01.02.2014<b> </b>

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

It was a very volatile past 7 days, I have stuff that I want to add to the PREMIUM SERVICE library of useful training tools but I just have not had the time to physically take a few hours. I really thought that we were going to have a quiet week with only the FED and RBNZ creating any meaningful volatility. The Emerging Markets crisis certainly put my thoughts in the bin, as soon as Turkey followed by South Africa grabbed the headlines with rate hikes.

The FED stood firm on tapering and now I think that the lines have been drawn. I will write my thoughts and how I view the EUR/USD later in this blog.

As PREMIUM SERVICE subscribers would already know, January was a great income month from my forex trade set-ups. Profitable trades certainly out-numbered losing trades.<b> </b>
<p align="center"><b>RADAR TRADES:
</b><b>Total Trades: 23
</b><b>Profitable Trades: 17 (65%)
</b><b>Losing Trades: 6 (35%)</b></p>
<p align="center"><b> </b><b>FLASH TRADES:
</b><b>Total Trades: 25
</b><b style="line-height: 1.5em;">Profitable Trades: 24 (96%)
</b><b style="line-height: 1.5em;">Losing Trades: 1 (4%)</b></p>
<p align="center"><b> </b><b>TOTAL JANUARY 2014 PERFORMANCE:
</b><b>Total Trades: 48
</b><b style="line-height: 1.5em;">Profitable Trades: 41 (83%)
</b><b style="line-height: 1.5em;">Losing Trades: 7 (17%)</b></p>
<p align="center">(The summary above does not include any trades opened in January that have not yet been closed)</p>
There were some great scalping / pullback trades in the month (all charts later). If we can keep this performance for the year happy days!!
Realistically I usually look at a 70% / 30% split over an extended period as the average winning to losing trades. The key is to limit losses in financial terms.

January also saw the launch of my FUNDAMENTAL trades, based upon my macro level view of where I see world economic and political events drawing the forex market. I only expect to have a small number of trades in this category and I am hoping to let them run for months if possible.

I will be sending to all subscribers to the free “WEEKLY FX DRIVE-THRU” newsletter who have not yet upgraded to the PREMIUM SERVICE, a summary of the PREMIUM SERVICE performance to date. This will publish soon after this blog is posted.

&nbsp;

<b><span style="text-decoration: underline;">2. THE VIEW FROM MY TRADING DESK:</span></b>
<p align="center"><b>THE FED versus THE ECB
“THE FED STANDS FIRM / ECB WOULD BE LOOKING FOR A CAN TO KICK”</b></p>
Last year when Ben Bernanke announced (surprising the market with the timing) that tapering was going to start at $10 Billion per month and that the FED would be reducing bond purchases by this amount most months until it reaches zero, it was a huge change in FED monetary policy.

I do not believe until maybe this week that the markets actually fully understood what this meant medium to long term looking forward. Equity market traders having been supported by an overly active FED policy for a number of years through QE simply know nothing but “Buy the dip” when it comes to market participation. However now, as Dylan sings “The Times They are a Changing”

There was a lot of chatter pre FOMC that the “Emerging Markets” issues may cause the FED to postpone a cut this meeting. Not a whisper about Emerging Markets in the statement affecting the decision or being taken into any serious consideration. The FED stood firm.

This opens up a topic that I have referred to a number of times over the past 12 months….Where does this take the EUR/USD?
<p align="center"><a href="https://weeklyfxdrivethru.com/wp-content/uploads/2014/01/EURUSD-MONTHLY-01.022014.png"><img class="aligncenter size-large wp-image-3165" alt="EURUSD MONTHLY 01.022014" src="https://weeklyfxdrivethru.com/wp-content/uploads/2014/01/EURUSD-MONTHLY-01.022014-1024x516.png" width="1024" height="516" /></a></p>
The chart above is a long-term (Monthly) chart. As you can see we are in a descending wedge and recently we tested the upper down sloping trend line. Where are we heading next?

A confirmed breakdown through 1.3500 certainly opens up a much larger downside opportunity. I am focused initially on the 61.8% Fibonacci retracement level of 1.3320 from the big 1.1659 to 1.6007 move. After this I think that levels of sub 1.3000 appear to be mentioned over and over again (1.2650 is favourite one of my own!!). I really find it hard to see the EUR/USD drop below 1.3000 and stay there.

At the back of my mind though, the following haunts me. I look at the FED and the way that it has tackled matters since the financial crisis of 2007-2008 and directly compare it to the ECB way of managing matters. It is a chalk and cheese matter.

The FED is proactive, highly communicative and tries through forward guidance to give markets stability by taking away uncertainty.

On the other side of the Atlantic Ocean, Jean-Claude Trichet, followed by Mario Draghi operate an ECB driven by reactive policies, most times as a result of the market calling it a crisis.

A typical example of this was the last ECB rate cut. It followed deflation data (which by the way still exists), when within 48 hours Draghi cut ECB interest rates. It was a total surprise to most people and a knee-jerk reaction. At the ensuing press conference the cut was also described as a measure being taken to help periphery countries.

What good did it do?

The EUR/USD aggressively sold off about 150 pips and bounced back to below levels we are at now. Basically, it did nothing.

This is the difference between the FED and the ECB.
<p align="center"><strong><span style="font-size: 14px;"><i><span style="text-decoration: underline;">“The FED does and the ECB does not”.</span></i></span></strong></p>
This last comment may be a little unfair but in the Eurozone the battle to resurrect everything back to “normal” is much, much harder because of the number of countries involved, the ego’s of the personalities involved and the basic mistrust that exists between some countries and politicians.

The ECB still has many issues to fix: -
<p align="center"><strong>UNEMPLOYMENT (in particular youth unemployment)</strong>
<strong>DEFLATION</strong>
<strong>BANK LIQUIDITY (yet another stress test is being planned)</strong>
<strong>BANKING STRENGTH (The long awaited banking union)</strong>
<strong><span style="line-height: 1.5em;">PERIPHERY GROWTH
</span><span style="line-height: 1.5em;">RESTORE MARKET CONFIDENCE IN HOUSING MARKETS</span></strong></p>
For too long they have been “Kicking cans down the road” and now that the U.S. is starting to bounce back and cut QE the differences in comparisons will become more evident.

The ECB needs a crisis to happen to force the issue. Many people are stating that full-blown QE is required to fix the Eurozone. I am not 100% sure this is accurate but a market moving definitive LTRO is needed to support the banks. Additionally, they need to be forced through an aggressive ECB rate policy to lend money to small business to create growth. We need another ECB crisis.

A crisis will add fuel to USD strength and drive the EUR/USD towards 1.3000 and possibly below.

Draghi, with Merkel (in Berlin) pulling his strings will procrastinate and say things are in-line with expectations. The backdrop is Germany has the chequebook and does not want the invoices to fix the Eurozone as well. I totally get it.

As a trader bring on a Eurozone crisis….

&nbsp;

<b><span style="text-decoration: underline;">3. LOOKING FORWARD…THE KEY SUPPORT &amp; RESISTANCE LEVELS WITH THE USD MAJORS:</span></b><b> </b>

<b>EUR/USD: Closing Price 1.3485.</b>  We ended the week closing below the key level of 1.3500. There are lots of high-level news items this coming week, in particular the ECB Interest Rate decision and Press Conference on Thursday and then on Friday U.S. Non-Farm payrolls. We could see a huge amount of volatility with this pair. Recent Draghi press conferences have apart from the rate-cut event, been in the main Euro supportive. Having written that I do believe that we are now thanks to the FED having a EUR/USD sentiment change, I therefore see more down side pressure on this pair. Bear in mind though; it will not be a straight down affair. We will push and pull one way then another stepping down towards 1.3000 in my opinion. For this immediate time the range to look at is support at 1.3450 initially, below there 1.3400 and then my target of 1.3320. Upside resistance is good at 1.3585 and 1.3650.

<b>GBP/USD: Closing Price 1.6438.  </b>Not much of a closing price difference week on week. I do see downside pressure with this pair continuing, but I do find cable hard to read and difficult to follow. The charts show a double top in play with a measure downside move to 1.6300. Resistance should be very good at 1.6525.

<b>AUD/USD: Closing Price 0.8753</b>.  This pair has been quite elevated all week. When I think that it is going to fall it stays well bid. The RBA meet Monday on Interest Rates and later in the week RBA governor, Stevens releases the latest Monetary Policy Statement. It is well known that the RBA want this pair trading in the mid to low 0.80’s. We are not far away but I still expect a few words on that subject. Do NOT fight a Central Bank.  The Key levels for me right now are 0.8660 to 0.8820.

<b>NZD/USD: Closing Price 0.8074</b>.  I am annoyed that I missed this pair heading lower, but I would not be surprised to see it bounce, strange as that might seem. For now I think we test 0.8000 as support and 0.8180, 0.8250 will offer resistance in the other direction.

<b>USD/CAD: Closing Price 1.1127. </b>The “Loonie” did it’s thing yesterday (Friday) not quite sure what that was all about but the currency strengthened like crazy and in so doing screwed up my CAD cross rate trades, which I am still in albeit down considerably on pips. If we sell off again at the open tomorrow (Sunday) there could be a great buying opportunity. I see the range though being supported at 1.1085 to 1.1220.

<b>USD/CHF: Closing Price 0.9058</b>.  Not a bad ending to the week if you are thinking of establishing a long position.  Support should be good at 0.8970 and the topside should have some resistance around 0.9125.

<b>USD/JPY: Closing Price 102.00. </b> Ready to fall. That is how I would describe the present USD/JPY closing position. 101.75 offers support, if this is broken I can see a bigger move lower. It would be great to get a Sunday night bounce to resistance at 102.80 first and enter short at that level if possible.

&nbsp;

<b><span style="text-decoration: underline;">4. MAJOR FOREX NEWS THIS WEEK THAT INTERESTS ME:</span></b>

SUNDAY: AUD – Building Approvals.

MONDAY: GBP – Manufacturing PMi.
MONDAY: AUD – RBA Statement and Cash Rate.

TUESDAY: GBP – Construction PMi.
TUESDAY: NZD – Employment Data and Unemployment Rate.

WEDNESDAY: GBP – Services PMi.
WEDNESDAY: USD – ADP Non-Farm Employment Change.
WEDNESDAY: CAD – Building Permits.
<span style="line-height: 1.5em;">WEDNESDAY: USD – ISM Non-Manufacturing PMi.
</span><span style="line-height: 1.5em;">WEDNESDAY: AUD – Retail Sales and Trade Balance.</span>

THURSDAY: GBP – Asset Purchase and Bank Rates.
THURSDAY: EUR – ECB Interest Rates and Press Conference.
THURSDAY: CAD – Ivey PMi
THURSDAY: AUD – RBA Monetary Policy Statement.

FRIDAY: CAD – Employment Change and Unemployment Rate.
FRIDAY: USD – Non-Farm Employment Change and Unemployment Rate.

&nbsp;

<b><span style="text-decoration: underline;">5. FINAL THOUGHTS:</span></b>

To say that we have a week with market moving news is a little bit of an understatement. I am expecting a great deal of volatility this week.

I have lots of trades open and several placed with limit orders. I will be trading 50% sized positions this week to allow for the chaos and disorder that will probably be served up.

This is the type of week, when the news items openly encourage numpty politicians to crawl out from under rocks and make stupid attention grabbing headlines. Watch out in particular for this to happen in the Eurozone.

Always, always remember. There is market everyday. You do not need to trade everyday to make your financial goals. Over the coming weeks I will visit as many topics on trading tips as possible to hopefully help and aid better trading success.

Good luck and trade within your TRADE PLAN guidelines and most importantly use MONEY MANAGEMENT SKILLS to control your risks.

Scott Pickering
The Pip Accumulator
Saturday February 1st 2014

EMAIL / FOLLOW ME AT:
drivethru@weeklyfxdrivethru.com
Twitter: @pipaccumulator
<span style="line-height: 1.5em;">Google+/scottpickering
</span><span style="line-height: 1.5em;">StockTwits: thepipaccumulator
</span>(01.02.2014 - 2.3)

&nbsp;