THE DRAGHI THUNDERBOLT: By Scott Pickering

  1. INTRODUCTION:

Last week’s title for my blog was: –

WILL THE ECB PULL IT OFF?

The answer was a resounding “Yes” ….

Despite the odds stacked against him Mario Draghi did a modern-day Houdini act. He delivered a “THUNDERBOLT” to the markets and silenced EURO bulls inside a minute.

I will comment more about this later.

Last week was like the week before lots of pips and $$$ being generated, primarily on the back of NZD weakness across the board.

I cleared my 4 x HEDGED trades (2 x EUR/NZD, GBP/NZD and GBP/AUD) with net profits, only to enter three more on the back of the BOC last Wednesday. I am still a believer that the USD/CAD will be going lower than 1.2000 and that the BOC will surprise hike once again. Having not hedged trades for over two years to jump in with 7 in the same month is a bit of a nose-bleed situation.

I personally view HEDGING as a trading tool to effectively “park” trades that you are in, that are moving sideways or against you but FUNDAMENTALLY you believe that you are directionally correct.

On many occasions, you can be focused on trades that are “up in your face” and let other trades go by. HEDGING removes this. I hedged last Wednesday, and I am still waiting to activate my exit strategy.

Moving on.

The PREMIUM SERVICE has now achieved its annual target of net 10,000 pips.

The total for 2017 now stands at 10,702 pips

I am delighted with this because I have achieved this despite the fact that I moved home this year, trekking 13 hours across Canada out of Quebec into Nova Scotia, which took up a lot of my time. Plus, the move was followed by a 25-day trip to Australia and New Zealand, moving to a new house, with all the planning and scheduling with the trip as well, certainly placed an additional stress on trading. Remote trading is at the best of time very stressful. It was when all said and done about a three-month event, therefore to hit target with over two months of the year left is pleasing.

As my good friend, Roger would say “Happy Days”, I would add “Fecking” into the middle of his little saying.

The following section was in last week’s blog and I am leaving it unchanged (except for Italics) again this week, with the added couple of comments: –

  • As we enter the final couple of months in 2017, If you are thinking about FX trading as an additional income stream, why not get on board now? Get used to the way I do things, get familiar with the PREMIUM SERVICE system and get ready for blast off in 2018.
  • Between now and the end of 2017 there are still pips to be gathered and $$$ to make!

My annual target of 10,000 pips is in sight, however, nothing can be taken for granted and given that my position sizing this year has been smaller due to the markets having greater RISK attached, my income from trading will be lower this year… but, there should be an income barring any disasters in the run up to the year end.

My point here as I mention every year is that those of you who trade with smaller account sizes can still make some money from trading Forex.

Single MINI LOT trades                                 = USD$1.00 each
PREMIUM SERVICE Annual target               = 10,000 pips

Anticipated Gross Income                            = USD$10,000 (10,000 pips x USD$1)

Less PREMIUM SERVICE

Annual subscription                                       = USD$1,000 (equivalent)
NET TRADING INCOME                               = USD$9,000

Working on the 50% rule
Should you can only capture:
50% of my suggested trades
50% of my entries on time
50% of my exits on time
You could still generate a NET INCOME
after subscription                                            of USD$4,0000

Obviously, you would need in the first year to open and adequately fund a broker account to meet the trading criteria you have set yourself. I would say to trade MINI LOT trades you would require a minimum of a USD$6,000 account for you first year after one year you should be able to trade and operate your account on trading income and then as the year’s progress increase your trading size to say 2 or 3 MINI LOTS but at the same time you must remember increased POSITION SIZES = INCREASED RISK.

RISK MANAGEMENT is crucial to FX trading. Without it you fail.

 

  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.

 

BOC: INTEREST RATE DECISION.

The Bank of Canada left interest rates unchanged last week. This was not a complete surprise as recent financial data had been sliding away.

Stephen Poloz, BOC Governor, was quite dovish, but now that I understand him a little better he was really being nothing other than “matter of fact” with his language. Nevertheless, the CAD weakened like crazy, moving the USD/CAD about 150 pips higher to 1.2800. Potentially there is the chance of a 1.3000 re-test especially if you add in USD strength.

Whilst, I think he sounded dovish, Poloz also amended forward forecasting quite a bit. Both the 2017 growth was revised up and the same for 2018, he also was very clear stating that less monetary stimulus would be required into the Canadian Economy.

The old chestnuts about Inflation risks to the downside, excess capacity in the Labour Market, softness in wage growth and elevated household debt all featured vis-a-vis the effects on these from higher interest rates.

Poloz focused a great deal on lower inflation so reading between the lines the chances of another hike in 2017 look a little optimistic at this stage. We should not get too carried away here as 4 weeks ago we were expecting another hike this year, it could all turn around again in the next 2/3 weeks and a December move once again becomes a possibility

One thing I have learned in trading FX for 10 years is never say never; even with a Central Bank.

My bias with the CAD, referring to USD/CAD is short-term Canadian weakness to be replaced at the turn of next year at the latest with CAD strength and the USD/CAD moving back lower towards 1.2000 once again.

 

EUR: ECB INTEREST RATE & PRESS CONFERENCE.

THE DRAGHI THUNDERBOLT:

Fair play the Pizza Boy pulled it off!

As mentioned last week the forward guidance provided was pretty much in line with what Draghi regurgitated to the assembled unsullied in Frankfurt.

The key takeaway was that the asset purchases would fall from the current €60 billion per month to €30 billion per month with effect from January 2018 and run at least until September 2018 or beyond. Expiring maturing securities that the ECB currently owns will be re-invested.

The key phrase from Draghi that was used on a number of occasions was “Extended period of time”, I was looking out for a well-used FED term “Transitory” and at times I was a little distracted but I do not recall a “Transitory” being used. However, “Extended period of time” for as long as necessary featured quite a bit.

Draghi stated that there would be NO interest rate increase until the end of the Asset Purchases (QE) that means October 2018 at the earliest. That was like a knife straight through the middle of all the aspiring Euro bull’s hearts.

Basically, Draghi was as dovish as he could be highlighting the only thing that he could highlight as an area of concern that was keeping the ECB accommodative moving forward, that was inflation, or rather the lack of it. He could not focus on other economic data as generally speaking all EUROZONE data has been improving of late. The only blemish is inflation. This was his focus.

The EUR/USD fell on his prepared statement and subsequent Q & A through his press conference just a few pips shy of 200 pips. I would say that if I still lived in Marbella, Spain I would be able to hear the “Draghi” champagne corks popping all the way from Frankfurt.


EUR:
CATALONIA.

This is going to be made into a Christmas pantomime.

Puidgemont was going to announce independence then he wasn’t … wait 30 minutes longer and he was definitely going to announce it.

Well…

He didn’t and the best that I can make out is that he wants more elections that Madrid won’t agree to!

I think that we are back at square one.

There are meetings scheduled and discussions within the Catalan parliament but with Madrid holding all the keys now it all seems rather old news to me now.

The funniest piece of news last Friday, was that at the same time as the Catalonian government were voting on declaring independence the Madrid parliament was voting through Article 155 to take away all the powers of Catalonia.

Late Friday, I noticed on the wires that Puidgemont could get a jail sentence of up to 30 years for his recent actions.

You couldn’t make this stuff up.

 

USD: JANET YELLEN’S REPLACEMENT.

Who is it going to be?

Take your pick.

JANET YELLEN
GARY COHN
JEROME POWELL
KEVIN WARSH
JOHN TAYLOR

That was last week’s list….

Here is this week’s list….

JEROME POWELL
JOHN TAYLOR

As far as I can gather it’s an either-or decision for the president who believes his key roles under his job description as leader of the free world are: –

Keep the Stock Market going up at all costs.
Keep interest rates low.
Argue on twitter with as many people as possible.

Insult families of service people who have made the ultimate sacrifice for their country.

Slag off the press. Unless he likes the reporting its “FAKE NEWS”

Last Friday an unnamed White House source said that THE DONALD was leaning towards POWELL. Is this FAKE NEWS? Rule nothing out at all. Just because BLOOMBERG who delivered the news believes that they were given an exclusive means nothing vis-à-vis this administration.

The bookies still have POWELL & TAYLOR as the dream ticket possibly filling the CHAIR and VICE CHAIR roles. It could be more like a fecking nightmare for them with TRUMP as President if this is true and plays out.

 

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:

This week is packed and will be volatile, there are key events dotted throughout the week. The following are the pick from my perspective and the ones that interest me the most.

CAD: GDP & EMPLOYMENT DATA.

GDP is on Tuesday and the jobs data is released the same as NFP on Friday.

The CAD$ is weak following some poor data and then a very dovish BOC policy statement last week. Positioning for the CAD was very heavily based on CAD strength, I am one of those traders, in fact I have hedged my CAD short positions for the shorter term. I have NOT ruled out a hike before the end of 2017 and the data that the market feeds off has little impact on how the BOC thinks. The last interest rate hike for example was a surprise.

CAD banks have re-positioned themselves, vis-à-vis their thoughts on interest rate increases and whilst in the main they see hikes early into 2018 only a couple are still believing that December 2017 should NOT be ruled out.

The data this week will either place what many would call the final nail in the coffin on no rate hikes in 2017, or if data is good maybe positioning will change.

The previous reading on GDP was 0%
This month the expectation is for 0.1%
Employment last month was +10,000
This Month the market is expecting +13,600

 

GBP: MANUFACTURING, CONSTRUCTION & SERVICES PMi.

My God that was a quick month…

It only seems a week or so ago I was predicting and got right, what I am about to predict again.

Last month: –

Manufacturing 55.1
Construction 48.1
Services 53.6

This month the market expects: –

Manufacturing 55.9
Construction 48.9
Services 53.3

This month I expect to see more of the same. Manufacturing and Construction to miss estimates and Services in line.

This information although backward looking is good from a BREXIT position, although PMi data is rather over-shadowed this week by the clatter of BOE data, none more important than the eagerly awaited interest rate decision.

 

GBP: INFLATION REPORT, INTEREST RATE, MPC VOTES & CARNEY.

This is it; Carneys biggest meeting so far. For me this is bigger than his 2 “mile” walk down the BOE corridor the day after the BREXIT vote, to announce more QE and a rate cut.

He is now on the brink of raising rates solely because inflation is a 3% above the 2% objective. Everything else in the UK is up in the air both politically and economically.

The GBP/USD has strengthened of late on the back of the expected rate increase, although USD strength is pulling it back towards 1.3000 again.

BREXIT is still a shambles and the chances of a “NO DEAL” is quickly becoming what many believe will be the outcome. I have always said that the two-year time scale to tie up the loose ends to exit was challenging. Leave it to politicians and we have what can only be expected… a huge fu*k up.

Many people have argued in the media that a 0.25% basis point increase will do nothing to stop inflation rising as it is “transitory”, if that’s the case DO NOT raise rates!

Wage growth is a full 1% behind inflation and the proposed 0.25% rate increase will no doubt be passed on in full to households, increasing household debt and further pressures on family budgets will be felt.

I make no apologies for raising this point again. BREXIT negotiations have NOT got past how much the divorce will cost, never mind the actual issues to address. WE haven’t even heard the word TRADE much of late. The trade deal will be so complex to manage and agree upon.

Carney must see this. He must see the timetable for BREXIT = better than 50% chance of a NO DEAL. To raise interest rates with this backdrop could go down in the history books as foolish and seriously lacking of any vision.

It will be a very interesting announcement this Thursday. The market is anticipating a 0.25% rate increase and 9-0 on the MPC votes in favour of the increase.

 

AUD: TRADE BALANCE & RETAIL SALES.

Political calamities appear all over the globe. The Malcolm Turnbull government has now lost control of parliament following a legal intervention precluding dual nationality citizens living in Australia the ability to represent in parliament.

The High court ruled that Deputy Prime Minister Barnaby Joyce is ineligible to remain in Parliament as he has both Aussie and Kiwi citizenships. A bi-election now takes place and Turnbull is now looking for support from minorities to vote with his party to keep the government in play.

This political development over hangs the economic data with the view to sentiment moving forward as rallies will probably be sold into should data releases be good for the economy. The political uncertainty will trump economic data and therefore I would use rallies as selling opportunities.

The numbers expected are:

Retail Sales 0.6% last month was a dreadful -0.5%
Trade balance AUD$1.20 Billion versus last month AUD$0.99 Billion

 

USD: ADP, NON-FARM EMPLOYMENT DATA & AVERAGE EARNINGS.

The TRUMP circus continues, with the next round of U.S. employment data. The focus will be on average hourly earnings to see if the economy can generate some inflation.

Janet Yellen’s “transitory” beliefs will be put to the test as we hit the next round of Inflation and jobs data.

We all wait with baited breath.

Bottom line, she is raising rates in December come hell or very high water.

ADP Expected 191,000, last month it was 135,000.
NFP Expected 311,000, last month it was -33,000.
Average Hourly Earnings this month 0.2% last month it was 0.5%

 

2.2.5: HOW TO PLAY THE MARKET THIS WEEK:

We are jam packed with news events this coming week so you will probably not be too surprised with my thoughts for the coming week

  1. The EUR/USD has triggered a Head and Shoulders pattern. It will NOT be a straightforward drop lower to its measured move target. At the same time the DXY (USD Index) has an inverted Head and Shoulders pattern in play (see chart below). This will NOT be a fast move higher either.
  2. The appointment of the FED CHAIR / VICE CHAIR rumoured to be POWELL / TAYLOR, the “dream team” ticket is being viewed widely as USD positive.This news if released this week should therefore support the Inverted Head and Shoulders move with the DXY.
  3. For good measure, we have an FOMC Statement this week. How many “transitory’s” will there be this time around. Yellen will probably announce at this release that she is NOT extending her stay at the FED beyond February 2018.Will the FOMC be USD positive? I would say YES. She cannot suddenly turn dovish after her last Oscar winning performance… or can she?
  4. S. employment is always a bit of a lottery and last month the adverse weather was used in advance to say that the numbers should be treated basically as meaningless.This month however a more usual number is expected. The question is will it be USD positive or negative?

    If I knew the answer to that question, I would not be writing this blog!

  5. We have a major BOE announcement on Thursday. How Carney deals with the peripherals not as much the rate decision is of greater importance to me moving forward.Nevertheless; this is the MAJOR piece of data this week. However, GBP moves should remain very focused to GBP related pairs.
  6. We have CAD jobs at the same time as NFP, the opportunity for a double whammy exists with the CAD should the Cad jobs data be weak and the US data strong.Moves with antipodean currencies on NZD and AUD should just affect local crosses as well.

    I would view any “RIPS” with AUD and NZD opportunities to sell into and obtain good shorting prices.

SUMMARY:

When you look at my bullet points I am giving a very USD positive (strength) viewpoint and for the time being I am biased that way. However, DO NOT LEAP in with full sized positions and here is why.

TRUMP is on a goodwill mission to Asia at the end of the week, heaping TRUMP LOVE all over Asia.

TRUMP is full of himself, full of shite and full of bravado, he is a Mr. Magoo character, leaving chaos and disorder behind wherever he treads. He cannot help himself. The TWEETS will be flowing. Before he leaves, the TWEETS about how great he is will be flowing.

Trade smaller positions, stay on your toes. TRUMP has a FED announcement before he goes on his “goodwill Trip” and nothing ever passes off smoothly.

In my opinion, as time has moved forward his true colours are being displayed and having given him the benefit of the doubt for so long, my opinion of him is just that he is no more than at best a walking, talking, tweeting hemorrhoid. I am sure he must have great qualities somewhere, but I can’t see them.

Moving on…

Look at cross-rate pairs to trade and stay away from currencies that will be directly affected by TRUMP fuck ups… USD, JPY and CHF.

 

 

  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:
LAST WEEKS PIP TOTAL:            +1,543 net pips
OCTOBER 2017 TO DATE:           +2,655 net pips
YEAR TO DATE 2017:                    +10,702 net 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”.

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

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: #257 FREE NEWSLETTER
29th October 2017

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