Prior to the past week, the previous two weeks of trading were painful for me. From the Boris Johnson BREXIT sell off in the cable, which was followed by severe ice storms which left me without either power or any ISP’s operating for two days. It took time to re-focus and gather one’s thoughts / patterns again.

Thankfully, this past week was a good one. In “my week in hell” All of my PREMIUM SERVICE pip gains for 2016 were erased and last week I replaced 75% of them. I am on a roll as they say in Vegas! I am still confident of generating 10,000 pips this year as I did in 2014 and 2015.

Adding in my weekly weather check…. We are thawing here, just off the island of Montreal. Soon the snow and ice will be gone. My wife and I can walk the dogs again without fear of being run over by snow ploughs, and I can trade from the terrace in the sun close to a fully functional BBQ. Yes, the summer routine should be back in play very soon once again, with a bit of luck.




What a feck of a week we just had.

Jesus, Mary and Joseph, I said last week that “CENTRAL BANKS TAKE CENTRE STAGE”, even one of my heroes, Mick Jagger, would have had difficulty managing and working that stage.

We had the BOC, RBNZ and ECB all dominating Forex traders minds regarding trading and to set the week off just prior to the BOC statement we had Mark Carney with testimony in front of a Treasury Select Committee hearing where Carney was talking about the BREXIT… deep joy and what fun.

My review of these four events is as follows: –



My first comment about this was how awfully, “awfully” the chaps were. There was none of the GOP debate nonsense of small hands, calling people liars, chokers, no wetting one’s trousers’, no spray tans and the bible never came up once. The most heated it got was when Euro-skeptic MP Jacob Rees-Mogg addressed Carney with a “with due respect”.

You have got to love old blighty, the U.S. has Ted Cruz, Bernie Sanders, Donald Trump, Mitt Romney and Little Marco… the Brits have a Jacob Rees-Mogg, married to a Helena de Chair with a sibling named Annunziata Rees-Mogg. Bollocks to the U.S., the Brits have a history and they have names that age like a good bottle of Corton, which, is in complete contrast to the bottle of BUD comparison of the Teds, Bernie’s, Mitts and Donald’s of this world. I mean what sex is that sibling, it sounds female but is it? However, Jacob and Helena have a son named Tom Wentworth Somerset Dunstan Rees-Mogg, I would like to see how VISA and MasterCard cope with that!

Moving on…

The 3 hours or so of questions and answers were the usual toing and froing that one sees in the UK. No rambles of statements pretending to be questions that Janet Yellen faces when she is giving her testimony on Capital Hill.

Carney was accused of being pro-EU and he stood his ground. He had apparently not conducted through the BOE any scenarios of effects should the BREXIT occur. Brave man, however, I do not believe in a million years that not one single paper has been produced inside the BOE with what their strategies are.



No press conference this time and guess what? All is just fecking brilliant here in Canada. The snows are melting exposing potholes all over the roads here in Quebec. The mass of concrete that is so heavy in the crumbling infrastructure of Montreal, crumbles away some more. We had a massive sinkhole this week in Montreal. Jobs are disappearing from the prosperous provinces of Alberta and British Columbia. The chances of a housing bubble in Vancouver and Toronto are still there, prices are not giving up. However, from the thick pile cushioned carpets inside the BOC all are warm and cuddly.

Stephen Poloz is banking on Justin Trudeau’s first budget on the 22nd March to provide fiscal stimulus to cure all the issues facing the Canadian economy. Lets see how that goes.

For now rates are on hold.




Graeme Wheeler in a market surprise event cut interest rates by 0.25%. He promised more should matters Kiwi not improve. I notice that another 0.25% has been penciled in prior to the completion of Q2.

The one thing I noticed from reading the statement and listening to the press conference and parliament speech was the number of times China was mentioned. I don’t think that Wheeler is planning a vacation, more just shitt**g his pants as China is New Zealand’s largest trading partner and the slowdown and hard landing that we all know is coming is starting to bite, and bite hard.

Selling the NZD on spikes would seem to be a great trade for the time being.



WTF! – Draghi throws the kitchen sink in. He did not hold back and instead of the EUR weakening it strengthened. It shot up so fast off 1.0820, like a rat up a drain pipe, and it rallied from 1.0820 to over 1.1200, 4 cents in one session an unbelievable move.

Draghi cut, added, added some more stimuli and at the end basically fecked up by saying that’s about it, no more scope, nothing more to do now. At that point the EUR/USD and crosses spiked. I watched not believing the squeeze that took place.

Who would be Draghi pouring out his fruit loops this morning reading all the media coverage about the press conference? Wiedmann at the Bundesbank, will be handing Mario a huge slice of I told you so soon, if he hasn’t already done so.

What happened though has much wider implications, which I will look at later in the blog. The impact of post ECB has wider implications for Central Banks, Governments will take note, and, it filters all the way down to us Forex Traders on how we approach the markets moving forward.




(This is a line taken from “IN DEFENCE OF MONETARY POLICY” written by Vitor Constancio, Vice President of the ECB. It was written the day following the latest ECB Press Conference)


The latest ECB press conference was the second one from which the markets poo-pooed the ECB stimulus and the single currency strengthened instead of weakening. One occasion is a freak; the second is a pattern… but why?

Draghi unleashed aggressive monetary stimulus.

Refinancing Rate cut from 0% to 0.05%.
Overnight deposit negative rates increased from -0.3% to -0.4%.
QE increased to €80 billion per month from €60 billion per month.
New 4 year TLTRO’s.
Asset Purchases to now include Corporate Bonds
He then also lowered 2016 and 2017 GDP and Inflation Forecasts.

Lets face facts the above is strong stimulus and collectively they are worthy of the title “BAZOOKA”.

What went wrong?

Why did the market react the way it did?

I have a hard time believing that a 4-cent rise in the EUR/USD exchange rate on the day could not all be attributed to the fact that the ECB believe that they have done enough. I say that in the complete knowledge that the FX market is at times mental and appears to outsiders, and us traders sometimes, to be totally dysfunctional.

The fact that Vitor Constancio released his memorandum the following day says it all for me. Briefly, he stated that the stimulus provided was in response to the vocal skepticism in the media and markets about the prior ECB package in play. He went on to say that fiscal and structural reforms are welcome but across all the member states of the EUROZONE would have implementation issues as parliaments are all different and different time lines would be in play and laws may be restrictive. Plus not all member states would adopt fiscal policy changes whether they needed to or not. Structural reforms are too long to implement.

He summarizes with the comments that in the EURO area, higher growth is urgently required to reduce negative output and unemployment gaps.

He ends his final sentence with IF NOT MONETARY POLICY, THEN WHAT?

My thoughts are, if central bank monetary policy no longer influences exchange rates, we have a huge problem.

Stock markets should have been flying as a result of the ECB stimulus. We got a sell off. This has wider implications for those people who have pensions etc linked into the stock market.

The same thing happened after the BOJ introduced negative overnight interest rates. A massive sell–off followed.

This is volatility that is not expected. One of the key roles and responsibility of a central bank is that of creating and maintaining price stability, and at the same time removing uncertainty.

After the ECB and BOJ we have uncertainty. We now have risks that we never thought that we would have. Stimulus normally means stock market bullishness.

Will this reaction to the ECB affect the FED and the SNB?

We have an FOMC meeting this week. The fact that Draghi and the ECB was so accommodative, one would think that if they wanted it to, this would have supported the FED being hawkish. I somehow believe that the FED will hold until the end of Q2 before raising again, although even if it raised rates this week I think it would have a minimal effect.

Thomas Jordan (SNB) must have been an interested on-looker last Thursday. I have no doubt he will NOT want the CHF to strengthen and intervention could happen at any time. Even with negative interest rates there could still be a safety play at some time for the CHF pairs. The EUR will weaken over time and Jordan will want to be proactive rather than reactive with his actions.

Stepping back…

When you first start trading you are aware that central bank monetary policy is the cornerstone to a currencies behavior. If you cannot rely on that what do you have?

In my opinion, confusion and uncertainty come into play, which, I believe manifests itself as FEAR and GREED. FEAR and GREED rule FX at the best of times even when there is nothing to FEAR. If markets no longer take a Viagra pill on the back of currency stimulus we have to start re-thinking about correlations next.

Without doubt it means that we should be cautious and let the dust settle down for a few days. Certainly the FED meeting this week will be one event to follow with interest. Will the FED still demand respect?

The ECB is arguably the biggest central bank in the world. The BOJ is in the top three without doubt. If the FED gets paid lip service we do have a problem moving forward.

The risks across all markets should this be the case should not be under estimated. Should the equity markets move lower, the corrections could be greater than we thought possible and then we have FEAR, followed by GREED.

Waiting for fiscal and structural changes may be the way, but they are not instant to re-invigorating an economy. They take time. If Central Bank monetary policy is truly now sterile and markets immune to the effects, we could end up in chaos with an unruly sell–off. There would be a run to both GOLD and CASH.

Personally, I have never traded in a period when central bank policies were almost ignored by the markets. With the FED meeting this week, its commentary takes on another level of interest and reaction in my eyes given what has recently happened with the BOJ and ECB.

I do not want to get doom and gloom orientated but I do believe we have big issues facing markets in the near term. If monetary policy just isn’t enough on its own for the immediate future, we have issues to address.





(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: AUD – Monetary Policy Meeting Minutes.

TUESDAY: BOJ – Press Conference and Monetary Policy Statement.
TUESDAY: USD – PPI and Retail Sales.
TUESDAY: NZD – GDT Price Index.

WEDNESDAY: GBP – Unemployment Data and Annual Budget.
WEDNESDAY: USD – CPi and Core CPi.
WEDNESDAY: USD – FOMC Statement, Rate, Projections & Press Conference.
WEDNESDAY: AUD – Employment Data.

THURSDAY: SNB – Libor Rate and Monetary Policy Statement.
THURSDAY: GBP – BOE Bank Rate and Policy Summary

FRIDAY: CAD – Core Retail Sales and Core CPi.



(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. If you have difficulty getting them to expand please let me know. Sometimes word press is difficult.

This week, I have decided to break the usual approach and look at monthly charts instead of daily charts. This is in response to feedback, when I was asked for a more macro level view.

EUR/USD – Weekly Closing Price: 1.1145

EURUSD M 12032016

GBP/USD – Weekly Closing Price: 1.4386

GBPUSD M 12032016

AUD/USD – Weekly Closing Price: 0.7559

AUDUSD M 12032016

NZD/USD – Weekly Closing Price: 0.6742

NZDUSD M 12032016

USD/CAD – Weekly Closing Price: 1.3215

USDCAD M 12032016

USD/CHF – Weekly Closing Price: 0.9825

USDCHF M 12032016

USD/JPY – Weekly Closing Price: 113.81

USDJPY M 12032016



Another big week for news lies ahead of us.

We have another three central banks with rate announcements, this time it’s the BOJ, SNB and BOE.

Unless Thomas Jordan at the SNB does another “gob smacker”, I am expecting this week to be focused on the FED and the FOMC with Janet Yellen’s press conference.

We should also note that we have employment data from the GBP and AUD.

As always, be savvy…

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.

Take care,

Scott Pickering
The Pip Accumulator


The post IF NOT MONETARY POLICY… THEN WHAT? appeared first on www.forextell.com.

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