What a boring week.
I am “LIVE” in many trades, but I am just sitting and waiting for moves to take place.
I was the wrong way vis-a-via the RBNZ last week, like many other people I expected a dovish commentary from the RBNZ Governor, Adrian Orr, instead I read a more hawkish commentary and ever since the NZD has remained elevated. It’s a real kick in the nuts as I am short NZD/USD, NZD/CAD and long GBP/NZD. I am obviously therefore, under water in all these pairs being patient waiting for a move lower, which I except to happen. My peak losses are not increasing, losses fluctuate lower then higher. Overall not a concern or a worry… yet.
I am adjusting to my new way of trading.
From January 1st2019, I changed my trading emphasis away from shorter term day to swing, into longer-term swing into position trading. It takes time to adjust especially as I am adopting a specific plan on my BREXIT related trades, different from my non-BREXIT trades.
I believe in TRADE PLANS; they are a discipline that so many traders choose to ignore. I firmly believe that they are essential. In fact, I love them so much I am operating with two distinct TRADE PLANS at the moment!
In addition to BREXIT and NZD related trades, I am also short AUD/USD and AUD/CAD and also long the AUD/NZD and GBP/AUD. I am probably too early to the party so to speak with the AUD trades, but I do believe that any trade deal agreed between the U.S. and CHINA will benefit the U.S. and Australia will suffer as a result. The trade deal is taking longer to finalize than I originally thought, and should no deal be struck, this will in my opinion also be AUD negative So, I am just waiting, sitting patiently.
With reference to other trades, I am still bearish the EUR/USD, but I failed to get the long entry I wanted with the USD/CHF.
All things considered it was quite a frustrating week, no new pips added or taken away from last week’s totals. On a positive note my mindset is positioned well and my thought process around my open trades remains positive, it is just that with the FX market being range bound I must demonstrate patience and wait for my trades to gather traction.
Moving on….
FX: TIGHT RANGES STILL IN PLACE…
BUT IT’S ALL GOING TO KICK OFF SOON
As just mentioned, last week the tight ranges continued and its hardly surprising when you look at the plethora of fundamental news hanging over the FX market. As a future pricing mechanism all the market and political uncertainty is hanging over FX like the Sword of Damocles.
I try not to procrastinate or over think matters but when looking objectively from a macro viewpoint the FX market is caught between a rock and hard place at the moment.
The EUR/USD, which is the most liquid of all FX pairs has been roughly operating in 30-40 pip daily ranges most of the past two weeks. I would argue we are slowly but surely moving lower and that the bears are in control, but they lack conviction to take the pair out of a clearly defined range at the moment. Uncertainty is the reason, and despite many fundamental factors being in play to some extent many of these factors cancel each other out resulting in limited movement.
This is NOT an unusual phenomenon for FX, it happens fairly frequently and when a break out of the range occurs it is usually significant.
To give you an idea of the factors at play at the moment, I have broken these out by region, U.S., EUROPE and UK. I am NOT saying that these are all the factors at play, but these are enough hopefully to back up my point of view.
U.S:
- The political spat in D.C. over border wall funding and border security reached new levels. TRUMP avoided another Government shutdown by signing the congress papers on funding. However, at the same time he declared the Mexican border a National Emergency, which allows him to move funds around within the budget to facilitate the building of the wall.Democrats have already set legal challenges in place to reverse his actions.
- The U.S. / CHINA trade deal talks are NOT going to complete by the TRUMP imposed deadline of March 1stTRUMP is keen to keep talking and is willing NOT to introduce additional tariffs on CHINA imports and is looking to extend the deadline by 60 days to try and get an agreement.Many statements have recently been released stating that the two sides are a long, long way away from reaching a mutually beneficial agreement.
- The FBI Robert Muller investigation into Russian involvement in the TRUMP campaign of 2016 continues with more information about the investigation regarding being continually lied to over meetings, events and timelines. It is getting closer to TRUMP day by day.
- Tariffs with the EUROPEAN UNION are being raised again.
- TRUMP has another face to face meeting in Vietnam with President Kim from North Korea.There have been several press releases very recently about the North Korean nuclear program NOT being dismantled. This could be “SPIN” ahead of the summit.
- The U.S. Government budget ceiling limit will be back in focus once again inside the next month.
EUROPE:
At the end of my bullet points, I included numerous tweets taking from my feed last Friday morning over a 2-3 hour period. All of these quotes are consistent with regards to issues that the EUROZONE and EUROPEAN UNION faces. None could be described as EUR positive.
These are in addition to the bullet points below which all offer uncertainty.
- SPAIN – elections APRIL
EUROZONE – parliament elections MAY
PORTUGAL – elections OCTOBER
GREECE – elections DECEMBER - Economic data continues to be poor and there appears to be little sign of light at the end of the tunnel.ITALY is in recession and the EUROZONE powerhouse GERMANY narrowly escaped recession on recent GDP data.
- The ITALIAN government coalition is starting to show cracks. Quotes are now being seen about an ITALIAN future relationship with the EU.
- BREXIT is not just a UK issue it will affect the EUROPEAN UNION just as much. The fact that the UK could crash out without a deal is starting to resonate with IRELAND who are co signatories to the GOOD FRIDAY agreement.A no deal BREXIT brings the IRISH border to the forefront. At the moment there are lots of heads buried in sand believing that a deal will be done. We are far from it in my opinion, but the clock is ticking down.
UK:
BREXIT is the single biggest issue facing the UK in decades. It has been a journey to hell for business leaders. It has been badly managed from day one. I have no doubt that if the past two years could be started again the approach would be completely different second time around. However, we have what we have, and we have to work with it.
There are hundreds of tweets in my timeline every day and as with EUROPE above, I give an example of what tweets came through in a 2-3 hour period and I have added these to the blog below my BREXIT bullet points.
- BREXIT – DEAL or NO DEAL?At the end of February we will have a parliamentary vote of the deal that the government has at that time.If it passes, we move to the next stage which is negotiating the future trade deal. If it fails, there will either be a BREXIT crash out with no deal on March 29th2019, or there will be a push to extend A50 and a further attempt to get a parliamentary deal sorted to the take to the European Union.
- The risk of a no deal is gathering pace and economists are reacting to news about food and drug shortages and how the BOE may react.
- A disorderly exit certainly heightens the risk of shortages.
- I have read many articles referencing STAGFLATION. The risk of inflation through shortages is real. Importing inflation is non controllable. In a situation of STAGFLATION, one would normally expect the Central Bank to loosen policy but with shortages we may see a hike in interest rates.
These are the macro issues that I am considering. There are more.
Something will give sooner rather than later we are wound up quite tight in the FX market and as far as I am concerned have been for over two weeks now and it will end with a large move.
All the geopolitical issues listed above equate to a full-on “event move”. Will it be BREXIT, will it be one of the U.S. issues, who knows but, I can tell you we are building for a huge move sooner rather than later.
FOREX REVIEW:
1. FX – FORWARDS, BACKWARDS & SIDEWAYS:
1.1. THIS WEEK’S ECONOMIC DATA:
NOTE: Only the items that interest me are listed here.
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:
We finally saw a break below 1.1300 but there is stiff support at 1.1250. This has surprised me a little as I expected solid support between 1.1200 and 1.1215.
Whilst I remain bearish this pair the move lower could be one that could try the patience of a saint!
On the chart below I also show a descending wedge pattern which usually has an upside move off the lows in the majority of cases. The move lower I thought would take out the weekly gap fill of 1.0780. If the descending wedge plays out, we may only move lower to c.1.1000.
1.4.2. GBP/USD:
In my opinion, there is not a lot to do here with this pair pre-BREXIT.
I am more interested in placing ARMAGEDDON trades in position to take advantage of some of the highly anticipated DIPS in price.
The cable is well supported. This is a little surprising given the fact we are so close to a disorderly BREXIT. The market is heavily anticipating a deal or A50 extension.
As you can see from the attached chart, we are in a down sloping channel and trading well inside a sideways range.
1.4.3. AUD/USD:
I am a seller of the AUD as I mentioned earlier in the blog. In my opinion, any deal done with the U.S. / CHINA trade deal will favour the U.S. The Australian fallout can only be negative.
The RBA is on hold to dovish ready to react.
For now, we are below a trend line from earlier this year and for now still inside a sideways trading range. In my opinion, “SELL THE RIPS”.
1.4.4. NZD/USD:
Poor jobs data two weeks ago followed by a hawkish RBNZ last week. It just does NOT add up to me. The RBNZ took the market by surprise and as a result the NZD remains very well supported and elevated above 0.6800.
This is annoying as I am a seller of the NZD… argh!!
We are still in a trading range as shown on the weekly chart below. Whilst I am not overly concerned at the moment as I do believe ultimately this year the NZD fair value especially with the USD is nearer 0.6000 than 0.7000 is it just a frustrating pair once again in 2019 as it was for most of 2018.
1.4.5. USD/CAD:
I hate this currency pair at the moment.
I am still sidelined, I am just not sure what to do with this pair. We are not too far from a sell zone as indicated on the chart below, just not sure how to approach the CAD.
This is usually the time that this currency has a huge move in my longer-term direction, and I become a woulda, coulda shoulda trader as I did NOT follow through on my initial conviction. I have to admit a short around 1.3360 – 1.3450 does appeal.
1.4.6. USD/CHF:
I have missed my first opportunity with this pair… argh!!
At the moment I really would like a pullback to enter long, I am just not sure that will be forthcoming and in the interim I am not sure what to do until I am aggressively short the EUR/USD.
I have lost my mojo with this pair, a few years ago I was always in a CHF position whether this pair or the EUR/CHF. At the moment I am long GBP/CHF on the back of being short EUR/GBP, so I am not directly interested in the CHF.
I will continue to wait until my entry level comes into view and I still believe this pair will be back towards 1.0500 by the year end. We ended last week with quite a bearish candle hopefully this will be just what the doctor ordered to place a long entry a lower level.
1.4.7. USD/JPY:
I missed my entry last week due to sleep. For once, I did not place a limit order entry. I am looking towards 111.00 to enter short.
My thoughts longer term are that this pair will be closer to 105.00 at the end of 2019. In my eyes this pair offers a great opportunity I just want to achieve the best price to stick with it as it moves lower.
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
February 2019 so far: +575 net profitable pips.
2019 year to date: +2,820 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.comhas 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 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.
3. WEEKLY FX PREMIUM SUBSCRIBERS ONLY:
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: #313 FREE NEWSLETTER
DATE: 17th February 2019