THE WEEKLY FX DRIVE THRU

MARIO DRAGHI – “PULL THE OTHER ONE”  

INTRODUCTION:

Last week I will remember well for the trades that either just missed hitting my price point to enter or for a few trades that I cancelled that I should have left in place. My trading around the ECB press conference was bad. Once again I just wish that I could have been blessed with that wonderful thing that we all wished we had in abundance… hindsight. All trades combined, I missed out on about 600 pips. I stopped counting as it was just annoying me. The positive from all of this was of course that I did not lose any pips or $$$. However, to once and for all erase these 24 hours from my memory I would just like to write…bugger!!

As I tell subscribers it’s not how we fall down, it’s how we learn from the experience and how we get back up and get back into the trading cycle.

LOOKING BACKWARDS: THE FX MARKET PLACE
LAST WEEK’S FOREX and ECONOMIC NEWS – MY VIEWS:

From last week there was one standout for me: –

THE ECB PRESS CONFERENCE:

So this time the markets reacted positively to Mario Draghi. The single currency is now at its lowest level since May this year and it could be off to test the March 2015 lows of 1.0450.

So here is my take…

Apart from the fact I had a nose bleed as the markets actually reacted probably correctly to Draghi’s dovish commentary for once, in all honesty, do you believe that an ECB two-day board meeting with the current stimulus program ending in less than six months had no discussion on how to end the program or about extending the end date?

Mario Draghi stated that neither were mentioned. Well…  glaze my nipples and call me Rita!  Pull the other one. Was Draghi talking bullst, cowst or camels**t?

In the name of sanity are we the unwashed expected to believe this?

Of course the ECB board discussed it. If it’s not a meeting agenda issue for every ECB policy meeting it damn well should be.

Draghi has suggested further easing in December and this may have been what weakened the EUR/USD. However, I am, more in the camp that the USD, which is strong at the moment and on one hell of a bull run was just looking for any reason to push higher and this was an opportunity. For me, this move on Draghi’s “grand day out” was more about the USD than the EUR.

Is the ECB QE (Quantitative Easing) program going to conclude in March 2017? Very unlikely in my opinion, it will probably be extended by at least six months to September 2017.

Not that it really matters to us as traders, but has the QE program worked for Draghi?

It pist off Wolfgang Schaeuble the German Chancellor, so if that was a goal for Draghi (it would have been for me), job done… I jest and mock.

Back on point…

Very simply, not really, by any stretch. It never really addressed or weakened the single currency to promote EUROZONE exports. Consumer prices never really got a boost from QE.

I think it will be extended and on the basis that several months ago Mario Draghi stated that the fiscal stimulus should also be used along with the monetary policy initiatives from the ECB to move the member states economies forward, as far as I can, see bugger all has been done by the member states in this regard. Politicians inside the EUROZONE are only bleating about BREXIT instead. So there is still much to do in my opinion.

The QE program as a stand-alone has had questionable success and the fact the EUROZONE leaders cannot unify and fiscally address issues says it all. Continued can-kicking and crisis led management will continue to be the order of the day. Those leaders inside the EUROZONE believing that Mario Draghi could somehow wave a magic wand over EUROPE and fix things are in cuckoo land. To his credit Draghi has stopped the hemorrhaging but I doubt it’s a permanent fix by and stretch of the imagination.

The EUROZONE has deep-rooted issues beyond the scope of the country leaders and the bureaucratic Brussels operation is only full of desk sucking, pen pushing jotter blotters, who are merely a drain on running costs of the EUROPEAN UNION. They are not initiators just a cost, and a huge cost.

Moving back to the currency movement after the announcement….

Think back when Mario Draghi launched the €80 million per month start of the QE program, the EUR/USD rallied upwards about 200 pips on the day. If you recall he launched the program and said to the press contingent gathered “That’s it” …and on the day “THAT WAS IT” for the single currency it strengthened rather than weakened across the board. I think in delivery of news terms we call that a f*ck up…. in meetings I refer to it this when having policy meetings as “I do not want to do a Draghi!!”

Last week, obviously, Mario Draghi decided not to comment and took the tight lipped approach.

Let me re-iterate, I believe that last week it was more about the USD rather than the EUR. There is a market realism creeping in that the FED will raise interest rates this December. I think that any excuse to buy USD is being taken at the moment, especially with the DXY heading back at a rapid rate towards the 99.00 level (See the DXY chart below).

dxy-monthly-chart-22102016

BREXIT:

The focus this week has been interesting to say the least. On one hand, we have seen UK Chancellor Philip Hammond defending the future role, and, to some on lookers, the very continued existence of the City of London financial district remaining a powerhouse. Whilst on the other hand Prime Minister Theresa May along with Brexit secretary David Davis spouting ahead of a Brussels wine and cheese ECB ministers meeting, about the flow of labour into the UK.

The posturing is inevitable. BREXIT negotiations will not start yet and all the key lines in the sand need to be out there so that all parties can start with their own lines in the sand as well.

The upshot of all of this is that rhetoric will remain very high for the foreseeable future and it is in my opinion not a question of if but when is the GBP/USD going to test the flash crash lows from the hourly chart that followed the crash as that is one that everyone can agree on…. that level is 1.2085.

It will be tested at some time and the 1.2000 level is an obvious target to follow. We are trading around 1.2200 so it is all within a day’s striking distance without any problem at all.

 

BOC RATE DECISION & PRESS CONFERENCE:

My views and comments about Stephen Poloz the governor of the BOC are well documented.

No surprises for me this month at all. I have gone on record by stating that the BOC operates behind the curve and is 100% reactionary.

Last Friday’s Retail Sales numbers were a poor miss. As I have already stated there is an undercurrent of poor confidence in the economy as recent tightening in housing starts to bite. Canada is not in any way shape or form comparable to the London UK market, but homeowners anywhere in the world DO NOT like hearing or reading that house prices are falling. It effects outlook.

Poloz has to deal with this moving forward. Next the consumer confidence numbers will move lower and then he has a real problem to deal with.

The head in the sand approach hoping issues will go away has suited him this year when you look back. Moving forward he will need to implement stimulus to the economy either by an interest cut or by something inventive to keep money moving.

He kept interest rates on hold at 0.50% and talked dovishly last Thursday. But there will come a time sooner rather than later that will require action rather than commentary in my opinion.

 

THE U.S. PRESIDENTIAL ELECTION:

The circus continues… what can I add that hasn’t already been written or spoken about on TV?

It is a joke. The whole world is laughing at the U.S. over this reality show and the U.S. doesn’t even realize this.

I probably shouldn’t write this, but it’s my blog…

Coming initially from the UK, the BBC is largely unbiased in the way it presents news, especially political news.

Living in Canada, we receive U.S. TV stations and we get via our cable a lot of news stations. Frankly neither candidate (GROPER or CROOKED) does it for me, I think if that is this is the best that the U.S. political system can present the U.S. as the next president, it is in deep shit moving forward, and the misfits on the hill will just continue to abuse their positions, nothing will get done and the party political lines will remain as is moving forward. This of course does also affect the rest of the world as the U.S. president also claims the title of the leader of the free world…. God help us all.

That aside…

CNN, which is a one-sided 100% biased presentation and coverage of the election, has for the past six months or so had a revolving panel of guests (6 or 8 at a time) squabbling over the candidates said or did this, that, or the other. There has been virtually no other news on the station. Yet it still calls itself the “first in news”.

Is it any wonder that education in the U.S. is so poor?
Is it any wonder extremes blossom in the U.S. society?

People believe more of what they watch than they read. They are being fed crap by CNN. Viewers are down because the programming is poor. They never get behind the news. To combat lower viewers CNN is diverting hugely away from news. They now have 60 minute programs to fill the overnight and late evening slots.

CNBC gave up financial market news 24 hours a day because it only wants good news and bulls on the station talking to viewers. People wanted realism. They moved away from CNBC. You only have to look at how CNBC conducted itself at one of the Republican debates, it was a shambles and the GOP vowed never to give them a debate ever again.

Both CNBC and CNN cannot give an unbiased opinion. They believe their viewers are of a lower intelligence, so you feed them what the station wants them to be fed on and fill in the gaps with programming that has NOTHING to do with the core channel mission statement.

Reality TV is filling the voids left from normal programming. This is the future. DONALD TRUMP is running a reality TV style campaign and these stations feed off this because it generates ad revenues.

Education, unbiased coverage, behind the facts journalism, what the feck do these things mean and where do they fit it? These are things from the past, long gone, never to return. Where are the facts in this reality TV debate?

Is it any wonder trading is so jittery and full of false moves based on sound-bytes. As our Nobel prize guy says “The times they are-a-changing”… in fact they have already changed and I doubt that they will be coming back.

 

LOOKING FORWARDS:
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).

SUNDAY: N/A

MONDAY: N/A.

TUESDAY: GBP – BOE Mark Carney speaks.
TUESDAY: EUR – ECB Mario Draghi speaks.
TUESDAY: AUD – CPi.

WEDNESDAY: GBP – Preliminary GDP.

THURSDAY: N/A.

FRIDAY: USD – Advance GDP.

Economic timed data releases are a little light this coming week.

The standouts will be Mark Carney and Mario Draghi both this coming Tuesday.

Mark Carney is addressing a House of Lords committee on the Economic Consequences to the UK of the BREXIT and Mario Draghi is addressing the DIW Economic Institute in Berlin on ECB policies. Both items have the ability to move the markets.

FOREX TRADING IN GENERAL TERMS THIS WEEK:

Without getting drawn into too many specifics, because that is what the PREMIUM SERVICE is for.

Look at all the closing daily and in many cases weekly candles across a broad section of currency pairs, but especially those linked to the USD. There are some powerful moves afoot that should see momentum carrying on into the start of this week in many, many cases.

The only issue that I have is that the Asian sessions are fraught with potential miss-leading moves due to thin trading and extremely low liquidity. If you are already in positions, it’s all about managing these positions through the initial Asian session in Europe. In the European session should the USD still be well bid there are opportunities to add and tighten up stops to protect some profits.

If you are looking to establish positions, I would wait until the European session. The first trading session of the week, reacting to the weekends news events can offer up more than you bargained for by way of volatility. Just because we have a string of what look like powerful prior week closing candles, recent events will take priority regardless and to have strength in your trade, in my opinion, I would wait a few hours for London to start.

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: 1.0882

eurusd-weekly-21102016

GBP/USD – Weekly Closing Price: 1.2227

gbpusd-weekly-22102016

AUD/USD – Weekly Closing Price: 0.7604

audusd-weekly-21102016

NZD/USD – Weekly Closing Price: 0.7163

nzdusd-daily-21102016

USD/CAD – Weekly Closing Price: 1.3333

usdcad-weekly-21102016

USD/CHF – Weekly Closing Price: 0.9932

usdchf-daily-22102016

USD/JPY – Weekly Closing Price: 103.82

usdjpy-daily-21102016

 

THIS COMING WEEK – THE NON-USD MAJORS PAIRS (MY THOUGHTS):

Not wanting to give away too much in this section as this overlaps with commentary that PREMIUM SERVICE SUBSCRIBERS receive in section 5.

I am maintaining positions with EUR/GBP, EUR/CHF, GBP/CHF and AUD/NZD.

Other non USD majors that are on my RADAR are: –

GBP crosses. When cable makes its next break lower, should we test and break lower than 1.2000, I will then be starting to look for reversal moves back with the crosses.

The JPY pairs are on my RADAR. The PREMIUM SERVICE is currently long USD/JPY and I am looking to add additional JPY cross-rate pairs once the USD/JPY breaks above 104.60. I haven’t decided exactly which pairs, but I can definitely say that it will NOT involve the GBP/JPY for obvious reasons and the EUR/JPY could also be excluded.

 

MY CLOSING THOUGHTS:

Not a lot of events are scheduled this week with regards to the Economic calendar. This does not mean that we can be complacent.

There are plenty of geopolitical events to keep the markets fluid through the European and North American sessions: – OIL, BREXIT and the U.S. Presidential Election to name three of them. Add to these the FED and its (assumed) desire to raise U.S. interest rates and we have enough uncertainties to deal with.

Do not get suckered into believing the market is moving strongly in one direction. It can and does change in an instant. We are close to several range extremes, which increases volatility and the number of false moves. Remain careful and vigilant.

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.

Take care,

Scott Pickering
The Pip Accumulator
http://weeklyfxdrivethru.com/disclaimer/
BLOG VERSION: #38 FOREXTELL
DATE: 22nd October 2016.

 

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