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

I wrote several weeks ago saying that I think maybe I will take a break from trading until after the summer holidays. I didn’t do that because our friend BEN got things moving and shaking in the markets with increasing the mutterings and mumblings of the dreaded “Tapering”. In fact, since BEN broke the word to the markets it has become the one word that is a must be “in” any sentence that you are using to discuss the markets.

I stayed in playing the market long and short, when in reality, I should have stuck to my guns and sidelined myself for a well earned break.  I have been taking small losses all over the map, when prior to the "BEN effect" I was enjoying a great run……what a fecking dipstick!!

I have one longer term trade that I am in and have been all week, quite why beggars belief, but I must have picked the one currency that seems to have static within its trading range and it too appears lethargic and unable to get a move on, it must be waiting for the middle of September. I am referring to the USD/CAD and I will write about this trade later.

Big news items this week, obviously if one lived in Germany and France one would have been deafened on Wednesday morning with the sounds of millions of champagne corks popping as the two countries responsible for bringing misery on millions of people in the Eurozone stood side by side and celebrated. I think the reason for the celebration was “Germany, France haul euro zone out of recession.”

You could almost hear Hollande mutter under his breath to Merkel…

Hollande, “You get your elections out of the way darling in September, and then together we will drive forward to greatness together arm in arm”

“What about the Greeks, The Spanish, The Portuguese, The Italians, The Irish, The Cypriots, The Slovenians etc. etc.…said Angela”

Hollande,“F**k ‘em…. we’re alright, and we saved our banks by f**king those idiots on the Mediterranean. All they are interested in is sunshine and cheap booze. The workers are up north with us…F**k them in the South. If they don’t like, it will cost them millions of Euros to leave and we will make even more money off them if they go, the plan worked perfectly”

I just cannot see Ireland, Greece, Spain, Portugal, Italy, Cyprus or Slovenia enter celebratory mode for quite some time. There are years and years of austerity ahead and the joyousness expressed by Hollande and Merkel at the Elyse Palace should only be viewed as electioneering for both parties but it was totally insensitive for the rest of Europe deep in austerity programmes.

The Fx markets for the week were mainly just drifting and at times moves were exaggerated creating little pockets of volatility. We are trading “Thin” so it is sensible to pull away and stay in cash. If you get caught the wrong side of a trade and you have chanced a larger position than maybe you should have placed, you will run the risk of depleting your broker balance for not the best of reasons. Take a three/four week holiday and re-charge the batteries,<b><span style="text-decoration: underline;"> </span></b>

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<b><span style="text-decoration: underline;">2. THE EUROZONE RECESSION IS OVER…ALL IN THE GARDEN IS NOW ROSY…YEAH RIGHT!</span></b>

<b><span style="text-decoration: underline;"> </span></b>I really hate myself sometimes for repeating items or comments in this blog, and then other times I think maybe this time when I write the same thing I will position the emphasis in a different place.

With regards to title of this section <b><span style="text-decoration: underline;">“BULLS**T”</span></b>

What a load of bollo**s, technically the German and French economic data may show the Eurozone exiting it’s 1½ year recession, but oh my God talk about a two or three tier system. The rich get richer, the countries in the middle struggle and the remaining countries who played ball like good citizens are now fu**ed.  The two tier policy approach has shown 100% crystal clear that the policies put forth politically and those provided by the ECB, which, is just a puppet of Berlin support those with the money.

So what next?

Will we see Italy, Greece, Spain and Portugal follow suit in the short term? I think not, they will be bouncing off the bottom for the foreseeable future, from time to time; we may see a positive quarter and then a drop back. All of these countries are seriously deep in the s**t.

The exception, in my opinion is Italy. Italy’s issues are mainly political; it is hard to get past the shenanigans of the Sex God aka Berlusconi when talking about Italy. Certainly, the economy has the ability to turn around if the politicians were focused. However, as with most Eurozone countries the country is led by a “week-willed lily livered” set of numpties that couldn’t blow their way out of a paper bag.

For the rest, Spain and Greece in particular, the problems facing these countries will take a serious amount of time and huge amounts of money to fix…they have neither.

The Spanish housing market and bad and doubtful debts registered with domestic mortgage lenders underestimates the underlying problems that have been there for over 4 years. The Spanish regional debt is in a dire state. I used to live in Marbella, Costa del Sol in Andalusia. I am being told from a reliable source that of the 100% town hall tax bills being issued, the capital collection in 2012 was less than 40%. If this is reflected nationwide Spain is broke!!!

Greece is still not with the programme, and the word on the street is another bailout will be required after the elections in Germany. If Merkel is not re-elected God knows what ‘s going to happen. The likes of the IMF co-holding the Greek chequebook may be holding up spending. But the roots of all the issues in Greece are so deep it will take a huge amount of time to get the country moving forward. Just sorting out the speed that new businesses can set up and attempt to add to the countries GDP is such a long drawn out procedure. The countries infrastructure is set up to make things fail rather than succeed.

I will re-iterate what I have said for the past twelve months or so…. The Eurozone is down the crapper. We will see shoots of hope…. but these shoots will be from the obvious places where we should see hope. The core is no better off today than it was 2/3 years ago. I reckon if you ask the various populations they would say worse off not better.

The positives in GDP from Northern Members only serve to mask the desperate position faced by members in the south.

The hurrah times felt in the markets last week will be very short lived. Members in the south require serious aid to help them see growth, otherwise unemployment lines will not get smaller and social welfare will get less and less and mortgage arrears will just grow.

Is there a trade?

I do believe that there is a trade but right now it is tangled up in the JPY and Tapering talk that seem to be controlling the markets.

Eventually, I see the need for interest rates in the Eurozone to be cut in conjunction with a growth aid package aimed at reducing unemployment lines through tax codes or by corporation tax reductions. Whether Mario Draghi will be given the go ahead from Berlin to do this is debatable but the cost of not doing it are probably not that far away from the costs to do it.

My trade will eventually be EUR/USD short. But it will take sometime, for now it’s chop, chop, and chop like the rest of the market.

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

I entered the USD/CAD long about 5 days ago. Only a small trade. The reason I picked this trade was it falling to support at 1.0340. Of all the currency pairs in the market this one was not moving particularly far in either direction and was immune to the JPY/Tapering discussion in the most part. I am holding, my parameters are set and it is well within my trading plan.

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<p align="center"><b>USD/CAD:
ENTRY (Cost Average): 1.0352
TRADE: Long
</b><b>POSITION SIZE: 20%
</b><b>STOP LOSS: 1.0240
</b><b>LIMIT (Take Profit): 1.075
</b><b>CLOSING PRICE: 1.0335
</b><b>PRESENT POSITION: -17 pips</b><b><span style="text-decoration: underline;"> </span></b></p>
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<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 1.3328. </b>After a week of chop and more chop, not much of a change in the closing price this week over last week.  We are in the summer and we are in ranges that never seem to get broken. To the upside 1.3420 looms and a confirmed break above this level and 1.3700 beckons. On the support side we really need to see below 1.3200 to get things moving towards 1.3000. I think it will take a major news item to get a directional move in operation, for now and the next weeks its just chop chop.

<b>GBP/USD: Closing Price 1.5621. </b>The one currency pair that has been motoring to the upside is the GBP/USD. Improving economic data has been very supportive of this move and it all stems back to Carney’s first economic report. How high can this pair go? 1.5670 is the next stopping point before 1.5750 and if we break through there you have to think that 1.6000 is calling. Support is good at 1.5500.

<b>AUD/USD: Closing Price 0.9182. </b>This pair is consolidating before moving lower once again. You have to remember, this pair dropped from 1.0600 to 0.9000 very, very fast. There were huge oversold conditions and they needed to work through and it was totally expected that there would be a bit of a pullback. We have pulled back about 300 pips, which is normal, not excessive. So when do we roll over again? That is easy as soon as the equity markets start to fall away so will the AUD/USD. For now I am looking at the following levels 0.9075 as support and 0.9250 as resistance.

<b>NZD/USD: Closing Price 0.8096</b>. I tried this pair several times to the short side over the past two weeks or so and failed nearly every time. It has been very, very frustrating. I think we need to see Gold drop, the USD index rise and equities drop for this pair to finally head lower. I will not be joining in unless the above conditions are in play. My levels for the initial period ahead are support 0.8050 and resistance 0.8110 and then 0.8170.

<b>USD/CAD: Closing Price 1.0335.  </b>I am in this pair with a very small long trade. Not at all worried 1.0240 is my area to get out. With all the moves up and down in the recent chop fests this pair has not been affected too much and has virtually stood it’s ground. I do believe long term the USD will strengthen and commodity currencies will come under pressure so I am happy to hold. Up side resistance is 1.0370.

<b>USD/CHF: Closing Price 0.9260.  </b>I had a very small long trade with this pair early in the week and exited it in error in a good profitable position…. divvy!!  I am looking at the range here from 0.9180 to 0.9350.

<b>USD/JPY: Closing Price 97.52.  </b>The JPY chop continues. If I am correct in my beliefs from a couple of weeks ago that equities are going to sell off, I do still see the S&amp;P relationship remaining intact and all the JPY pairs will come under pressure. For now we chop chop. The levels that interest me are 96.50 to 98.50.

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

<b><span style="text-decoration: underline;"> </span></b>MONDAY: AUD – Monetary Policy Meeting Minutes

WEDNESDAY: USD – FOMC
WEDNESDAY: CNY – HSBC Flash PMi Manufacturing

THURSDAY: EUR – Flash PMi Germany and France

FRIDAY: CAD – Core CPi

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

Be careful in the chop fest. There is some news but not a lot of major news this week. The FED meets and I suppose "TaperTalk" will be at fever pitch but there is so much hot air expelled about this I do not know what to believe anymore. Unless it's BEN at the microphone be careful. It could be just one of his underlings just trying to make a name for themselves, with their 30 seconds of fame.

I am going to try to stay in cash until early September when normality steps back into the marketplace.

I am holding my long USD/CAD position but intend not to add anymore until we are out of the summer thin trading environment.

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

Good luck and take care.

Scott Pickering
The Pip Accumulator
Saturday August 17th 2013

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