RBNZ CHAPS OR CHUMPS? By Scott Pickering

  1. INTRODUCTION:

Is it just me, or am I missing something?

I find this current FX market very hard. The equity investor approach of “BUY THE DIP” is literally driving me insane. I think a lot of this stuff as I said last week, is MIND MANAGEMENT that I need to deal with, but with no major economic data to support moves, trying to trade in a news driven orientated marketplace is damn hard.

TRUMP on his goodwill trip in Asia, the GOP screwing up yet another campaign promise, this time the TAX BILL in the U.S. and to a lesser extent, Theresa May’s government problems in the UK with cabinet sackings and scandals have been at the forefront of all the news. Add in an ascending OIL price, multiple corruption arrests in Riyadh, Saudi Arabia and an attempted missile strike on Riyadh International Airport. Plus, not forgetting a parabolic rise and then blow off top in the NIKKEi index, it was a strange week.

The two main news events on my list last week were Central Bank policy announcements from the RBA and RBNZ. These were boring and frankly a snooze fest.

For the entire week, I felt like a pork pie at a Jewish wedding… sitting and waiting. Hindsight is a beautiful thing, had I known that last week was going to be what it was, it would have been an ideal week away from charts and screens.

I think that the main reason for my masterly inactivity was due the fact that my CORE TRADES were in transition and CROSS RATE trading is in a consolidation mode and until fresh ranges are established I have learned through experience to stay away.

Moving on…

Reality check…

One aspect about trading that I will always to stay true to, is to remain truthful about my trading performance especially with the responsibility to the PREMIUM SERVICE.

If I am having a bad week, if I am uncertain with what to do I will tell you.

Suffice to say with what I have just written the PREMIUM SERVICE did not motor through pips like it had been doing on the weeks previous. It was a poor yielding week. There were a few losing trades and few profitable trades that netted a whopping +47 pips in the week. Having said that most open trades are just reading water.

Naturally, with the benefit of hindsight, the ”pip return” could have been 5 or 6 times what it was but we all know this.

I live to battle for another week!!

 

  1. THE FX MARKET PLACE:

2.1: LOOKING BACK AT LAST WEEK’S NEWS.

Here is what tickled my fancy in the news last week as a currency trader.

ECONOMIC NEWS:

AUD: RBA RATE STATEMENT & MONETARY POLICY STATEMENTS.

The rate statement was the biggest snooze fest I have set the alarm to wake up for. Absolutely nothing happened.

Guess what? The Monetary Policy Statement was a no change snooze fest as well.

From an external viewpoint Philip Lowe has achieved the ultimate stability. It is very rare that two announcements from a major Central Bank in the same week pass by with little or no real reaction.

A key goal of market stability without any uncertainties to create a clear understanding of policy has been achieved.

 

NZD: RBNZ RATE STATEMENT & PRESS CONFERENCE.

CHAPS OR CHUMPS?

Maybe I am just getting intolerant of incompetence, but that Press Conference by stand-in RBNZ Governor, Grant Spencer was the biggest time-wasting event I have ever witnessed from a Central Bank.

I used to criticize his predecessor Graeme Wheeler because the press conferences were so laid back that instead of chairs behind tables they should have been on psychiatrist’s loungers. At his very worst, Wheeler was never this bad.

The NZD economy is in a state of flux right now on the basis that there is a new government coalition between the Liberal and NZ First parties.

There is uncertainty over the new government’s policies and the final draft of how the new mandate for the RBNZ will look has still not been finalized. Basically, since the last meeting Grant Spencer has seen growth with employment and a pullback in housing prices.

Spencer was generally upbeat, which surprised me a great deal, given the uncertainties that we all know lie ahead. These were brushed aside as non-consequential. I strongly suspect Spencer is now re-living these fucks ups in delivery.

We know from the Finance Minister (Robinson) that there will be a two-phase review of the RBNZ mandate. The first phase to focus on employment and the second to review the board make up and role. The government wants minutes of the RBNZ board meetings to be published, and also that the RBNZ will have employment maximization as a goal as well the existing inflation target. These changes were brushed off as easy to integrate.

However, the press conference took a move sideways when Spencer was asked questions with regards to the future makeup of the board of the RBNZ. The new government wants to extend the banks mandate and increase the diversity of opinion on the board through adding outside members to the board of the RBNZ. When asked would he be in favour of external members on the board he was anti this idea. He cited examples of other boards such as the FED and ECB where board members commented openly against majority decisions. He was anti minutes and publicizing how board members had voted.

Basically, I got the very strong feeling that he is a “I love and embrace change and I am a change manager BUT” type of person.

Spencer talked about consistency of message. He said in the press conference that the current NZD/USD exchange rate was “in the vicinity” of where he saw fair value. Hmmn… about 90 minutes later his deputy was on the wires saying the NZD/USD exchange rate should be a few cents lower from current levels.

Mr. Spencer please tell me how is this different from the FED or ECB?

The bottom line was that the RBNZ moved their expectations of the next interest rate hike from Q3 2019 to Q2 2019…. Give me a fecking break; are you kidding?

Then little more than 2 hours later to contradict everything Spencer stated about the new RBNZ mandate. Grant Robertson the Finance Minister was back on the wires stating that the new mandate could mean a looser policy from the RBNZ.

Then 24 hours later NZ Finance Minister Grant Robertson not happy with statement one, came back on the wires again this time stating that the RBNZ inflation objective may not be a hard rule moving forward, again pointing to a looser policy.

You could NOT make this stuff up. Left hand versus right hand – no coordination -complete lack of professionalism. I cannot believe a damn thing Spencer waffled on about. Thank God, he’s gone next March. This is shambolic for a Central Bank.

As I have said on several occasions, the New Zealand economy is going through and will continue to go through huge change over the coming months which will keep the NZD currency pressured to the downside. We are one headline away from a 50-pip drop. This week we have two examples of the “Headline drop”. I have absolutely no doubt that there will lots more ahead.

 

GEOPOLITICAL NEWS:

If the economic data could be best described as non-events and snooze fests, that could NOT be said about the geopolitical news.

Let me try to keep this brief…

 

SAUDI ARABIA:

There was a mass arrest under the banner of an anti-corruption sweep related to various levels of fraud, money laundering and other corrupt business practices. Over 200 people have now been arrested and still detained. Notably, 11 Royal Family Princes including billionaire Prince Alwaleed bin Talal have been detained. This list of detainees also includes prominent businessmen and former government ministers and officials.

This crossed the wires around the same time as it was reported a missile from Yemen was intercepted with its target being Riyadh’s international airport.

If this were not enough, a dispute with Lebanon also erupted. The Lebanese Prime Minister resigned whilst in Riyadh last weekend. Saudi Arabia wants change in Lebanon following Iran’s increasing influence in the middle east. The fact that Iran has close ties with Hizbollah who have power with the Lebanese government is pissing off the Saudis. This has now escalated to the point that all Saudi passport holders have been advised to leave Lebanon and a travel ban has been imposed.

There is a power shift in the region and Saudi Arabia is flexing and power games are at play in the region.

What was the effect of this on the FX market…. I noticed nothing…. Nada.

 

THERESA MAY’s GOVERNMENT / CABINET SCANDALS & BREXIT:

There is nothing like a good old sex scandal or corrupt politician in Westminster.  Priti Patel, International Development Secretary had been naughty, she had several unauthorized meetings with Israeli Politicians including Prime Minister Benjamin Netanyahu. Boris Johnson her boss as Foreign Secretary knew nothing of the meetings.

This followed the other resignation earlier in the week of Defense Secretary Michael Fallon who has allegedly done a “Weinstein”. There are also accusations of a few touchy / feely rumours and predator text messages going on with Junior Ministers.

Happy Days the UK press this weekend will be in overdrive.

Then there was BREXIT…. no change still a fuck up, no noticeable progress. On Friday, last week there was a joint Press Conference by Michel Barnier (Chief EU negotiator) and David Davis (UK Cabinet BREXIT negotiator), I think it was very easy to see straightaway that these two just do not get on.

The progress was nonspecific and cable jumped higher on the back of that… incredible. It was all hot air from my perspective the usual posturing. A journalist from the Guardian newspaper in London asked a couple of questions of Barnier basically to see if he was a puppet of the French and German governments or was he in control of the negotiations. Just when it was going to get interesting “TIME OUT” was called. The questions were not answered.

I am now getting more and more of the opinion that a NO DEAL will be the outcome and a walk away.

Cable is always in my opinion one news headline away from a 100-pip spike or drop, as seen Friday these moves can be based on nothing. Eventually Cable will be a mega buy… but not yet, I think we have another big shot lower first.


DONALD TRUMPS ASIAN “GOODWILL” TRIP:

Melania’s outfits were striking, a lot of money spend there no doubt. As for yer man… it’s just a nonsense and embarrassing to watch and listen to him. I think world leaders give him more respect than he gets back in the U.S. from his own people but I do think that they are playing and just humouring him.

 

GOP TAX PLAN:

For a political party to be in opposition for eight years, one would have expected that they would hit the road running on their campaign pledges. Not in the U.S., a failure with the affordable care act (Obamacare) and now at the heart of every Republican Party the promise of lower taxes.

It must be embarrassing to be a representative in Washington, yet I don’t see it in any dialogue. U.S. systems are set up on a pedestal for the rest of the world to be envious of.

I don’t see it and I don’t get it. This is a shamble.

I know the GOP did not think they would have a majority, never mind win the presidential election, TRUMP did that basically on his own. But the fact that in opposition, elected representatives DID NOTHING to prepare for government must sadden so many Americans, whether you are Republican or Democrat.

Away on his GOODWILL TRIP spreading the love around Asia, THE DONALD jumped in on the Tax Bill reform and seemed to side with the senate version of the bill which delays the Corporate Tax cuts until 2019. Previously being a decisive leader and great deal maker his was onboard with the “HOUSE” version of the bill. THE DONALD has once again gone for a watered down limp version of reform.

The DOW, S&P, NASDAQ and RUSSELL all went “bigly” RED on the news that Corporate Tax cuts would likely be delayed. A nice sell-off took place Thursday but by the close with the “BUY THE DIP” mentality in place 2/3rds of the losses across the DOW and S&P were paired back. 24 hours later the market after absorbing the news consolidates sideways as it was a Friday. It is quite predictable at times.

 

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: USD – TRADING CHARTS and COMMENTARIES:

The charts below contain commentary (my thoughts and views), these are the USD major charts that are reflected in the spreadsheet above.


EUR/USD:

 

GBP/USD:

 

AUD/USD:

 

NZD/USD:

 

USD/CAD:

 

USD/CHF:

 

USD/JPY:

 

 

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

GBP: CPi, AVERAGE EARNINGS INDEX & RETAIL SALES.

These figures will be interesting to note based on whether the UK economy is moving forward or not. They mean nothing vis-a-vis future BOE policy as we have just had the dovish rate hike.

Consumer Prices last time around were at 3%, with wages rising at only 2.2% and Retail sales were disappointing at -0.8%

It is the differential gap between CPI (Inflation) and Average Earnings which will attract 99.999999999% of the attention. Will it have narrowed?

From a Retail Sales numbers perspective if this cannot start to pick up in the run up to Christmas it will never move higher. The issue of course will then be the Credit Card spending numbers if families have decided to go for it at Christmas, put the expense on the plastic and then worry about trying to clear the debt in the new year. At higher interest rates, of course thanks to the recent interest rate increase, the early Mark Carney Christmas present from the BOE!


AUD:
JOBS DATA.

I have a feeling that the jobs data this time around could really surprise to the upside. There tends to be cycles with AUD jobs data. Good numbers, then lower, then blowout.  Last month the number was 19.8k.

As long as last month’s number is beaten and growth can be seen, I think given the recent RBA down playing of the Australian economy this will be viewed positively by the markets.

 

CAD: CPi & CORE RETAIL SALES.

I have no doubt that Stephen Poloz, BOC governor will be expecting CPI greater than 0.2% and a positive reading on Retail Sales after last month’s miserable negative 0.7% reading.

 

USD: PPI, CPI & RETAIL SALES.

Like the UK. These numbers probably mean very little vis-à-vis the FED monetary policy action that is widely expected next month, when it is expected that the annual Christmas present of a 0.25% interest rate increase is actioned.

Obviously, it goes without saying that good numbers, significant beats over the previous set are expected, especially as the storm season has been blamed for a lot of the recent mixed U.S. data.

Obviously good numbers across the board will have the TV networks frothing at the mouth over the December FED meeting and future policy with a new FED chair in place next year. Conversely, the same could be said if the numbers are a bloody disaster!

 

2.2.5: HOW TO PLAY THE MARKET THIS WEEK:

GEOPOLITICAL ISSUES TO CONSIDER:

BREXIT

SAUDI ARABIA

TRUMPS GOODWILL TRIP TO ASIA

 

Last week was a very strange week to trade. There was very little economic data to get your teeth into and the news that was there, was basically a snooze fest. This coming week offers a plethora of options.

I have not been very active in the FX market the past 5/6 days. I was waiting for the momentum indicators to re-set and for a lot of the cross rate overbought / oversold conditions to settle down.

This coming week the JPY interests me a great deal.

 

 

From the chart above it is clear to see that the once very consistent correlation between the NIKKEI index and the USD/JPY is over. I have been referring to this over the past week or two.

As long time readers will know I place a lot of faith in correlations as they give a security of consistency and confidence when placing trades. When they are not aligned, they can create opportunities.

We have such an opportunity with the JPY. The chart above shows a quite remarkable move higher with the NIKKEI that was not traced by the USD/JPY, in fact quite the opposite on occasion. With the NIKKEI busting higher and the DOW, S&P and NASDAQ pumping new highs, one would have expected the USD/JPY close to 130.00 maybe 140.00… instead quite the opposite.

When the NIKKEI retraces and the U.S. equities finally give up the relentless push higher, the USD/JPY that failed to rally will be prime to accelerate its move lower as equities retrace lower.

I am currently short through the PREMIUM SERVICE short AUD/JPY, EUR/JPY, GBP/JPY and NZD/JPY. The Antipodean pairs are positive but the European pairs spiked against me last Friday. My intention is to remain short for the foreseeable future to see how this plays out.

The USD/JPY, has critical support around 113.10 and then should that level give way there could be 200-300 pips in the move lower. Hopefully my 4 x JPY trades will move lower as well. At the moment, the USD/JPY is hovering about 50 pips above the key support.

Additionally…

I am trying to look around not be as reliant on the USD for trades. I have very mixed feelings about trading reliance on the USD when we operate in a news driven market. Great positions can be upside down in minutes for no real reason.

 

  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:

PIPS ADDED LAST WEEK:           = +47 pips
PIPS MONTH TO DATE:                = +169 pips
YEAR TO DATE:                              = +10,571 pips

Further information can be found by clicking TESTIMONIALS, PART-TIME TRADERS and FX PROMOTIONS tabs on my website www.weeklyfxdrivethru.com

Alternatively, if you prefer to watch a video recording about the PREMIUM SERVICE, click the link below. You will be directed to a 40-minute webinar presentation entitled “AN INTRODUCTION TO THE PREMIUM SERVICE”.

http://screencasts.weeklyfxdrivethru.com/watch/cb6fqiIAZX

To subscribe to THE PREMIUM SERVICE, you will require a valid credit card.

  1. PREMIUM SERVICE SUBSCRIBERS ONLY:

(Only SUBSCRIBERS to the PREMIUM SERVICE can view this section of the BLOG)

4.1: TRADING REVIEW:

4.2: SENTIMENT CHART, FUNDAMENTAL & MACRO THOUGHTS:

4.3: EXISTING CORE TRADES (PLANS & STRATEGIES):

4.4: CURRENT LIVE TRADES & LIMIT ORDERS:

4.5: FX BROKER NEWS with their MARKET FEEDBACK:

 

  1. THE FINISHING LINE:

5.1: WANT A FREE PREMIUM SERVICE SUBSCRIPTION:

If you like what you have read in this blog and would like the chance to win a FREE SUBSCRIPTION valued at CAD$150.00, all you need to do is subscribe to my FREE NEWSLETTER (this blog), by adding your email address on my welcome page just below my cube logo at www.weeklyfxdrivethru.com

5.2: PREMIUM SERVICE SUBSCRIPTIONS:

If you like what you’ve read in this blog and should you want to go a stage further and subscribe to the PREMIUM SERVICE, this can be done on my website www.weeklyfxdrivethru.com under the Tab SUBSCRIBE HERE.

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 than those things. Check it all out under the tab HISTORY & PERFORMANCE on my website www.weeklyfxdrivethru.com

Alternatively, if you prefer to watch a video recording about the PREMIUM SERVICE, click the link below. You will be directed to a 40-minute webinar presentation entitled “AN INTRODUCTION TO THE PREMIUM SERVICE”.

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To subscribe to THE PREMIUM SERVICE, you will require a valid credit card.


5.3: CLOSING THOUGHTS:

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

https://weeklyfxdrivethru.com/disclaimer/

BLOG VERSION: #259 FREE NEWSLETTER
12th November 2017

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