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

The Washington D.C. game of “chicken” continues.

Now we see that the U.S. politicians are playing, or attempting to play the Eurozone approach of “Kicking the can down the road” by trying to settle on a five to six week extension. So far, this approach could not even gain traction in the negotiations. Observing from the outside, to be honest, I do not blame Obama for not accepting this bargaining tool from the GOP as he has the Republicans on the back foot. The Republican Party as a whole, except the Tea Party faction, are feeling pressure from constituents. They are in danger of losing the popular vote in marginal constituencies. They hold quite a number of marginal seats at the moment and they are being seen in the popular press as the blockage to progress in the negotiations, or rather lack of them!!

I have been limiting my trading of late to preserve my broker account capital. The main reason for pulling back on my trading is just to be a little sensible whilst there is a great deal of market uncertainty. We are in trading ranges with most major forex pairs, and within these ranges the daily ‘chop fest” takes place. It is hard enough trading at the best of times, so for me, to add this additional layer of stress is just not desirable.

I tried on one or two occasions to set positional trades in place, but even then after placing the trades I read a bit here and there and decided to take profits. I do think in “Times like these” (according to Dave Grohl), it’s best to maybe sit back and observe.

Janet Yellen has been confirmed as the replacement for Ben Bernanke as the new FED Head. This kind of crept under the radar a little as the children in the capital were playing their games with the lives of ordinary Americans. This appointment, after Larry Summers pulled out was highly expected and at least it gives the markets continuity of approach by the Fed although at some stage she will want to stamp her own authoritative mark on the way the FED moves.

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<b><span style="text-decoration: underline;">2. THE VIEW FROM MY TRADING DESK:</span></b>
<p align="center"><b><span style="text-decoration: underline;">IS PEOPLE PRESSURE BRINGING THE U.S. CLOSER TO A DEAL IN WASHINGTON?</span></b></p>
The biggest single issue on trading blogs and financial news networks at the moment is the continuing breakdown in Washington. The refusal and digging in of heels not wanting to give an inch in negotiation is being seen as laughable by many commentators. However, in the last day or so I am starting to think that for all the political posturing and all the brave statements from both sides about “final offers”, “we are walking away” and “no more negotiation” there are signs of cracks appearing. The markets make money out of fear and greed. Politicians thrive on it…they are junkies for it.

It is fear placed into the Republican party via their voters that may be bringing common sense into the negotiations. It may well be the American voters placing fear where politicians hate it most, in the ballot box that is finally bringing the two sides together.

Initial talks have been held and although maintaining one’s negotiation position is vital, at least the two sides are talking.

The American parliamentary boundary map is a fascinating document to study. Over the recent years government after government have refined the electoral boundaries so much that there are so many “safe” seats now in place that the now all too few seats that can be categorized “floating” are causing the party leaders concern. In particular, the Republican Party has quite a few of these types of seats in major eastern cities that tend to be more Democratic in party affiliation. The pressure of potentially losing share of the vote in these constituencies is causing concern. Not that this worries the 30 or so “Tea Party” lobbyists, who, are all in very safe GOP strongholds. But, it is bringing matters to a head with regards to coming to the table to try to broker a deal.

If this is true and the longer this stalemate continues, the greater the chance of voter dissatisfaction increases and, the greater the chance the fear of losing seats increases. Will this bring the Republican Party to the “crossroads” seats or tea party?

I watched Donald Trump re-iterate this past Thursday evening, what is being touted about by many Republicans that Obama has “no negotiation experience”. In my opinion this is a fighting comment made by the GOP as they are worried and they say this to deflect from issues that they are having with supporting voters demanding a resolution to the government shutdown. As I see it, Obama has all the cards, he has “Obamacare” passed into law, and the GOP’s “Tea Party” members are on a very weak footing trying to hold the country to ransom, by forcing the hand of the Republican leadership.

Obama’s negotiation skills and stance look pretty good as a non U.S. citizen observing from the sidelines. I am not politically motivated; it is crazy, stupid, bloody ridiculous and just weak management by John Boehner (Speaker of the U.S. House of Representatives) exposing the fact that he cannot control his party. If this were a business, he would not have taken, nor would he be allowed to pursue the route he has taken if he were in disagreement with a company policy decision, it is just mental to think that ”the alleged” super-power of the world has numpties such as these representing people making domestic and international policy decisions.

It is therefore, not the politicians that will bring the “Shutdown” and “Debt Ceiling” issues to a head. In my opinion, the voter will apply pressure directly to where it hurts. Ironic isn’t it the people the politicians hurt the most are in fact the ones with the power to fix it?

Power to the people…that’s what I say; I just cannot believe what most politicians say. They are not trained at what they do; they are just in the political business to play games and do not actually represent their constituents, nor do they in most cases try to improve the general well being of their country.

Off my soap-box…what is the forex trade?

All that being said, where is the trade?

I believe initially on a U.S. settlement that there will be relief in the markets and the equity markets will rally. Then, the reality that “tapering” is back on will set in. On the basis that the silly games in D.C. will be over, this may give Janet Yellen / Ben Bernanke more options on the initial size reduction to taper. This will resonate with markets very quickly. This will cause USD strength and a market sell-off, which is so long overdue it just needed a catalyst. Tapering or a Eurozone issue, either would do, combined we could see a 15-20% S&amp;P pull back. That’s not important to me right now, but I do see a USD long being the trader to be moving forward.

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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. I opened four on Friday morning and decided to close them. Three with profit and one with a loss. All the press statements and TV news were conflicting and I thought why do this; just sit back and wait.

I am now waiting for a Washington D.C. settlement before looking to establish positions once again.

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

Here is my plan / strategy: -

As I have written already, I am expecting after an agreement is reached to re-open the U.S. government and sort out the debt ceiling limit that there will be a period of USD weakness. This will soon be followed by USD strength to enter the market as realism of tapering comes into view.

I am looking to use the above scenario as a means to trade the USD long as the major pairs react. Below, I provide the entry and stop levels, plus the initial target levels that come to mind. I am expecting the moves to be quite large as we are due an equity market pullback as well. Add to this the fact I believe we should see Gold drop below $1,000. If you check the weekly Gold chart there is a bearish flag formation pointing to $800.00. I am expecting Oil to pull back below $100 as well. Both of these moves are also USD positive to help the USD strengthen.
<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>USD/CHF
</b><b>Long at: 0.8990
</b><b>Stop Loss: 0.8950
</b><b>Initial Target: 0.9430</b></p>
<p align="center"><b>EUR/USD
</b><b>Short at: 1.3670
</b><b>Stop Loss: 1.3750
</b><b>Initial Target 1.3200</b></p>
<p align="center"><b>AUD/USD
Short at: 0.9550
Stop Loss: 0.9630
</b><b>Initial Target: 0.9200</b><b> </b></p>
<p align="center"><b>NZD/USD
</b><b>Short at: 0.8430
</b><b>Stop Loss: 0.8520
</b><b>Initial Target: 0.8000</b></p>
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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 1.3538. </b>Pretty much as I said last week. We are still in a trading range. This pair is well supported at 1.3450 (FOMC No Taper Press Conference Day) and resistance is at 1.3660. I hate repeating myself but the best trade is to ignore the chop fest and wait for a confirmed breakout.

<b>GBP/USD: Closing Price 1.5946. </b>Just like I wrote last week, we saw failure at 1.6250 and ever since we have been tracking lower. Big support at 1.5970 was breached this week. I think the GBP bulls will cave should the Armageddon line in the sand at 1.5915 is crossed.  A break thru here opens up a move back towards 1.5800 initially and then to be realistic we should bounce but if not 1.5500 becomes the target for GBP bears.

<b>AUD/USD: Closing Price 0.9465</b>. One of my favourite pairs to trade, but I am finding chart reading a nightmare. It is so choppy and not really a pair that offers any help. The way I see it is that I really want it to rally properly, get the long move and any AUD shorts squeezed out so I can get short at a great risk reward level of around 0.9600. It threatens to do this, then it pulls back…. chop chop bloody chop. The range of 0.9390 to 0.9530 needs to be broken to give me a clue what to do with this pair. If you can make sense of it, good luck.

<b>NZD/USD: Closing Price 0.8316</b>.  Not much of a move in a week, just two pips!! Very similar to the Aussie. I really want the range broken. Once we set ourselves free of 0.8200 to 0.8430 then I think this pair will directionalise itself once again. For the moment the chop chop continues. Like most pairs a resolution in Washington is required.

<b>USD/CAD: Closing Price 1.0347. </b>I lost money on this pair trying to play a breakout above 1.0400. I foolishly missed the 1.0340-1.0360 move and to some extent I was revenge trading. The charts did look bullish above the 1.0360 breakout and to some extent still do even though we closed at 1.0347. 1.0340 was the big resistance recently and as long as we stay ahead of this number through the Asian opening and European sessions that start off next week, I will still be bullish. My best trade though would be a pullback to 1.0275-1.0300 and get long there for another run to the long side. Let this pair come to the trade set up that you want deploy.

<b>USD/CHF: Closing Price 0.9108. </b>0.8990 held fantastically well as support last week. I traded this pair briefly on Friday and banked some good profits. Now I wait for Washington to agree a settlement to let it pullback to the lows again to enter long…hopefully. Anywhere between 0.8990 and 0.9050 would be a reasonable area to establish a long position with limited risk. Above 0.9180 sees this pair turn bullish once again.

<b>USD/JPY: Closing Price 98.55. </b>I really do not know what to write about, or what to do with this pair. I find it confusing and so affected by press sound-bytes I am staying away from it personally. The trade of the year is long the JPY. I really thought by now we would be at 105.00 -110.00. But frustratingly we have been from 96.50 to 99.00, up and then back and then up and then back. 99.20 a week or so ago looked a number where a squeeze would happen…it didn’t, in fact, we pulled back.  The range that may set up a directional move is 97.50 to 99.00. A break of this range may do it but do not count on it unless Washington has settled.

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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: NZD – CPi
MONDAY: AUD – Monetary Policy Meeting Minutes

TUESDAY: N/A

WEDNESDAY: N/A
WEDNESDAY: N/A

THURSDAY: N/A

FRIDAY: CAD – Core CPi
FRIDAY: GBP –Retail Sales

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

I am not looking at next week’s news with great interest. My sole focus right now is on the U.S. Washington D.C. settlement. This is a trump card to all other news in my opinion. The longer stalemate exists the more twitchy everybody’s bottom in the centre of the mess becomes.

I am going to try and keep my fingers way from the keyboard until I feel that my plan on USD long positions is ready to action.

If you feel that you must trade, be careful, because as time progresses moves will be more and more choppy. Trade smaller with wider stops and trade within the guidelines 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.

Scott Pickering
The Pip Accumulator
Saturday October 12th 2013

FOLLOW ME AT:
Twitter: @pipaccumulator

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