THE WEEKLY FX DRIVE THRU
INTRODUCTION:
Wow… I must be getting old! This past week has just flown by.
From a trading perspective being positive, I am still adding pips to the yearly total, which now stands at 1,493 pips of net profit.
I did what I promised I would do during the month of March, which was to remove trades that I felt were going nowhere fast “sticky” and where having them “LIVE” was just preventing me from adding too many other trades because it would extend my RISK beyond the parameters that I am comfortable with. In fact, I removed almost 1,000 pips in total. This was about 25% from normal trading and 75% of the aforementioned “sticky” trades.
I know that it sounds crazy but even after c.10 years of trading to have those “sticky” trades gone is still an uplifting experience once you have come to terms with banking the loss in both pips and $$$. Thankfully, the trades were small sized, so the pain in $$$ was not as great as it could have been. However, I measure myself in net pips of profit and my annual goal is 10,000 pips. I have beaten this objective in all three years that the PREMIUM SERVICE has been in operation so I have my work cut out this year, which will be, very fragmented due to a house move and early vacation
On a further positive note… fingers crossed and also touching wood as I type this… no further software issues.
Leading on from the pleasantries…
Last week was dominated by BREXIT and “THE DONALDS” twitter account. Nothing new in this.
BREXIT – part two comes later in “THE SOAPBOX” in section 5, so I will leave my thoughts, views and commentary until there.
I was asked what is the rationale for splitting it down as I have, which I explain further below:
- Part One – since the vote and all the shenanigans that have taken place even before the Lisbon Treaty (Article 50) has been triggered.
- Part Two – A50 triggered what are the 27-remaining member EUROPEAN UNION countries looking for and what is the potential common ground (the easy bits for negotiation) moving forward.
- Part Three – The Negotiation period and possible outcomes. The new look in Europe and the UK.
- Part Four – the trades that I will be focused on. Levels of entry. This is more based on the bottoms for reversal trade opportunities.
Whilst parts one and two will run back to back, I am not 100% sure parts three and four will immediately follow as I want to see the opening shorts of negotiation, rather than the guesswork and rumours that fill the media pages at the moment.
“THE DONALD” just cannot help himself. This twitter account of his should be shut down. I understand why he wants it and likes it but it is damaging his presidency and it undermines his team who appear to come under continual scrutiny about their validity and credentials to do the job for which they were hired. He does NOT have enough kids to fill every portfolio!
He is back on currency manipulation once again. The Chinese Premier is due to fly in for some Florida Golf soon and “THE DONALD” is laying the groundwork in advance.
If TRUMP was so hell bent on punishing all currency manipulators why on earth has he not singled out the SNB. The Swiss Central Bank spent over $65 billion supporting the CHF with currency intervention in 2016. Oh…let me guess why Thomas Jordan has NOT been singled out?
Could it be that the US does not compete with the Swiss vis-à-vis high-end watch and clock mechanisms? Of course, China competes with the US in the same markets. Very shallow Donald.
Regarding the markets…
The month end and Q1 fix was a volatile affair as institutions re-balanced their FX positioning. The USD took quite a big hit…. From my perspective, it was a buy the dips and sell the rips opportunity. For PREMIUM SERVICE subscribers, I tweeted my exits from several positions late in the Asian session on the 30th just in case the European session was caught up in pre-fixing on the back of the Tusk press conference regarding the response to the UK BREXIT formal letter. At times, I wonder if I am too cautious!
Plus…
Keep one eye on GREECE. They have a debt re-payment of €8.2 billion in July this year and guess what? No cash to pay it. This story will develop moving forward over the next few weeks. Be prepared GREECE BAILOUT ACT IV is coming soon to a theatre near you!
Moving on…
THE WEEKLY FX DRIVE THRU – LIVE webinars.
#9 this Monday 3rd April at 5:30PM.
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Scott Pickering Weekly FX Drive Thru for a freshly posted copy of the webinar, usually, within a couple of hours of its completion.
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Almost there…
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THE FX MARKET PLACE – LOOKING FORWARD:
ECONOMIC DATA RELEASES:
MY THOUGHTS ON THE WEEK AHEAD:
A nice busy week coming up with the highlight obviously being NFP on Friday: –
- GBP: The UK dominates this week with a series of PMI data Manufacturing, Services and Construction. This data will either support the calls that cable has bottomed or they will throw the whole BREXIT negotiations and the UK economy uncertainty back to the forefront once again.
- USD: The NFP release will once again take pride of place regarding the data releases this week. We will be placed once again in a will they (FED) / wont they (FED) hike 2 or 3 times more this year?We also have FOMC meeting minutes and ISM PMI data releases this week. There should be nothing new in the FED minutes.
- AUD: Not expecting much out of the RBA this week, except more of the same. Retails sales and Trade Balance numbers will be interesting though and could cause a few ripples. Recently AUD data has been pretty dull from a trading perspective.
Obviously, the BREXIT news will be on the wires at ad-hoc times. I am however, expecting this to calm down as the 27 members of the EU do not meet to formally discuss BREXIT until the end of April and negotiations do not start until the end of May. Nevertheless, we still should be on our toes.
USD MAJORS – “IMMEDIATE” SUPPORT & RESISTANCE:
The charts below contain commentary (my thoughts and views), these are the USD major charts that are reflected in the spreadsheet above.
EUR/USD:
GBP/USD:
AUD/USD:
NZD/USD:
USD/CAD:
USD/CHF:
USD/JPY:
THE SOAPBOX:
LET THE FUN AND GAMES BEGIN (PART TWO):
Where to start.
Last week ahead of the A50 trigger I laid out basically the timetable of events for the BREXIT negotiations.
This week in Part Two, I wanted to take a slightly different view of BREXIT not so much from the day to day squabbles that will happen but the macro level overview of what the remaining 27 members of the EUROPEAN UNION will be looking to get out of BREXIT.
Remember, we are dealing with the EUROPEAN UNION and Brussels, nothing ever appears as it does on the surface, and beneath there is all sorts going on. If there is one thing since the establishment of the EUROPEAN UNION that I write with confidence is that what is said is not always what is meant and what isn’t said is what is meant.
The first couple of points are quite straightforward, without exception, I expect that every member country would be unanimous in the fact that they want the UK to pay up their dues until the very last second. If the UK is let off the hook it would cost them!! The UK leaving as a net contributor is a scare to the smaller countries as they may turn from being net receivers in the UNION to net contributors following BREXIT.
Before moving forward, I would imagine that from country to country there are some lines drawn in the sand on what is acceptable and unacceptable for a BREXIT deal. I firmly believe this will be a very messy affair for two years or so and even after the negotiations are complete they must present the deal to the 27 country heads for ratification. This will be a drawn-out procedure with many twists and turns.
First of all, trade is vital to all countries. The EU is not a free trade zone it is 100% bureaucratic and a rain forest of paper is required to get anything agreed. One should bear in mind the EU definition of a cabbage is 350+ pages long. Bear in mind, It took Canada years to get a trade agreement in place with the EU. Nothing is ever carried out at a pace. Everything in the EU is at two speeds; slow and stop. Do not get caught up in Brussels rhetoric.
I have read reports from various commentators, news bureaus, media outlets and the EU media centre itself to try to get the following information into basically a bullet point format rather than 500 pages worth of commentary.
The keys macro areas of concern by country:
- CITIZENS RIGHTS (EU nationals in the UK and UK nationals in the EU):
Austria, Bulgaria, Czech Republic, Greece, Hungary, Italy, Ireland, Latvia, Lithuania, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia and Spain.
- EU REVISED BUDGET CONTRIBUTIONS:
Austria, Hungary, Italy, Latvia, Lithuania, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia and Sweden.
- GOOD CONTINUED TRADE RELATIONS with the UK:
Belgium, Czech Republic, Denmark, Estonia, Italy, The Netherlands and Romania
- CONTINUED SHARING OF SECURITY INFORMATION:
Belgium, Croatia, Estonia and Portugal.
- EU UNITY FOLLOWING BREXIT:
Finland, France, Germany, Malta and Sweden.
So why have I done this research?
My main reason was to see if there was a theme. When negotiations start to keep matters positive and have a common agreement moving forward it is an excellent starting point. Now, I am not saying my 5 topics above were the only ones that I could find. There were more, like Tourism, Gibraltar, Scotland etc. but these represent the best tools for common ground in my opinion.
Whilst the UK basically voted for BREXIT based on anti-freedom of movement I have no doubt that a reciprocal deal will be struck to put at ease all those currently displaced nationals around the EUROPEAN UNION. From a UK matter this would draw a line under existing non-UK nationals residing in the UK and hopefully put those UK nationals living abroad at ease.
From a discussion perspective CITIZENS RIGHTS would in my opinion be a positive to focus on. In addition, the continued sharing of security and border intelligence would seem to benefit both sides of the negotiating table.
With regards to EU UNITY and REVISED BUDGET CONTRIBUTIONS following BREXIT, the UK has no interest in these topics and would not feature at all in the BREXIT negotiations.
The big one is of course TRADE.
7 out of 27 countries as far as I could see, have this as important to their futures. Basically, this represents only 25% of the member countries. If I were a negotiator for the UK I would feel a little let down by this number.
Being cynical, my take on this is that there is much more than 25%, but as the EU already knows that the UK wants a great trade deal they do not want to declare their hand.
So, the upshot is that Donald Tusk stated last Friday that before the UK can discuss with the EU any trade deals or the like, both parties must negotiate what has become known as “the divorce terms”.
There is of course a growing number of commentators who are saying that a negotiated settlement may never actually happen as both sides of the table have dug their heels in on how they want to proceed. In fact, do we have a Mexican standoff before we start?
It will be fun and games, there will be leaks, there will be rumours, there will be sound-bytes that are favorable describing an accord and there will be sound-bytes highlighting aspiration.
As mentioned several times since last June when the BREXIT referendum vote took place, having just two years to organize the BREXIT deal is tight. There are something in the region of 20,000 sets of rules and regulations to effectively manage throughout the divorce proceedings. When you look at the time line that I included last week (repeated below), the fact A50 was triggered on the 29th March means it will be the end of April before the EU leaders discuss BREXIT and then another month before negotiations begin. That is 2 months out of 24 months with zero activity. This does NOT give confidence at all with the time frame suggested. As mentioned on many occasions in the past, it took Greenland two years to exit and they had nothing like the complexities of the UK relationship.
As I understand it, the pathway forward is going to be something like this: –
- A50 triggered by UK on March 29th, 2017.
- On April 29th, 2017, the remaining 27 EU members meet to discuss the UK request to withdraw.
- There is then a period of two years set aside when negotiations begin. A draft of the deal agreed between both parties is put before the 27 leaders (if this is still the number in two years!!).
- 20 of the current 27 member countries totaling at least 65% of the EU population needs to approve the exit deal.
- It is then ratified by the European Parliament.
- If at the end of two years of negotiations nothing is finalized they can be extended only if all member countries agree.
- If no agreement between the two sides is negotiated. The UK leaves the EUROPEAN UNION.
- The UK Parliament repeals the 1972 European Communities Act.
- Should the UK want back into the EU it must go through the same procedures that any new entrant applies with.
As soon as we hear of multi-national banks leaving the city of London and job losses being announced the UK negotiating position will harden as public pressure to achieve a good deal will be expected. At the same time the EU negotiators do not want to give any preferential treatment for fear of a CONTAGION EFFECT.
Therefore in my opinion whilst the negotiating doors will be firmly closed, facts and figures will be leaked and there will be volatility attached.
There are traders who are saying that cable is building a bottom, which frankly I think is quite dangerous.
There is so much uncertainty moving forward.
After two years will we see a negotiated arrangement, something that can transition from what is there now to something new. Would this include a trade arrangement? These can take years to set up but if a framework was in place this would be a bonus for the UK.
Maybe we will have a negotiated extension because two years is not long enough to finalize an agreement.
Finally, perhaps the talks could breakdown and both sides could walk away from the negotiating table,
There are no guarantees of anything with this complex deal.
The pressure for both sides not to show weakness of any kind will be uppermost in everybody’s mind. The sides are starting from a position of mistrust and therefore in my opinion it can only get worse and then a stalemate would ensue.
…. LET THE FUN AND GAMES BEGIN…. (PART TWO) …
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
Twitter: @pipaccumulator
http://weeklyfxdrivethru.com/disclaimer/
BLOG VERSION: #55 FOREXTELL
DATE: 2nd April 2017.
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