Well, there I was up at 4AM this morning, coffee ready, dogs out and back ready to watch “Super Saturday” in the UK House of Commons, bringing part one of the BREXIT deal to a conclusion, one way or another with an exit based on a deal with the EU.
As usual, the theatrics and log jam that is based upon the well-known fact that the UK lawmakers are “REMAINERS” and will do anything to delay, obstruct and delay more to frustrate the UK voters who voted 52% / 48% in June 2016 to leave the EU.
Basically, politicians don’t trust politicians… FFS!
I find this whole matter quite laughable. The opposition parties’ politicians who don’t trust Boris Johnson, are in the main not trusted by the British electorate. Back in the day, it was double glazing salespeople and car salespeople who ranked at the bottom of the most untrustworthy. Now its politicians, lawyers and bankers!
This mistrust became from what sold as an “Insurance Policy” amendment from ex whipped Tory Sir Oliver Letwin, which gave additional protection to a no deal BREXIT fallout already contained in the Hillary Benn act.
The Leader of the House, Jacob Rees-Mogg has announced that the BREXIT deal agreed between the British Government and EU will have its meaningful vote on Monday 21st October 2019. Whether this happens, is of course down to the speaker John Bercow, who, could decide against it, as he may feel that the Government is just playing games with parliamentary timetables. We will not mind out until Monday morning what the governments intentions are.
The full brief on the shenanigans that took place will be well documented elsewhere.
My focus is what to do vis-à-vis the cable on the week’s open.
BREXIT views to one side: –
- Any delay that keeps the UK tied to the EU = GBP positive.
- The “Letwin” amendment by its nature = GBP positive.
- There is still uncertainty but the UK parliament it trying to close any loopholes = GBP Positive.
- Boris Johnson had an impish grin on his face when he told Jeremy Corbyn after losing the “Letwin” amendment vote 322 / 306 that he would not be supplying the EU with an extension letter required by law. Does he have a rabbit up his sleeve? I think not he may have a “nods as good as wink” verbal agreement with Macron etc. but we are not aware of anything formal = potentially GBP negative.
- Do not expect a fast response from Donald Tusk (EU) assuming that he receives a letter from Boris Johnson requesting an extension. The EU deadline is 31st October 2019, I think that Tusk will want to see the UK plans before agreeing to an extension, whether short for technical reasons or longer. This delay = GBP positive.
- The “Letwin” amendment allows UK lawmakers to add conditions to the agreed BREXIT deal on the table. I think initially this = GBP negative purely from a BREXIT fatigue point of view but ultimately this = GBP positive.
Obviously, it’s a sad day for UK democracy. Given the mandate by the people the lawmakers have failed, over and over again. They believe they are righteous in what they say but it’s based on what; very sad indeed. THE POLITICAL CIRCUS IN THE UK MOVES ON AGAIN.
The vote was close on the Letwin amendment and I think a vote on the Boris Johnson withdrawal agreement will be even closer now that rebel Tories would probably vote for him. If that deal passes, the GBP will soar, maybe to 1.3600 in a few days. Fair value is closer to 1.5000 in my opinion and should the Bank of England raise rates like its widely thought, 1.5000 should NOT be out of the question.
But what about the open this week?
If you are really looking to be in cable. Given all the what I believe are GBP positives from above, buying dips is the route. But what are the buying areas and will GBP/USD GAP lower? I expect it to so support levels around 1.2700 to 1.2750 must be attractive but that is almost a 250 pip GAP lower to open the week, that could be a stretch. A GAP lower to 1.2850 is that an opportunity…. possibly.
What about a GAP higher?
It’s possible but due to market uncertainty probably not going to happen. I write this even with all the GBP positive bullet points above. In this instance however, I would buy dips based on the GBP positives listed.
The bottom line is that I cannot give advice…
What is the safest trading plan?
Question: What would I do if I weren’t already in GBP related trades?
Answer: Wait until the meaningful vote is voted on and the result is known.
Moving on…
It is often said that “The best opportunities to make money usually go hand in glove with the biggest risks. How to manage the risks is the key”.
This has without doubt been the challenge in 2019. Without being frivolous, trading Forex involves RISK, and whilst, the technical set ups and chart patterns remain constant, however, it must be no surprise to anyone that since the TRUMP presidency started, the RISKS of trading have increased on the basis that markets can move on the content of a presidential “tweet”. This “TRUMP change” was a determining reason for my change of trading strategy this year.
One factor which has, I suppose crept in and crept up some might say as a “Stealth Factor” is algorithmic trading. The increasing sophistication of these “algo’s” has meant that the market reaction to tweets has at times been very volatile and, in some cases have been misleading reactions.
Algos are something that, in my opinion, are almost completely overlooked by many analysts who are never held to account over their market analysis. As retail traders we will still take our profits on the “coat-tail” moves from the big banks and institutions, but it is plain to see that FX trading is becoming more complicated, that is unless you are a scalper trader. Any trader that deals beyond a 4-hour time frame has a completely new set of considerations to take into account. My reasons for mentioning TRUMP and algorithm trading in this section is that as we are now in Q4 of 2019, and I believe that we should start planning ahead for 2020, taking into account these new considerations into our TRADE PLANS.
Moving on once again…
October so far has been a very productive month for generating pips via the FX PREMIUM subscription option. The moves in GBP related pairs triggered many of my BREXIT related trades in line with my longer-term thoughts and views. These trades contributed substantially to the current pip total of +2,870 for the month so far.
I will always challenge myself to move forward without procrastinating. I can visualize where I want to get to and whilst I am around 160% of my annual net pip objective, there are still areas to work on moving into the end of this year to get ready for 2020.
FOREX REVIEW:
1.FX – FORWARDS, BACKWARDS & SIDEWAYS:
1.1. THIS WEEK’S ECONOMIC DATA:
Courtesy of Forex Factory.
1.2. BIAS CHART – USD MAJORS SUPPORT and RESISTANCE:
1.3. USD INDEX (DXY) OVERVIEW – MY THOUGHTS:
The Daily DXY chart is below and my thoughts, ideas and comments regarding the DXY are contained on the chart.
1.4. USD MAJORS – TRADING CHARTS and MY THOUGHTS:
1.4.1. EUR/USD:
The single currency has broken out on the long side and is now out of the BEAR CHANNEL on the chart below.
We are moving towards a large resistance area that includes major confluences of not just a large amount of previous support and resistance levels, but also, the 200 DAY SMA and the 61.8% Fibonacci level which both rest at 1.1200.
Obviously how the single currency reacts to the UK BREXIT Super Saturday outcome will be very influential in the way that this pair moves.
If we see a move through 1.1200, my thoughts are that we squeeze maybe to 1.1400.
Moves with this pair most recently have been more about the USD rather than the EUR. Many traders are bearish the EUR based on economics and longer-term fundamental data. I am included in this category. So, from my perspective I see moves higher just a great opportunity from which to short from.
1.4.2. GBP/USD:
Will the GBP GAP at the open following the shenanigans in the UK Parliament on Saturday? It could GAP either way, it all depends on what has transpired Saturday evening / Sunday with Boris Johnson asking, or NOT asking for a BREXIT extension.
My macro thoughts are that the closer the UK remains tied to the EU the greater risk is for the GBP to move higher. The more uncertainty that is removed, the greater the chances are of the GBP moving to a fair value position with the EUR the USD and other currencies.
I see that the best opportunities lie in buying dips. If we GAP lower to 1.2850, is that a good level to enter long… possibly?
Once a deal is done, I really believe that the GBP will rise like a rat up a drainpipe. We are a long way away from fair value in my opinion.
1.4.3. AUD/USD:
This pair is breaking out above the trend line from July this year.
The CHINA trade deal (of sorts) has sparked a move higher and has to a large extent been supported by an across the board USD sell-off.
I will be looking at the 61.8% 0.6925 and the 200 DAY SMA level of c.6970 as areas to look to short from.
1.4.4. NZD/USD:
We have an inverted Head and Shoulders pattern on the DAILY chart below. The measured move is to c.0.6450.
In addition, as mentioned last week, there is also a possible DOUBLE BOTTOM pattern in play on a break above 0.6450 (longer-term chart), with a measured move target of 0.6630.
I am looking to fade these moves.
1.4.5. USD/CAD:
Nothing has changed in the past week.
I still hold a CORE SHORT position.
1.3350 appears to be huge resistance. We are now moving lower after a prolonged time of range bound activity.
A move below 1.3120 and 1.3100 are needed to get the wheels in motion. These have been sticky to pass.
Recently, I was quite happy with the fact that the USMCA deal would soon be ratified, but the TRUMP impeachment process may have delayed this, especially with the White House meltdown with Nanci Pelosi last week.
If the USMCA is passed my thought process is that this should provide CAD strength.
1.4.6. USD/CHF:
This pair has broken down as the EUR/USD has broken out. The carry costs are high to be short this pair, so I prefer to be long as I hold my trades for quite a long time.
I want much lower levels c. 0.9600 / 0.9720, before I would consider a long trade.
1.4.7. USD/JPY:
No change from last week.
I hold a CORE SHORT position.
108.50 is a key level and a sort of BULL / BEAR line to consider. Long-term, I am still bearish this pair and my targets are between 100.00 and 102.00.
I am still looking to fade a trade deal resolution with more short positions.
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
October 2019 so far: +2,870 net profitable pips.
2019 year to date: +16,216 net profitable pips.
The WEEKLY FX PREMIUM is my subscribed based FX support option, which offers, subscribers’ full access to my suggested trade set-ups and my market commentaries.
If you go to my website you will see more information about the WEEKLY FX PREMIUM, including the “SUBSCRIBE” tab at the top of my welcome page.
My website www.weeklyfxdrivethru.com has full details of my trade projection for 2019 along with reasons why you should consider joining my other subscribers at the WEEKLY FX PREMIUM. You will find this information under the “History and Performance “tab
Plus, my website also contains full details of the subscription options available. You will find this under the “Subscriptions” tab.
FINALLY: I have just recently launched CORE POSITION trades. These segregate my longer-term trades into a category that may appeal to part-time traders and those who cannot access their trading screens more than two or three times a day.
This year I am now operating within my TRADE PLAN three categories of longer-term position trades: –
- CORE POSITION TRADES*
- NON-BREXIT POSITION TRADES*
- BREXIT RELATED TRADES*
*All categories have specific goals and objectives and vary on position sizes, RISK and RISK TOLERANCE.
3. WEEKLY FX PREMIUM SUBSCRIBERS ONLY:
(This section is for paid WEEKLY FX PREMIUM subscribers and is posted in a separate / dedicated blog)
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: #340 FREE NEWSLETTER
DATE: 20th October 2019
(Posted to WordPress Saturday 19th October 4PM New York time)