<span style="text-decoration: underline;">1.</span><b><span style="text-decoration: underline;"> INTRODUCTION:</span></b>

What a week that was…the lunatics in the asylum have agreed a short-term solution to re-open the U.S. government and lift the debt ceiling. The interim solution gives us all a 90-day or so break from the continuing theatrics until the first of the delayed deadlines re-emerges.

From a trading perspective, I have simply not been involved, as I have basically remained on the sidelines in cash $$$. So, you could take either of the following views; firstly, that I have been either a goody two-shoes by staying on the side ignoring the daily chop fest, or, secondly, I am a chicken not to get involved. In my defence, not that I think I need one, but if I did, I have said this on many, many occasions in the past. Trading is hard enough at the best of times. Why take on additional stress, if you know that the market is in a period of uncertainty and that increased volatility will be prevalent.

Moving on, over the past 48 hours or so I have been scouting around charts looking for possible entry levels across not just the U.S. majors but also some of the commodity cross-rate pairs.

<b><span style="text-decoration: underline;">2. THE VIEW FROM MY TRADING DESK:</span></b>
<p align="center"><b><span style="text-decoration: underline;">THE USD IS UNDER PRESSURE AND I BELIEVE I HAVE A COUPLE OF GREAT TRADE SET UPS</span></b></p>
Last Wednesday evening / Thursday after the votes were cast in Washington the USD took an initial hit as predicted. But the buy on the rumour sell on the news move that looked to be in the making was stopped dead in its tracks. The Chinese rating agency, Dagong Global, downgraded the U.S. Sovereign Debt to A- from A. This action by a ratings agency in the country, which is and has been for sometime the largest holder of U.S. debt, did not go unnoticed in the Fx markets. It was largely ignored by media such as CNBC and CNN, who spent the most of Thursday interviewing the little tin Gods from the hill.

The focus of U.S. media was as always inwards, looking for “pats on the back”. Frankly, I would be s**t scared of what the International community thinks for once with regards to how the alleged “greatest country on earth” could be hijacked by about 40 or so politicians out of touch with the hard facts of living.

I see continued USD weakness, emanating from a number of fronts.
<ol>
	<li>The ratings agencies downgrade. Not just the Chinese agency down grade but also the S&amp;P negative outlook. Moody’s claims no adjustment for 2 years. Quite frankly how an agency can say this beggars belief. Do they not have memories from 2008? Quite unbelievable and totally irresponsible.</li>
	<li>The fact that tapering now looks to be so far in the distance, I am thinking it will take a miracle if it were to happen in the first half of 2014. There is no way the FED can rock the boat. We have continued uncertainty, as the peace will only last about 90 days before the circus comes back to town. This will keep the FED intervening buying bonds etc.</li>
	<li>Who knows exactly what damage  the Government shutdown caused economically to the U.S. There are figures being quoted by some economists stating that 0.6% off GDP for Q4 2013. This type of talk will keep the USD weak. The economic data that was not published during the shutdown starts to be released this week, but I do not think that we can trust the data 100% and we will require a couple of months to get back into the routine. For this reason this will add uncertainty in my opinion and uncertainty usually manifests itself as sell the USD.</li>
</ol>
My two USD trades are short the USD and involve the EUR/USD and the GBP/USD.

Firstly, the EUR/USD: This pair has defied all the critics and even gravity over the past couple of years. Despite continued calls, many of them from myself that the EUR/USD should be trading nearer to parity. It has flirted with sub 1.2000 in its darkest hours but bounced back into the 1.30’s.

The statements that the U.S. economy is out of the woods, mean little to most people given the events of the past two/three weeks. The resilience of the single currency has therefore got to be noticed and applauded. Whilst the strengthening of the Euro is bad news for European exporters, I see it winning out in the currency games against the U.S. in the short to medium term of the next 3-6 months.

On the Monthly chart below, you can see that whilst we are still in a massive downtrend move, the EUR/USD can pull higher quite some way without touching the down sloping trend lines.
<p align="center"><a href="http://www.thepipaccumulator.com/blog/wp-content/uploads/2013/10/EURUSD-MONTHLY-19102013.png"><img class="aligncenter size-large wp-image-2026" alt="EURUSD MONTHLY 19102013" src="http://www.thepipaccumulator.com/blog/wp-content/uploads/2013/10/EURUSD-MONTHLY-19102013-1024x516.png" width="1024" height="516" /></a></p>
With continued USD weakness there should at least be a test of the 50% retracement of the last big move of 1.6007 to 1.1659, which comes in around 1.3881. Trend line resistance enters around 1.4000. This is where I see a test in a couple of months or so.

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<p align="center"><b>TRADE IDEA:
</b><b>EUR/USD
</b><b>Long at: 1.3625
</b><b>Stop Loss: 1.3525
</b><b>Initial Target: 1.3880</b></p>
Secondly, GBP/USD: Cable has been extremely strong of late as a result of continuing good economic data from the UK. Whilst we had a big rejection last week just below 1.6200, if momentum surpasses this figure in the next few days, there could be a huge move in the pipeline.

From the chart below, the initial key level for me after breaking 1.6260 is 1.6385 the 38% retracement of the large downside move from 2.1125 to 1.3484. I am also interested in the 100% retracement of the last big move that can be seen on the second Fibonacci chart at 1.6735.
<p align="center"><b><a href="http://www.thepipaccumulator.com/blog/wp-content/uploads/2013/10/GBPUSD-MONTHLY-19102013.png"><img class="aligncenter size-large wp-image-2027" alt="GBPUSD MONTHLY 19102013" src="http://www.thepipaccumulator.com/blog/wp-content/uploads/2013/10/GBPUSD-MONTHLY-19102013-1024x516.png" width="1024" height="516" /></a></b></p>
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<p align="center"><b>TRADE IDEA:
</b><b>GBP/USD
</b><b>Long at: 1.6120
</b><b>Stop Loss: 1.6020
</b><b>Initial Target: 1.6730</b></p>
<p style="text-align: left;" align="center">Do not expect these moves detailed above to happen overnight. There will be pushes and pulls in both pairs in both directions, but I am confident that the underlying move will be short the USD.</p>
You will notice that both of the above trade ideas are based upon a pullback entry. There will be some profit taking first from traders who have followed these pairs higher. In addition, there will be a period of consolidation for a few days at least. As you aware, trend line break outs need to be tested and verified before momentum moves are resumed.

I will not chase trades…

I need to grab an entry that offers a better risk.<b><span style="text-decoration: underline;">
</span></b>

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<b><span style="text-decoration: underline;">3. MY CURRENT LIVE TRADES:</span></b>

I am currently not in any live trades.

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<b><span style="text-decoration: underline;">4. POTENTIAL TRADES ON MY RADAR:</span></b>

Here are my plans and strategy: -

Over the past two weeks or so I have been writing and tweeting about the commodity cross-rate pairs quite a lot; EUR/AUD, GBP/AUD, EUR/NZD, GBP/NZD, EUR/CAD and GBP/CAD. Prior to the shutdown, I had a reasonable run with these pairs and I think that further opportunities lie ahead. These pairs are heavily influenced by the “risk-on” “risk off” behavior of the market, they are less liquid than the USD majors so you must exercise caution when placing trades. Assess your risk; know your limits before entering a trade.

The CAD has not been strengthening or weakening much over the past few weeks. It has been trading in a range of 1.0260 to 1.0420. This has kept the cross pairs of the EUR/CAD and GBP/CAD well bid. The EUR/CAD is close to an annual breakout level of 1.4372, and the GBP/CAD is on the cusp of a major move. At the same time given that the USD/CAD has held up so well I am bullish on this pair, but, at the same time, I am asking “Do I really want to buy the USD?”

Below, I show charts on the EUR/CAD and GBP/CAD showing the levels that interest me plus my target entries, stops and limit objectives should these trades activate. For the three of the CAD trades listed, I have corresponding buy orders with my broker. <b> </b>
<p align="center"><b> </b></p>
<p align="center"><b><a href="http://www.thepipaccumulator.com/blog/wp-content/uploads/2013/10/EURCAD-MONTHLY-19102013.png"><img class="aligncenter size-large wp-image-2023" alt="EURCAD MONTHLY 19102013" src="http://www.thepipaccumulator.com/blog/wp-content/uploads/2013/10/EURCAD-MONTHLY-19102013-1024x516.png" width="1024" height="516" /></a></b></p>
<p align="center"><b> <a href="http://www.thepipaccumulator.com/blog/wp-content/uploads/2013/10/GBPCAD-MONTHLY-19102013.png"><img class="aligncenter size-large wp-image-2024" alt="GBPCAD MONTHLY 19102013" src="http://www.thepipaccumulator.com/blog/wp-content/uploads/2013/10/GBPCAD-MONTHLY-19102013-1024x516.png" width="1024" height="516" /></a></b></p>
<p align="center"><b></b><b> </b></p>
<p align="center"><b>USD/CAD
</b><b>Long at: 1.0260
</b><b>Stop Loss: 1.0180
</b><b>Initial Target: 1.0680</b></p>
<p align="center"><b> </b></p>
<p align="center"><b>EUR/CAD
</b><b>Long at: 1.3950
</b><b>Stop Loss: 1.3840
Initial Target: 1.4800</b></p>
<p align="center"><b> </b></p>
<p align="center"><b>GBP/USD
</b><b>Long at: 1.6440
</b><b>Stop Loss: 1.6320
</b><b>Initial Target: 1.8165</b><b> </b></p>
The EUR/AUD and GBP/AUD, I am watching but not as ready to make the plunge yet. I am waiting for my price entries to trigger and I need reasonable pullbacks. If the pullbacks do not happen, I will not chase, but re-assess the trade opportunity. Additionally, the price action in equities needs to be confirmed for me to trade these pairs. I am however, tracking the GBP/NZD, and I do see a set up that interests me with this pair.

The weekly chart below, whilst it shows three down weeks in the past three weeks,, there has been a recovery in place this past week and I am thinking along the following lines. Longer term, I still have my 2013/14 super trade in mind. A break of 2.0000 sets up a possible move to 2.1000 and well beyond even 2.2500.
<p align="center"><b> </b><b> <a href="http://www.thepipaccumulator.com/blog/wp-content/uploads/2013/10/GBPNZD-WEEKLY-CHART-19102013.png"><img class="aligncenter size-large wp-image-2025" alt="GBPNZD WEEKLY CHART 19102013" src="http://www.thepipaccumulator.com/blog/wp-content/uploads/2013/10/GBPNZD-WEEKLY-CHART-19102013-1024x516.png" width="1024" height="516" /></a></b></p>
<p align="center"><b> </b></p>
<p align="center"><b>GBP/NZD
</b><b>Long at: 1.9125
</b><b>Stop Loss: 1.8950
</b><b>Initial Target: 1.9400</b></p>
<p align="center"><b></b><b></b><b> </b></p>
The EUR/GBP is also interesting me. A break below 0.8425 should trigger stops and set up a move lower. If you track the daily chart, we had a sell-off, then a reversal back to the 38.2% Fibonacci level. Then we are selling off again. In my opinion a move below 0.8400 sets up a move to 0.8000 in the very long term
<p align="center"><b> </b></p>
<p align="center"><b>EUR/GBP
</b><b>Short at: 0.8425
</b><b>Stop Loss: 0.8485
</b><b>Initial Target: 0.8280</b><b> </b></p>
With regards to the AUD/USD and NZD/USD. I think that there are levels that will be too much for me to resist a short trade at. They are a long, long way from where these pairs trade at the moment. Any trades, would be very small positions with very long objectives. These set ups are placed with my broker, but I doubt that they will initiate for weeks…maybe not at all.

I have been taking a whipping on these pairs of late in the daily chop fest trying to top pick a level. With equities driving higher, I think these pairs will stay supported most of the time and continue to push higher.
<p align="center"><b>AUD/USD
</b><b>Short at: 0.9835
</b><b>Stop Loss: 0.9920
</b><b>Initial Target: 0.9400</b><b> </b></p>
<p align="center"><b>NZD/USD
</b><b>Short at: 0.8680
</b><b>Stop Loss: 0.8850
</b><b>Initial Target: 0.8000</b></p>
<p align="center"><b><span style="text-decoration: underline;"> </span></b></p>
<b><span style="text-decoration: underline;">5. LOOKING FORWARD…THE KEY SUPPORT &amp; RESISTANCE LEVELS WITH THE USD MAJORS:</span></b>

<b>EUR/USD: </b>Closing Price 1.3685. This pair closed very close to its highs of the week, which were at 1.3704. This was a bullish end to the week and quite frankly it looks like the USD could continue to get smashed next week. Non-Farm payrolls delayed from last month will be released on Tuesday. Whilst it is difficult to analyse too much on this data, it will be a market mover. This could be the news that drives the EUR/USD towards 1.4000.  Support for the EUR/USD will be good around 1.3625 and then again 1.3570.

<b>GBP/USD: Closing Price 1.6143. </b>In the past week this pair has moved higher by about 200 pips. Data from the UK continues to improve and the pair looks bullish. We are consolidating its move higher at the moment. 1.6200 has been a tough nut to crack on the move higher. I do feel that if 1.6200 and then 1.6260 are taken as resistance levels, it could spark a move towards 1.6735 and possibly beyond. It all depends on the USD. 1.6120 and then 1.6000 offer good support should this pair pullback.

<b>AUD/USD: Closing Price 0.9674</b>. This pair was the biggest gainer against the USD this past 7 days. As long as equities are supported and continue to drive higher, the AUD will not turn lower. The next level of resistance is 0.9750. Support is good at 0.9585 and we will need to break lower than this level for the pair to turn bearish.

<b>NZD/USD: Closing Price 0.8495</b>.  Resistance at 0.8520 has kept this pair capped for the past few days. Any move above 0.8550 and I think we could squeeze very quickly. Support is good at 0.8440 and then 0.8380.

<b>USD/CAD: Closing Price 1.0285.  </b>This pair has held up very well during the last sessions in which the USD was being sold quite aggressively. Support is very good at 1.0260-1.0270. Resistance is very good at 1.0360 then 1.0420.

<b>USD/CHF: Closing Price 0.9015. </b>0.8980 held fantastically well as support last week. I see a range from 0.8980 to 0.9090 that needs to be broken.

<b>USD/JPY: Closing Price 97.73. </b>This pair is hard for me to follow. The JPY is strengthening causing this pair to move lower. On the other hand equities continue to move up and at some point the JPY will play catch up. I am sidelined with this pair at the moment. The range that I see on the charts is 97.70 to 98.30.

<b><span style="text-decoration: underline;"> </span></b>

<b><span style="text-decoration: underline;">6. MAJOR FOREX NEWS THIS WEEK THAT INTERESTS ME:</span></b>

SUNDAY: N/A

MONDAY: USD – Existing Home Sales.

TUESDAY: CAD – Core Retail Sales.
TUESDAY: USD – Non-Farm Employment Change and Unemployment Rate.
TUESDAY: AUD – CPi.

WEDNESDAY: CAD – BOC Rate Statement and Press Conference.
WEDNESDAY: NZD – Trade Balance.
WEDNESDAY: CNY – HSBC Flash Manufacturing PMi.

THURSDAY: EUR – French and German Flash Manufacturing PMi.
THURSDAY: USD – New Home Sales.
THURSDAY: GBP – Carney speaks………..

FRIDAY: EUR – German IFO Business Climate.
FRIDAY: GBP – Preliminary GDP.

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<b><span style="text-decoration: underline;">7. FINAL THOUGHTS:</span></b>

For those of you who are news junkies, over the next few weeks, the missing data from the U.S. shutdown should be hitting us hard and fast. A note of caution, old data and new data will sometimes overlap and cause uncertainty, which will increase market volatility.

As always, trade mean and trade lean inside the parameters of your trading plan.

I will update in the middle of the week with the Midweek Fx Fix, either Tuesday evening in Asia or Wednesday morning in the North American session.

Good luck and take care.

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Scott Pickering
The Pip Accumulator
Saturday October 19th 2013

FOLLOW ME AT:
Twitter: @pipaccumulator

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