minority, I know this, but I am still looking at the cable at 1.2000 at the end of 2017. It has spiked higher recently, however, I believe this is more of a move based from the weak USD (DXY) rather than UK economic supporting data.
BREXIT is a shambolic affair. Theresa May is apparently delivering a major speech on September 21st to parliament on her timetable, negotiating timetable, successes and failures etc. This should be funnier than an episode of Frasier or The Big Bang Theory. The BREXIT successes should have me rolling about on the floor. That will be a short section of the speech if you are in anyway distracted for a second or two you may miss that bit.
Back to the data dump…
CPI and Retail Sales will be misses unless tourism boosts these numbers. Disposable incomes have been sharply eaten into with inflation.
Wages have shown signs of life of late but are still not keeping pace with inflation and I expect this to remain the case this Wednesday when the latest numbers are released. This is placing pressure on household disposable income.
I have heard many rather glib comments from mainly non-UK bodies saying that with UK inflation above the 2% target a 0.25% rate hike won’t make too much of a difference. I hear and I read the comments and my immediate well thought out response is bollocks.
Rate hikes would be passed on at almost double the 0.25% hike onto credit cards, credit lines and overdrafts without any thought by the high-street banks. Much of the already disappearing household disposable income caused by inflation that remains will just be annihilated by an interest rate increase. In my opinion, this would be one of the biggest f**k ups ever by a Central Bank. I just don't see it.
So, I see Mark Carney, BOE Governor fumbling his way through a no change statement remaining vigilant and accommodative well into 2018.
USD: We enter another week in the life of a TRUMP administration. Dysfunctional Washington persists and frankly looking at the US data I am becoming less and less interested as reactions are short lived as the USD is more responsive to twitter and headline news than economic data.
We have key inflation data this week. PPi, CPi and view of the consumer via Retail Sales. I would normally say these are crucial numbers for the FED to dissect vis-à-vis Monetary Policy normalization.
My thoughts, being a cynical fecker is that the ECB and FED have done a deal to both move in December. The FED will raise again regardless and this will help the ECB from rip roaring to 1.3000 in a few weeks.
We have been given a curveball by the FED telling us that they are looking more at its Balance Sheet reduction as a priority over interest rate normalization.
Back to the data…
As long as, PPi and CPi are positive, I believe the markets will be happy enough. Retail Sales will have to match the last print at 0.6% as a minimum in my opinion. Anything less than these bare minimums will send the DXY crashing.
- THE PREMIUM SERVICE:
4.1: PREMIUM SERVICE PERFORMANCE YEAR TO DATE:
The PREMIUM SERVICE is a subscriber based Forex support service offering my suggested trade set-ups and market commentary.
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.
CURRENT PREMIUM SERVICE PERFORMANCE:
MONTH TO DATE: +325 net pips
YEAR TO DATE: +6,656 net pips
Further information can be found by clicking TESTIMONIALS, PART-TIME TRADERS and FX PROMOTIONS tabs on my website www.weeklyfxdrivethru.com
To subscribe to THE PREMIUM SERVICE, you will require a valid credit card.
4.2: NEW SUBSCRIPTION OPTIONS:
4.3: CURRENT SUBSCRIPTION PROMOTION:
If you would like to be in the monthly draw to win a “FREE 30 DAY SUBSCRIPTION” to the PREMIUM SERVICE, valued at CAD$150.00, 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.
4.5: PREMIUM SERVICE – SUBSCRIBER CONTENT AREA:
(Only SUBSCRIBERS to the PREMIUM SERVICE can view this content of the BLOG)
4.5.1: TRADING REVIEW, INSIGHTS and SUMMARY:
4.5.2: MARKET SENTIMENT:
4.5.3: USD: MY SUPPORT & RESISTANCE LEVELS with TRADING CHARTS:
4.5.4: CORE TRADES, ASSOCIATED NEWS and INSIGHTS:
4.5.5: PREMIUM SERVICE – CURRENT LIVE TRADES & LIMIT ORDERS:
- THE SOAPBOX:
TIPPING POINTS, STRUCTURAL RE-ALIGNMENTS, MARKET STABILITY and DXY to 87.50?
That's quite a lot to take in…
It seems like a life time ago, but it was in fact only July when I wrote back to back blogs about the TIPPING POINT and a market STRUCTURAL RE-ALIGNMENT.
As a macro, FUNDAMENTAL thinker / trader first I am usually either ahead of the market by varying degrees or sometimes just never there at all as my thought process may never play out the way that I had originally thought for one reason or a combination of reasons.
Recently, trading or attempting to trade the USD to the long side has been like trying to roll a snowball up hill. Yes, there have been opportunities but they are few and far between. Just looking at the USD Index (DXY) chart below shows that basically since “THE DONALD’S” inauguration the DXY has been on a slide lower.
The simple fact is that the USD could slip below the current 91.00 level of support, break through the 90.00 psychological number and then maybe take a run at 87.50.
This potential move lower sits well with the administrations ideology of a weak USD and a low interest rate policy.
The potential moves ahead with the single currency should also fuel this decline in the USD as when the ECB announces its path to interest rate normalization the EUR should strengthen creating further USD weakness.
The backdrop to all this conjecture is that Central Banks around the globe all have maintaining MARKET STABILITY as a written or in some cases an unwritten rule.
There are so many factors influencing movements in price at the moment MARKET STABILITY appears to be somewhat lost, although to his credit Mario Draghi referenced it on a few occasions last Thursday in his ECB Press Conference. The truth is the markets could not give a rat’s hairy ass about STABILITY when FEAR and GREED are dominating the process, which they are for now.
The U.S. has two impending massive natural disasters on its plate, and the threat of war from North Korea. A President who is not trusted by his alleged party of allegiance and also but not surprisingly by the opposition party that are only interested in disruption rather than making the U.S. a better place to live and work, is a recipe for continued uncertainly and total instability. The U.S. is so dysfunctional and so far up its own arse it cannot see what it is doing to itself and it is fast becoming a laughing stock for onlookers around the globe.
Yet, with all this going on, the U.S. stock market is close to its highs. Quite staggering and incomprehensible to myself and possibly a few others.
So where am I going?
Let me get there piece by piece….
I have often said to new traders something along the lines of the following: -
- Trading currencies is essentially routine.
- Routine can be boring.
- There are classic market alignments and correlations.
- First thing in the morning when I go to my screens, I check the following charts, these are my LEAD INDICATORS: - DXY, GOLD, OIL, COPPER, S&P, US10YEARNOTE, USD/CAD, USD/SEK, AUD/JPY and USD/JPY. This looks labour intensive and it can be but from my perspective essential background. It does not even allow for the reading material that I go through with coffee each morning.
- If my alignments and correlations whether they be inter-market or inter-currency are off, I have a RED FLAG.
- Having completed what I call my market research I look through trading charts, at the same time as checking open trades and limit orders to verify are they still tradeable entries or not?
- I watch/listen to BLOOMBERG in the background on my iPAD PRO, to listen out for geopolitical news and events that could influence my trading.
- All this take’s about an hour, but I have found over the past 10 years of trading it works for me. I trade for the long haul. There is a market 5 days a week. I can miss a day if I do NOT like the way the market looks or performs. Why put yourself at RISK? Is not one of a trader’s key goals and objective to MANAGE RISK?
This routine is all well and good karma. However, of late it in my opinion the market has become news driven rather than economically driven. This creates a dysfunctional market where correlations do matter but tend to be skewed… RED FLAG.
Currency relationships look awkward and no longer aligned to RISK … RED FLAG.
All the research in the world means feck all.
We are very quickly approaching the TIPPING POINT I referred to back in July. We are about to see the USD drop like a lead balloon and the EUR rip higher. Just the moves lower in the USD and higher in the EUR would cause a TIPPING POINT and a STRUCTURAL RE-ALIGNMENT in the FX market.
Never mind what influences the Central Banks have, or believe that they have. Most of the Central Banks around the globe related to G7 countries have credibility issues with the markets. The BOE, BOJ, ECB and even the FED to some extent are classics in recent history. When the news is DOVISH / ACCOMODATIVE it’s easy to communicate. However, when turning HAWKISH as those listed have found to their detriment it is much more difficult to effectively communicate and maintain MARKET STABILITY.
Only the BOC under Stephen Poloz has delivered his promise quickly and smoothly. The BOC received so much bang for their buck out of two 0.25% rate increases. I realise it’s much easier for a small economy like Canada but it is still a G7 and G10 country.
I would add the SNB under Thomas Jordan has also been relatively consistent and Philip Lowe having replaced Glenn Stevens at the RBA appears to be very clear and unambiguous with his commentary.
Back on track…
Moving to interest rate normalization around the globe will happen and the fact that U.S. is struggling for a multitude of reasons already mentioned means that at the end of this year we could have both the FED and ECB with major announcements at the same time…fluke or by design?
I believe that the FED has a deal done with the ECB to raise rates in December when the ECB will announce more details about policy normalization. I think October for ECB is a “can kicking” exercise and that December will be the real deal.
December looks primed to start the FX RE-ALIGNMENT but it will not be as volatile if both Central Banks (FED & ECB) go together. December is a great month for releasing data for obvious reasons, holidays, end of year etc. and both Central Banks have back to back meetings.
13th December – FOMC (FED)
14th December – ECB – Press Conference in Frankfurt.
The G10 Central Bank leaders do talk to each other. I for one would NOT be surprised if a handshake over a glass of red has taken place over timings.
Given the desire and concerns over MARKET STABILITY do NOT rule out a coordinated policy announcement ahead of the dates of these meetings to announce change at the same time. It has been done before.
It could happen but maybe not.
At the end of the day what would the FX world look like?
I still believe that no matter what is attempted, the USD is on very rocky ground. Fundamentally I cannot see Washington kissing and making up party to party or President to either party so dysfunctionality will remain in place.
Fair value for the single currency even with another 0.25% on the U.S. rate must still be in the 1.3000 range, but it is not about where fair value lies it’s how it gravitates to the level that is the important consideration.
At EUR/USD at 1.3000.
EUR crosses would all be elevated from current levels and the majors would be elevated and re-aligned as well as a consequence.
That is when the real fun starts.
How will the RBA and RBNZ feel when their currencies are at 0.9000 and maybe 0.8000 levels once again? Competitiveness would suffer unless it was a balanced increase across the board.
It is possible that we enter currency wars 2.0?
TIPPING POINTS, RE-ALIGNMENTS both have consequences and MARKET STABILITY may suffer despite a great deal of effort and planning being introduced. Then we have the DXY to 87.50. I hate using the words “Nailed on”, but I just see this happening. There is absolutely nothing that tells me to buy USD at the moment, apart from the fact its oversold and stretched.
I just see 87.50 as inevitable 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: #250 FREE NEWSLETTER VERSION
September 10th, 2017