THE WEEKLY FX DRIVE THRU
Jesus, Mary and Joseph… THE DONALD did it.
Last Tuesday was a hell of a ride, in fact it all started long before the day of the vote. The markets had decided that HILLARY had it all sewn up on the Monday morning following the prior weekends polls.
Never has there been an election in the world, that I can remember, where everyone and I mean everyone had an opinion on the outcome, based upon the shenanigans that we have ALL lived through for the past 18 months.
From a trading perspective, I went into the U.S. election with my focus on three pairs all based around a HILLARY victory. I banked a few pips on the night but to be honest, I was totally drawn in to the TV coverage, especially as the CNN expert panel started to think the unthinkable, and realise, that the candidate that they had trashed for the previous 12 months was about to become their next President. Between trading charts, two TV channels, Tweet Deck, emails and the odd connectivity issue, my primary focus was more on the prospect of THE DONALD in The White House than anything else.
I had my TRADE PLAN (A) but my TRADE PLAN (B) was not fixed in my mind. I had my price extremes list on the currency pairs that interested me, that I had issued to PREMIUM SERVICE subscribers in front of me.
I missed a great opportunity to short the EUR/USD after it became apparent that THE DONALD had a more than 50/50 chance of winning. My pre-event chart had the areas of interest to me for a EUR/USD short at 1.1240 and 1.1310. The pair spiked and leapt up like a salmon off 1.0990 support on the possible TRUMP victory. I advised PREMIUM SERVICE subscribers that I was NOT going to short at 1.1240 but 1.1310 the next level offered a better entry. The pair just failed short 1.1310 by a few pips.
It has subsequently fallen on the “TRUMPFLATION” move and is now challenging big support at 1.0850.
So, I missed several trades on the night. As I explained over twitter in the “wee hours”, you cannot be in all trades and such a geopolitical event is NOT just the night itself but the days that follow as well. On the night, I banked a smallish number of pips, however in the days that followed my pip gains have been much, much better.
The aftermath of the elections was relatively good for my trading as basically all of the bank analysis about what would happen should THE DONALD be victorious was bullsh*t. The FX reaction was 180 degrees away from all of the banks market interpretations that I could lay my hands on.
The week prior to the election, the PREMIUM SERVICE was negative -194 pips, (for the month) having started November at -300 pips. Now a week later for the month of November the PREMIUM SERVICE is positive by +694pips.
As my PREMIUM SERVICE subscribers are aware, I am dubious about the present levels in equities. The relationship between prices, EPS and overall valuations has me puzzled and I think we should not get carried away. I have started building short positions with the commodity currencies and I am gathering my thoughts and ideas for trading in 2017 based upon a TRUMP White House.
More of my 2017 thoughts and trade ideas are listed later in section 5 for PREMIUM SERVICE subscribers.
LOOKING BACKWARDS: THE FX MARKET PLACE
LAST WEEK’S FOREX and ECONOMIC NEWS – MY VIEWS:
U.S. PRESIDENTIAL ELECTION:
As I stated at the beginning of the blog THE DONALD (#45) is the next U.S. President.
The market reaction was opposite to what all the highly paid no skin in the market bank analysts had predicted, as soon as the markets realized that a TRUMP Presidency means SPEND, SPEND, SPEND and SPEND some more. In the U.S. with the great divide between Wall Street and Main Street firmly in situ (and those differences will be cemented in even more with THE DONALD in place at The White House), it was really hard to imagine that around 2.00AM EST on election night, the DOW was under a LIMIT DOWN and negative 830 points. Yet at the open it rallied to all-time highs.
Since THE DONALD became President-elect, copper is on “Walter White” meth’s and the Bonds are dropping like a series of lead balloons across the financial centres. Gold is falling and Oil is starting to crater, regardless of the now laughable OPEC production cut to be formally written into the files of the “pointless and pathetic” at the end of this month.
Yup… welcome to the new world order; TRUMPISM and TRUMPFLATION is here!
From the markets perspective, where money is concerned who gives a rats’ ass about who or what is President. The view is greater freedoms, less regulation, possible repeal of the Dodd-Frank legislation… happy days are here again.
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: GBP – Inflation Report Hearings.
MONDAY: NZD – Retail Sales.
MONDAY: AUD – Monetary Policy Meeting Minutes.
TUESDAY: GBP – CPi.
TUESDAY: NZD – GDT Auction Results.
WEDNESDAY: GBP – Jobs Data.
WEDNESDAY: USD – PPi.
WEDNESDAY: NZD – PPi.
WEDNESDAY: AUD – Jobs Data.
THURSDAY: GBP – Retail Sales.
THURSDAY: USD – CPi, Core CPi, Philly FED Manufacturing Index.
FRIDAY: CAD – Core CPi.
A nice mix of high level data this week. Our attentions will be starting to shift once again to the FED, with the will she or wont she raise rates discussion entering all the inter-market chat rooms once again.
If she wants job security our little FED ditherer will raise rates in December as expected by the markets, who, are now allegedly 85% on board with a FED increase in December, and next year with TRUMPFLATION on the cards two/three further rises should NOT be ruled out.
I am still bearish the cable and I am sitting in two short GBP/USD trades that are out of the money…argh!! I am therefore hoping for Theresa May or better still my mate Boris to say something bad this weekend regarding the BREXIT that causes cable to slip below 1.1500 preferably…. I live in hope!!
We must also bear in mind that the BREXIT will continue to offer volatility moving forward given the high court ruling on article 50. I would not be surprised to see EUROZONE players getting involved in the media sound-bytes, plus we are now in the same month as the alleged proposed OPEC OIL production cut (he laughs as he types!!), this should also start to weigh in on the markets.
MY THOUGHTS ON “THE DONALDS” FALLOUT:
Now before we all start popping Krug as if it were Dom Pérignon, there is much, much more to consider.
Let me just list a few of the initiatives that THE DONALD has in mind based upon what I would refer to as his ELECTION MANIFESTO.
- THE WALL: not a Roger Waters version, but the one to be erected between the U.S. and Mexico.
- THE AFFORDABLE HEATLH CARE ACT (aka OBAMACARE): to be repealed.
- NAFTA (North American Free Trade Agreement): To be torn up.
- NATO (North Atlantic Treaty Organisation): re-financed, replaced or eradicated.
- IRAN NUCLEAR AGREEMENT: To be torn up… revoked, repealed whatever.
- THE FED: Janet Yellen to be replaced by someone who will normalize U.S. interest rates at a faster pace. THE DONALD wants an aggressive little fecker in the FED as chairman.
Now enjoy it while you can… but let’s take a step back and look at this short list that springs to mind.
If you think for one moment that putting these action items into play is going to fuel a continued rally in equities good luck to you. The honeymoon will be over very soon when realism sets in.
THE DONALD is NOT a career politician. He is an arrogant, will say anything to get a deal done salesman. His path forward is not laid in GOLD… far from it.
I talk a lot about INTER-MARKET CORRELATIONS (PREMIUM SERVICE subscribers there is an item about this in the Training section). They are important to me to give me confidence in a move. Correlations confirm moves. They are vital to the way I trade and how I approach my day. Like my dogs (Ozzy and Aoife), I have my morning routines.
Before I take a really deep look at my charts and refresh myself with how my LIVE trades are behaving.
I scan the following: –
GOLD – /GC#0 (re AUD/USD and NZD/USD)
OIL – /CL#0 (re USD/CAD)
COPPER – /HGZ2 (re AUD/USD)
10 and 30 YEAR US BONDS – /ZN#0 and /ZB#0 (re USD/JPY and DXY)
S&P – /ES#0 (re AUD/JPY)
DXY – USD index
USD/SEK – this pair is very sensitive and a great leading indicator.
I will quickly scan the inverse relationships of: –
EUR/USD and USD/CHF
EUR/GBP and GBP/CHF
S&P and AUD/JPY
I will look at GOLD versus the AUD and CHF currencies as a whole some days as well.
Started in 2015, if OIL is up or down I look at USD/CAD, USD/NOK and sometimes
USD/MXN (of late this has been more of a THE DONALD trade) to check the movement correlation.
By verifying and checking all of these and it takes me 15 minutes for a fast appraisal, this gives me the market overview I require from which to trade from.
I will guarantee you right now, with the list of THE DONALD’s manifesto objectives listed above, correlations over the next 6-9 months will be more off than on.
My point here is that I strongly believe that we have continued uncertainty from a U.S. domestic perspective and it will be a riot on U.S. Foreign Policy.
Over the coming weeks I will be burning the midnight oil to gather more and more opinions to counsel me further or trade against, which is the norm more often than not.
This market will stop dead in its track and reverse. This is not a super heavy oil tanker that requires 25 miles to stop and turn around…. be careful.
FOREX TRADING IN GENERAL TERMS THIS WEEK:
Basically keep it nimble. I do NOT trust these equity markets at these very lofty heights.
Bottom line just be careful. Very small position sizes if you are participating.
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.
EUR/USD – Weekly Closing Price: 1.0847
GBP/USD – Weekly Closing Price: 1.2594
AUD/USD – Weekly Closing Price: 0.7539
NZD/USD – Weekly Closing Price: 0.7115
USD/CAD – Weekly Closing Price: 1.3538
USD/CHF – Weekly Closing Price: 0.9870
USD/JPY – Weekly Closing Price: 106.59
MY CLOSING THOUGHTS:
Well, if you survived last week you are now good to go.
The equity markets look toppy to me so be careful as we will have huge “RIPS” and “DIPS” being at so many extremes all at the same time (DOW, S&P, BONDS, COPPER).
Be conscious that BREXIT and the up-coming election in ITALY, could send the markets into mega confusion as protest votes are the way to go nowadays.
A big rejection of constitutional reform in ITALY on 4th December could send the EUROZONE and the single currency into a tail-spin. Add a bit of BORIS JOHNSON and THE DONALD into the mix and volatility is the name of the game…. never mind “HUGE” uncertainty about Matteo Renzi the Italian Prime Minister.
So once again, the sword of Damocles hangs over the markets. I have to mention OPEC… what a joke. If they actually do something that is measurable quantifiable and accountable never mind identifiable, yes, look out of your windows and catch the squadrons of pink pigs flying overhead…. need I say anymore?
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: #41 FOREXTELL
DATE: 12th November 2016.