23.11.2013

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

I must admit for a lot of the past week I have not been participating in the moves in the currency market. In fact, I think I tweeted on either Monday or Tuesday that it was “Boring, boring, boring”. At that point I thought enough was enough and I did other things. From last weeks blog, a whole list of my “Radar Trades” were not picked up by my broker for some reason still not known to me and frankly the broker involved has just done a modern day “Pontius Pilate” on the whole event.

Had these trades triggered, and I hope that some of you guys got into the trades,  the profits would have yielded  excellent results.
<p style="padding-left: 300px;"><strong>NZD/USD short: entry 0.8350: Closing Price: 0.8188  Profit: 162 pips</strong>
<strong>AUD/USD short: entry 0.9380: Closing Price: 0.9166  Profit: 214 pips        </strong>
<strong>USD/CAD long: entry 1.0420: Closing Price: 1.0512    Profit: 92 pips</strong>
<strong>GBP/AUD long: entry 1.7150: Closing Price: 1.7681    Profit: 531 pips</strong>
<strong>GBP/CAD long: entry 1.6800: Closing Price: 1.7055    Profit: 255 pips</strong></p>
The total profit on just one mini lot per trade could have been over $1,200.00 If a standard lot per trade was purchased the profit could have been over $12,000.00 (The profits would have been even greater had the trades closed yesterday morning (Friday) prior to the consolidations and pullbacks).

So as a result you can imagine I am a bit pissed off. I will not chase the market it is not in my trading plan / style and watching these pairs was painful, in particular, the “exotics”, as they exploded to the upside.

The volatility levels picked up Wednesday onwards with the FED minutes and Bernanke’s love fest with Janet Yellen was confirmed by his comments during the week.

Eurozone news that France is now one report away from officially being back in recession was expected, although in typical French style denied. Various additional sound-bytes came through from the Eurozone regarding “Negative Deposit rates”. However, the best for me was one of my favourite limelight seekers in the Eurozone, Austrian Central Bank Governor, Ewald Nowotny with his latest classic stating that inflation is anchored, but growth is basically weak...it’s deflation NOT inflation and deflation is like a cancer that is what the Eurozone is suffering from. Just look at Japan and all the measures taken by Abe to try once and for all to get rid. If Merkel and the ECB do not get a grip of matters and represent the whole single currency area the new Japan is on the way to Europe.

Finally, there is one very important notice for all my readers to be aware of. During the week I will also deliver introductory information on a new “Premium Service” that I am looking to introduce in 2014. This is something that I have always wanted to do and now with almost 100 blogs under my belt I think that the timing is right. I will provide some data during the week to subscribers directly via email.

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<b><span style="text-decoration: underline;">2. THE VIEW FROM MY TRADING DESK: </span></b>
<p style="text-align: center;"><b><span style="text-decoration: underline;"> </span></b><b><span style="text-decoration: underline;">THE COMMODITY CURRENCY DIVERGENCE CONTINUES</span></b></p>
In my blog of November 9<sup>th</sup> I wrote about EUR/USD short opportunities and highlighted issues with the commodity currencies as lead indicators, plus gold, copper and oil (The Holy Trinity). The “Trinity” are all falling, the commodity currencies that usually follow the S&amp;P index are falling at the same time that the S&amp;P is at new highs.

Is there something wrong with this overview picture?

You bet your ass there is something wrong…there is something big looming on the horizon.

I blogged last week stating that I believed all the smart money was leaving or had already left the equities markets. I am so certain of those comments last week. What makes me so certain?

Being in $$$ most of the week in the afternoons, in particular, I took to watching CNBC, there I admit it, I watched “Bull market TV”. You are not allowed on as a guest unless you are a strong overall buyer. That TV station has so many “Buy the Dips” guys its frightening what they will do and how they will react if / when the markets turn lower.

The factor that makes me so certain that the smart money is out and we are heading lower is a report that “Ma and Pa” investors are ready to join the equities Bull Run now!! Jesus, Mary and Joseph are they serious?

That's it…. as we know. Independent retail buys at the highs and sells at the lows. They lose money at both ends of the range.

Look at the pip moves lower in my lead indicator currencies (I will ignore the cross-rates even though their moves are stronger!): -
<p style="text-align: center;"><em>AUD/USD lower by: - over 200 pips.</em></p>
<p style="text-align: center;"><em>(I admit that comments by RBA Stevens stating that the RBA may directly intervene in the currency markets to weaken the AUD have helped)</em></p>
<p style="text-align: center;"><em>NZD/USD lower by: - about 150 pips.</em></p>
<p style="text-align: center;"><em>(Even though RBNZ Wheeler has openly stated that they may have to increase interest rates to stem the housing bubble move amongst other economic data)</em></p>
<p style="text-align: center;"><em>USD/CAD higher by: - about 55 pips.</em></p>
Look at GOLD. It is struggling to move back above $1250.00 and stay there. The next move is lower towards $1180.00. If that level does not hold and sellers really enter the market, it looks like sub $800.00 could be the resting place and probably a great place to maybe think of getting long if it should fall this far. I read on Thursday last week that Goldman Sachs is expecting Gold to fall throughout 2014.

Gold is / was an inflation hedge. Where is the inflation? Japan, USA and Europe are all deflation zones. The outlook for Gold is bad, from an Fx perspective this will add fuel to the USD bulls.

WTi - falling below $95.00, and looks to be struggling to move back above $95.00. This will add to USD strength.

Copper is in a downward spiral. Should it ever threaten a fall below $3.00, “The wheels will be off the bus” and this will produce a massive, massive lower move in equities and USD strength of unbelievable magnitude.

The commodity currencies are all influenced by Gold, Oil and Copper and this will only add power to the moves lower.

Finally, in addition should the USD gather major strength the factors below all increase the power and supply of the USD move, which will add even greater power to the commodity currencies moves as well.
<p align="center"><i>USA - Budget Limits.</i></p>
<p align="center"><i>USA - Sequestration agreement.</i></p>
<p align="center"><i>USA - The Affordable Healthcare Act (Obama care).</i></p>
<p align="center"><i>USA – Tapering / timing.</i></p>
<p align="center"><i>USA – Currency and Commodity divergences.</i></p>
<p align="center"><i>Eurozone – Deflation policies / EUR exchange rates</i></p>
<p align="center"><i>China - Banking issues / debt.</i></p>
<p align="center"><i>Japan - Abenomics, QE, JPY targets.</i></p>
<p align="center"><i>Emerging Markets – Effects of U.S. Monetary Policy.</i></p>
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<b><span style="text-decoration: underline;">3. MY CURRENT LIVE TRADES:</span></b>

I currently have three live trades.

<b><span style="text-decoration: underline;"> </span></b>
<p align="center"><b>1. AUD/USD
</b><b>Short
</b><b>Entry / Cost Average: 0.9166
</b><b>Position Size: 20%
</b><b>Closing Price: 0.9166
</b><b>Stop: 0.9220
</b><b>Limit: 0.8500
</b><b>Present Position: - 8 pips</b><b> </b></p>
<p align="center"><b>2. USD/CHF
</b><b>Long
</b><b>Entry / Cost Average: 0.9101
</b><b>Position Size: 40%
</b><b>Closing Price: 0.9063
</b><b>Stop: 0.9042
</b><b>Limit: 0.9370
</b><b>Present Position - 37 pips</b><b> </b></p>
<p align="center"><b>3. NZD/USD
</b><b>Short
</b><b>Entry / Cost Average: 0.8157
</b><b>Position Size: 20%
</b><b>Closing Price: 0.8188
</b><b>Stop: 0.8210
</b><b>Limit: 0.7900
</b><b>Present Position - 41 pips</b></p>
<b><span style="text-decoration: underline;">4. TRADES THAT ARE ON MY RADAR:</span></b>

I am looking at the exotic crosses once again: -
<p align="center"><strong>EUR/CAD</strong>
<strong>GBP/CAD</strong>
<strong>EUR/AUD</strong>
<strong>GBP/AUD</strong>
<strong>GBP/NZD</strong>
<strong>EUR/NZD</strong></p>
These pairs are now consolidating after big moves to the upside, so I will look at these next week to enter long after quite large pullbacks. I still see that the continuation moves have some way to go and there are thousands of upside pips still available. I am not 100% confirmed on entry levels yet, but I list below my initial thoughts that I am 90% certain on. Some of my entries are ambitious, but in my mind offer a great risk / return value.

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<p style="text-align: center;"><strong><span style="text-decoration: underline;">CURRENCY PAIR </span>              <span style="text-decoration: underline;">ENTRY</span>                       <span style="text-decoration: underline;">TARGET</span></strong></p>
<p style="text-align: center;"><strong> EUR/CAD                              1.4165                       1.5500</strong>
<strong>GBP/CAD                              1.6960                       1.8000</strong>
<strong>EUR/AUD                              1.4600                       1.5500</strong>
<strong>GBP/AUD                              1.7380                       2.0180</strong>
<strong>GBP/NZD                              1.9600                       2.2450</strong>
<strong>EUR/NZD                              1.6440                       1.7035</strong></p>
All of these pairs are very volatile with huge daily ATR’s. I would recommend that if you decide to take trades with these pairs to take smaller positions with very wide stop losses to accommodate the increased levels of volatility.

My point to get across here is that I am waiting for the trades to come to me. Not all may activate but the entry level and the risk associated with these trades is very important.

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<b><span style="text-decoration: underline;">5. LOOKING FORWARD…THE KEY SUPPORT &amp; RESISTANCE LEVELS WITH THE USD MAJORS:</span></b>

<b>EUR/USD: Closing Price 1.3557.</b>   This pair has closed just below critical line in the sand resistance at 1.3580. Should it break through this level, I think we can say hello to 1.3700. The Eurozone periphery would go mental should this currency pair move higher. Time will tell, and, who knows what will happen. I think we have to break lower through 1.3450 to have the bears in control again.

<b>GBP/USD: Closing Price 1.6223. </b>GBP cross rates have been having a party of their own this past 7 days. With their help the GBP/USD have moved over 100 pips higher in the past week. The performances / moves higher in the GBP/JPY, GBP/CAD, GBP/AUD and GBP/ NZD should not go unnoticed. There should be some consolidation early next week, but it is cable that I am writing about and it does take on a life of its own so do not be surprised to see 1.6500 soon if the present momentum fires up again. I do not see the bears back in the driving seat unless there is a break lower through 1.6050.

<b>AUD/USD: Closing Price 0.9166</b>. A 200 pip move lower in the week. It looks a bit oversold and yesterday’s lack of movement in the North American session should have helped work out some of the oversold measurements. The RBA issued a warning that it would directly intervene in the currency market to weaken the AUD if it deemed that action necessary…watch this space. Upside resistance lies at 0.9310 and support is really at 0.9040 after we go lower through 0.9150.

<b>NZD/USD: Closing Price 0.8188</b>.  We have just witnessed about a 150 pip drop in this pair over the past 7 days.  It pulled back from the brink yesterday (Friday) after reaching 0.8125 and I will be looking to add to my existing short Sunday night / Monday morning. Support is big at 0.8100 and resistance good at 0.8250.

<b>USD/CAD: Closing Price 1.0512.  </b>Finally, it has broken out. If this pair gets through 1.0620 we are off…up, up and away much higher to where the air is thin. Potentially a 1.1000 to 1.1200 move could be in the making. Support is now good at 1.0511 and below that 1.0450. I will be looking to pick up at these lower levels if possible.

<b>USD/CHF: Closing Price 0.9063</b>. I am currently long this pair and at the moment not too concerned with my small loss position, but should the EUR/USD break out to the long side, I will probably close this trade and take my loss. I see the bulls back in control once we scale through 0.9150. Support is good at 0.9050.

<b>USD/JPY: Closing Price 101.24. </b> We are breaking higher, finally in the USD/JPY. I do not believe this move - just as I get out of my long off it goes!! I still find it a little difficult to read this pair. Support is good at 100.60. On the long side resistance looks to be minor until we hit 102.00.

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

SUNDAY: N/A

MONDAY: N/A

TUESDAY: GBP – Inflation Report Hearings.
TUESDAY: USD – Consumer Confidence.
TUESDAY: NZD – Trade Balance

WEDNESDAY: N/A

THURSDAY: N/A

FRIDAY: CAD – GDP m/m.

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

A bit of a thin week for me trading around news events this week. I also think that volumes will start falling off as we head towards December. Without doubt after the Non-Farm payrolls data, it may be the end of 2013 trading for me, as I hate thin trading conditions.

Smaller and thinner trading volumes create wilder moves based on nothing that can cost you money so be careful.

As always, trade smaller with wider stops to establish your position, only then do you add in, but it should be in line with your trading plan. Do not over-stretch yourself and let the trades come to you. Price your entries and establish your risk prior to taking a trade. This is a sound practice and it works

This week I will release initial information regarding the “Premium” service that I am looking to introduce in 2014.

Good luck and take care.

Scott Pickering
The Pip Accumulator
Saturday November 23rd 2013

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Twitter: @pipaccumulator
Google+/scottpickering

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