I cannot believe that we are into August. This blog is the last one for a few weeks, I return with the “DRIVE THRU” blog on September 3rd, 2017.
PREMIUM SERVICE subscribers please note that trading will continue through the “DRIVE THRU” break. I do have one or two key domestic action items to fulfil during the break and I will alert you when these are in play.
The BOE “Super Thursday” event is now behind us and despite advising the markets that tightening is on the way, it was obvious due to the reaction in cable falling from around 1.3260 to about 1.3110 in the hour or so after the news was released and Mark Carney’s subsequent press conference, that the markets had priced in a more hawkish BOE. I will cover this event a in little more detail later.
Looking at money $$$...
I covered lots of trades ahead of last Friday’s Non-Farm Payrolls and added a positive +691 pips for the first few days of the month. It’s a great start and I am very quickly pulling back my pips shortfall from earlier in the year due to my house move followed almost immediately by a 4-week vacation. There is still some way to go to my 10,000-pip annual objective but I am now almost back to where my pips total should be for this time of the year.
- LAST WEEK – MY TAKE ON SOME KEY EVENTS:
In no particular order, here is what floated my boat last week.
- NZD: Jobs Data.The Kiwi has been struggling since the data was released mid-week. Job growth in New Zealand is flat-lining. In Q2 2017, employment fell by 0.2% It was up 1.2% the previous quarter and it was forecasted to be positive this quarter by 0.7%.It was the first contraction in employment since Q3 2015. The participation rate also slid 0.6%.Having only recently visited New Zealand both North and South Islands, the place was buzzing and the dynamics appeared very positive. However, beneath this outer crust and dynamism the wages environment is subdued. In this instance, New Zealand is no different to other developed countries, despite unemployment levels being at historic low levels, wages are just NOT picking up.
- AUD: RBA Rate Statement.Dr. Philip Lowe (RBA Governor) kept rates unchanged and kept the commentary neutral. He did however elude to the fact that should the current AUD strength continue, it is likely to weigh on the outlook for output and employment. An appreciating exchange rate would result in a slower pick-up of economic activity and inflation than currently forecasted.Do I read… AUD strength = a growth slowdown?From a currency perspective; I do think that the RBA would prefer a weaker currency (who wouldn’t). With the AUD/USD hitting an 0.8065, the orders for Prozac at the RBA would have increased. A break below 0.7840 (recent breakout level) would ease matters a great deal. Obviously, an AUD/USD exchange rate hovering between 0.7000 and 0.7500 would be preferred by the RBA.
- GBP: BOE and Carney Press Conference.Interest Rate on Hold
MPC 6-2 vote
Growth forecasts revised lower.
Inflation to peak c.3% in October.
Interest Rates may need TO RISE FASTER than markets imply.
Uncertainty about BREXIT will weigh on growth.
Wages growth market down from 3.5% to 3%.They were the key things that I noted from the Statement and Press Conference.In addition, what made me giggle a bit was Carney’s multiple references to households and businesses taking the lead in reactions to BREXIT uncertainties. He noted that both households and business were taking BREXIT in their stride and that they were both expecting a smooth transition.FFS… my arse.
Households are more in debt than ever. Wages are not keeping growth in line with inflation. There is great uncertainty.
Businesses are using BREXIT as an excuse to limit wage rises on the back of “be grateful you have a job all things considered”.
Is Threadneedle Street in a time warp?
These guys beggar belief. Carney stated that the BOE has spoken to ‘real” people about policies. Who are these people, the Chaps in the local pub in the city around the corner from the BOE?
The GBP however was whacked on the BOE statement and the following Press Conference and again on the NFP data, moving lower by almost 250 pips from its pre “Super Thursday” highs.
- CAD: Jobs Data.It was a small miss on the Canadian data, which, I suppose given how, of late Canadian data has nearly always been a beat was a little surprising. Personally, I welcomed this miss, as it has allowed the USD/CAD to rally (CAD to weaken). I have been waiting very patiently for an entry level short (This entry was posted to PREMIUM SERVICE subscribers POS393). I feel that this level should be achieved early this week.The Trade Balance number at (-3.6 CAD$ Billion versus -1.3 CAD$ billion expected) was a little worrying… but one month does not make up a trend.I am firmly in the camp that the CAD has at least another leg lower and a big one at that.
- USD: Non-Farm Payrolls data.I suppose my position on the reaction to the data would be “The market was just too heavily positioned the wrong way… far too much USD weakness, and by the looks of things too many USD shorts.The data at 209k new jobs versus 181k predicted once again showed up the difference between ADP and NFP. ADP simply cannot be trusted as an indicator or a barometer when it comes to looking at forecasting NFP. Then again, only a fecking loony would forecast NFP, it's a bloody lottery when all said and done…but hang on…maybe it’s not a lottery. At least with a lottery you have a chance!Back on track…Blow out numbers. After the analysts and experts crawled out from beneath their desks and realised this the USD started to strengthen in style (Over 100 points higher).
Well over, +100 pip moves with EUR/USD, GBP/USD and USD/JPY.
The usual suspects crawled out from under rocks to claim that the FED’s rate rise in December is possibility back on. FFS, HMOG, FGS, and JM&J… we are in the middle of summer. Given the fact we have a clown in the White House, I would not be giving forward guidance on a damn thing more than a few hours ahead never mind a few months. I suppose these flutes are not in any way accountable for their predictions and they mostly have no skin in the game, so who cares what they say. In my opinion, this is one reason why CNBC ratings are falling faster than the cable at the moment.
The only person to listen to about FED activity in my opinion is Janet Yellen. Ignore the noise.
- THE FX MARKET PLACE:
3.1: THIS WEEK’S ECONOMIC DATA RELEASES:
3.2: MY THOUGHTS ON THIS WEEK’S ECONOMIC DATA:
Economic data releases this week are a bit thin on the ground.
However, here are my picks of the upcoming week.
- NZD: Those awfully nice chaps at the RBNZ led by Governor Graeme “the dealer” Wheeler has my top pick of the week this week.As I type this, the memorandum will already be circulating at the RBNZ deciding on the choice of wine for this week’s Press Conference and whether to go for cheese or pate. All the local corporate hospitality companies have been moved from orange to red alert to ensure sufficient stemware is on hand. No swigging from the bottles at the RBNZ.On a more serious note...The jobs data last week was a surprising miss. The Kiwi dollar back up at NZD/USD 0.7500 must have had Wheeler pissing conkers. Many traders / analysts / experts? had the NZD/USD trading at 0.7800 testing the May 2015 levels.Nobody expects a rate move from the current 1.75%. It’s all about the commentary. Will Wheeler remain neutral or will he jawbone and go dovish trying to send the NZD/USD back towards 0.7000?
A couple of weeks ago just prior to the latest drop in the USD, the NZD was showing signs of life to move sharply higher. A spokesperson from the RBNZ said basically “so what” 75%-80% of what the NZD/USD does exchange rate wise is out of the RBNZ control.
OK… let’s roll out the same flute with the NZD/USD at 0.8000. Would the response be different? As sure as eggs are eggs it would be. There would be jawboning. As soon as dairy exports are threatened the RBNZ will act and like a good central bank they want stability. I would not rule out jawboning at this meeting just to keep the markets in check.
Unfortunately, Wheelers rate statement and his jawboning never seem to go in tandem. It’s like he speaks with this right hand and writes with his left and neither hand knows what the other hand has done or is doing.
It all adds together to give us a news event to follow with interest. The Rate statement is released at 5PM EST and the Press Conference takes place at 6PM EST this Wednesday.
- USD: PPi and CPi data is released this week. Given that the FED is off its normalization route at the moment (even with the better than expected NFP data). These news items may not have the usual effect on markets other than for 30 minutes or so after the data is released. The FED change and the summer may play a combined role here. Nevertheless, we should be aware of the results.
3.3: USD MAJORS – MY SUPPORT & RESISTANCE LEVELS:
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:
4.1: WHAT IS THE PREMIUM SERVICE?
The PREMIUM SERVICE is a subscriber based Forex support service offering my suggested trade set-ups and market commentary.
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I am obviously biased in this section;
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Forex Trading is repetition and to a large extent it is a daily routine and many times it is quite boring.
Technical trading of patterns, previous support and resistance levels, Pivot points and Fibonacci levels, they all work. I feel that my successes are based these indicators being used alongside fundamentals. If pushed, I would say that I am a fundamental trader. However, fundamentals alone are not good enough in my opinion. They will eventually work but requires very, very deep pockets. It is the combination of using fundamentals and technical analysis combined that is a winning formula; plus obviously identifying high probability trade set ups.
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4.2: PREMIUM SERVICE PERFORMANCE YEAR TO DATE:
So; if nothing else, I tell it how it is. I am currently about 70% of my target for this time of the year. I had a poor start to the year and I am now following a vacation and a protracted house move, in “Pip” recovery mode.
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.
If you want to be a part of what I hope will be a storming end to 2017, login at my website and get subscribed. I mean business from here on in.
CURRENT PREMIUM SERVICE PERFORMANCE:
MONTH TO DATE: +691 net pips
YEAR TO DATE: +4,906 net pips
4.2.1: SUBSCRIBING NOW… HAS BENEFITS:
Even though I am not producing a “DRIVE THRU” blog for the next three weeks, my subscription periods of 10, 20 or 40 weeks are based around the DRIVE THRU posts.
Therefore subscribing now really means that your subscription does not start until 3rd September, three weeks’ time. However, between now and them, I am still trading therefore suggested set ups and twitter, email, in fact all communication is open.
A 10-week CAD$500.00 subscription starts 3rd September and would complete on 12th November 2017.
A 20-week CAD$800.00 subscription would start 3rd September and would complete on 10th February 2018.
A 40-week CAD$1,250.00 Platinum subscription would start 3rd September and complete on 30th June 2018.
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Because of my “time out” this month. No freebie subscription this month back in September, in fact the next “DRIVE THRU” blog.
4.4: PREMIUM SERVICE – SUBSCRIBER CONTENT AREA:
(Only SUBSCRIBERS to the PREMIUM SERVICE can view this section of the BLOG)
4.4.1: TRADING REVIEW:
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4.4.3: CORE TRADES:
4.4.4: PREMIUM SERVICE – CURRENT LIVE TRADES & LIMIT ORDERS:
- THE SOAPBOX:
WHAT’S NEXT AFTER THE RECENT BIG MOVES
With a title like that it sounds like I have an end of the world type of prediction to follow… you are safe!
We are now into the sleepy summer. There are some risks, most of them are geopolitical.
I have in the main over recent weeks been looking forward predicting a new world… CENTRAL BANK DIVERGENCE, RE-STRUCTURE, RE-ALIGNMENT of the markets and I still believe we are in the throes of this happening despite the recent 72 hours or so in the Forex Market.
Let’s recap what happened in the immediate past: -
- Mark Carney (BOE, Governor), finally came out and said what needed to be said to put the damn bulls back in their boxes for at least this year.
- We had a blowout NFP number.
That’s nothing earth shattering. Does the above change my thoughts and views that I have had for the past month or so?
Absolutely not; I was bearish and shorting the cable long before “Super Thursday”.
Did I predict a good NFP?
I don't do predictions and I doubt even David Copperfield or Penn & Teller could magic up an accurate NFP number.
We are in transition.
From this Monday I am on 50% leave for the summer until the 1st September. So, what is next?
Over the next few weeks the big Forex event could be the Jackson Hole Symposium. Initially Mario Draghi (ECB, President) was going to use this event as the place he would talk about the timetable of events within the ECB for a return to interest rate normalization.
I am not so certain that he will do this. My thought process is basically due to the fact the markets are ready to leap on the back of the single currency and send it to outer space (in forex terms) about 1.2500-1.3000 if the mood takes them. Draghi would literally poop his pants if he thought the EUR/USD would be at 1.2500 in rapid order.
We have German elections this Autumn/Fall and whilst German savers would welcome normalization, I would say that EUROZONE exporters primarily based in Germany would be buying “Andrex” and the like, in Costco quantities on a daily basis, as the increase in liquid stools could potentially reach epidemic proportions. Sales of Imodium could go through the roof (This is not investment advice).
German elections is one good reason why Mario Draghi may just provide some B.S. at Jackson Hole.
My fear is that “THE DONALD” will create the next big move. It will of course be largely “not surprising” but it will be unpredictable from a timing viewpoint, even though we know about the potential of something happening.
Right now, given all the geopolitical events in play around the world the markets are complacent. All the U.S. markets are concerned about are 401K valuations and returns, stock valuations mean feck all; we are on the brink once again in my opinion… (RE-STRUCTURE and RE-ALIGNMENT).
- What about China being declared a currency manipulator, now that they failed to intervene effectively with North Korea?
- What about China getting huge trade restrictions placed upon them by the U.S.?
- What about North Korea dropping an ICBN on Japan… by mistake or intentionally?
- What about North Korea taking aim on the continental United States?
- What about the Russian / U.S. diplomatic expulsion tit for tat getting out of control spilling over into troubles in the “Old Soviet Block?
- What happens if the Iran / U.S. nuclear deal blows up?
- TRUMP has sided with Saudi Arabia over the Qatar terrorism claims. What would happen if this dispute escalates and unsettles stability in the region and subsequently OIL production?
I have only highlighted US based geopolitical related issues, as usually these would affect all markets to varying degrees. The chances of something happening could be 50-50 from my perspective, but who knows. I have ignored all the investigations and enquiries that shadow the TRUMP administration, these can just flare up at any time without warning, a tweet could kick it off.
So; what am I saying?
Just be on your toes if you are trading over the next three or four weeks. Many traders are away. Many traders simply do not trade the summer.
Most risks are similar to what we have every summer… geopolitical. There are more flare up zones than the ones I have listed above, but I do feel that those areas with a TRUMP involvement are more at risk.
From a trading perspective as I have written earlier we are in the throes of a transition. There are entry “Gifts” as I call them on the horizon. Grab them; the EUR/USD in particular, but hold with wider stops than usual to allow for the very thin trading conditions with lower liquidity than usual.
Take care, back on September 3rd.
- 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: #FREE NEWSLETTER
DATE: 6th August 2017.