Archives for August 2018

August ends with risk off sentiment going into the long weekend

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The trade tariff rhetoric has caught the market’s attention, as anticipated – going into the holiday long weekend for North America.  Equity markets were down today and money was flowing to safety.

The EURUSD made a triple top early in the U.K. session and began to move down.  A short was taken risking 13 pips for a potential 70 pips to our daily target at 1.1607.  Price moved down to its Asian session low, retested the level and moved lower to close below yesterday’s low, but had difficulty breaking some important technical levels.  We tightened our profit stop and the trade was closed.  We missed the final wave down but we were spared a retracement in advance of it.

It’s unclear how the NAFTA talks will conclude today.  President Trump is talking tariffs versus Europe again.  Further trade tariffs with China next week may keep the market seeking safety while this gets worked out.  September will not doubt be an exciting month as volumes pick up after the summer and we get closer the mid-term elections of November.

Good luck with your trading and enjoy your weekend!

Moderate USD strength today but little appetite for risk as the EURJPY sets up for a short

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It’s been difficult to understand the euro strength since mid August.  It is still a year away before the ECB will start normalization of its monetary policy.  Conflicts continue within the euro zone and Italy has threatened to not make payments into the EU budget and may break its deficit target, then  ask the ECB for assistance.  Germany however, is doing very well and there is some inflation.

Today moderate USD strength emerged after a week, but money flows to the yen were apparent as the U.S. 10 year yield and equities were under pressure – in a risk off environment.

A short EURJPY setup gave us an entry in advance of the U.S. session – risking 20 pips for a potential 61 pips to our daily target at 129.89.  Keeping our profit stop tight we locked in profit as the trade moved to the target where we closed the trade.

It will be interesting to see how the markets close the week in advance of the North American long weekend.  NAFTA may come closer to fruition on Friday, but the market will be focused on the potential increase of $200 billion in tariffs on imports from China being implemented as early as next week.

Good luck with your trading as we close the month of August!

Now which direction will the USD go?

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All it took was one dovish comment from Jerome Powell on Friday at Jackson Hole for the USD to weaken.  Curiously President Trump has recently been critical of the Federal Reserve for continuing to raise interest rates.  With another rate increase pending with 90% certainty in September, followed by one more in December with 60% probability…where will the USD go from here?  I will leave that for analysts and economists to muse.

Will President Trump be able to influence Jerome Powell and possibly Mario Draghi? The latter having already stated that interest rates would not go up in the E.U. before the end of next summer.  If the president chooses to believe other countries have been manipulating their currencies to make them more competitive, what would happen if he tells Germany for example, that their economy is growing very nicely and it’s time to raise interest rates or risk substantial tariffs on German goods imported into the U.S.?  A couple of tweets of this nature strikes me as plausible.

In mid June, Mario Draghi’s comments were able to knock the euro down from 1.1851 to 1.1563 in a day.  It looks like this level could be retested if the USD continues to soften.  It’s difficult to not make a case for a stronger USD but since Friday the market has been selling the USD and President Trump may be getting his way at the moment.

Despite a weaker USD today, in the U.S. session overlap the GBPUSD set up for a short trade.  Risking 15 pips for a potential 79 pips to our daily target, we were able to capture a move downward before having to close the trade at the European close due to a scheduled appointment.  A potential reversal candle at the close made for an easy decision to get out – having bounced upward from its low by 11 pips.

There is some U.S. economic releases scheduled for Wednesday to be aware of – as well as potential volatility for the USDCAD.  Crude oil inventories and any headlines regarding the trade agreement between the two countries may cause the pair to be volatile.

Trade cautiously and don’t let your profits turn into losses.

Good luck with your trading!

 

The FOMC meeting minutes had very little effect on the market until the Asian session – when the USD strengthened

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The FOMC meeting minutes on Wednesday did not contain any surprises and hinted at a pending rate hike in September.  The market already has this rate increase priced in.  The remainder of the U.S. session was subdued.  During the Asian session the USD strengthened against the majors.  The first half of the U.K. session was subdued but trading picked up during the U.S. session overlap.

We chose to go long the USDJPY risking 13 pips for a potential 33 pips to our daily target at 111.20

As price rose above its Asian session high toward our daily target, we locked in profit and closed the trade at the target.

It’s good to see the USD show some strength after a very tedious 2 weeks of taking a breather.  The fundamentals remain very strong for the USD and unless President Trump can somehow talk it down, the trend remains higher.

Good luck with your trading!

 

Shorting the EURJPY as money flows moved away from risk early in the U.K. session

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The EURUSD , EURJPY , AUDUSD and NZDUSD all moved simultaneously higher early in the U.K. session.  The U.S. 10 year yield was dropping.  Waiting 2 more candles confirmed that the EURUSD and EURJPY were moving down and with the EURJPY being very active recently, we risked 17 pips for a potential 136 pips to our daily target (not shown) at 1.2491.  Despite a note of optimism regarding the U.S. and China planning to talk again regarding sanctions, Turkey concerns less prevalent than earlier in the week…it made sense that safe money flows to the JPY and CHF would be prudent with the uncertainty of news and “tweets” over the coming weekend.  The USD has not been consistent this week and as a trader if I’m not comfortable holding U.S. dollars then I’m going to be squeamish about holding euros at this stage of the economic cycle.

A short was taken and price moved down but left notable lower wicks as it declined…indicating that buyers were entering.  As price moved lower, we locked in more profit with each candle and our trade was closed as price moved up 2 hours before the U.S. open.  With a weaker USD at the time, a EURUSD short was not appealing, and my thought was with money flows to safety that the EURJPY would be the better trade.

Keep your stops relatively tight, as this market abruptly turns… then turns again.  A good trader protects his profits and gets the risk out of trades by locking in profit as the trade moves in their favour.

Enjoy your weekend!

Nothing on Thursday but in and out of the GBPUSD twice on Wednesday for modest gains

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Shorting the trending EURUSD and GBPUSD pairs has been an obvious choice on days of USD strength. On Wednesday there was little appetite for risk in the markets.  The GBPUSD failed to stay above its Asian high and began to make lower highs.  An entry short was taken risking 15 pips for a potential 79 pips to our daily target at 1.2635.   What looked like a great trade stalled out just above its Asian low and moved up to close our trade as price began to retrace in advance of the U.S. Open.

After the U.S. news, we entered short again with a stop above the U.S. session high and price moved down, stalled and bounced upward taking us out for a modest gain.

Some days trades look clear and work out nicely.  Other days they can look great and just not deliver what you expect.  Always keep yourself protected  in any trade and lock in profit.  At the very least get the risk out of the trade when it moves sufficiently in your favour.

Good luck with your trading!