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

I wanted to open the blog this week by re-iterating “the words of caution” that I mentioned at the end of last weeks blog. Yes, the AUD did catch a bid and squeeze.

<i>“There are lots of news items this week - that means lots of opportunities. </i><i>I want to single out the AUD. If you trade the AUD there are lots of market moving news events that could yield huge profit opportunities. Be careful though as I am conscious that the AUD/USD could catch a bid if there is positive news and we could see a squeeze”</i>

Moving on.

Personally I have found it tough going trading this past week. Not that I have had multiple trades going just that it has been slow moving at times and then ultra volatile and I have been caught on the wrong side of the market on a couple of occasions…painful. When I balance out the week I am below breakeven so I am obviously disappointed at losing a little money, but more I am annoyed with myself as I know full well what this type of slow market in the summer can do.

Looking back at the news over the past few days, there is a major announcement to make: -

“<b><span style="text-decoration: underline;">ALL</span></b> in the world is now good get over yourself”

The financial data from the UK, USA, the Eurozone and China is improving and to all those living with austerity, lower wages as a result of government austerity plans, no jobs, the prospect of working until you are 85 to pay for austerity and cover your retirement because your pension fund has been depleted and/or benefits severely reduced….should …as the Eagles once sang “Get over it”.

What a load of crap. We are bouncing on or off the bottom. Economies do not just turn. The best signs in my eyes to show that the feel good factor is returning, is an improving housing market, an improving labour market with the jobless queues/lines reducing and a definite increase in consumer spending month on month for at least three months.
<ul>
	<li>The UK is showing improvements in housing, but I am not yet convinced on housing and unemployment.</li>
	<li>The Eurozone is just a disaster. It is split in two and the poor side is still suffering. One size fits all does NOT work and although there are signs of improvement in certain countries housing and unemployment are pitiful.</li>
	<li>The U.S. - the last Non Farm Payroll numbers were poor, housing and consumer spending still weak.</li>
	<li>China still has house price issues and frankly I take most Chinese data with a pinch of salt. If consumers around the world aren’t spending, how on this planet can Chinese numbers be so good?</li>
</ul>
As usual, TV commentators, in particular, CNBC and their guest financial analysts are way ahead of themselves, remember broadcasting good news whether accurate or not sells advertising space.

I am certainly not getting directional for a while yet. I still think that Japan (Abe and Kuroda) and Bernake will have the last words on the matter. As always, I believe the FED will have the last laugh so to speak, and, with the Yen and Nikkei 225 in such a volatile mood do not rule out intervention of a more direct nature by the BOJ to weaken the Yen.

&nbsp;

<b><span style="text-decoration: underline;">2. MOVE OVER KING DOLLAR….IT’S KING YEN NOW!</span></b>

In the past week as a trader you must have noticed that usual correlations in the market have gone a little astray. One example of this is the way at times the EUR/USD and USD/CAD have been moving in tandem rather than opposite.

The big factor that has come into being though is that the EUR/USD and USD/JPY have been acting the same as the EUR/USD and the USD/CHF. The inverse relationship of the CHF is now the same with the JPY with the USD. Yen volatility has been in full swing this past week as soon as the Nikkei 225 sells off so does the USD/JPY and vice-versa should the Nikkei 225 move upwards. Basically, the Fx market has been in yawn mode for a while, the only rush periods have been around news items from the RBA, China data releases and the biggest one of the week was Carney’s first major press outing as BOE Governor. In his inflation report, which, was more upbeat than predicted the GBP/USD rallied about 300 pips in short order.

Apart from the above, all the movements in the market recently have been initiated by the USD/JPY it has been responsible for pulling the USD one way or the other.

Why?

My theory is that, we are in the summer and it’s generally a boring and range-bound period anyway, but, in addition, one of the biggest potential market moving events is in the pipeline and because no one knows what and how it will affect both the equity and forex markets I believe this had added to the range bound position we find ourselves dealing with. I am of course referring to “Tapering”.

The fact that the Yen / Nikkei 225 has been like a yo-yo it has kept the EUR/USD somewhat in check, and, if this pair does not move the markets are understandably quiet.

The commodity currencies have been flexing a little, but to me it’s more a case that these extensions may be seen to be false breakouts. I was being extremely cautious with my AUD/USD, NZD/USD and USD/CAD trades and I was out of the money last week. We have to be really careful

So what about forex trading: -

I see no difference in the way the Fx market will operate for the next couple of weeks so take note. I am of the opinion that the JPY is about to head a lot lower as well. My blog dated 25<sup>th</sup> July refers in detail to this point. If this happens, given the fact that there is now a pretty convincing inverted relationship in play, the EUR/USD could break higher. If it breaks above 1.3415, there will be a squeeze higher, this will get the markets moving.

The political pressure on Abe in Japan is massive and the uncertainty is being reflected in the Nikkei 225, which is, in turn, putting pressure on the USD/JPY and the other Yen crosses. Keeping with my policy of dealing with the major pairs if the Nikkei 225 implodes the USD/JPY is capable of falling to 94.00-94.50 in my opinion fairly quickly and personally I will be looking at these levels as an opportunity to buy and go long.

&nbsp;

<b></b><b><span style="text-decoration: underline;">3. LONG TERM TRADES:</span></b>

I have no longer-term trades in play at the moment. I am looking to set up longer-term trades but I need to see a true directional market first for me to be convinced.

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

<b></b><b><span style="text-decoration: underline;">4. LOOKING FORWARD…THE KEY SUPPORT &amp; RESISTANCE LEVELS WITH THE USD MAJORS:</span></b>

<b>EUR/USD: Closing Price 1.3339. </b>This pair seems to have been in a trading range of 1.3300 to 1.3415 for quite some time. We closed the week yesterday below a key trend line of 1.3350 and whilst technically this could be viewed as EUR negative, I am not so certain. The USD/JPY will decide as long as trading volumes remain thin. Therefore, we need to see a break of the range aforementioned to get a direction.

<b>GBP/USD: Closing Price 1.5497. </b> After Carney’s debut Inflation Report last week this pair has rallied and not really pulled back. This pair was held back by the following: key trend line resistance, the 200 day moving average and 61.8% fib. All of these came into play around 1.5550. Looking forward, this pair needs to fall below 1.5400 before it gets bearish and if it breaks 1.5550, it will be going a lot higher.<b> </b>

<b>AUD/USD: Closing Price 0.9199. </b>This pair has pulled off its lows in style this past week moving about 300 pips in total. We ended the week on a key resistance level of 0.9200. It proved difficult to pass through yesterday and looking ahead I see the bearish trend resuming if the AUD/USD breaks below 0.9100 and it will squeeze should it break 0.9250<b>.</b>

<b>NZD/USD: Closing Price 0.8035</b>.  We ended the week just below key resistance of 0.8050. Support is big and should it break below through 0.7990 a bearish tone will reappear

<b>USD/CAD: Closing Price 1.0285. </b>After pretty poor Employment statistics yesterday morning, this pair rallied off 1.0290 to 1.0345 or so only to give it all back before lunch. 1.0240 to 1.0350 is the range that interests me with this pair.

<b>USD/CHF: Closing Price 0.9217. </b>Boring, boring, boring. I have found this pair to be a little boring. It is still inverse of the EUR/USD but it seems to be reacting with the JPY and it’s moves have been a little limited. I am looking at a trading range of 0.9150 to 0.9280.

<b>USD/JPY: Closing Price 96.22. </b>About 180 pips lower in the week. I am looking at 97.00 being stiff resistance and until this is broken any move higher will not be bullish in my opinion unless we break through 97.00. At this level I think sentiment changes to bullish. 95.50 should offer a little support on any move lower, but I do think if we break down through this level we are heading a lot lower.

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

<b><span style="text-decoration: underline;">5. MAJOR FOREX NEWS THIS WEEK THAT INTERESTS ME:</span></b>

SUNDAY: JPY – GDP.

TUESDAY: GBP – CPi.
TUESDAY: EUR – ZEW Report
TUESDAY: USD – Core Retail Sales and Retail Sales.
TUESDAY: NZD – Retail Sales.

WEDNESDAY: GBP – Unemployment Numbers and Interest Rate and Asset Puchase Facility Votes

THURSDAY: GBP – Retail Sales

<b><span style="text-decoration: underline;">6. FINAL THOUGHTS:</span></b>

I have mentioned on several occasions in this week’s blog that the USD/JPY currency pair has been leading and controlling. Be careful watch it, follow it and be careful of wild swings, in particular in the Asian sessions trading will be thin.

As always trade within your account limitations and use your trade plan effectively.

Good luck and take care.

&nbsp;

Scott Pickering
The Pip Accumulator
Saturday August 10th 2013

FOLLOW ME AT:
Twitter: @pipaccumulator
StockTwits: www.stocktwits.com/thepipaccumulator

&nbsp;

&nbsp;