ITALY AND BREXIT STILL KEY FX DRIVERS: By Scott Pickering

I have just completed a very frustrating week of trading.

After an exceptional start to this month, with over 1,000 pips in week one, In week two, I gave 50% back from poorly executed CAD related trades and, this past week, I have been building positions with my longer-term trades and getting caught in the “noise” on shorter-term trades just booking small losses…. frustrating and annoying.

We have seen a lot of volatility, but from my perspective most pairs have been choppy inside ranges. I have been caught out for not looking bigger with my trade parameters. I am very happy with my building of positions but my day to day trades were in the main bloody awful.

Moving on…

We have seen the announcement that TRUMP and XI will talk trade and tariffs in Buenos Aires next month.

In addition, the political fallout from the Saudi killing of a U.S. journalist in Turkey, in the Saudi consulate no less, is delayed, as the Saudi’s look to see who is to blame and how to distance the Saudi leadership led by the crowned Prince from the killing. It should be fascinating how they move this forward as the Prince has named himself the lead in the investigation. Saudi justice at its best in action for the whole world to observe! How TRUMP handles this will be interesting?

We have worldwide equities on the wobble as mainly U.S. valuations and corporate balance sheets are now starting to cause some market jitters. From my perspective, this coming week it’s all about ITALY and BREXIT.

 

ITALY:

Recent words from ex. French Socialist Party member (never gave a crap about budget targets in the past), Pierre Moscovici, who is now poacher turned gamekeeper as the EU Commissioner for Economic and Financial Affairs, have calmed the markets a little.

Basically, the difference in ITALIAN (BTP) and GERMAN (BUND)10-year treasuries were quickly approaching 400 basis points. This level is seen by the market as critical. The differential spread was growing on the back of the fact that the Italian Budget submission to the EU was outside Brussels.

Initially Moscovici, had issued a “BAD BOY” letter setting out the EU concerns, which, created an emergency cabinet meeting in Italy, with a response due back to Brussels early this week. Then in typical EU style, Moscovici goes on TV to say “Chill out” all is good its not all that bad!

Confused? I am….

What do you trade?

I went short EUR/USD and EUR/JPY and I am holding loss positions thru the weekend. The Italian government are not going to “Bend the Knee” to a bunch of EU bureaucrats. I still feel that the shorter-term move of the single currency is lower.

We have an ECB Press Conference this week and Mario Draghi, ECB President, is bound to be asked questions about Italy. My thoughts are around the following: – Will the ECB be forced to decelerate its policy of reducing monthly Bond purchases in view of the Italian issues?

We will have to wait and see what happens next week.

 

BREXIT:

The caravan rolls on… and on… and on…….

I still believe that Theresa May’s position is untenable and that she will be resigning. It now looks like she is trying to agree greater time to sort out a “Back Stop” for the Irish border issue.

The EU know the position that Theresa May is in from a parliamentary perspective. It would not surprise me if they are looking for her to be the next victim in this process which, they hope to exploit and will force a delay as a general election would be called in the UK. Raising the chance for another referendum and a change in result. Now that is what I call a conspiracy theory. Politicians are slimy little feckers never rule anything out!

Bottom line. I am trapped with a couple of cross-rate GBP pairs that I am holding regardless, and I have a bunch of limit orders ready to go on positive BREXIT news. I am not and will not trade the cable at the moment.

The cable is news-driven at the moment and press releases can be at any time by anyone directly involved in the negotiation process or not.

Be careful and analyze your RISKS carefully around GBP at the moment.

FOREX REVIEW:

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: 

Same basic comments for two weeks: –

Longer-term into early 2019, I do see the DXY tacking the big 100.00 level. Between now then we have BULLS and BEARS fighting for control at previous resistance around 95.80. I wrote this last sentence last week and my opinions have not really changed.

I still see a push to 100.00 taking place but for now we are in a range of 94.40 to 95.80 as highlighted with the purple horizontal tend lines on the chart below. I also have 94.43 as an area of strong support within the larger range.

We have a nice triangle forming on the daily chart. Having said that, price can still wiggle around a bit before we reach a breakout or breakdown point.

Cards on the table the FED will win out and Central Bank Divergence I believe will be a trade. For this reason, I see a 100.00 attempt on the cards.

 

1.5. USD MAJORS – TRADING CHARTS and MY THOUGHTS: 

1.5.1. EUR/USD:

The monthly chart below shows that the EUR/USD is in a down sloping channel.

As I see it, we have an outer range and an inner range. The BLACK trend lines denote the outer range 1.0350 to 1.2550. The PURPLE trend lines denote the inner range of 1.1300 to 1.1840.

The Italian situation and BREXIT will weigh on this pair and the EUR crosses. I am bearish this pair and it is a sell the rips pair in my opinion.

 

1.5.2. GBP/USD:

I have left my chart from last week detailing 3 x Fibonacci retracements on the monthly chart below.

As you know, I am expecting quite a sizeable pullback with the cable.  My thought process at the moment assuming we see a pullback is to around 1.2700 initially. This would coincide with 23.6% (BEIGE) at 1.2680 and 38% (GREY) 1.2694. If this level does not hold we are in round number territory and 1.2500, followed by previous support of 1.2150 stands out.

Some institutional traders have spoken about 1.1000. In my mind that would be a BLACK SWAN, ARMEGEDDON, CAPITULATION, GENERATIONAL move. Great if we get the bounce back across all GBP pairs, it would be awesome awesome, awesome.

Focusing longer-term on the upside, 1.3600 is a major Fibonacci confluence area, then 1.4200 and then 1.5000.

Between now and all that, we need to wait, watch and be ready. Above all be patient with GBP/USD it is liable to huge swings in price on headline news and is now simply news driven pair.

As you can see the pair is staying well bid and basically moving sideways for now.

Be careful.

 

1.5.3. AUD/USD:

We are still in a down sloping channel as shown on weekly chart below. I would just love a sell into strength and short around 0.7300. I am just not confident of a pullback to this level once again.

The range in play is 0.7040 to 0.7160.

  

1.5.4. NZD/USD:

Lots of multi-year trend lines on the weekly chart below.

I am looking for a pullback to 0.6700 to short, but just not 100% sure we will see this level. The lower trend line from November 2000 with lows of 0.6100 last seen in 2005 is my short target longer-term.

During the past week 0.6600 held as resistance on two/three occasions.

 

 

1.5.5. USD/CAD:

The BOC meets this week and there is still a market expectation of a rate hike. This on the back of weak data. It is going to be interesting.

Not sure but 1.3120 looks like it could be a target area for BULLS and from the other side of the trade a great spot to try a short trade from.

 

1.5.6. USD/CHF:

I am looking at a BULL FLAG pattern with a measured move to 1.0230. I have really missed out with this pair this year primarily due to the markets “Flight to safety” reasons.  It used to be a permanent feature of my live trades.

 

1.5.7. USD/JPY:

You can see on the weekly chart below, that went out to subscribers that the measured move from trend line resistance at 114.58 (114.60) to 109.98 (110.00), was highlighted and the trade is half way completed. Obviously, I did not take the trade!

 

 

 2. THE WEEKLY FX PREMIUM TRADING SUMMARY:

2.1. SOMETHING TO CONSIDER:

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 of all the subscription options under the TAB– “SUBSCRIBE”.

2.2. WEEKLY FX PREMIUM PERFORMANCE:

October 2018 so far:           546 net profitable pips
2018 to date:                         12,212 net profitable pips

2.3. WEEKLY FX PREMIUM PERFORMANCE SUMMARY:

(Incorporating the last 5 completed 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. MYFUNDAMENTAL & MACRO THOUGHTS THRU THE YEAR:

3.4. BREXIT RELATED TRADES:

3.5. LIVE TRADES and LIMIT ORDERS:

3.5.1. LIVE TRADES:

3.5.2. LIMIT ORDER TRADES:

 

 4. THE FINAL SHOT: 

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.

Scott Pickering
The Pip Accumulator
Twitter: @pipaccumulator

https://weeklyfxdrivethru.com/disclaimer/

BLOG VERSION: #297 FREE NEWSLETTER
DATE: 21st October 2018

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