- THE FIRST FEW SHOTS:
With a tear in my eye and sadness in my heart, I have to announce that this is the last DRIVE THRU blog of 2017. My arse… I can’t wait for the Christmas break; I am looking forward to Turkey, bingeing on TV and Football and having a few Jack Daniels or glasses of Shiraz or Pinot Noir without worrying about getting up early for news events in the European session.
So, we have had the FED rate hike, with Janet Yellen’s farewell press conference, the BOE and SNB staying pat and Draghi at the ECB running through a press conference ensuring that he continues to emphasize low rates, support forever or even longer than that.
Janet Yellen delivered a dovish rate hike, the USD sold off, it was nothing more than a buy the rumour, sell the news event. She confirmed that interest rate hikes would continue and the “Dot” plot, which was also released at the same time looked for three more rate increases in 2018.
Thomas Jordan and Mark Carney, did not surprise at all. Policies at the SNB and BOE remain unchanged. Rather boring data releases.
Mario Draghi started off his press conference with the words “Happy Christmas”.
Firstly, he could never say that in the U.S. without being frowned upon.
Secondly, he looked ready for the staff Christmas Party, he was in a jolly mood, the most relaxed I have seen him for a long, long, long time. I lost count of references that were dovish, or mentioned extended periods of time and long after QE etc… There were several of them.
All the hard work had been done by the ECB in the previous 60 days. All Draghi had to do in the interim period was silence the governing council numpties that can’t keep their gobs shut so that the run in to the end of the year was smooth without awkward questions.
Blasting through the data highlights from last week…
On top of the Central Bank statements, Retail Sales in the UK finally spiked over 1%. U.S. Retail Sales beat estimates, UK inflation hit 3.1%, however, UK average earnings were still lagging at 2.5%. But the prize for the best statistics last week had to go to Australian Employment Data, it beat by a landslide, 18.1K jobs expected but 61.6k recorded.
However…
While that all sounds great, the FX market, has recently been driven by news events.
In the U.S. it’s all about the GOP TAX BILL. That fiasco goes on, and on, and on, and on… The latest that I have read, (but being honest I am kind of bored with the whole GOP / TRUMP thing I am exhausted and apathy has set in, thank God, its Christmas!) was that LITTLE MARCO who was voting against has been bought and now he’s in favour and that voting in both houses should happen this week. However, there are still senators not 100% so we could see more twists right up to the votes being cast….
Eight years in opposition with two prime pieces of legislation that apparently united the GOP…. OBAMACARE & TAX REFORM, and the GOP operates like a headless chicken. Sorry to keep with the poultry trend, but many Republicans have no idea what they are voting for…. For many I am certain that its tantamount to “Turkey’s voting for Christmas”.
D.C. IS NO BETTER THAN A REALITY TV SHOW
With all confidence, I can safely say that one way or another TRUMP will dominate the U.S. markets this week. Initially, the Tax Bill has control of the markets moving forward. It will be this news event the makes the moves…. Then who knows what’s next to surface or reappear?
In Europe, BREXIT has the narrative. Theresa May loses a crucial house vote, flies off to Brussels hits the EU Christmas Party council meeting, sits on Santa’s knee, asks Santa for the OK to move to phase two of the BREXIT NEGOTIATIONS to be her wish for Christmas and low and behold… Phase two it is!
I think that it’s fair to say this is now the meat of the BREXIT negotiations and in true politician style, its urgent, so they will start discussions in March 2018, leaving just a year to complete the divorce. It’s a tall order. The pathway forward is clear, but there will be twists and turns along the way.
From an FX viewpoint, I am now trying to get my head around all the FUNDAMENTALS of the past 7 days or so, Central Banks, U.S. politics, BREXIT and China to have my goals clear in my head for Q1 and Q2 next year. I don’t think that I can’t look too far beyond H1.
Next year in FX should be just as challenging as this year, which leads me nicely forward…
“BUY ONE GET ONE FREE”
With a new year on the horizon and another target of 10,000 pips for me to beat in 2018, I am launching a PREMIUM SERVICE promotion “BUY ONE GET ONE FREE” running until January 31st 2018.
All “sign-ups” under this promotion, please note that your subscription period will NOT start until January 8th 2018, which is the formal date for next year’s trading to commence. Having said that, trading will continue albeit at a greatly reduced involvement through the holidays.
The benefit of subscribing now means that you cannot only take advantage of the trading that does take place but you can also use the interim period as an opportunity to familiarize yourself with the website and location of the content.
The details of the “BUY ONE GET ONE FREE” promotion can be found on my home page under the TAB “PROMOTIONS”
- MY (THE PREMIUM SERVICE) TRADING LAST WEEK:
Last week was light on trading for me. There was just too much chop in the market to maintain my interest 100%. Add to this the end of the year account balancing and reduced liquidity it didn’t really get the blood circulating through my veins at the normal rate.
My thoughts are probably a little “old school”, in the sense that why trade when you believe the market is not true and does sit with your TRADE PLAN. In other words, why take on the RISK?
I was more focused last week myself on exits rather than entries…
As mentioned in previous “DRIVE THRU” blogs, I was looking to manage out of my USD/CAD position. Well, I off-loaded my long-term USD/CAD short position. I decided NOT to wait until next year. My belief is that this pair will move higher before resuming lower. All the indicators were against me, I was trying to swim upstream and whilst I gave myself time and several attempts to manufacture an out trade for my HEDGED position it was just NOT working so I decided to minimize additional losses and take my pain.
The end result is that at the moment I am running a loss position on “pips” for this month, with just a week to go until I close off for 2017.
PERFORMANCE 2017 TO DATE:
2017 YEAR TO DATE: +12,116 net pips
This is roughly where I predicted the year end 2017 total will lie, I am well above my net 10,000 pip objective.
- THE FX MARKET PLACE THIS WEEK:
3:1. THIS WEEK’S ECONOMIC DATA RELEASES:
3:2. MY THOUGHTS ON THIS WEEK’S ECONOMIC DATA:
This week, will be a strange one as we wind down for Christmas. There are only a couple of economic releases that will make sure that I am around for “LIVE” the rest I will pick up via Twitter.
The year-end movements and re-balancing for most institutions took place last Friday. In my opinion, liquidity could be dreadful this week. Moves could therefore be exaggerated; therefore, one should be very cautious.
NZD: GDP.
Whilst this is a quarterly backwards looking number, it is a number that the markets respect.
A word of caution. This data is scheduled for release Wednesday at the start of Asian Trading. At the best of times Asian Trading is thin. At this time of the year it could be brutal.
Given the political situation in New Zealand, this number should be noted as it should reflect most of the initial period of the new Labour governments tenure. If it is a poor number, I do not think that too much can be attributed to the new Labour government, although in economics as well as politics bad news does stick… at least initially.
Right now, the NZD looks strong and a good number here could project it well above the .7070 (38% Fib. retracement) towards the next trend line resistance around 0.7200.
I would be very surprised if we see such a projected move but stranger things have happened in a thin market trading environment.
CAD: CPi, RETAIL SALES and GDP.
Stephen Poloz, Governor of the BOC, is not on my 2017 Christmas card list. He shot the USD/CAD lower the day after I took losses… bugger!
Medium-term, I do see the BOC having little alternative but to raise rates to keep differentials with the FED intact.
All of this data coming in line or at least beating the previous releases as a minimum is required to give Poloz support to move on rates early in 2018. The next BOC statement is scheduled on January 17th, the following one which is when I think he will raise interest rates is scheduled for March 7th, 2018.
Increasing interest rates then will beat the first possibility of another FED rise. The FOMC meet March 21st, but the smart money is on a U.S. rise at the FOMC June 13th meeting.
Interest rate conjecture placed to one side, this data takes on greater importance given the latest FED policy statement.
GBP: CURRENT ACCOUNT.
I am not an economist, nor do I consider myself any sort of expert in this area but as with most things, a little knowledge is dangerous.
Fadó, fadó (a long, long time ago), well it seems it now, I studied Government and Politics, Economics and Commerce in my last years of education. Bits and pieces are still stuck in the grey matter inside my skull.
This data (Current Account) is largely ignored by the press and markets. I believe with BREXIT it’s probably one of the key pieces of data that the H.M. Treasury and the BOE examine it under a microscope.
This is all about the health of an economy.
It is the balance sheet of trade and services and monetary transfers in and out of the UK.
Combined with BREXIT, the fact that the UK is basically a service industry economy and the BREXIT effect on the City of London through companies exiting the UK, could have a huge effect on the CURRENT ACCOUNT as monies will be re-directed away from the UK.
This affects jobs directly in Financial services based in the UK as well direct and indirect support service jobs and business viability.
The last print was GBP -23.2biliion. There are targets and limits; it is the pace of change that is also watched. It is somewhat of a stealth number at times. It should create a response in normal trading conditions. It just depends how many traders are around on December 22nd!
It is worth following re the fundamentals, in my opinion.
3:3. USD MAJORS – SUPPORT & RESISTANCE with BIAS:
3:4. USD – TRADING CHARTS:
More often than not I will use DAILY CHARTS for my analysis. My commentary and thoughts for each trading pair are above the charts.
CANDLE ANALYSIS: I have now added my thoughts based on the closing daily and weekly candles to the weeks trading.
EUR/USD:
DAILY CLOSING CANDLE: SHOOTING STAR
WEEKLY CLOSING CANDLE: SPINNING TOP
On FOMC day, there was a very, very strong move higher as you can see on the chart below. Usually, when someone says to me what follows a big GREEN candle, like the one seen last Wednesday, 9 times out of 10 I would reply, another BIG GREEN candle.
However, the following day was the ECB rate announcement and press conference in which, Mario Draghi was a little more dovish than expected and he forced the single currency lower.
Friday was the end of the year bookkeeping adjustment day and we saw a chunk of volatility in the markets. Will we pull higher once again after the weekend into this week?
The range is quite well defined at 1.1715 to 1.1960.
We have ended the week bearish but until we break support or resistance we are in my opinion just range trading.
GBP/USD:
DAILY CLOSING CANDLE: CLOSING CHART PATTERN = EVENING STAR
WEEKLY CLOSING CANDLE: SHOOTING STAR
It’s all rather bearish if these candles play out for the start of the week.
From my perspective, the flag pattern shown on the chart is still in play unless we break below 1.3290, at which point it is invalidated and all bets are off on the bullish side.
Should 1.3300 hold, the measured move with the flag is 1.3740.
We just have to bear in mind any BREXIT news vis-a-via the cable.
AUD/USD:
DAILY CLOSING CANDLE: SHOOTING STAR
WEEKLY CLOSING CANDLE: BULLISH
We are in a triangle pattern and this pair bounced nicely off a December 2016 trend line.
We do not have alignment with candles and this matches a non-alignment with sentiment.
We have to see above 0.7740 or below 0.7490 to get a momentum move confirmed in my opinion.
NZD/USD:
DAILY CLOSING CANDLE: BEARISH
WEEKLY CLOSING CANDLE: BULLISH
Sentiment has shifted bullish, but the candles are lagging a little. The daily close represents the USD strength into the end of the year bookkeeping adjustments.
Early this week, I expect this pair to move higher back with trend and sentiment.
USD/CAD:
DAILY CLOSING CANDLE: BULLISH
WEEKLY CLOSING CANDLE: HAMMER
This pair looks like it is going to move higher and the levels of 1.3000 and 1.3100 appear to be sucking this pair in like a tractor beam from Star Trek.
We have a bullish wedge at 1.2915.
If this breaks I will have to get long even though I am a little reluctant given the time of the year. In my experience moves out of wedge tend to be very powerful and decisive.
On the basis that I booked a loss on this pair to the short side last week the upside potential break would vindicate my decision to cut and run.
USD/CHF:
DAILY CLOSING CANDLE: INDECISIVE
WEEKLY CLOSING CANDLE: HANGING MAN (BULLISH)
Albeit that last Friday’s candle is neither one thing nor the other, I still feel this pair has a potential upside break ahead of it.
The keys levels are 0.9860 and 0.9940.
USD/JPY:
DAILY CLOSING CANDLE: BULLISH ENGULFING
WEEKLY CLOSING CANDLE: BEARISH ENGULFING
Both candles are powerful looking candles. The issue is that they are contrary to each other.
My thought process here is that the WEEKLY candle should outweigh the DAILY candle. Given the day that last Friday was, that is, closing the books for most institutions on 2017, I would be inclined to believe that this would add weight to my thought process.
However, a word of caution.
Don’t count on anything as we are entering the silly season vis-à-vis liquidity and I would not believe anything until I see a good couple of sessions pass by to try to establish some confirmation. I know that that sounds a little unrealistic but it is the time of the year that drives my thought process this way.
Watching levels at 112.00 and 113.20 may give a better visual for directional confirmation.
3:5. MY THOUGHTS ON HOW TO PLAY FX THIS WEEK:
If you are going to trade this week, keep it very small and DO NOT get too involved.
Liquidity will get worse as the week progresses with most of the institutions, especially in the U.S. well into Christmas Party mode with senior management probably issued directives on what constitutes sexual harassment to be handed down in memo form or discussed in group meetings. There will be headlines early next year… guaranteed. I would say those executives who consider themselves on a “fast track” will avoid the parties. It just takes an accusation and it’s all over.
Getting back on point…
There are market movers in the economic data releases but I think more disturbingly the market will be driven by the GOP and TRUMP.
I am NOT a believer that the Asian market is good for FX. Liquidity is just getting lower and lower, year by year and the vast majority of times, Asian moves are reversed in Europe. If liquidity is usually poor. Just imagine it this week.
The UK liquidity will be better but also poor.
Therefore, here’s a tip. If you need to trade, trade only the following times when liquidity will be at its highest: 8.00AM EST to NOON EST.
Be extremely careful with cross rates as they will be the first to suffer from the lower liquidity and exaggerated moves.
- 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. TRADING PLANS:
4:3.1. TRADING PLAN OVERVIEW THIS WEEK:
4:3.2. EXISTING CORE TRADES (PLANS & STRATEGIES):
4:4. CURRENT LIVE TRADES & LIMIT ORDERS:
4:5. FX BROKER NEWS with their MARKET FEEDBACK:
- 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.
5:1. CURRENT 2017 PREMIUM SERVICE PERFORMANCE:
YEAR TO DATE: +12,116 net pips
In sales mode; I am now planning for 2018. I will have live trades through the Christmas and New Year holidays so I will be on twitter and probably email.
In 2018, the PREMIUM SERVICE will return with a new TRADE STYLE option for subscribers to consider and the SUBSCRIBER SECTION of the “DRIVE THRU” will be larger with greater emphasis on sentiment and market direction. Therefore, now is a great time to join the PREMIUM SERVICE get familiar and ready to go with the 2018 launch!!
5:2. HOW TO SUBSCRIBE TO THE PREMIUM SERVICE:
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- THE FINAL SHOTS:
6:1. WANT A FREE PREMIUM SERVICE SUBSCRIPTION:
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6:2. 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.
Finally …
The DRIVE THRU blog returns January 13th 2018, in the interim have a
Happy Christmas and I hopr that you have a great trading year in 2018.
Scott Pickering
The Pip Accumulator
Twitter: @pipaccumulator
https://weeklyfxdrivethru.com/disclaimer/
BLOG VERSION: #263 FREE NEWSLETTER
17th December 2017