What can I say?
Trading FX brings up surprises every now and then. Last Thursday the MPC vote hit the wires showing a 6-3 in favour of no change in interest rates. In a matter of milli-seconds the BOE Chief Economist Andy Haldane was flashed on twitter feed as being the voting member who switched sides from hold to hike.
I do not want to be flippant, but it is the BOE. I have seen better organized headless chicken so needless to say I find it difficult to believe or to take statements or actions made by the MPC very seriously.
Let me take it on face value, the chief economist one would think should know a thing or two about the state of the UK economy and whether or not it is ready for a rate hike or not.
So, it should be treated as significant, although with the caveat about it being the BOE taken into consideration.
The Cable (GBP/USD) rallied from basically 1.3100 to 1.3270 following the data release. By any stretch this was a huge move. The cable has been badly beaten up of late falling from basically 1.4400 down to 1.3100 in basically 60 days, that’s a drop of 1,300 pips, which is a substantial break lower. Therefore, any news that could stop the downside pressure would be reacted to with strength, which was what we saw happen.
There are a few things to consider before we all run out and start dancing in the streets waving GBP charts in the air shouting I’m a cable BULL!
In no particular order FUNDAMENTALLY and TECHNICALLY here are a few things to think about. Some of the points refer to the GBP/USD chart below.
USD strength has been relentless of late.
The GBP news fell on a day that the USD was weak, we had poor Philly FED Business data and yields were pulling back.
The GBP/USD is in the middle of a DOUBLE TOP chart pattern with a measured move target of 1.3040 (Green dotted trend line on chart below).
There is also a BEAR FLAG pattern in play in addition to the DOUBLE TOP with a measured move of 1.2400.
The 200 DAY SMA lies ahead at 1.3600 (Purple horizontal line on chart below).
We are still in a down trend (2 x burgundy down sloping parallel lines on chart below). Trend line resistance held on Friday last week, but that does NOT mean that there will not be another attempt.
In my opinion the PIVOT POINT that is the BULL/BEAR line in the sand is at 1.3470 (brown horizontal line on the chart below).
Therefore, entering with a long trade pre-1.3470 is in my opinion a counter-trend trade and one should exercise caution by taking a much smaller position size.
This still applies should the pair break the channel resistance trend line (burgundy dotted line) at 1.3300 (pale blue horizontal line). Whilst you could consider it a bullish move, a greater retracement is required in my opinion before I would consider the BULLS to be challenging for control.
Looking at Fibonacci retracements, the 38% of the move from the 1.4400 high to the 1.3100 low is at 1.3580, almost the 200 DAY SMA
Whilst the first PIVOT is at 1.3470, from my trading perspective the 1.3600 level has so much going on that I would say it has to be the place where BULLS and BEARS will fight for absolute control of future pricing…. assuming we can get there!
There will be many quotes on TWITTER and the like claiming much higher levels are on the way. Do NOT get caught up in the emotion unless you read categorical facts from the BOE.
In fact, these are two BIG reasons why not to get caught up in the euphoria of the GBP move that appears to have gripped the FX market.
BREXIT will TRUMP (no pun intended) all news. As geopolitical events go this has the ability to send the GBP/USD crashing into the mid 1.20’s never mind the DOUBLE TOP measured move or the BEAR FLAG pattern. In the same vein a positive BREXIT announcement could see the GBP/USD back at 1.4000 once again and possibly even higher very quickly.
Place yourself in the shoes of a Business Owner in the UK that currently exports goods and services into the EU.
How is export business going to operate re duties / tariffs / other requirements post BREXIT? The answer is you do not know.
On Friday last week there were doubts cast about the UK future business relationship with Airbus post BREXIT.
Businesses in the UK face serious headwinds.
There is huge uncertainty
There is much to consider it is NOT as straightforward as some are saying with the BOE having indicated a more HAWKISH position. The BOE rate increase will probably be just be a “one and done for 2018”, so the move on the back of pricing in a 0.25% hike will have limitations and although I think that 1.3600 technically, would appear the ideal level from where to short from looking for a move lower, I doubt we could hit a 1.3600 level on a priced in 0.25% one and done rate increase!
BREXIT is still the dominant force in the FX moves regarding the GBP in my opinion and you can get BREXIT news at any time.
You have to trade the GBP with a health warning at the best of times given how wild it can move. I have seen the GBP/USD strip out longs and shorts from the market in the same session.
1. FX – FORWARDS, BACKWARDS & SIDEWAYS:
1.1. THIS WEEKS TRADE INFORMATION: ECONOMIC DATA:
NOTE: Only the items that interest me are listed here.
1.2. THIS WEEKS TRADE INFORMATION: GEOPOLITICAL EVENTS:
1.3. BIAS CHART – USD MAJORS SUPPORT and RESISTANCE:
1.4. USD INDEX (DXY) OVERVIEW – MY THOUGHTS:
Looking at the chart below: –
Firstly, we are in an uptrend.
The BULL FLAG measured move is still in play. You will see two green “Ellipse” bubbles on the chart. Basically, we failed to pass the 95.19 full Fibonacci retracement based on the October / November highs from 2017. We have pulled back and are showing a false breakout at the moment. The question is, how far will the DXY pull back? We can pull back to 93.50 and the uptrend will still be intact.
I think that we still move higher, there is so much FUNDAMENTALLY to support a USD rally higher. I am not getting excited over the move lower in the DXY of 60-70 points, I see this as consolidation at the moment.
1.5. USD MAJORS – TRADING CHARTS:
A couple of interesting points to mention here.
Following Mario Draghi’s ECB Press Conference two weeks ago we have still to reach a 38% retracement of that day’s candle. Bear in mind, the ECB Press Conference hit the markets very close to the EUR/USD at the HOD. The markets were looking to spike higher! The 38% retracement lies at 1.1675. So far moves back have been shallow.
We are witnessing some USD weakness at the moment which shows up in the EUR/USD as well given the fact this pair dominates the weighted basket of currencies that form the DXY.
Is the start of a bigger move?
Is it profit taking?
Is it the start of end of month / quarter end window dressing for institutional accounts?
The fact is we do not know at the moment and because the markets have been “dull” of late, some analysts are trying to make a name for themselves by getting rather over excited with predictions.
Remember that’s all they are…PREDICTIONS. Be careful.
My comments are at the beginning of this week’s DRIVE THRU blog.
Last week I talked about “SELL THE RIPS”. We are below trend line resistance and shorting around the trend line resistance of 0.7520 makes some sense to me looking forward.
Whether we are in a larger corrective move is out for debate at the moment in my opinion.
The big BLUE BOX shows the range of 0.6775 to 0.7555. It is a big range, but it is what it is.
I do believe we will ultimately break lower, but it is extremely hard to place a date on such an event. I had thought that TRADE WARS with China would have done it but alas not.
No change in my commentary from last week:
We are now breaking out higher and, in my opinion, could possibly move as high as 1.3600 looking at the triangle break pattern.
It is a powerful move higher given the fact that we have broken through a 2-year-old trend line.
It is still a danger to get too heavily involved with this pair given U.S. / Canada tariff issues. I think NAFTA is now off the table until 2019. TRUMP however could withdraw from NAFTA and this should send this pair much higher, very quickly based upon uncertainty etc.
Looks like a nice BULL FLAG coming into play very soon.
Not wanting to sound boring, but, no change from last week despite all of the geopolitical news.
A nice triangle break will be on the cards very soon.
At the moment the pair looks bullish and a bullish break would favour many people. However, the pattern has been maintained in a very orderly fashion and it is quite likely that we see this pair pushed lower from trend line resistance c.111.50.
Time will tell.
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
2.1. INTRODUCTION…SOMETHING TO CONSIDER:
Trading with me via the FX PREMIUM option is a relative low-cost option to give you some or all of the following: –
Confirmation of what a trader who actually trades his trades, thoughts and ideas is doing and thinking in real time.
I am a long term “POSITION” style trader at heart. I believe in FUNDAMENTALS first. If you are a TECHNICAL trader first this could be a good fit. I have a proven record.
I DO NOT trade if I do NOT see a trade.
I am a disciplined trader. I have my TRADING PLAN, plus my RISK, MONEY and HEAD MANAGEMENT rules that I stick to.
If your trading is NOT as smooth or rewarding as you would like. Even if you just captured just 50% of my trades due to geographical location issues, you should still cover the cost of a subscription if you traded single mini lot trades in a year.
I tell it as I see it. I am not interested in bullsh*t.
You can get on board and join my FX PREMIUM subscribers and subscribe to the “10,000 pips a year” group from as little as CAD$10 for the first 10 days and then CAD$150.00 per month, currency conversions for CAD$150 are roughly as follows: –
GBP £90 per month
EUR €100 per month
USD $115 per month
JPY 12,500 per month
AUD $160 per month
NZD $170 per month
CHF 115 per month
Go to my website www.weeklyfxdrivethru.comfor more details under the TAB – “SUBSCRIBE”.
2.2. WEEKLY FX PREMIUM PERFORMANCE HIGHLIGHTS:
June so far: 905 net profitable pips
2018 TOTAL: 7,317 net profitable pips
2.3. WEEKLY FX PREMIUM PERFORMANCE SUMMARY:
(Incorporating the last 5 WEEKLY FX PREMIUM TRADES)
3. WEEKLY FX PREMIUM SUBSCRIBERS ONLY:
3.1. TRADING REVIEW:
3.2. OPEN TRADES… HOW WILL I TRADE THIS WEEK:
3.3. MY FUNDAMENTAL & MACRO THOUGHTS:
3.4. THE MARKET SENTIMENT CHART:
3.5. CURRENT LIVE TRADES & LIMIT ORDERS:
3.5.1. CURRENT LIVE TRADES:
3.5.2. CURRENT LIMIT ORDER TRADES:
3.5.3. BREXIT RELATED TRADES:
3.6. FX BROKER NEWS:
4. THE FINAL SHOT:
Nothing more to add here, I have said enough except,
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: #287 FREE NEWSLETTER
DATE: 23rd June 2018