- THE FIRST FEW SHOTS:
I think that it’s fair to say that economic data has a back seat at the moment. It’s all about geopolitical news and the effect of these news items that are driving the markets at the moment. When I say driving, I really mean pushing one way then the other most times without reason.
The markets are not as liquid now as they were 12 months ago, and, this is evidenced as we enter periods like now, where it is largely historically recognized that many large institutions are preparing to run down their books into the year-end ready for the start of next year.
TRUMP and BREXIT headlines have dominated all week. It seems really strange to write that when the past week included U.S. Non-Farm Payrolls.
TRUMP goes from controversy to controversy, investigation to investigation and the great negotiator is still without a single campaign promise delivered. The latest from the great negotiator was that we had an 11th hour deal to fund the government for two weeks to prevent a shutdown, as once again the debt ceiling was reached. Not out of the woods yet, a permanent solution is required by December 22nd to enable the government to function moving forward.
You could not make this up. It is a reality TV program played out in front of the world with the oval office as the studio.
With regards to BREXIT, last Friday we had an agreement from Juncker and Barnier that enough progress had been made on phase one of the negotiations that the UK and the EU negotiators could now move to phase two.
At what cost?
RED LINES & DEADLINES = CAN KICKED DOWN THE ROAD
The ECB needs success as much as Theresa May with the RED LINES and DEADLINES set by both teams ahead of the EU 27 member states 2017 Christmas party aka December Council Meeting.
The ECB therefore did what they are master of… FUDGING, to you and me it’s also known as KICKIN’THE CAN DOWN THE ROAD.
It looks like the Irish border issue has been kicked down the road. We were provided with very little detail and this was the stumbling block. All parties, Theresa May (UK PM…by a thread), Michel Barnier (EU Chief Negotiator), Jean Claude Junker (President of the EU Commission), Leo Varadkar (IRISH PM) and Arlene Foster (DUP) placed a positive spin on the fact enough progress had been made but very light on specifics.
The fact that both Barnier and Juncker had broad smiles in the press conferences that followed the announcement, makes me think that the UK was screwed. This will no doubt roll on and there will be fallout, I think that’s a given.
From an FX perspective, the trading around the BREXIT agreement was no more than a buy the rumour sell the news event. Cable basically nosedived. After all was said and done it moved over 140 pips lower from the highs at one point.
NOTE: With regards to cables move lower, this was more than severe profit taking in my opinion.
Finally, …
I picked this up out of my twitter feed last week…. made me giggle.
- MY (THE PREMIUM SERIVICE) TRADING LAST WEEK:
I spent most of last week writing to PREMIUM SERVICE subscribers about how I wanted to reduce RISK ahead of NFP. I am pleased to say, I cut out lots of trades before the monthly lottery day aka NFP! I was very successful in reducing what I call circumstantial RISK prior to the NFP data release. I just had to manage my longer-term positions of AUD/NZD and USD/CAD.
I did not as I indicated to PREMIUM SERVICE subscribers trade NFP. I find that I only get annoyed and frustrated with NFP moves which linger into and hover over the weekends. This may be more of thing of the past but I just hate the knee-jerk moves and then two/ three hours of a chop fest that follows. It just does not suit my style at all.
Trading this month so far has been a little strange. I am conscious that I want to reduce RISK heading into the Christmas holidays. This coming week is, in my opinion, the last week of this year with decent liquidity and I do not want to be carrying multiple trades forward or having to manage a huge quantity over the Christmas holidays.
Economic and Central Bank data this week makes it a huge week of importance as well. At the same time, I realise that most of my core positions of the USD/CAD and AUD/NZD will be probably be carried forward into 2018. I have a few USD/CAD trades that I will unload next week. I expect my pip net profit for 2017 to lie a little lower than current levels once I cull!
PERFORMANCE 2017 TO DATE:
December 2017 net TOTAL: +536 net pips
2017 YEAR TO DATE: +13,319 net pips
In sales mode; I am now planning for 2018. I will have live trades through the Christmas and New Year holidays so I will be on twitter and probably email.
In 2018, the PREMIUM SERVICE will return with a new TRADE STYLE option for subscribers to consider and the SUBSCRIBER SECTION of the “DRIVE THRU” will be larger with greater emphasis on sentiment and market direction. Therefore, now is a great time to join the PREMIUM SERVICE get familiar and ready to go with the 2018 launch!!
- THE FX MARKET PLACE THIS WEEK:
3:1. THIS WEEK’S ECONOMIC DATA RELEASES:
3:2. MY THOUGHTS ON THIS WEEK’S ECONOMIC DATA:
This week I would say is probably one of if not the most important weeks for trading FX in 2017. We should get more than a feeling for direction into early 2018 given the information that should be provided.
We have Central Bank interest rate decisions and market commentaries from the FED, ECB, BOE and SNB.
We also have, Consumer Prices from the U.S. and the UK, Jobs Data from Australia, Average Earnings Data in the UK plus Producer Prices and Retail Sales data from the U.S. It is without doubt a packed week.
The most important part from my perspective however is to hear about any changes in Central Bank monetary policies moving into 2018.
In no particular order: –
GBP: CPi, AVERAGE EARNINGS, RETAIL SALES & THE BOE.
I do not for a minute believe that Mark Carney or any members of the MPC will be looking to amend interest rates, however, when the BOE announces on Thursday, I do expect that by that time we should have a pretty good idea about the state of the UK economy.
There is still inflation in the UK and CPI on Tuesday will give us the nod on whether it has topped out or not. The last reading was 3.0%.
Average Earnings is one that will be watched very, very closely. With inflation at 3.0% last time around earnings were lagging at 2.2%. For it to be a HAPPY CHRISTMAS the BOE and the government will at least want the numbers to match or be very close.
Retail Sales should be positive and a beat. If a country cannot have a good retail sales number leading up to Christmas, it never will.
Interest rates should remain at 0.50% and the MPC vote at 7-2. Any deviations from these numbers and the cable will be off running around like a headless chicken.
Given the “low on details” BREXIT phase one deal completed last Friday, I am once again having mixed views on the GBP.
This week’s data is therefore crucial to me moving forward.
USD: CPi, PPi, RETAIL SALES and the FOMC.
I am just not sure what to make of the USD at the moment. My brain tells me one thing and my gut another. I have read a lot of analyst reports for 2018 and there are institutions expecting 3 possibly even 4 further interest rate increases on top of the one due this week, which would take the U.S. FED Funds Rate to 1.50%.
This time next year it could be ready to move to 2.50%.
What is at the back of my mind is that there is NO INFLATION around. Last week’s Average Hourlies released at the same time as the NFP data was once again missing signs of inflation.
This week CPi needs to beat 0.1% to show that there is some life in the economy vis-à-vis inflation. Producer prices and Retail Sales need to show growth as well. This has been lacking more or less of late. With this as a backdrop I just cannot see multiple rate hikes on the horizon. This must be a fear for the FED moving forward. All this talk of transitory stands for nothing it would appear.
So, Janet Yellen has her final Press Conference this week and she will announce a 0.25% rate increase. If the FED does not raise there will be blood!
EUR: INTEREST RATE ANNOUNCEMENT and PRESS CONFERENCE.
The final Central Bank announcement of the week is Mario Draghi at the ECB. Fair play to Mario Draghi of late, at all speeches he has watched his “p’s and q’s” very closely.
It looks from a trading perceptive that to keep a lid on the single currencies strength below 1.2000 is key objective, both he and the ECB council members will be happy that recent policy initiatives have worked out very well putting a cap on EURO strength.
I suspect that Draghi will be popping the Dom Perignon should the FED raise rates next Wednesday and the USD strengthen across the board, ahead of his press conference the following day.
I am expecting a boring press conference and speech from Draghi. Happy Christmas, thanks for coming there are mince pies for everyone at the back of the room type of stuff. But… you just never know with the ECB. There is a history of council members breaking ranks and noting their dissent to undermine Mario Draghi. For this reason, this week, this event cannot be missed.
3:3. USD MAJORS – SUPPORT & RESISTANCE with BIAS:
3:4. USD – TRADING CHARTS:
More often than not I will use DAILY CHARTS for my analysis. My commentary and thoughts for each trading pair are above the charts.
CANDLE ANALYSIS: I have now added my thoughts based on the closing daily candle to the weeks trading.
EUR/USD:
DAILY CLOSING CANDLE: BULLISH
The single currency has been in sell mode this past week, with USD strength returning to the markets ahead of the anticipated rate increase from the FOMC this coming Wednesday.
Support at 61.8% Fibonacci level of 1.1701 looks to be acting like a “Star Trek” tractor beam sucking the pair lower. I see no reason why this trend lower should stop in the run up to the FOMC. Below 1.1701, the horizontal support / resistance level around 1.1650-60 is next up. This could be a great level ahead from which a reversal could start.
GBP/USD:
DAILY CLOSING CANDLE: VERY BEARISH
Right now… I am not sure that whatever pattern or measured move, pivot point, Fibonacci level etc. you think about or can see on a chart means too much for the next few days. This pair will be driven by political news rather than economic news or technical data.
Looking at the chart below, 1.3340 looks to have been an area where buyers and sellers have come together in the past to compete over directional control.
Recently, I had been long this pair and quite bullish looking forward. After the BREXIT phase one deal (of sorts) I think there are so many questions unanswered that it is hard to remain bullish. The uncertainties surrounding the BREXIT to a large extent still remain, and frankly when you consider arriving at stage one “the easy way” has been like drawing blood from a stone… The next phase includes trade agreements so it can only be harder in my opinion.
We have a bull flag on the chart but I just cannot take it seriously at the moment.
AUD/USD:
DAILY CLOSING CANDLE: BEARISH
We have a double top pattern in play.
Fundamentally some comments from the RBA make me think that the bottom may have been in around the 0.7500 level. But last week on great data the AUD/USD was rejected at 0.7640 and now following USD strength we have slipped below the 0.7520 level, and broken back to re-test.
This means in usual trading conditions that the double top measured move should be in play down to 0.7420.
Personally, in my opinion the markets are twitchy at the moment, at times brutal and commodity currencies have been acting independently of the EUR/USD so I am not convinced that this move will happen.
Obviously, a break back above 0.7520-40 places the move in doubt.
NZD/USD:
DAILY CLOSING CANDLE: BEARISH (INVERTED HAMMER)
If you like to play “ping pong” you must love this pair at the moment. My thoughts are that we are heading to the John Key low of 0.6600. It just seems to be taking an eternity.
Last week some words from Grant aka “Frank (Some Central Banks do have them)” Spencer, stopped the Kiwi’s move lower.
For now we are range bound 0.6780 to 0.6960.
USD/CAD:
DAILY CLOSING CANDLE: INDECISION (SPINNING TOP)
Bugger…
I am HEDGED this pair and short some more!! Sooner rather than later I am going to have to make the TRADE DECISION. I still have capacity before I reach my RISK TOLERANCE limit so I will wait for now, but it annoys me every time I open up the broker account that trades are inside. Maybe its best not to open that broker account!!
It looked to me originally that a confluence of Fibonacci levels would have held this pair at 1.2800. Next was 1.2840 and now my thoughts are 1.12910 the recent highs although my fears are that 1.3000 looms overhead….
Below 1.2800 gives the bears some optimism moving forward, 1.2750 is definitely greater comfort but around 1.2850 I can only see higher…argh!!
The chart below shows the QUAD TOP measured move. That has not yet played out!!
USD/CHF:
DAILY CLOSING CANDLE: BEARISH (SHOOTING STAR)
The BULL FLAG from last week is still in play. However, it’s a nasty closing candle, which indicates a direction change.
One has to be cautious here, we are still inside the pennant but the candle indicates a bearish move.
SUPPORT at 0.9740
RESISTANCE at 1.0000
USD/JPY:
DAILY CLOSING CANDLE: BULLISH
With so many investigations surrounding TRUMP and the geopolitical tension with which he is associated, unless you are short this pair I do not think it would be prudent to trade it, no matter how bullish it looks to the long side.
The BEAR FLAG is probably too long vis-à-vis the flag pole length and should NOT be taken seriously. I put it there just to show how powerful upward moves can be at a time of so much confusion regarding the U.S. policies at home and internationally.
Below 110.80 obviously get bears well in control but that is a long way away now. We have retraced more than the 61.8% off the last high to low move.
I would leave well alone but for the addicted top pickers the 76.4% Fibonacci at 113.80 may offer a try with an entry short with a tight stop.
3:5. MY THOUGHTS ON HOW TO PLAY FX THIS WEEK:
This week is loaded.
I am probably going to focus more on exiting existing trades than entering new ones. I am not saying that my work for 2017 is complete but with the FED, ECB, BOE and SNB all on the floor this week plus a plethora of inflation data from the UK and U.S. one has to be lighter than usual with trades.
PLUS: – This week liquidity will be starting to dry up.
If I look at the USD, despite all my rumblings earlier in this blog we have the greatest trading directional sentiment alignment of the majors for a long, long time. That said, personally for the most part, I am going to stay away from USD related pairs.
Trading cross rates with lower liquidity also brings with it greater RISK even if you still reduce your position sizes.
I expect that there will be more fallout from BREXIT and TRUMPS antics will obviously continue, why would his character change?
It sounds like I am closing the doors on 2017. Monday after the first Asian and European sessions of the week, I will review charts but not until then.
Sunday evening when the trading week starts its bound to be BITCOIN this and BITCOIN that as the focus as the futures exchange in the crypto comes on line. I expect things to get very “crunchy” as shorting comes into play.
Pushed on pairs to look at, I would say EUR/JPY, EUR/GBP, EUR/CHF and maybe AUD related pairs.
Just remember we are in December, you cannot expect as much as if you were trading in say April or May. Trading expectations need to be wound back.
As a junkie on BREXIT news I will probably find myself reading lots of Sunday / weekend reviews and reports on what’s next!
- PREMIUM SERVICE SUBSCRIBERS ONLY:
(Only SUBSCRIBERS to the PREMIUM SERVICE can view this section of the BLOG)
4:1. TRADING REVIEW:
4:2. SENTIMENT CHART, FUNDAMENTAL & MACRO THOUGHTS:
4:3. TRADING PLANS:
4:3.1. TRADING PLAN OVERVIEW THIS WEEK:
4:3.2. EXISTING CORE TRADES (PLANS & STRATEGIES)
4:4. CURRENT LIVE TRADES & LIMIT ORDERS:
4:5. FX BROKER NEWS with their MARKET FEEDBACK:
- THE PREMIUM SERVICE:
The PREMIUM SERVICE is my own subscriber based Forex support service that offers subscribers my suggested trade set-ups and market commentaries.
5:1. CURRENT 2017 PREMIUM SERVICE PERFORMANCE:
PIPS TOTAL DECEMBER TO DATE 2017: = +536 pips
YEAR TO DATE: = +13,319 pips
In sales mode; I am now planning for 2018. I will have live trades through the Christmas and New Year holidays so I will be on twitter and probably email.
In 2018, the PREMIUM SERVICE will return with a new TRADE STYLE option for subscribers to consider and the SUBSCRIBER SECTION of the “DRIVE THRU” will be larger with greater emphasis on sentiment and market direction. Therefore, now is a great time to join the PREMIUM SERVICE get familiar and ready to go with the 2018 launch!!
5:2. HOW TO SUBSCRIBE TO THE PREMIUM SERVICE:
If you like what you’ve read in this blog and should you want to go a stage further and subscribe to the PREMIUM SERVICE, this can be done on my website www.weeklyfxdrivethru.com under the Tab SUBSCRIBE HERE.
Subscribing to the PREMIUM SERVICE is not just about receiving a larger “DRIVE THRU” blog packed with more trading supporting information, my thoughts and ideas. There is much more to a subscription than those things. Check it all out under the tab HISTORY & PERFORMANCE on my website www.weeklyfxdrivethru.com
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- THE FINAL SHOTS:
6:1. WANT A FREE PREMIUM SERVICE SUBSCRIPTION:
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6:2. 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.
Scott Pickering
The Pip Accumulator
Twitter: @pipaccumulator
https://weeklyfxdrivethru.com/disclaimer/
BLOG VERSION: #262 FREE NEWSLETTER
10th December 2017