THE WEEKLY FX DRIVE THRU
I never traded last week. From the get go I decided to err on the side of caution. Moves in the DXY continued just about higher overall with some profit taking coming through. At times, there were moves for no apparent reason other than probably a large order being placed that made a few waves, I decided for once just to stick to my guns and step aside. Basically, I just managed a couple of trades and closed with a few pips here and there.
I am still very suspect of the knee-jerk reaction moves in the markets since THE TRUMP election victory. The FED has cemented in some of the move and now we face a period of about 9 months when the EUROZONE will, in my opinion dominate the forex moves.
On Black Friday, we started to see some pullbacks in the dollar index, but it’s not consistent across the board. The EUR still trades heavy in my opinion and this move supports the inverse relationship move with the USD/CHF. It is the commodity currencies that always attract my eye. I still firmly believe commodities always lead the markets in one shape or another and the rest of the markets follow. It therefore stands to reason that moves in the AUD, NZD, CAD and NOK are uppermost on my mind plus the SEK as the USD/SEK is so sensitive to general forex moves.
The spanner in the works at the moment is the JPY. After the EUR/USD, the USD/JPY is the second most traded currency pair with the EUR/JPY not too far behind. The JPY can drive the DXY and sway the forex market easier now than a couple of years ago due to less corporate and institutional players, basically less volume and much less liquidity especially in Asia where it dominates the proceedings. So, as a result, the moves in the DXY are not always what they seem at first glance, as always, forex moves require more homework to try and “get a handle” on why and what, to give us traders the now common response to some unexplained moves…WTF!
Therefore, rather than trade an across the board USD weakness, look carefully as it could be sporadic. Whilst the EUR dominates the DXY weighted index, we may have to pick our way through currency pairs rather than take a general overview to give us the confirmation placing trades.
We will have a pullback of the recent moves. However, some will be shallower than others as the geopolitical news will still dominate within the pullback.
Back on point…
What I am saying is keep up your guard; CASH IS A POSITION never forget this no matter what you trade. I always end my blog each week with the following: –
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”.
I mean this; I am here for the long haul.
I set myself achievable and reasonable targets per annum of 10,000 pips. I trade for basically 10 months a year. Since 2013 when I adjusted my approach and revised everything I have achieved my objective. It’s hard, it’s certainly not easy, I trade what the market gives and, for the most time I wait for the trades to come to me. I have MY PLAN and I TRADE MY PLAN.
Here we are once again with the final blog of a trading year, after today, I return in 2017 on January 8th.
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LOOKING BACKWARDS: THE FX MARKET PLACE
LAST WEEK’S FOREX and ECONOMIC NEWS – MY VIEWS:
Although I was really “not playing” last week, my eyes and ears were open watching and reading. Two pieces from last week resonated with me and although they were raised last week they are news items that will remain with us for months moving forward.
THE EUROZONE (ECB FINANCIAL STABILITY REPORT)
TONY BLAIR on BREXIT:
EUROZONE IMPLOSION 2017?
These reports over the past couple of years have tended to come and go with little more than a cursory glance. I must be “old school” I still believe that the data supplied to the markets by Central Banks actually mean something despite the personalities involved. I know I am the first to call various Central Bank governors, Muppets, JCB Drivers, numpties etc. However, we should try to understand, what the messages are that they are trying to deliver, sometimes with a hidden agenda, or, a clouded delivery.
From my perspective, there is not another Central Bank President on the planet with as difficult a job as Mario Draghi so to hear and read what the views are from the EUROZONE should be read with greater seriousness as these views represent 50% of the most traded currency pair in the forex market.
Long time readers / subscribers will be aware that I see the EUROZONE as a failed project doomed to failure. Despite everything like a prehistoric dinosaur, it labours inefficiently forward from catastrophe to catastrophe and set back after setback kicking more cans down the road than could fit in a re-cycling plant… it’s still here as Jim Kerr would sing “ALIVE and KICKING”, and only God knows how and why!
Back to the report…
Hardly surprising given what the EUROZONE must battle through in the next 7-8 months it sees both political and financial RISKS on the horizon.
KEY EUROZONE AGENDA ITEMS ON THE HORIZON:
- NOVEMBER 27th: – FRANCE: Second round vote Republican Presidential election.
- DECEMBER 1st: – FRANCE: Socialist primaries for Presidential election.
- DECEMBER 4th: – AUSTRIA: Presidential Election re-run.
- DECEMBER 4th: – ITALY: Referendum on Constitutional Reforms.
- DECEMBER 5th: – GREECE: Deadline day for stakeholders of GREEK DEBT to agree debt relief measures.
- DECEMBER 15th: – FRANCE: Socialist primaries closed.
- DECEMBER 31st: – GREECE: IMF to decide on involvement in GREEK third bailout.
- JANUARY 29th: – FRANCE: Socialist Primary Elections.
- FEBRUARY 12th: – GERMANY: Presidential Elections.
- MARCH 15th: – HOLLAND: Parliamentary Elections.
- MARCH 26th: – GERMANY: Regional Elections.
- APRIL 23rd: – FRANCE: Presidential Elections.
- JUNE 18th: – FRANCE: General Elections.
Whilst one could say the ECB presentation appeared downbeat to some extent given the list 1-13 above I would say that a “WTF” discussion took place in Frankfurt and a play it all down approach was deemed to be the correct path to adopt.
Matteo Renzi has placed his political career on the line with the Italian referendum, should the people vote NO he will resign if he is as good as his word.
Would this place the EUROZIONE in panic mode?
In my opinion, if not aired publicly, then definitely behind closed doors. Why?
In my opinion at the moment, with elections / referendums the questions being asked are practically irrelevant. It’s all about an anti-establishment vote. For years, due to voter apathy with career “in it for themselves” politicians, turn out at all forms of elections around the world have been declining.
The BREXIT vote was a game changer. The populist vote was back making headlines.
Then we had TRUMP. The circus ended with an extra-ordinary result with all the polls wrong. People lie to these organisations. Your vote is private to you and it’s high time the likes of CNN grabbed this concept. Believe it or not for Non-North Americans reading this blog CNN are in denial no changes in approach to programming… is it any wonder.
Take a look at what is lurking in the EUROZONE… more importantly NOT IN THE SHADOWS: –
- AUSTRIA – THE FREEDOM PARTY
- BELGIUM – VLAAMS BELANG
- DENMARK – DANISH PEOPLE’S PARTY
- FINLAND – FINNS PARTY
- FRANCE – FRONT NATIONAL
- GERMANY – ALTERNATIVE FUR DEUTSCHLAND
- GREECE – COALITION FOR THE RADICAL LEFT
- ITALY – THE 5 STAR MOVEMENT & LEGA NORD
- HOLLAND – PARTY FOR FREEDOM
- SPAIN – PODERMOS
- SWEDEN – SWEDISH DEMOCRATS
These parties are either FAR LEFT or FAR RIGHT but they are no longer considered FAR OUT.
June 23rd in the UK was game changer. TRUMP was sensational given the way the US people are usually governed by fear. The vote to elect TRUMP was incredible and a raised finger to DC. Whether TRUMP can effect change the way he predicted in the campaign remains to be seen.
Back in the EUROZONE we are once again at the precipice and I do not think that cans, can be kicked anymore.
The policy of one size fits all, 19 into 1 will be shown up for what it is in 2017, especially if the populist vote gathers momentum.
Mario Draghi is widely rumoured to announce an extension of the ECB QE (Quantitative Easing) program in December. It remains to be seen what effect the Italian vote, if a no, will have on what he announces. Most analysts are expecting a time frame extension through to September 2017 from the present deadline of March 2017 and a view on potential tapering of the existing buying program. It could all be up in the air.
The ECB report talked about the Italian referendum, the bust voting calendar into the end of 2016 and the first half of 2017. BREXIT was briefly mentioned and as we all strongly suspect; BREXIT will drag on and on. I am still doubtful it will ever happen. I see a second vote. I am not certain how it will manifest itself, however should the EUROZONE implode it could all be a complete waste of time anyway.
The ECB also mentioned uncertainty surrounding TRUMP. The rising U.S. debt and TRUMPS focus on domestic issues rather than international may cause ripples around world markets. More like fecking Tsunamis in my opinion but there you go.
I think having read the report twice now it would be fair to say that political concerns worry the ECB more than economical…. My, my, my, how times have changed.
Moving to BREXIT and Tony Blair…
Poor Tony Blair, completely taken for a fool by George W. Bush over WMD. Never believe what intelligence tells you, those guys are fueled by, the shoot first ask questions later brain cells.
Our Tone now takes the view that democracy is a load of shite. The people have voted in a simple majority vote to leave the EUROPEAN UNION. Tony now says “feck that” we shouldn’t leave and I know better than you. (This is why we have the populist vote growing by the way). The same thing happened in the U.S. election Mitt Romney called voters basically, idiots if they voted for TRUMP, he told them to vote the way I tell you, I know better and I know much more than you do… hence TRUMP. There is a pattern, career politicians’ days are numbered.
Back to my point…
Tony could be right, legally there is a case that says until the supreme court rules that the vote was NOT legally binding. In the name of sanity though, who is going to say it was NOT a democratic vote.
Theresa May, UK Prime Minister has said she will respect the wishes of the electorate and trigger article 50 of the Lisbon Treaty before 31st March 2017.
Had the economic performance and the uncertainty of the UK following the BREXIT vote been dire, I could see a second referendum (not unheard of in Europe, both IRELAND & HOLLAND were given second chances in the past to “get it right!!!!”).
The UK however, did not shut down. There are issues and most of them are due to uncertainty.
Would the UK public welcome a second referendum?
Personally, I think that given the fact the political opposition in the UK is such poor shape, Theresa May should call a snap election to proceed with the BREXIT, this would probably give her an increased majority in the HOUSE of Commons and a clear mandate to get on with it.
There are issues to address with the Scottish, Welsh and Northern Ireland parliaments, who all wanted to REMAIN in the EUROPEAN UNION, as did the voters in LONDON.
However, I go full circle. Many voters feel left out hence the rise of the “anti-vote”.
The BREXIT story still has legs, and long ones they are, left to run. It would be political suicide to go against a democratic vote and whilst there are millions who want another vote, I am not sure whether this is a good thing or bad thing. If my thoughts on the EUROZONE come through it’s all a non-event anyway. The EUROZONE has a habit of surviving anything that is thrown at it. 2017 could be the year it doesn’t survive, or it becomes so dysfunctional a CONTAGION EFFECT of wanting out takes hold and it break ups in a few years. That makes the BREXIT vote and the trigger of article 50 irrelevant.
THIS WEEK’S FOREX and ECONOMIC NEWS – MY VIEWS:
THIS WEEK’S FOREX NEWS THAT INTERESTS ME:
(There are many more news items related to the Forex Market other than the ones listed below. These are the ones that interest me. You can go to www.forexfactory.com and www.tradingeconomics.com for a more comprehensive lists of all news events that are Forex related).
MONDAY: EUR – Mario Draghi (ECB) speaks.
MONDAY: CAD – Stephen Poloz (BOC) speaks.
TUESDAY: USD – GDP and Consumer Confidence.
TUESDAY: NZD – RBNZ Financial Stability Report & Graeme Wheeler speaks.
WEDNESDAY: GBP – Bank Stress Test Results.
WEDNESDAY: OPEC Production Cut Meeting.
WEDNESDAY: EUR – Mario Draghi (ECB) speaks.
WEDNESDAY: USD – ADP Non-Farm Employment Data.
WEDNESDAY: CAD – GDP.
WEDNESDAY: AUD – Private Capital Expenditure.
WEDNESDAY: CNY – Manufacturing PMi.
THURSDAY: GBP – Manufacturing PMi.
THURSDAY: USD – ISM Manufacturing PMi.
THURSDAY: AUD – Retail Sales.
FRIDAY: GBP – Construction PMi.
FRIDAY: CAD – Jobs Data and Unemployment Rate.
FRIDAY: USD – Non-Farm Payrolls and Unemployment Rate.
After the short week just completed we are back with a bang this week with a plethora of economic data releases.
Obviously NFP on Friday is the jewel in the crown and if its a beat or even in line it will be the confirming data, should it be required, to see U.S. interest rates increase in December. Frankly, if rates do not rise in December, God help the USD and God help Janet Yellen she would be the first victim of a non-reality “You’re fired” by Donald Trump.
We have the long-awaited OPEC production cut announcement this week. Up to now the OPEC members have been producing like crazy to show a cut-back to probably the average production levels. This is nonsense. OPEC has no importance anymore in my opinion. It is now simply a collection of countries with a commodity in decline. Only the hedge fund gamblers of this world play the oil trade in quantity and frankly as the OPEC reliability gets less and less a few big hedge fund losses will end that speculative market and OPEC will be no more.
For now, we have a Christmas laugh and giggle on the horizon. This is a classic buy the rumour sell the news event. Take it seriously for 24 hours, if that, and then watch the selloff.
The UK bank stress tests will be interesting to watch. Over the recent months the government has been selling stakes in the banks it supported at the time of the Financial Crash back in 2008-2009 so I doubt that this would not be done unless the BOE tipped them the nod.
Several PMi’s on the table this week. China will be interesting to follow. The market is expecting a small pullback but still a consolidation above 50.0 which is important moving forward.
I think my message is that with the Forex markets prime for a pullback at any time, albeit across selective currencies, be careful with getting in too heavy especially in a week that contains U.S. non-farm payrolls.
THIS COMING WEEK – THE USD MAJORS (MY THOUGHTS):
(In this section I have as usual kept my charts as minimalist as possible. With regards to charting in my opinion less is more!! I hope that they are clear. All readers regardless of level of experience should be able to follow my thoughts from my comments to the levels on the charts with ease)
My comments are contained on the charts.
GBP/USD – Weekly Closing Price: 1.2473
AUD/USD – Weekly Closing Price: 0.7438
NZD/USD – Weekly Closing Price: 0.7041
USD/CAD – Weekly Closing Price: 1.3513
USD/CHF – Weekly Closing Price: 1.0131
USD/JPY – Weekly Closing Price: 113.16
MY CLOSING THOUGHTS:
This is a big week on data and geopolitical news events.
Even though the blog is finished for 2016 my trading is not and I fully expect to trade through to at least the FOMC interest rate decision.
My personal goal with trading through to the year end is to build up core positions for 2017 based upon my FUNDAMENTAL thoughts and views.
I am expecting equities to pullback, what has gone on since the TRUMP victory makes no sense, and whilst there is always the approach of the market is the market work with it, and I fully get that, the recent moves are just a typical market move ready to leave all the retail traders hanging out there to dry at the highs after they get suckered in.
The Forex market is well over done and the fact that every analyst wrongly predicted the effect of a TRUMP victory, they can all stick their revised predictions where the sun doesn’t shine.
As a trader, you have get hold of the reality that you are on your own. No-one gives a shit whether you live or die by this market. The markets are unforgiving. It is NOT a level playing field, the institutions drive the markets and majority of the pundits / analysts / so-called experts on TV have what is called “NO SKIN IN THE GAME”. Bear this in mind when you see or hear that Goldman or Barclays says something. They sell their own books. It is 99.99999999999% of the time an opinion based on what trades they have in place.
If these banks that provide analysis were so good they would be shouting their successes from the rooftops every day. They are not. In fact, if the truth be told, the majority of the major FX banks, have been found guilty of falsifying data and God knows what else over the past 12-18 months. They have been caught out trying to manipulate the market. This has affected them so much they are pulling back from FX now that they are losing their advantages to manipulate the market.
As we enter the silly season of lower volumes and less liquidity bear in mind you are on your own. If you are a PREMIUM SERVICE subscriber you have me as a sounding board but I am not blessed with ability to read the future.
All I can tell you is take care and do not be a sucker by being influenced by a bank opinion. If they get something right once it is not the second coming… it is at best a 50-50 bet made by someone who could not give a crap as he or she is not a trader.
So once again, in my opinion, the sword of Damocles STILL hangs over the markets.
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: #43 FOREXTELL
DATE: 26th November 2016.