THE WEEKLY FX DRIVE THRU
INTRODUCTION:
Welcome 2017.
Wherever you are located, whether you celebrate the Christmas / New Year Holidays or not, I hope you had an enjoyable break.
I re-opened my screens last week, traded a little, lost more money than I made, getting caught up in thin volume trading and got taken in and out of trades whilst asleep, oh what joy, happy days, it feels great to be back!
Moving on…
Hopefully from next Monday onwards the markets will have a little more volume attached to them and it will business as usual. I ignored Non-Farm Payrolls and the like last week, I only managed existing trades. I am mentally and psychologically ready for next Monday 9th January.
What’s new to mention, that will appear different this year in comparison to last year?
- The “DRIVE THRU” blog format / structure is being amended over the next few weeks. There are some subtle changes already in place.One of the benefits of your own blog is the fact you can write all sorts of stuff, you can choose what or who you write about and how you write about them or it.This year I am launching “SCOTT’S SOAPBOX” (Section 5 on most blog formats). I will “have a go” in my own way at a multitude of subjects and FX personalities as the year progresses. There is NO shortage of topics or numpties to write about. I have a plethora of subjects ready to rock.
- Starting next Monday 9th January 2017 at 30PM EST – my long-awaited debut on PERISCOPE starts. The 30 minute or so broadcasts are through my twitter address @pipaccumulatorI can be flexible on this time but this was the most popular, and I like it. From my perspective, it’s a great time as it will be after the close of day one of a new week. We can look at price movements based upon the previous week’s weekly candle plus the last two daily candles.In 2016 movements on daily candles were the foundation of the PREMIUM SERVICE success.
All I ask is cut me some slack for the first two or three weeks whilst I get comfortable with the process….!!
- During the holiday break, I have been asked by a few non-PREMIUM SERVICE subscribers to re-introduce the weekly training feature that was in my blog each week in 2013-2015.Last year I had thought about bringing this back, however, I have decided that this is a PREMIUM SERVICE (PLATINUM) subscriber benefit This will be available on a one-on-one basis through the PLATINUM subscriber review meeting.
- PREMIUM SERVICE subscription prices have been updated for 2017.
Let’s hope that we have a directional, easy to read liquid market with all currencies obeying trend lines, chart pattern measured moves, and it respects Fibonacci levels. Boring as that might be we would all make plenty of $$$ should that happen.
My thoughts are that the forex market will be a dysfunctional mess of Central Bank governors clutching at straws in attempts to explain the unexplainable. In addition, we will have the desk sucking, pen pushing, jotter blotters, who are mainly unelected officials (numpties) in places such as Brussels, forcing through their own interpretations of policies creating chaos and disorder in all markets. Not to forget cartels like OPEC who do not even control 100% of their market trying to influence price by defying the pure economics of supply and demand.
In summary; I see 2017 a bit of a 2016 replay.
Let’s get at it….
THE FX MARKET PLACE – LOOKING FORWARD:
NOTE: This year, 2017, I am not going to look backwards in this section only forwards. News items / points of interest from the prior week will be covered in the introduction.
ECONOMIC DATA RELEASES:
MY THOUGHTS ON THE WEEK AHEAD:
It looks like a pretty light week on economic data this coming week.
Given the price action at the end of last week and the “TRUMP EFFECT” maybe being a little overdone to say the least, we could be in for a choppy period through to the “DONALD’S” inauguration.
I think that the fact we have seen reactions from both the Chinese and Mexican Central Banks to the “TWEET EFFECT” from the U.S. President Elect, we will have more of the same on the calendar moving forward. I think we must expect the unexpected, and, frankly given the fact that TWITTER appears to be preferred method of communication at the moment on U.S. policy moves and ideas, we should be on our toes moving through Q1 2017 or at least until things settle down to the TRUMP way of being President. On the positive side, we will know in 140 characters what he’s thinking about rather than having to wade through pages of padding. Dare I say it, the FED could adopt this approach, and, whilst I am at it so could many of the other Central Banks, especially those awfully nice chaps from the RNBZ.
Therefore, looking ahead, I think that geopolitical news and the stock market will drive the currencies over the next week…. yikes!!
USD MAJORS – “IMMEDIATE” SUPPORT & RESISTANCE with TREND:
My trade charts for the USD majors are below. My thoughts, views and commentary is written on the charts.
You will find my charts, hopefully easy to follow. I only use Fibonacci levels, trend lines, confluence points and sometimes chart patterns to identify my high probability trades. If you have any difficulty understanding the points that I am trying to make, please do not hesitate to contract me.
EUR/USD:
GBP/USD:
AUD/USD:
NZD/USD:
USD/CAD:
USD/CHF:
USD/JPY:
SCOTT’S SOAPBOX:
If you recall, in my final “DRIVE THRU” of 2016, I provided a list of TRADING PREDICTIONS for 2017. I basically named several geopolitical events that I feel will weigh on the markets this year. Therefore, for the first few weeks of 2017, I want to look at these events in a little more detail.
As you will be aware, so much has been said already on the subjects that I have highlighted, I can only add points and views that are my own, based upon how I see things and how I am going to view trading around these events.
BREXIT – A LOT OF HOT AIR AND AS OF “RIGHT NOW” … STILL NOTHING HAS HAPPENED
As we all know Forex is a future pricing mechanism. Since late June last year after the BREXIT referendum took place, we have all sat back and waited for the mass job losses, economic disaster, financial markets in chaos and general doom and gloom to have run a riot in the UK. It just has not happened. All the fear mongering from David Cameron (Prime Minister at the time) and George Osborne (Chancellor of the Exchequer at the time) was just that…. fear mongering based on zero facts. In fact, if the truth be told those who supported and campaigned for the BREXIT have been closer to the truth than they probably thought during the fierce campaigning that took place in the run up to the June vote.
The vote to leave the EU was a huge one and so far, bugger all has happened apart from Messrs. Cameron and Osborne resigning and Theresa May being voted in by the Tory government as the new Prime Minister. Article 50 from the Lisbon treaty has still to be triggered. Prime Minister May has signaled that this will done prior to the end of march 2017.
After the vote came in there was huge uncertainty, the cable dropped like a lead balloon and the BOE under the guidance of the part-time JCB driver on forward guidance aka BOE governor Mark Carney took immediate steps to protect the cable by reducing interest rates to 0.25% and provided additional sterling support through further Quantitative Easing (QE) by an additional £70 billion ensuring competitiveness in business and continued low interest rates for consumers amongst other stabling factors.
Can you remember his Presidential style walk along a c.300-meter corridor to arrive at his lectern to deliver his rate cutting announcement? That walk was so damn long his mother had given him a packed lunch to eat half way and when he arrived at the lectern he needed to move his watch an hour forward… talk about over dramatic, Holy Mother of God.
So, let me look at a few key areas the BRITS were told would feck up their lives if they voted to BREXIT and where are we right now:
- THE ECONOMY:Huge negative impact and consumer confidence would be crapping the bed. The economy continues to grow. In the quarter following the BREXIT vote by 0.6%.Retail sales grew 5.9% year over year in November 2016. Inflation has risen to 1.2% in November up from 0.5% in June 2016.
CPi is at 1.2% the highest since October 2014.
House price inflation has continued to ease following the BREXIT. This is most apparent in the London area where the impact of BREXIT will be felt the most.
Construction is bullish despite the rise in raw material prices that are imported.
The trade gap widened then narrowed in October as exports rose considerably helped by a weaker cable.
The job front it is more muddled. Unemployment fell from June to October but has since cooled a little as the Financial Services sector uncertainty starts to weigh a little.
- THE CABLE (CURRENCY):As expected with uncertainty and fueled by the BOE the GBP/USD exchange rate fell from 1.4700 to sub 1.2100 in the months that followed the BREXIT vote. Right now, I believe that cable is in a wide trading range of 1.2100 to 1.2800, see the chart below.This move in currency, whilst it has helped exporters, has on the other side made foreign trips abroad for UK tourists more expensive and at the same time import prices for goods have also increased. Obviously, tourist numbers into the UK have increased significantly with a weaker cable.
- NEGOTIATIONS TO LEAVE THE EU:Nothing formal yet. Basically, Prime Minister May was advised by EU leaders that the UK would NOT have it easy leaving the EU and it would NOT be allowed to cherry pick EU benefits that it would like to retain given its proximity to mainland Europe. In fact, EU leaders gave Prime Minister May what amounted to a European “Two finger” salute by saying feck off and until you trigger article 50 we are not talking to you.The whole situation around article 50 is cloudy. David Davis who is Secretary of State for leaving the EU, hasn’t even confirmed that he will lead the negotiating team. So, mismanaged is the BREXIT itself the highest-ranking UK official in Brussels Sir Ivan Rogers resigned only last week claiming it’s all a muddle!
The EU has announced that former French Foreign Minister Michel Barnier will head up to lead the negotiations on behalf of the European Commission. No favours here, technically the BRITS and FRENCH are still at war. There will be no “Entente Cordiale”.
So it’s all up to Prime Minister May to trigger article 50.
The bottom line; nothing has happened yet.
When the BREXIT vote came through, I must admit my initial thoughts were that the UK would see this process as time consuming, uncertain, pro-longed and expensive. I thought that the government would do what has previously happened in IRELAND and THE NETHERLANDS…have another vote!!
I had convinced myself that after a few weeks the calls for a re vote because the initial vote was so close would prevail. I have since changed my thoughts.
The alleged two years to exit is in my opinion a bit of a dream. Greenland population c.56,000 people left the EU it took them 2 years to exit. With a population of 65 million the UK, is never going to exit in two years given how inter-twined it currently is with the EU. Greenland had a bit of a partnership and that took two years, the BRITS have a far more complex situation.
The EU must remain strong and ensure that no special deals are done otherwise there will be a CONTAGION EFFECT as other countries line up to do likewise. The populist vote as seen by BREXIT and then TRUMP is in the ascendancy. There are elections in France, The Netherlands and Germany this year and in all three cases the existing leadership is under a serious threat.
In fact, I would go so far as to say that the EU leaders have done nothing at all to stem the tide of the growth in the populist parties back in their own countries, if anything the fact they (as a group) failed to unite after the BREXIT has only fueled the populist parties.
I have written many times over the past 5/6 years about the fact that main stream politicians are practically useless in using political courage to knock back the populist right. I firmly believe that this is having more than just a minimal effect on EU stability. It is being seen / viewed by voters as mainstream politicians being out of touch.
MOVING FORWARD and TRADING:
The BRITS must trigger article 50 before the end of March 2017, failure to do so will have the cable and the single currency doing a merry dance, with the EUR/GBP not knowing whether it’s coming or going.
With elections on the horizon the EU will be under its own pressures should a far-right party establish a foothold. It just requires one country to vote out mainstream politics and then we have a domino effect, then a potential CONTAGION.
This year I expect the EUR to be under pressure, and it will not take much to see it slip through parity and target lower levels such as 0.9500. We are dangerously close resting around the 1.0500-1.0700 levels, a couple of days with moves lower and if sub 1.0300 is taken a test of parity is on the cards.
The cable is still in a bubble despite some sideways moves of late. We are however just range trading and frankly a difficult BREXIT negotiation, which I am certain it will be, will result in a move lower. This talk of SOFT BREXIT / HARD BREXIT, is in my opinion a load of bollocks. It will be tough for the reasons I have already outlined, so to me it’s always going to be a HARD BREXIT…. nothing less. Price wise with the GBP/USD a re-test of just below 1.2100 is there for the taking and frankly 1.1500 maybe even less, looks more than achievable when you think of what needs to be done and the time that this is going to take.
The GBP crosses all look vulnerable except for the EUR/GBP for the reasons outlined above regarding the single currency. All the previous lows with the GBP/AUD, GBP/CAD, GBP/CHF, GBP/JPY and GBP/NZD are there, in my opinion for the taking.
When you think so much has been said, so much has been suggested, so many analysts have voiced opinions and so much has been rumoured by so many people and institutions yet to date, nothing serious has happened apart from the vote itself some 7 months ago!!
I can guarantee you that I will be revisiting this subject more than a dozen times this year.
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.
Take care, have a great trading week.
Scott Pickering
The Pip Accumulator
http://weeklyfxdrivethru.com/disclaimer/
BLOG VERSION: #44 FOREXTELL
DATE: 8th January 2017.
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