FED ADMITS IT HAS NO CLUE: By Scott Pickering

  1. INTRODUCTION:

The outstanding items from last week remain outstanding items this week.

They are…

I still need to complete my PREMIUM SERVICE video.

My EA’s (Expert Advisors – Algorithms) that I mentioned last week are STILL outstanding.

Not that I need to offer up excuses, but I started cleaning my computer files. I thought that I had all three Macs linked, but… apparently not. My trading computer that drives my screens is purpose built but runs on MSFT software for the brokers and so getting this stuff across and into a library was a little tedious. Those of you who I have interacted with know that I am a trader and NOT a computer whizz kid or geek.

I recently re-connected with my old neighbour in Dublin, who can run rings around the best of folk on machines, software limits, apps etc. At the best of times, it’s another bloody language to me.

From last week, the word of the week was….

“PATIENCE”

From my perspective I banked $$$ and pips but what a struggle. I am carrying CORE POSITIONS now with negative positions and I am patiently waiting for the markets to re-set.

I will cover the following in more detail later but the GERMAN and NEW ZEALAND ELECTION RESULTS, STEPHEN POLOZ (BOC), JANET YELLEN and “FLIP-FLOPPER” MARK CARNEY to name but a few were all screwing with me.

I was basically badly positioned for the events but looking down from a MACRO level with my FUNDAMENTALS in place, I feel I am correctly pointed.

I was trying to be patient and get myself re-positioned to be ready to take advantage moving forward. I am getting there bit by bit with my CORE POSITIONS adjustments have been made and additions are now in place.

I think back in 2013 I wrote an entire section in the blog about trading with patience is one of the hardest things to do. The need to believe that you must be trading every day, can be overwhelming when in fact cash is a position and to be sidelined for 24-48 hours is not a bad thing to let the markets re-set.

It is hard at times because there are other factors hanging over the markets such as NORTH KOREA, the TRUMP TAX PLAN and BREXIT the re-setting takes a little longer as positions are skewed. Also with last week being both a month and quarter end it was quite a cocktail.

With some degree of PATIENCE having been applied I am now ready for the final quarter of 2017.

 

  1. THE FX MARKET PLACE:

2.1: LOOKING BACK AT LAST WEEK’S NEWS.

In no special order, here is what floated my boat last week.

EUR: THE GERMAN NATIONAL ELECTIONS and THE CATALONIA ISSUE.

Holy shit. The press never saw that coming. The “Far Right” now have a good number of seats in parliament and poor old Angela Merkel has her work cut out forming a government excluding the “AfD” party.
Americans point fingers at TRUMP with 48% or whatever it was of the turnout and he occupies the White House. Merkel only received 32% of the popular vote. I am finding it very hard in the west to recall the last government that was in power based upon being more than 50% of the popular vote.

Anyways back to the point…

The election outcome leaves a bitter taste in the mouth of many “jotter blotters” in Brussels as their gravy train of expenses, potted plants, Chateauneuf-du-Pape on Friday’s and lavish pensions may be coming to an end as there are pledges to manage costs… yeah right, my arse!!

On that point, I read with interest but absolutely ZERO SURPRISE that EU BREXIT negotiator Michel Barnier, so far has racked up travel expenses to the tune of €47,417.60 since October 1st, 2016. This will be a drop in the ocean when all is said and done. The amount of €€€€ wasted in the EUROPEAN UNION is massive. This bill no matter what it ends up being when added to all the other BREXIT BILLS created will be swept under the carpet as the EU will say it was covered by the UK in their divorce fees. It will be €millions.

These; pen pushing, jotter blotters in Brussels know how to spend money… it’s all billable.

Back to the EUR…

The single currency was kicked back from its breakout move by the FOMC the previous week and just as it was starting to breathe again the German Election result kicked it hard in the samosas and from my perspective it looks constructive to re-test lower support levels moving forward.

At the time of writing this blog, I freely admit to being a little confused. Is the Catalan vote on or off?

The independence vote is creating a constitutional crisis with government in Madrid saying its illegal. The 8 million people or thereabouts who live in North Eastern Spain have wanted independence for some time…in fact quite some time. Courts have already brandished the vote illegal should it go ahead. The government has seized ballot papers and locked polling booths. It’s all very unclear to me what is happening.

From a currency perspective, obviously, the Catalan vote / issue has the potential to be very EUR negative.

 

CAD: STEPHEN POLOZ SPEECH IN ST. JOHNS.

WTF.

I was NOT alone being wrong footed on this speech. Hindsight is a beautiful thing.

The previous rate hikes got so much bang for their buck with a movement of about $0.15cents for a combined increase of 0.50%, the BOC is probably on PROZAC worried about the markets getting carried away with another hike on the cards.

Poloz reeled everyone back in. “No predetermined path for rates” that’s a great line. Bottom line, I still see the data from Canada being good and therefore it is inevitable that they will raise rates again this year.

Dare I mention my conspiracy theory once again? I reckon they all go (FED, BOE, ECB and BOC) on the same day. This would have the effect of stopping mad swings day after day in December as Central Banks adjust their policies.

Then again, from a trading perspective its better if they go one at a time. If you want to trade each event separately there is a choice and a better opportunity to make $$$ as you would be better focused.

Anyway…

I had to adjust trades and take losses on the back of the Poloz speech. I am now back and ready to face the BOC and Poloz head on!!

 

NZD: RBNZ RATE STATEMENT, CASH RATE and THE GENERAL ELECTION.

It’s another WTF!

I am going to show my age here and some of you may need to google this but Grant “aka Frank” Spencer temporary Governor of the RBNZ, now in charge of the keys to Wheeler’s drinks cabinet for the chaps, announced that New Zealand interest rates would remain accommodative for an extended period of time.

I expected the Kiwi to drop faster than a lead balloon. I was ready, NZD/USD, EUR/NZD, GBP/NZD and AUD/NZD on the news not really much happened at all. Not really a flicker… bugger.

The Election is still taking its toll. Another weak coalition government needs to be formed. This will take some time by all accounts. PATIENCE with the NZD will be required it will flip-flop around in my opinion between 0.7150 to 0.7250 until we get a resolution.

 

GBP: CARNEY’S SPEECHES, CURRENT ACCOUNT DATA.

There is nothing much new that I can add to what I have said before about Mark Carney.

He has given poor forward guidance over the years since arriving from the BOC replacing Merve “The Swerve” King as BOE Governor. He is a flip flopper, which, in general terms creates market instability the one core part of his job description he is employed to avoid.

At times, under the immense pressure of the job (and who would want it!), acts like a modern-day Pontius Pilate. It would not surprise me at a future BOE press conference or Parliamentary Committee hearing if we saw him behind his desk or podium with a basin of water and a hand towel.

I think Carney has to go through with a one and done rate hike in the UK before the end of 2017. This of course does NOT mean he will despite all the rhetoric around the last interest rate statement and the 3.0% inflation level in the UK.

Carney has the problem, Kuroda (BOJ), Draghi (ECB) and Janet Yellen at the Fed wished they had… inflation. Carney is caught between the devil and deep blue sea. The accountants (jotter blotters) have squeezed his balls so tight he has bent the knee and yielded to a potential / probable rate hike.

His latest speeches have taken the usual path: –

  • The BOE is not the savior of BREXIT.
  • Worried about reckless lending as inflation bites and wages lag.
  • Household debt is concerning, “short term damage… next 2-3 years!”

Moving on…

The focus by many twitter feeds and analysts last Friday was based on the UK GDP data.  From my perspective given BREXIT and its potential effects on the City of London in particular, the UK Current Account data was more important. Although 90 days backward looking, it highlights the currency demand, income flows, values of imports and exports and basic banking transfers over the previous 90 days.

Why is it important to me?

With the banking industry and its supporting networks undergoing moves away from the UK as the BREXIT timetable moves forward, the flows will start to dry up causing an imbalance that the BOE must react to.

This quarter the forecasted number was:

Minus £15.8 Billion the actual number was Minus £23.2 Billion.

I believe a trend of misses will not start to form as banks and related institutions start the shift to mainland Europe and Ireland.

 

USD: JANET YELLEN in or OUT? & HER COMMENTS ABOUT INFLATION.

This story will develop over the weekend but as we all know Janet Yellen’s tenure as FED CHAIR ends in February 2018. The debate over whether she stays on or ends had fueled much speculation over recent weeks and months.

Last Friday it was announced or probably leaked that THE DONALD and his Treasury Secretary Stephen Mnuchin interviewed former FED governor Kevin Warsh about replacing Yellen.

WTF…

This follows on the back of her comments she disclosed last Tuesday during her speech to the National association for Business Economics. Yellen admitted that she doesn’t understand inflation, control of which is the FED’s number one responsibility. Apparently, all the FED’s working models on inflation are wrong.

FFS…

Why didn’t she just resign on the spot?

This sort of thing beggar’s belief.

Is everything about the U.S. just loud voices, bullshit and total bollocks?

 

2.2: LOOKING AHEAD TO THIS COMING WEEK:


2.2.1: THIS WEEK’S ECONOMIC DATA RELEASES:

 


2.2.2: USD MAJORS – MY SUPPORT & RESISTANCE LEVELS:

 

2.2.3: MY THOUGHTS ON THIS WEEK’S ECONOMIC DATA:

Not a lot this week to choose from. Here are my picks of the upcoming week.

GBP:  MANUFACTURING, CONSTRUCTION & SERVICES PMI’s.

Yikes; that was quick month!

Here we go again with the PMI data. Last month all three were above the 50 line which signifies expansion. The one in danger of slipping below 50 is Construction PMI which last time around stood at 51.1. Should this fall below the dreaded 50 it will in my opinion place the proposed BOE interest rate hike due probably in November on hold.

3% inflation or not I just cannot see the BOE raising rates in the environment that a sub 50 number would create.

I am expecting a miss from Construction and Manufacturing PMI’s but a beat from the Services PMi.

The UK is going through a change and from my buddies on the ground (not literally), it is not being discussed at high level and to a large extent being swept under the carpet.

 

AUD: RBA RATE STATEMENT, RETAIL SALES & TRADE BALANCE.

It is a big week for the AUD it rejected hard from 0.8000, mostly on the back of comments from RBA Governor Philip Lowe.

Dr. Lowe basically said that the Central Bank is not rushing to change direction of monetary policy just because a lot of other Central Banks are choosing to do so. Therefore, I cannot see the Cash Rate being moved from 1.5%.

Retail Sales last month came in flat at 0.0%. Anything better which I assume we should see this time around will be a beat and be AUD positive.

Trade Balance is sticky. This number in my opinion could go either way and the data will tell us whether the AUD spikes or continues to drift lower.

All three announcements are market movers. Trade Balance and Retail Sales are released at the same time Wednesday just to ensure we have ADVIL on hand!!

 

CAD: TRADE BALANCE & EMPLOYMENT DATA.

So, after last week’s GDP was a bit soft, I am looking for strong data to support my CORE CAD TRADE POSITION, which for now looks sick. Patience is being applied in huge volume.

Last month the jobs data disappointed because of the mix between part and full-time positions. I am thinking that it may be more of the same as we start the run up to Thanksgiving and Christmas festivities. Although, I must point out after what is deemed a poor or mediocre number one month from Canada the next month is usually a blowout.

This is truly what makes trading currencies such fun!!

The Trade Balance number is a sticky one. Last time being CAD$ -3.0 Billion. Trying to obtain very recent up to date data to give me a hint here has proved virtually impossible. More ADVIL required for this one!

 

USD: ADP, NON-FARM PAYROLLS and AVERAGE HOURLIES.

First off.

Do NOT get suckered in to trades based off the ADP numbers when planning your NFP day. The correlation between ADP data on a Wednesday from the private sector and the government data on a Friday has not seen any correlation of late. So, if you want to do a Robert Palmer, “Looking for Clues” there will probably be feck all in expecting NFP to follow ADP numbers.

I must say this…

Who give a f**k anyways? The Fed are raising rates come hell or high water, I for one will probably NOT trade NFP, it is a lottery and as an indicator for the FED forget it… that decision has been made. Plus, it looks like Yellen is NOT going to be around to pick up any pieces anyhow.

I do not think NFP has any real importance this week. I could be proved wrong but I really do feel that the FED are raising no matter what.

As for the actual numbers; ADP last month was 237,000 and NFP was 156,000. If NFP keeps roughly to the last 12 month monthly average, the markets should not go too wild.

There should be an acceptance in the markets about the perceived FED policy… what am I saying!!

Obviously, the average hourly rate needs to remain positive and a jump of 0.1% would keep the markets happy.

 

  1. THE PREMIUM SERVICE:

The PREMIUM SERVICE is my own subscriber based Forex support service that offers subscribers my suggested trade set-ups and market commentaries.

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 HISTORY & PERFORMANCE tab.

CURRENT 2017 PREMIUM SERVICE PERFORMANCE:
FINAL WEEK THIS MONTH:         +302 pips
MONTH OF SEPTEMBER 2017:  +1,175 net pips
YEAR TO DATE 2017:                    +7,506 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.

  1. PREMIUM SERVICE SUBSCRIBERS ONLY:

4.1: PREMIUM SERVICE – SUBSCRIBER CONTENT AREA:
(Only SUBSCRIBERS to the PREMIUM SERVICE can view this section of the BLOG)

4.1.1: TRADING REVIEW:

4.1.2: SENTIMENT, FUNDAMENTAL & MACRO THOUGHTS:

4.1.3: USD – SUPPORT & RESISTANCE LEVELS:

4.1.4: USD – TRADING CHARTS and COMMENTARIES:

4.1.5: EXISTING CORE TRADES (PLANS & STRATEGIES):

4.1.6: CURRENT LIVE TRADES & LIMIT ORDERS:

4.1.7: FX BROKER NEWS with their MARKET FEEDBACK:

 

 

  1. CLOSING THOUGHTS & IDEAS: 

5.1: WANT A FREE PREMIUM SERVICE SUBSCRIPTION:

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5.2: PREMIUM SERVICE SUBSCRIPTIONS:

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Subscribing to the PREMIUM SERVICE is not just about receiving a larger “DRIVE THRU” blog packed with more trading supporting information, my thoughts and ideas. There is much more to a subscription that those things. Check it all out under the tab HISTORY & PERFORMANCE on my website www.weeklyfxdrivethru.com

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5.3: THE FINISHING LINE:

Nothing more to add here, I have said enough except,

As usual…

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.

Scott Pickering
The Pip Accumulator
Twitter: @pipaccumulator

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BLOG VERSION: #253 FREE NEWSLETTER
1st October 2017

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