What surprises did the first full trading week of 2019 bring us?
There’s life in the old dog yet as GBP is finishing with a flourish and seemingly well on its way to 1.29 as the sands shift again over Brexit. Trading cable this week is best described by the power of gifs;
For months, trading Brexit has continuously mutated. I really don’t know now if Brexit is good, no-Brexit is good, no-deal is bad or a no no-deal is good or bad. Now next week, May losing the meaningful vote might not be as bad but it’s still not good either, which then makes the next steps good or not so bad, or indeed terrible. ARRRRGGHHHHHHHH!
Suffice to say, it’s crunch time in the big top on Tuesday (but even that might still not happen). We’ve possibly got some heightened weekend risk if the stories on the EU offering an olive branch by way of some additional assurances are to be believed. At the least, it’s the last time for the Sunday political TV shows to get some soundbites before Tuesday and they won’t miss that opportunity.
EURUSD skated confidently through 1.15 this week, then fell through ice late on. Old Teflon got a new coat from Christmas as it built itself up in the early part of the week. This was one of those rare times where you just knew it was coming. The price action and rest of the stars aligned. The traders in our trading room smelt blood and duly went in for the kill, either buying minutes before the break or running buy stops above 1.1500. That was the first big collective trading of the year and it’s great when it happens like that and it pays off big time.
Now we’re back below 1.1500, we need to see whether we’re back in the 1.12-1.15 range. The difference this time is that there’s been a clear-out and the 1.15 area has become diluted.
USDJPY is still not looking overly confident since the flash crash. It tried but failed to take out 109 properly but then had a weak attempt at taking out 108.00. I sense there’s still some nervousness in this pair. While there may be some bargain hunters out there, there’s also a big crowd who were caught out and they still might need to recover buy cutting losses or hedges in the rallies. The option landscape took a battering too and those folks are only just starting to rebuild. 108.00 still remains the key line for me and going with the holds and breaks is the way to play it.
The perma-bid in CAD was evident again and the BOC monetary policy announcement only delayed buyers who jumped in even after a lack of hawkishness from Poloz &Co. The USDCAD 1.3180 area highlighted pre-BOC looks to be where the bus is being parked for the weekend, and could be a good shout for a double bottom. USDCAD bounced to near 1.33 but that could be profit taking from a week of CAD buying. We’ll see what next week brings.
AUD is another pair to find a bid this week. 0.7200 is where it finds itself today. What’s the story, is it commods rallying, are there new carry trades being taken? The questions are the same for both this and CAD because it’s not just about USD.
But, on that front USD has had some ebb and flow. The Fed speakers came thick and fast and what was noticeable was that they all seemed to have the same speech writer. Patience, data dependence, and lack of inflation worries were the main themes from them all. Despite the market thinking otherwise, there are no real worries for the economy among Fed speakers. So, what we have is a divide between where the market thinks the Fed is at and where the Fed thinks it’s at. That’s a recipe for opportunity for us traders until those thoughts converge. With the US government still on shutdown, attention is starting to pick up on the economic consequences, and that puts the balance of Fed expectations towards the market’s thinking. If the shutdown remains unresolved, we’re going to start feeling it in the data.
China is the other big issue bubbling still but the mood seems good in negotiations…so for. Monday’s low-key meeting had a few players getting over eager for a result and we saw risk take a dip when they didn’t get what they were waiting for. This was never going to be solved at round one.
Trading wise, a good solid week for me this week, which is always nice to kick the year off. For personal satisfaction reasons, the best trade was fading the Evening Standard Brexit headlines. This was one of those times where it was a glaring fade when looking at the story details vs the price move. Trading headlines is hard these days because for one thing, catching the move is tough when the robots are involved, and then (depending on the subject matter) fading them isn’t always a certainty. Only rarely do we get something that sticks out like sore thumb and you get the opportunity to whack it. I used to do that every day in my city days so when it happens in this realm, it’s nice to know I’ve still got my wits about me.
Another part of trading in the old days (damn, I’m sounding like an old codger) was relying on gut feeling. The Spidey sense was tingling for the EURUSD break and as I mentioned earlier, myself and the trading room folks set ourselves up perfectly to catch it.
We hope that you made bags of pips this week too, and that our posts and advice aided that end. Trading is a tough old world and while some trades looked easy this week, it doesn’t always happen that way and we’re often working hard for our money.
ForexFlow is not here just to pump the headlines or detail some of the trades we do in the room. We’re here to help traders who struggle to get their trades right and profit regularly. Our trading platform is a place of learning where everyone helps out everyone else. So, if you are struggling, you’re not alone. Come and have a look and see whether we can help you find your trading feet. Come and share in the information that makes up this market. We don’t make it up and we don’t give it after they event, we’re planning and trading on it as it happens.
And to that end, I wish you many pips in your trading and thank you for coming to ForeFlow. To our trading platform traders, thank you for helping to create and feed a great community, and to my colleagues for their insight and experience in helping to shine a light on trading.
Have a great weekend all.
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