THE WEEKLY FX DRIVE THRU
INTRODUCTION:
I was going to make the title of this week’s blog something relevant to the U.S. Presidential election.
On Friday last week, CNN posted a poll stating that 83% of eligible Americans who can vote were disgusted with the way the Presidential campaigns were run.
So to all American readers….
Please, get out there and…
VOTE FOR YOUR LEAST HATED CANDIDATE
and let’s get the news cycle changed, please I am begging you!!
Moving on…
Last week was a very busy week for news items.
I made an elementary mistake early in the week that I paid the ultimate price for. Even though I was aware of the geopolitical events on the horizon coupled with a packed economic calendar, I went into long USD trades too early, although not too aggressively. I took some hits, which has set me back a little.
I was also caught off my guard with the U.S. opinion polls, from which, I took my trades expecting a bounce in the DXY but the flight to safety surrounding the possible TRUMP election victory took me for 300 pips. I felt somewhat like a lamb to the slaughter. However, as I have written about several times in this blog it’s NOT about how you fall down, it’s more about how you get back up!
Looking ahead…
I am a huge believer in having a TRADE PLAN and then actually trying to TRADE YOUR PLAN. You will read in many places a phrase PLAN YOUR TRADES and TRADE YOUR PLAN. I believe 100% with this approach to Forex. When I go into big news items I will have my plan in mind, as I need to know what way I am going to play the news, if it is my intention to trade the news. On many occasions I stay sidelined. I have moved more and more to trading with a longer-term perspective and to be effective with this type of trading you have to be able for the most part to sit through news releases. There are from time to time exceptions but for the main part my trades are there longer term.
This was not how I approached trading Forex in 2015 and definitely not my approach in 2014. Why am I writing about this?
Basically because I have just completed my October 2016 PREMIUM SERVICE performance, and updated all areas on my website whether open to all or the restricted areas open only to my PREMIUM SERVICE subscribers.
2016 was a very different year and looking back on what I wrote in late December 2015 and early 2016 in my DRIVE THRU blogs the year has panned out almost 180 degrees away from what I expected.
LOOKING BACKWARDS: THE FX MARKET PLACE
LAST WEEK’S FOREX and ECONOMIC NEWS – MY VIEWS:
UK BREXIT HIGH COURT RULING & BOE INFLATION REPORT:
Holy crap.
I totally get the high court’s reasoning behind parliament needing an agreement to trigger article 50. However, one would have thought given the fact that all along David Cameron (ex. UK Prime Minister) and Theresa May (current Prime Minister) have both stated that it was in the UK governments power alone to trigger article 50, that the legal “johnnies” would have given Cameron a legal opinion on this matter prior to the voting slips being printed?
Or did Cameron enter the referendum believing all was well in blighty… well it may have been in central London and no legal opinion was sought, did he believe that it was a slam dunk REMAIN victory?
What emanates out of this court ruling is yet more uncertainty. The appeal against this decision will be heard the first week of December and ruled upon then.
I would love an audience with Cameron and May to ask them a few questions about this process.
The referendum voting slip said: –
“This is your decision. The Government will implement what you decide”
The Supreme court could go either way on the high court ruling.
At the end of the day, let’s say Parliament has to vote. MP’s in fear of not being elected next time around, would be one brick from a full load if they did NOT vote in line with their constituents wishes from the BREXIT vote last June. If it’s just a vote, this is politics, the MP’s will vote in line with the people who elected them to represent their wishes.
In my opinion, it all depends on the wording of the paper put before the MP’s to vote on. It will end up being so vague to ensure an agreement between the House of Commons and the popular vote last June.
Then we move on…. here’s a thought!
Theresa May might call a snap general election, to firm up her mandate over the BREXIT negotiations and timings. Elections in the UK are usually held in Spring or Autumn. Dissolving Parliament takes 25-30 days, could she hold an election in March 2017? Yes; she could; and rule nothing out about having an election in March 2017, with the mandate to trigger Article 50 by the end of the month.
My fear about all of this is that if parliament gets too much debating time over BREXIT negotiations, this weakens the UK exit negotiating team’s abilities in the negotiating process. All this stuff about HARD BREXIT or SOFT BREXIT is all bollo**s in my opinion, you are either in or out, the process may be straightforward but both sides want the best deal for them for basic and very obvious reasons.
- EUROPEAN UNION – does not want the UK to cherry pick, because this will cause a CONTAGION effect.
- UK – wants border controls and the London Financial hub to remain as is.
Having a huge debate in Parliament is like (from the wild west days) “Selling guns to the Indians”. All the UK lines in the sand will be out there in the media and in front of the European union negotiating teams. This is going to result in the UK being on the back foot during negotiating and elevates the position of the European Union negotiating team.
We are as traders guaranteed more uncertainty and frankly I am still of the opinion to sell the rips in cable, my views on this have not changed. So, with BREXIT being the decision of the people…my arse it was….so far what was a clear vote has caused nothing but uncertainties.
Moving on….
At his latest Press Conference, this time the BOE Inflation Report, Carney did the usual, now customary, re-jigging of growth numbers that take place at practically every Central Bank press conference, regardless of location in the world. However, Carney was projecting upwards revisions rather than downwards. I had a nose bleed when I saw the numbers.
Despite all the gloom and doom from the “REMAIN” campaigners the UK economy so far has been extremely resilient. Carney moved revised upwards the GBP projections from this quarter through to 2018. Although let’s be clear higher CPi numbers comes from, in the main, the weaker currency moves in sterling.
The two events combined created a nice spike, to sell into in my opinion. Nothing has FUNDAMENTALLY changed when you look at all things. The big issue that Carney has to consider moving forward is that with regards to inward investment into the UK. He has to strike a balance between inflation potentials and interest rates to ensure that investment continues to come through.
Those pundits / analysts calling for rate hikes next year are a little premature in my opinion. There is a lot of water due to flow under the bridge before the subject of interest rate hikes should be contemplated never mind discussed.
FOMC STATEMENT:
A non-event. I would however point out that there was a line in the statement that called for more improvement in data. The UBER DOVE… Janet Yellen may use this as a way to hold off further on increasing rates.
I have written several times stating that it is so easy to be DOVE and much harder to be a HAWK.
I believe that Janet Yellen has displayed so much hesitancy in her time a FED chair, that she is a ditherer. God only knows what will happen in December if the lost awaited heavily anticipated and predicted interest rate hike does not happen.
THE U.S. PRESIDENTIAL ELECTION:
I eluded to this earlier in the blog. THE TRUMP effect is in play. The USD/MXN is the TRUMP TRADE. If you believe that TRUMP will be elected president, go long this pair. If you believe it will be HILLARY send her an email with the heading CLASSIFIED and go short the USD/MXN.
As numerous polls are released the USD/MXN reacts based upon who is out in front. The USD/MXN is up and down more time than a pair of prostitute’s knickers.
Not only is the USD/MXN directly affected with wild swings it all spills over the DXY and a flight to safety trade with both the JPY and CHF. I am certain that Thomas Jordan at the SNB is not a happy puppy about all of this volatile price action.
Less than a week to go. Then we can trade on reality…whatever form that will be!!
OPEC – PRODUCTION CUTS:
As I have written over and over. There is an oil glut. There is a massive miss between supply and demand.
Frankly oil has had its day. The self-serving countries that formed the cartel OPEC have never agreed on a damn thing from day one unless oil prices have been rising. To have a production cut or freeze frankly in an environment where this cannot be checked is a joke.
OPEC released a glibly worded agreement (verbally) to have the I’s dotted and t’s crossed at the end of November 2016. They had to do something after the Algiers meeting. In my opinion had they done nothing, the price of oil was once doomed to move lower to $30.00. They bought themselves some time, which appears to have backfired. They gave the waiting press a bulls*t statement, which, of course, the markets bought and oil rallied through $50.00, which, it could not sustain.
A statement from the Saudis in response to an Iranian release that they would not freeze output was announced, basically it was along the lines of “If you don’t freeze we will pump like feck… it was allegedly not made and was withdrawn. If it wasn’t made how do you withdraw it?
Draw your own conclusions, as I see it…
We now get closer to placing one’s testicles on the chopping board and nobody wants to be a born again soprano. The Iranians want to “pump baby pump” and raise the digit to its OPEC “friends!”. The Saudi in retaliation threaten to fill the worlds bathtubs with cheap oil, they would pump 36 hours a day if they could!!
And there you have it – a collection of self-serving oil producers who are solely focused on themselves. They say one thing and do the opposite. Even if they said there was a freeze in production, who knows if they are telling the truth. They are as manipulative as the market players in that market. We can see that from basic economic supply and demand curves.
The obvious trades after the election are long USD/CAD, USD/NOK and dare I say it USD/MXN.
U.S. NON FARM PAYROLLS:
A non-event. It was completely over shadowed by the U.S. election news. We just bounced around.
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: CNY – Trade Balance.
TUESDAY: USD – Presidential Election.
WEDNESDAY: NZD – RBNZ Rate Statement and Press Conference.
THURSDAY: N/A.
FRIDAY: CAD – BOC Governor Poloz speaks.
There is not an abundance of news items this week.
The big ones in my opinion that I will be very interested in are: –
- U.S. Presidential Election.
- NZD – RBNZ Rate Statement and Press Conference.
We must also bear in mind that the BREXIT will continue to offer volatility moving forward given the high court ruling on article 50. I would not be surprised to see EUROZONE players getting involved in the media sound-bytes, plus we are now in the same month as the alleged proposed OPEC OIL production cut, this should also start to weigh in.
FOREX TRADING IN GENERAL TERMS THIS WEEK:
It’s all about the U.S. election. I would be keeping clear of the USD as much as possible until the results are in.
The thought process is that with a HILLARY victory the stock market would move up for a day or two and with the TRUMP collapse due to uncertainty. Basically unless you have core positions that you are trading and you have clearly set out your trading parameters the less RISK approach is to wait.
I had looked at trading some cross rates in the run up to the election and this did not fair too well for me so I think the prudent approach all around it to wait.
Just remember, it could be very difficult to get into trades when / if the markets are chopping around as results come in. You have to be really careful in any chop fest. If you recall it was extremely difficult to enter new trades during the BREXIT results. I see this being exactly the same.
It’s risky to get in ahead of the results and very risky as well when the results are coming in even if you could get into your account to trade.
For those of you who trade with FXCM good luck. They will freeze to protect themselves, not you the trader. They froze you out for over four hours on the EUR/CHF PEG removal and a little less as I understand it on BREXIT referendum. I would expect more of the same with them, why would they change?
If you are sidelined, you may not be able to access your account until the result is confirmed. Remember, margin levels have been increased or about to be increased by many brokers.
Bottom line just be careful. Very small position sizes if you have to participate.
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: 1.1138
GBP/USD – Weekly Closing Price: 1.2515
AUD/USD – Weekly Closing Price: 0.7670
NZD/USD – Weekly Closing Price: 0.7323
USD/CAD – Weekly Closing Price: 1.3399
USD/CHF – Weekly Closing Price: 0.9679
USD/JPY – Weekly Closing Price: 103.09
THIS COMING WEEK – THE NON-USD MAJORS PAIRS (MY THOUGHTS):
I tried trading some cross-rates last week with little success at all. The polls showing TRUMP catching up with HILLARY created havoc across the board.
As I have stated already the prudent approach is to wait until after the votes are counted and a winner is declared. Then it’s all about RISK ON or RISK OFF moving forward.
MY CLOSING THOUGHTS:
The sword of Damocles hangs over the market at the moment. Basically we are on hold until we see if THE DONALD or HILLARY are pronounced victors.
The zero risk option is to be 100% flat with trades. I have a couple of core positions that I am trading at the moment, they are not full size and one core position does not involve the USD currency.
I have a feeling that additional BREXIT fallout will be hitting the markets at the same time as the U.S. election results. The cynic in me says if you are going to release really big news do at the time of a major geopolitical event. We have news on the horizon relating to BREXIT, no better time than Tuesday night, better still market open Wednesday to do it.
The one thing I do see is a great deal of volatility.
Therefore, if you want zero RISK; if you just want to sit back and observe I would say that Wednesday / Thursday next week would be the time to re-establish LIVE positions.
If you are going to trade, expect a chop fest. Do not get suckered into believing the market is moving strongly in one direction. It can and does change in an instant.
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: #40 FOREXTELL
DATE: 5th November 2016.
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