January 25th 2023
Welcome to the first newsletter of 2023.
The first few weeks of this year have followed on from Decembers theme of being very tricky to navigate, correlations only fleeting, and one has had to be a stock picker, i.e. trade what is moving and making sense rather than just trading the majors and expect to do well. The crosses have been very active whilst the Dollar has been range bound since its large plunge in the latter part of 2022.
The key driver of FX majors is of course interest rate expectations, visualised in the major bond markets. SO we need more information from the US Federal Reserve before traders views can be formed. Today we had the Bank of Canada, they made only a 25bps hike, and a dovish statement, which led many to expect the Fed will also be dovish and the US Dollar sold off as many assume the now assumed 25bps from the Fed is priced in. However, the Fed did tell us there would be 50bps coming…
DXY chart below suggests we can expect a new low before any bounce, we came within a whisker of such a low today. We have the next Federal Reserve meeting beginning on January 31st with the rate decision on February 1st. This means we have all the January month end flows to deal with before we receive new information from the Fed.
Gold has been very strong, but is finding resistance at US$1940s, only a clear break above will see an attack on US$2000.
Yen has been driving so much of the action, and Yen crosses are where the better, tradeable moves have been.
If the new years markets have been tough to navigate for manual traders and investors, the good news is that the algo I have mention previously is doing a good job. I will write a more complete report about the algorithm soon, but for now here is the link to see its performance.
ALGOTRADING
Whatever you do, keep it tight, “Because the World is Nuts”
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December 16th 2022
The past year has been a good year for short term trading. Plenty of volatility, lots of opportunities.
For me it has been a rather disrupted year, I have zigzagged across Europe a few times, seen a lot of things, places and experiences, not all good!
I have been told by a few people that I should write a book about it all, maybe I will eventually. its been quite a year.
I am sure 2023 will be equally volatile, maybe even more so. Interest rates expectations will continue to be the key feature.
In many ways this is a good thing, as this will take us back to finally seeing a true pricing of the value of a currency or stock, back to real value.
I attach a copy of my DXY chart to show the overall picture of the past few months since I began updating this chart for you.
What will be fascinating is how the picture will change as the Federal Reserve reach peak rates, and the ECB raise to curb inflation and support the Euro.
Then we have the Bank of England to consider, and seriously I do not know what they may do to fix the internal issues of the UK.
It does seem like the GBP will be under a lot of pressure, and keeping an eye on the EURGBP cross will be essential. Exciting times ahead for sure.
One project I have been working on involves an Automated algorithm for trading.
The programmer is ex RBS London and has been working on this system for many years.
His ideas align well with my ideas and so we have always stayed in contact after meeting up in Perth, Australia.
We are running a version of the system on a demo account for public viewing.
The creator already has some investors and is managing over $1million via a prop funding firm with no time limit.
If you do not know about these contact me and I will explain.
During Q1 2023 we will probably open this out to investors to partake of the opportunity of live or prop fund trading via copy trading
using this Algo so I will write about it again over the coming months.
Here is the link to view the current performance since August. LINK
There is a 9% profit to date, and probably we should have turned it off during the past week with all the bank rates and thin Xmas
markets, but we wanted to do a stress test, and it actually handled the situation very well.
For anyone wanting to talk about trading or investing feel free to drop me an email and we can set up a time to chat.
All the best for Christmas and New Year 2023, the year when I reckon FX will be the best place to be.
Alan Cooke
https://www.myfxbook.com/portfolio/6edgesautogd/9881279
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Market Notes 16th October 2022
Yet another crazy week in all markets, high volatility was seen across the board as money chased itself around the playing field, pushed and pulled by traders panic and pleasure.
What a great business we are fortunate enough to be involved in.
But enough philosophising and looking back at last week, let’s get down to business and look ahead to next weeks adventures.
Take out the political noise from the UK, Russia/Ukraine, French refinery strikes, China/Taiwan, and New Zealands tax on methane, you know, important things like these, and just focus on the charts because how else can you control your risk in this volatility?
With all the major currency pairs being quoted versus the US Dollar, any significant movement or trend change will depend on what the market has priced in regarding further interest rate hikes by the Federal Reserve, and that pricing relative to what the market expects the next move to be from the other major Central Banks.
Looking at the DXY chart, and weighing up where EURUSD closed the week around 0.9720, my bias is for the dollar to drop so long as we are trading below last weeks high, with potential for DXY to head for 111.00. There is very little US centric scheduled news this week, but we are in US earnings season, Tesla reports on Wednesday, plus this is opex week which might influence stocks and Dollar movements.
By the way, a few months ago I wrote a report on Tesla but decided not to send it out as it was too controversial and against the general consensus at the time…but I wish I had now…
Fundamentally, US data is seen as slightly weaker and some players are already pricing in less rate hikes than the market is currently doing, so we are in a period where flows might have already turned.
For me my general view is EURUSD long above 9720, heading for 9850 initially.
USDJPY has been totally one sided and impossible to position short, however technically there is an argument that it may have gone high enough for now and we might start to get some correction. Better to wait and see on that pair, and hopefully if it does drop, we can see a decent range forming over the next week.
Whatever you do, keep it tight,
Alan
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Market notes 6th October
Very fast markets with one way street days. I have little very time to do updates.
UK debt downgraded to Negative by Fitch.
Here is my current DXY lines…
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Market outlook 28th September
DXY chart was requested, here is what I am looking at.
However, do not forget to be aware of end of month and quarter, pension fund stress in UK and BoE, BOJ, and others all looking closely at these
markets right now. Standing aside is an option worth considering. We are being quite active today but using very tight risk control, both
long and short euro and cable.
Whatever you do, keep it tight.
Market outlook 26th September
Since the last update the dollar has surged and EURO and GBP have collapsed against the dollar and everything. Euro did not
move up enough to the 1.0200 region where I intended to short.
As said in the last update, once the SP500 broke lower all ideas of Euro rising were off other than intraday buys on possible support areas.
DXY charts below show the charts told us what to be doing.
Unfortunately for me, a kind of family emergency took me away from charts and entailed an 8,000km dash around Europe, my second such trip
during the past few weeks…All that time I could see the markets turmoil but was not able to update or to do a thing about it.
Fortunately my trading partner, with far more experience than I have, navigated the volatility, picked up euro
on several occasions, sending me updates throughout the week and ended the week in a positive fashion.
But what happens next? Well this is the big question, and even an analyst and trader at a particular private bank I track is asking the same question today.
Clearly all currencies are under pressure and volatility is high, so there are probably opportunities to make money on either side, just don’t hold on too long,
play hit and run if intraday trading, which is what I talk about on these updates.
We still think we are in a situation, from a short term trading viewpoint, where the surprise will be a Euro and GBP rise based on an announcement, comment,
or even a surprise action by a central bank, and with that in mind, we feel that buying euro or cable at key levels intraday is preferred, particularly down at 0.9600/9580,
or shorting around 0.9770/80 if seen today can offer good risk/reward. Personally I am buying now in the 9630’s with tight stops and no big expectations.
Whatever you do, keep it tight.
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Market notes September 15th 2022
Hi All,
I said the next main update would be for the 15th September for a reason.
I expected that the 15th will be a key day for the EURUSD and therefore USD majors and all markets generally.
So far this week the Yen has been the main currency in play due to Bank of Japan checking prices as they say when they want to warn us all that they are unhappy about the price, or rate of change of the Yen price versus the major currencies. Swings of 2% have been seen in the Yen pairs.
The US Dollar has also seen some very large and volatile swings as players price in possible future interest rate expectations, and it has also been a game of Headline Roulette as many new developments have arisen this week, such as President Biden trying to play the crude oil market by setting a target rate of $80 to consider replenishing the US oil reserves. Possibly just a gift/deal he has struck with Saudis? Who knows but I have seen calls for WTI to go to $120 and $40 this week so volatility is the only guarantee.
Stocks saw major sell offs, Apple had one of its biggest value drops on record. SP500 is at a critical support area, this really needs to hold for my trade scenarios here to work out so I will watch todays low closely.
Ultimately though, we need to assess a direction to trade, and from the 15th for a few days or maybe more depending on the speed of the moves, I prefer to be selling US Dollar against the Euro and the GBP.
There is still the possibility that we see a new low in Euro, but to me, the bond market, the interest rate cycle and risk to reward, suggest that the upside is more profitable than the downside and much easier to position for if one is not already short these markets from much higher.
As I mainly talk from a short term trading perspective, the long side is my preferred side until proven wrong, and even then I would probably still be looking for long opportunities intraday as the time must be near for Europe and the UK to start to play catchup regarding interest rate rises. The most ridiculous headline I saw, well one of them anyway, was “UK inflation eases to below 10%”!
One piece of good news for the British car driver is that when in Germany recently I paid Euro 2.32 per litre for 95 Unleaded, surely more than the UK is paying currently, although Poland was only 1.40…
So, back to the main theme, I am interested in buying Euro and GBP on dips for targets 200 or 300 pips above the month low in expectation that interest rates in those regions will need to be raised. Of the course the Bank of England has delayed its next rate meeting but I doubt that the Bond market will take notice of that and yields will keep rising, forcing the BoE to play catch up. The Italian elections are next week I believe, it is possible that European rates will move up after that.
I could write about this stuff all day, but this is supposed to be a quick update with actionable trade ideas and thoughts so I will stop now!
Good luck out there, keep it tight,
Alan
PS I will post the continually updated DXY chart below, share it around, its free and might help someone…
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Special Event Market Notes Pre ECB Rate Decision
EURUSD ends the wild summer markets at around 1.000.
The major players will be back at their desks now and already positioned for this extremely critical interest rate decision.
The market will see a 50point rise as weak and EURUSD will be crushed towards 0.9700/0.9600. A rate rise of at least 0.75 will be seen as a signal that the euro has fallen too far too fast and is adding to inflationary pressures, causing the ECB to finally wake up and attempt to do something about it.
This decision will see EURUSD bid towards at least1.0220 and enter a wide range trading situation, possibly up to 1.0300 and with support around the 1.000 figure. The volatility is high, daily ranges of at least 1%, plenty of opportunities to make money intraday, just ensure you adjust position size and risk parameters accordingly.
Dollar index 4hr chart below, possible dollar support mid 109s 107.80, new highs still possible.
I will be back from the 15th with more frequent updates, just wanted to get this one out for this very key market event.
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Market Notes for Wednesday 27th July
Dollar Index chart is back as some readers have requested it
Is this info useful?
Please share it!
Federal Reserve decision day is here and its clear the markets are in pause mode until the news is out.
No big ideas from me at this point, just short term trades, currently long USDCAD from 1.2850s/60 but might be out of that trade by the time you read this!
Thought you might like the updated Dollar Index chart I am looking at.
Remember, trade at the extremes and keep it tight!
Alan.
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Market Notes for Week commencing 24th July
Dollar Index chart is back as some readers have requested it
Is this info useful?
Please share it!
Massive week with the FOMC statement on Wednesday when we see if the Federal reserve do the 0.75% rate hike they have telegraphed or do they pull a Bank of Canada stunt and go for more, or do they do the 75 because they said they would but make comments such as this is enough for now lets wait and see and revert to a “data dependent” footing.
So key scheduled new events in my book are:
Monday German IFO – this used to be important but has become less so, however there is always an active market around this event
Tuesday Australian CPI — All CPI figures are important in the current interest rate sensitive environment and this will be closely watched.
Wednesday – the main event FOMC interest rate decision statement and press conference
Thursday and Friday will be influenced by End of Month flows and the after shocks of whatever occurs on Wednesday.
SP500 reached the 4000 I have been calling for and was rejected as it took a look above and hit a wall of selling. It sounds to me that everybody is making bearish calls but I still think that as long at 3926 supports we can see a bid in this, if not then 3850 can be seen quickly.
USDJPY interestingly made a similar pattern, this makes me ask myself if we will soon see the traditional risk on risk off patterns with stocks down, Yen strength, stocks up Yen weakness, this is something to watch for as this classic trading theme makes for some nice price action.
USDJPY sold off back into its recent extended range. The current movements make sense with the FOMC ahead and month end.
Dollar Index supported at my zone made 3 peaks away from it but was unable to sustain a rally and was pushed back into the range, making a stop below and closing in the range again. This is not a strong looking bounce, and with the Fed ahead I will look to play the ranges in EURUSD selling new highs and buying new lows until a clear direction is seen.
Gold made a strong bounce from clear support around the 1680s but we cannot rule out another attack on that area until we are clearly above 1800s.
Have great week,
Alan.
My dollar index chart below.
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Market Notes for Wednesday July 13th
Dollar Index chart is back as some readers have requested it
Please share this newsletter anywhere you can, I will appreciate it by keeping these going if I know people are finding them useful.
Key news
New Zealand Interest rates. Forecast is for a rise of 50bps.
UK economic news for services and manufacturing.
German and French CPI
US CPI
Canadian Interest rates. Forecast is for a rise of 75bps.
USDJPY did the third push to new highs that I have talking been about, the US 10s dropped back through 3% as though it wasn’t there, EURUSD touched parity 1.000, Crude dropped 7%.
US CPI will be absolutely key, because right now the Bond market looks to me like they are suggesting future hikes are priced in so it will take a very strong CPI number to change that. Gold is showing weak price action also suggesting inflation may be fully priced for this side of the summer at least. Even Silver has dropped and stayed below 20.
Commodity markets are also trading with a general weakness, the Bloomberg average dropped over 3% today and is down 12.5% on a rolling month basis, fortunately even Coffee is down 20% from February high and petrol prices in southern Europe are back under 2 euros a litre, that’s $7.62 per US Gallon!
I am still watching all the instruments mentioned on my previous post to assess price action and trading around it. USDJPY to the short side is my preferred, although now looking for a bounce to sell, maybe around 137.20s.
GBPUSD I am not interested in playing due to the potential for news risk, and EURUSD down here at parity is a total game, because you gotta realise it wont stop here, it almost certainly will trade lower, maybe into 0.98xx, just needs a catalyst to run all the stops that must be building up down there, so it is still a sell on bounces in my opinion, and until US CPI is over with we don’t have the full information.
Just a reminder, I trade short term but have to think of the picture on all time frames. But for example, nobody should go and sell their physical gold just because its trading weak at the moment, these notes are my own market notes, I am sharing them just for general information, education, and entertainment, nothing is to be taken as investment or trading advice.
Cheers
Hex.
DXY chart as promised with 2 possible scenarios.
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Market Notes for the week ahead week comm 10th July
A quick version for you today.
Wednesdays US CPI will be critical for future rate rise expectations.
Monday will be a low activity day for me as I want to see what happens in EURUSD and USDJPY and GBUSD.
What I am watching for exactly is US 10 year yields at 3%, do they look strong above it? Or does the market start to think future hikes are almost priced in for a few weeks?
EURUSD
The levels I am looking at are 1.0160 to 1.0220. No trades for me in that zone. Can potentially buy above if looking stable, for a run to 1.300/mid 0300’s, where a sell is most likely.
USDJPY
I want to see what happens here after the Japan Election. Do we get that third push up I mentioned previously to sell, and if we do get it, be cautious, don’t enter too soon as this pair can spike stronger than you might expect.
Watch out for comments from BOJ/MOF.
GBPUSD
I am totally avoiding mentioning politics in these notes, but what a mess..and we have BoE’s Bailey speaking twice this week, so watch the price action around these speeches carefully. Also EURGBP action will provide good information.
Keep it tight.
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Market notes midweek report Wednesday 6th July
Hi all back at the desk after some time away. I was actually fully back yesterday but did not get involved in the dollar surge unfortunately, the timing of it took me by surprise so soon after the quiet July 4th holiday.
However, if we look at the DXY charts I have been posting, there was a point where I left 2?? because that was a potential future pivot zone. Now we can see that after breaking higher, we retraced to that potential pivot zone, it held as support and dollar surged higher from that area.
Where does dollar go now? The sky really is the limit from here. Any bounce in EURUSD will be an opportunity to sell, maybe we will see mid 1.0300s again to get short, maybe scalp longs will be possible once we see a potential higher low made on shorter time frames, but the smarter thing to do it is trade the crosses and wait for a sell level in EURUSD.
What about USDJPY? We have seen a potential major top, but the drop so far has not been convincing and we may well see a new high, which will then give us a 3 rises pattern and then look for a drop of some 500 pips towards 130/13300. Big zone reflects the current volatility in the Forex markets.
SP500 on the other hand is rather subdued, usually a strong dollar move would have seen stocks lower. This may signal support for a rise towards 4000 again.
Crude has drop 20% from its highs, but it still costs 100 euros to fill the car…USDCAD up strongly, indeed all commodity currencies V dollar are down, and therefore EUR/Comm is down deeply with probably more to come, especially with the current interest rate disparities as Australia increased their base rate by 50 bps to 1.35 whilst the ECB are yet to realise the price of butter has gone up….25%.
Plenty of trading ideas above, but the key theme is buy dollar on setbacks, if there are any….lets see what tonight’s FOMC reveal about things, but technically even if the minutes are dovish it seems unlikely to change this trend.
Keep it tight,
Hex.
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Market notes Pre BOJ Rate decision
Well today saw the Swiss National Bank raise interest rates by 50bs but are still at negative 0.25%.
The BoE gave a rise of 25bps leaving them at 1.25%.
The ranges and levels I suggested yesterday 2200 to 2070 were completed even before the BoE rate decision due to very active Asian and early European session. The upper level of 2250 was then easily surpassed as cable put in a massive 360 pip range day.
EURUSD was more orderly and has reached my target levels around 1.0550/0600.
EURGBP is lower around 8550 but nothing major occurred there despite the expanding rate differential. Note that Southern European yields are over 3% now.
The next big news event is nearly upon us, the Bank of Japan will announce their rate decision around usually 4am London, no fixed time is given.
The market is waiting to see if they will give in to the market, meaning that currently the bond market is pricing in a 10year yield of 0.4% way above the YCC target.
This means that it is not impossible that the MOF/BOJ could scrap or move their YCC target, which may result in a move not unlike when the Swiss National Bank removed their control/floor of EURCHF 1.2000, this action caused a massive and immediate strengthening of the CHF. This could mean Yen can appreciate in a similar way.
Whilst this is unlikely, it does partly explain why the USDJPY pair has drop the past couple of days as traders too some risk off the table and others took speculative positions long Yen via spot and options.
Friday is also OPEX day, options expiration, and it is a massive number, which may mean we see a rally in the general stock market and we close inside Thursdays range, but again so much depends on the BOJ rate decision. Also we have a US Holiday on Monday so the markets will be very thin as many players would have ended their week tonight.
Cheers
Hex.
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Market notes Pre BoE Rate decision on Thursday 16th June
Wednesdays Fed meeting saw Powell raise rates by more than originally telegraphed, but less than the extremes that have been suggested during this week by some experts, the ones that don’t trade mainly…
The final decision of a 75bps hike was the largest Fed increase since 1994.
He has signalled more hikes to come with possible Fed funds rate target of 3.8% by 2024. But that’s a long time away in these markets.
So, what does this mean for BoE on Thursday?
Lets reason it out….
The UK is in a difficult position…probably needs higher rates to stem inflation.
The current tax take is high due to extortionate fuel taxes and low unemployment rates, and so they could afford higher rate payments on their own debt.
Exports wont be hurt by a slightly higher Pound from current levels, and exports are not the issue there right now anyway, getting enough people to make the stuff is.
Its probably better to keep confidence in the GBP and the BoE by raising, and getting ahead of possible higher inflation rates ahead, they are getting behind the curve currently.
The Fed 75 bps rise gives the BoE plenty of room for 25bps, and possibly even 50bps, but maybe better to do 25 and telegraph further hikes, data dependent and all that…
But what does all this mean for trades??
Well the dollar peaked today after it filled its gap down seen last night, and euro has rallied towards the levels I was thinking of, however there is still a long way to go to reach the 1.0550 or even 1.0600s.
EURGBP rallied a lot this week and is now dropping hard, but is still above 8500. Plenty of room downside without causing any issues.
Cable could see a 50bps rate rise, reach 1.22/2250 and then drop back into the range even down to 2070…it really is such a market that nothing really matters too much…
To see what I mean, just look at the way SP500 rallied on a major rate hike.
Of course, theres also a good chance the BoE will disappoint and be very dovish, either with a small hike or verbal dovishness…if so the Pound could be crushed…
Define your ranges and trade them.
As someone said to me tonight, “Powell has managed the expectations and situation perfectly.”
Be aware we do have the Australian jobs news overnight, then London session sees the Swiss rate before BoE and we have BOJ on Friday…
This is a Traders market…keep it tight…
Hex.
ps Heres my DXY chart I used today, very contained price action considering.
Keep it tight!
Hex.
Back on desk after too long away, so much has happened since I last posted.
DXY rose as predicted, EURUSD dropped to the low 0620s on ECB day, and then has followed through in a very weak fashion on the US Inflation figures last week.
With comments on the wires that the Fed may raise by more than the expected 50bps, it is possible that too much has been priced in and that we are due for a dollar pullback.
With this in mind I like the possibility of seeing EURUSD rise to mid 1.500s to 10600s before it may find resistance and head lower again.
My Deutsche bank EURO VIX source is currently offline so I dont have up to date numbers, but we dont need a quant to tell us that Volatilty has risen with more behind it with this weeks news schedule.
US PPI later today
US retail sales and Fed on Wednesday.
Swiss rate and Bank of England rate on Thursday.
Keep it tight!
Hex.
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Market notes Pre ECB Rate decision June 9th 2022
Thursday 9th June 12.45pm London, followed by Press Conference 13.30pm (08.30 New York)
Dollar is in a contained range since its recent low on May 30th when a Federal Reserve Governor Chris Wallace commented that he is prepared to go beyond neutral on interest rates to fight inflation CNBC Link
That comment cemented a low in the US Dollar for a 150 point rise and a similar sized drop in the EURUSD.
The largest moves have been in the Yen pairs, the USDJPY has climbed more that 700 pips in 9 days since that comment.
Yen weakness has been seen against all Forex pairs. How long will the Bank of Japan let this continue? They want 2% inflation but most of all they do not like fast move, we are now very near a prior high seen in 2002.
Now lets look at the EURUSD. This pair has been relatively quiet, and indeed FX Volatility has dropped sharply and is in similar to that seen in early May, when we saw around 2 trading weeks of quiet action followed by the dramatic break down in EURO to the current low of the year around 1.0350 and a strong bounce.
Will we see another strong rise in FX Volatilty at the ECB rate announcement and Press Conference?
Only if the rate is increased, as markets are expecting rates to stay unchanged until July, so unless there is a surprise I do not expect much action in Euro or Dollar, as we do have the Fed next week, which will certainly be more important, even though we have been told already what they will do.
EURUSD will probably head lower towards the low 1.0600s unless it is able to break and hold above 1.0800.
Note that the AUDUSD has sold off since the RBA raised rates on Tuesday by 50 points to 0.85%.
Most FX action will be in the Yen crosses, and as noted above, the recent moves have been anchored by comments from the BOJ and the Federal Reserve, so we are clearly in a market looking for guidance, so be alert comments from Central Banks that could indicate a turn and next intra month trend direction.
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Market Preview for Week Commencing May 30th 2022
Key news events
Monday US Holiday
Tuesday nothing to mention
Wednesday CAD Interest rate Inlaws arrive from Sydney!
Thursday UK Bank Holiday and US ADP employment change
Friday UK bank Holiday US Non Farm Payroll
Last week was a tricky week with many moves occurring outside main trading hours, the OPEX, Month End and European holiday Thursday and US holiday this coming Monday all combined to make it a bit annoying and was a great week to be less active and, let the algo do its job.
Stocks were the main benefactor as the Fed clearly wanted a strong close to keep people happy and spending!
Spooz still has not achieved more than a possible lower high and needs to really prove itself if we are to have seen the pre summer lows.
What would that proof look like? A strong close over 4200 is needed. But even then 4310 would be preferable. SO the possibility of a new low stands, but just because you have a number in your mind do not let it get in the way of trading what is going on right now.
EURUSD looks very keen on reaching 1.0800 which would be a key resistance area.
DXY continues to put itself in a place where it is easier to drop than to rise.
This move has really messed with dollar bulls since the bond market gave its signal which most would not have heard.
The way it looks, makes me ask myself, is it possible that ECB rate hikes are getting priced in, and any raise might be seen as too little and euro will sell off again! Or maybe Lagarde will delay a rate rise…certainly just talk of such has had quite an affect on the currency which will slightly reign in inflationary pressures compared to a DXY at 105.00 and above.
USDJPY possibly a low is being made but do not jump in too soon, Yen strengthened sharply mid week, despite Kuroda saying inflation would stay around 2% and suggested the recent increase in inflation alone would not lead to an immediate withdrawal of monetary stimulus.
Commodity currencies showed a lot of strength into the end of the week, crude oil very strong, Gold however did not particularly shine this past week.
Looking ahead to the coming week, Monday is a key US holiday, Tuesday looks very quiet and Wednesday has the event of the week with Canadas interest rate decision.
Thursday and Friday see a UK bank holiday and Friday is Non farm payrolls.
Last weeks movie question was answered correctly by 3 people! Rogue Trader movie, the motivational speech by the Barings guy, I always find it funny because you need information, but how good is that info, and who else knows it, and has the market already priced it in, and what do you when the trade goes wrong and you don’t have the option of a 88888 account!
Wishing you all a great trading week ahead, or maybe it will be a good week to take an extended break…
Hex.
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Midweek update 26th May 2022
EURUSD made a bullish start to the week as Biden announced he is considering changes to US tariffs on China. That resulted in a bullish Asian session and closing over 1.0600, the level we were watching for change of direction.
The US Dollar has lost a lot of ground quickly, and FOMC minutes reconfirmed the 50bps interest rate increases at the next 2 meetings. this caused more dollar weakness, and stocks rose strongly as the worst news is considered discounted.
EURUSD is currently in the high 0600s and has the potential for as high as 1.0800 whilst over 1.0600. Losing that level, combined with DXY regaining 102.50 could see euro back down to 1.0400.
Remember we have the European holiday today, US holiday Monday, Bond market has a half day Friday, and Month end Monday, with Month end Value date today 26th.
No strong view in either direction in any FX pair. It is very likely we have seen the weeks ranges in FX and Stock Indices, and any range break will probably be faded.
Look to the Commodity cross rates for the possibility of better daily ranges, or EURGBP may be interesting as month end action may suggest support at 8575, buy a bounce or short down to it could be the trade.
Month end, but holiday period, range trading view may be your best stance unless there is a major news catalyst. Dollar Index chart below with levels as a trading guide.
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Weekly outlook notes w/c 23rd May 2022
Main news events
Monday German IFO
Lots of speakers UK and Europe potential for comments all day.
Tuesday
German Manf. PMI
UK Manf. PMI
Powel and Lagarde speaking.
Wednesday
New Zealand Monpol statement.
Japan Kuroda speaking
FOMC minutes.
Thursday
Bank Holiday in Europe.
CAD Retail sales
US GDP q/q
Friday
Japan core CPI y/y
US Core PCE m/m
UoM Consen.
And note that Monday 30th is a US Bank Holiday.
This will affect how markets trade all week as players position for
the holiday and also the month end.
Previous week saw the Dow have its longest losing streak in 99 years.
The dollar fell strongly as was suggested by my comments re the bond market pricing the chance of rises in 2023 down to zero.
So despite Powell saying rises of 50Bps at the next 2 meetings, dollar sold off.
Also I mentioned the spurious comment I heard re Europe doing a surprise rate hike, which as I said was unlikely but it shows how players are thinking.
This kind of info, heard from the right sources is essential unless you think you can consistently beat the markets trading in a technical analysis vacuum.
This past week demonstrates several things.
1. The market is a forward looking machine 2. You have to know who to listen to. 3. It takes years to know who those people are.
- This knowledge does not come easily. 5. You have to put yourself inside the information curve. 6. Whoever can write to me and correctly answer to which movie number 5 refers, gets a phone call from me.
Looking ahead technically, many will see Dollar Index in a potential head and shoulder formation with potential to breakdown, whilst many will expect a test of 104.00.
Both views might turn out correct. Use the levels shown on the chart for guidance.
EURUSD may see 1.0400s unless it can break and hold above 1.0600, and USDJPY 129s again all things are possible due to the volatility we are currently seeing and the upcoming US holiday and month end.
SP500 may see new lows to 3700s during the next 2 weeks.
Updates will be less frequent for a few weeks now as I have commitments, but should resume in the future,
Good Luck and keep it tight.
Hex.
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Wild Wednesday oops yes it was Thursday yesterday, dollar broke lower, EURUSD and Cable rose strongly, cross rates very mixed, correlations pretty nonexistent.
Strong bear market rally seen in SP500.
Question now is, has dollar dropped too far and needs to bounce? Have stocks seen the low before Friday close and OPEX/Options Expiry?
I would answer that by saying Dollar quite possibly will rise into the close of Thursday, but cannot rule out 1.0600 in EURUSD, a slight new high before a drop may occur.
But you have to take each pair separately at the moment, meaning dollar may behave differently to Commodity currencies, or Yen or Euro…cross rates are causing fluctuations and high volatility , which means lots of opportunities if you have the stamina for it, as money is chasing itself around the markets trying to fool most of the people all of the time.
SP500 is key for sentiment and dollar performance, its close tonight and how Asia performs will be important, it does seem unlikely we have seen the low of the week just because of the time of the current low, but it is possible we will close the week up around current 3900 levels, however, Friday night is a long way off. Bear market rallies can be fierce and hard to trade. Watch commodity crosses for clues of risk.
Hex.
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Markets Notes For Thursday 19th May 2022
Market notes Thursday 19th May
Well we were looking for dollar buying to come in during Asia and early London on Wednesday and we got it, and then continued through the day.
Of course Dollar was a sideshow compared to the Yen and CHF buying as stocks fell after some very rough earnings figures from Target and Walmart.
USDJPY seems to have finally divorced itself from 129.40, DXY seems headed for the 103.90s again.
Crude down another few percentage points amid an interesting event not seen since 2010 whereby WTI traded a few points higher than Brent due to roll dates, and general confusion. Despite crude, USDCAD was pretty stagnant all day.
Into Thursday more dollar strength is probable, but perhaps a 2 way market may be more likely as we are now in a defined dollar range, and back to pivot around 103.90s.
Besides Aussie employment, there is no major news scheduled, although I heard one trader suggest Lagarde will do a surprise rate rise tomorrow…totally unlikely but at least you probably heard it here first!
G7 meetings and ECB monpol meeting accounts, and then US Unemployment claims and existing home sales figures.
Stocks look to be closing very weak and will probably be sold on any bounce, in such case dollar likely to remain bid but Yen and CHF crosses most active whilst DXY is in this range.
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Market notes for 18th May 2022
Market notes Wednesday 18th May
The round of talks from Lagarde, Powell and Mester on Tuesday caused a lot of activity but the only clear thing was Powell sounded very hawkish, “wants to see clear evidence inflation is cooling before slowing down the pace of hikes”.
Signals 50bps hikes at next 2 meetings.
Crude dropped 3% in a flash from the high made earlier in the day, stocks dropped, but Canada commented they want to build a new pipeline to supply crude to the US, so Spooz were saved again and bounced to print a new high of day, Dow followed although not a new high at time of writing. 32641 shown now.
DXY took the stops aforementioned, and dollar was given a general lift but nothing convincingly strong enough to drop EURUSD. If it can’t drop it probably has to rise further but it is hard to buy it up here, currently 1.0540.
USDJPY loves 129.40 it seems…
The question is, will Dollar buying occur in Asia and early London, or is Eurusd heading towards 1.0600
As mentioned, OPEX week, strange moves should be expected.
With the current situation, and UK CPI and CAD CPI due, Wednesday might be a good day to do less and watch and wait for opportunities to develop.
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Market notes Tuesday 17th May Pre US session
Cable GBPUSD has been very strong as anticipated due to comments from the BoE. EURGBP very weak. Might be done on the downside for now as Euro is very bid in all crosses.
USDJPY 129.40 still looking pivotal.
As mentioned in the Weekly outlook, noises about US rates being priced down to zero into 2023 are now being heard, hence why there no support in DXY on the way down from last weeks high, the 104.20 hardly gave a pause in the drop.
Looks like the only stops left are 103.70s DXY, so EURUSD may keep rising.
Brent Crude reached some key stops at 114.85 and cleared them. USDCAD may have found some support though, as all cross rates are seeing CAD and AUD sold.
Crude prices will likely weigh on stock prices soon.
Wild times, keep it tight.
Hex.
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Market Preview for Week Commencing May 16th 2022
Monday
UK BoE MPC policy hearings all day.
Tuesday
US core Retail sales
Powell Speaks followed by Mester
Wednesday
Australian wages figures
GBP CPI
CAD CPI
Thursday
Australian jobs numbers
Friday
UK Retail sales
Weekend Australian election
The main theme at the end of last weak was dollar strength as it finally cleared the 103.90s hurdle and sprinted higher, sending EURUSD to a new low of the year.
EURGBP sold off violently as it failed to find support above the prior week high.
This action saw Cable GBPUSD rise stronger than EURUSD on Friday.
Fundamental and technical thoughts
The Federal reserves Bostik claimed in the week that a rise of 75bps is not out of the question, and this gave Dollar the kick it needed to rise strongly. However, if you look carefully the Bond markets are now pricing in less aggressive rate rises out to 2023, which may weigh on the dollar over the next few months. That 75 call was probably a head fake.
I do see a possible new low in EURUSD into 1.0300/0290 which will bought and if we then see a daily close over 1.0350/0400 we may see a tradeable rally to 0700/0800
But for me the better action will in the Cable, Bank of England are far more likely to raise rates than the ECB. Watch Mondays MPC report for signals. While Cable continue to close above 1.22/1.2250 higher prices should be seen, and EURGBP will continue to be under pressure. How low the ECB will want this to go is hard to know but the current talk of a trade war between UK and the Eurozone due to the political situation surrounding Northern Ireland will keep this pair pretty active.
This would suggest GBP crosses will be very active and positive. However the EURO crosses will probably be pulled along by this, and are less violent to trade.
Yen…tricky…USDJPY did head down to the buy zone mentioned in the 128.s but its failure to clear 129.40 might be significant. I would only be a new buyer once we close clearly above that level. If that occurs there is plenty of scope for higher levels into 130s.
Will probably leave the Australian this week with the key news events, plus the election at the end of the week. You might recall the sudden last minute announcements before the previous election regarding home loans assistance or regulation which was used to swing the votes in favour of Scott Morrisons party, so I would not trust anything I hear from Australia this week regarding the jobs figures or announcements.
DXY Dollar index, as a barometer of what is going on can be confusing to some as often the cross rates cause some diversion between the majors and I think this may be the case early on in the week. EURGBP will be watched closely to see if I am correct, as I do not expect a new high in DXY early on, but a new low could be seen in EURUSD, this would mean EURGBP may show weakness early on, then rally, to be sold later in the week.
DXY 15 min chart showing last weeks action.
To Sum up… FX vol is going to continue this week, which I should say is also OPEX week which may also cause some unexpected action and flows
So keep it tight, and dont stay wrong this week traders, there will be plenty of opportunities, have a good one.
Feel free to contact me with any comments or questions regarding all markets and trading.
Hex.
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Market notes for May 13th
So many moving parts…lets keep it simple though. DXY regained 103.90s and found support, sending EURUSD lower to, and through the lower targets.
USDCHF reached Parity 1.000, a price last seen in 2019.
All Yen crosses moved by very large amounts, extreme ranges, yet Gold remain rangebound.
Commodity currencies have been crushed. Possible bounce areas nearby on any sign of dollar rally temporarily faltering.
FX Commodity crosses presented good opportunities, EURAUD and EURCAD for example.
EURGBP strongly rejected from last weeks high area.
Its all about risk management going into Friday with no key news scheduled.
Watch Stocks, will S&P500 find a floor on Friday? That will depend on what happens in Asia, I am hoping to see a good bid overnight and if that holds into the US Open then it could be a good risk on day Friday. If not…well lets see…
Dollar strength is clear above 10390/400 and this is supressing commodity currencies despite higher prices in everything. This will mean controlled prices in the US, but for UK and Europe, weak currency combined with high commodity prices just means more pain there.
Crazy wild week in the markets, one has to love it to do this!
I hope my notes have been of interest to some.
Day trading often involves taking the contrarian view to find opportunities, and to also get with the trend when the opportunity presents.
Lets see what next week brings.
Good weekend all,
Hex.
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Market notes for 11/12th May 2022
Yen pairs and commodity crosses very much in play and gold showing a strong bounce from a key area.
If it holds its current position near the days high we could see strong follow through higher in Asian session. If not a retest of the 1830/40 area could be seen.
Dollar Index still inside of recent range so the major pairs also rangebound, although with good volatility especially in Cable.
EURUSD still can see a new low unless it can firmly get above 1.0580/90. On the downside possible to see 1.0476/0460 before a correction.
Cable GBPUSD looking weak at the moment as EURGBP nears last weeks high, a crucial level there.
Stocks and crypto displaying very weak action.
Possible bounce in risk could be around the corner though.
Keep eyes on the DXY level 103.90s I have been showing all week, still proving to be a key pivot area.
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Market notes 10th May 2022
EURUSD very much stuck in the range. Positive while above 0500 but needs to clear the levels mentioned on Mondays update
“key is DC eu… A close blw 1,0500 would encourage CTA/trend followers to push for prior lows 0345, whereas we need a close abv at least 10580/90 to stabilize ( st resist 0527/0550/0565)”
Note USDCHF made a new high, EURUSD did not make a new low, which one is right we will know soon enough.
US CPI Wednesday will be the key event which should set up a directional move for the week, and at a minimum it will add to volatility based opportunities.
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Market notes for Tuesday May 10th 2022
EURUSD, GBPUSD, DXY.
Last update for a few days, just wanted to complete this trade cycle.
So far the buy on dips view is working, however the more time EURUSD spends in this current range , the more likely it is that we will break last weeks low. Need to stay alert to that possibility.
Markets are nice and volatile giving opportunities both ways, no need to get too committed one way.
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Market update Monday Pre US Session
Key is Daily Close on EURUSD… A close blw 1,0500 would encourage CTA/trend followers to push for prior lows 0345, whereas we need a close abv at least 10580/90 to stabilize ( st resist 0527/0550/0565)
Note the DXY did push to a new high before London open but the divergence Cable and euro bounced and DXY is back below 103.90s.
SPX dropping to Support zone pre US open. Hold or break will be key for risk on/off.
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Market Preview for Week Commencing May 9th 2022
Main News events
Tuesday Australian Retail Sales
Wednesday UK GDP * US CPI
Thursday NZ Inflation forecast
General market views.
Interest rate and inflation driven environment now, and about time too.
However, after a slew of Central Bank rate increases last week, we will find out this week if we have seen those priced in or if the FX and stock market moves have over reacted slightly for now.
Maybe as is often the case, markets have stretched to a point where they will come back into the ranges for now, and so we need to ask the question, quietly, “have we seen the peak or near the peaks for the next few weeks”
Be open to the possibility of the US dollar dropping slightly or at least not breaking higher for now, stocks may rise, and retrace more than traders might expect.
If that is not the case, we will soon know and can adjust our views to trade on the strong side of the market.
For this weekend review I want to look at the chart of the GBPUSD, Cable.
All this year the GBP has been dropping hard and fast.
We have a possible support zone nearby. Can we retrace up towards the 50% level?
For this to happen, we need USD to weaken, EURUSD to rise, and EURGBP to drop back from its 8600 resistance area.
The BoE raised rates by only 0.25% compared to the US rise of 0.5%, this caused a further sell off in Cable. At some point voices will be heard to say that a weak Pound is a cause of inflation,
and the snap back up may cause traders some severe whiplash, possible to see 1.26/27/maybe 1.28 area?
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Friday May 6th 2022
Pre NFP notes.
Looking at the EURUSD today.
Made new low of the week this morning and was picked up strongly just ahead of the Yearly Support2 pivot level.
The Bund action suggests we should consider EURUSD to be a Buy on Dips for now.
Preferred levels to buy after the news is 1.0530 and if stretched to 1.0510 this level offers the better risk to reward.
targets on the upside are 1.0610 to 1.0620.
A break and strong hourly closes and day close in the 1.0600s suggests potential for 1.0700 to 1.0800 in the course of the rest of the month.
Keep it tight and trade to trade another day.
6edges 