<strong> </strong>

<strong>1. INTRODUCTION:</strong>

The roller coaster ride in trading the Forex market continues. Until Draghi uttered the words “The Governing council of the ECB is comfortable with acting in June” coupled with “The Euro exchange rate is a serious concern” the USD was being taken to the cleaners and on the way there was being given a severe whipping. The USD index looked as it if was about to cave in. Just 24 hours later the EUR/USD was trading 200 pips lower and the GBP/USD 150 pips lower; an amazing turnaround.

During the past 5 days we also saw a huge number of major news releases from Australia. My overall observation at the end of the week is that both RBA Stevens and RBNZ Wheeler, could be using pretty much the same scriptwriter with regards to their comments on their currencies. The only difference being that Wheeler has threatened direct intervention to bring the value of the NZD lower. Stevens once again re-iterated last Tuesday that the AUD was too high. He is partially to blame for this jump higher in the AUD/USD. Two months ago he really talked it down by stating 0.8000 – 0.8500 was a more appropriate level. He did not keep banging the drum he took his eye off the ball and the AUD/USD rose towards 0.9470 in the recent caning given to the USD. Had he been consistent the AUD/USD exchange rate would be sub 0.9000.

Now we have the situation where, the ECB, RBA and RBNZ are talking dirty on currency exchange rates. As I have said many times talk is cheap. Draghi at the ECB looks like he is going to act next month, Wheeler at the RBNZ may directly intervene, where does that leave the RBA and Governor Stevens?

Friday saw a disastrous set of job figures for Canada, the market was expecting +12,800 for April, instead, Canada lost 28,900. For a smaller populated country like Canada this was an awful result. There will be calls for stimulus in Canada if the next few sets of key economic data releases are poor. Personally, I think the BOC should react and cut rates. Let’s NOT pontificate like other central banks, let’s be decisive and pro-active and do something. Time will tell.

Finally, I wanted to share something with you regarding the PREMIUM SERVICE.

About a couple of months ago, I launched a 4-week low cost $20.00 trial. Previously at the launch of the PREMIUM SERVICE I had resisted doing this, as what is happening now is what I thought could happen when why my gut feeling was not to offer this option. At renewal, I advise subscribers that the on-going option is from 10 to 40 weeks, ranging from $150 - $400 dependent upon the subscription period. About 50% renew 50% do not, I ask the “do not’s” why?

I am concerned: as I ask, not interrogate, I am told it’s NOT the costs involved, although one or two have said this, but the main reason is it's the fact I am not doing enough trades per day. Surely, trades per day is relative to the market conditions…the opportunities…the risks.

Forex trading is not gambling. Forex trading is RISK ASSESSMENT, you require total 100% DISCIPLINE to survive. I know from various social network media that many people see Forex trading as an easy fast killing to make thousands of $$$$. Oh my God, I am stunned by some of the responses I am getting.

Please, please….you should only trade if you see trades that meet your plan and guidelines. I have been a Forex trader for 7 years and I want to remain a Forex trader for at least another 7 years, longer if possible. Additionally, if you see Forex as quick way to deliver $$$, please do not subscribe to the PREMIUM SERVICE.

I have zero intention of blowing my accounts out in a dysfunctional marketplace. I am a Conservative/cautious “Steady Eddie” trader. My existing subscribers will admit to seeing me write on twitter that I screwed up an entry every now and then, I am human. I have losses, some because I get over stubborn on trades. The most recent example being the USD/CAD long, I took a hit of over 200 pips last Thursday. I should have exited a long time ago. I was in that trade for 38 days. I am NOT perfect; my wife will confirm this fact. I have learned the hard way how to apply DISCIPLINE to trading. If you want a fast cash gain you might as well gamble and go to Las Vegas and play a few tables.

As my father once said, “Gambling is a mugs game”. I had gamblers in my subscriber base; God only knows what size positions they were trading.
<p style="text-align: center;"><strong>The keys to Forex trading longevity in my opinion are: -</strong></p>
<p style="text-align: center;"><strong> DISCIPLINE (understand the power of Leverage)</strong>
<strong> RISK AND EFFECTIVE MONEY MANAGEMENT PLAN YOUR TRADES </strong>
<strong> TRADE YOUR TRADING PLAN RULES and GUIDELINES.</strong></p>
Every trader surely has a goal to make money from trading, but one has to be RESILIENT and DISCIPLINED.

I apologize, if you think my thoughts are overkill. But, unless you try to RISK MANAGE you may as well burn your cash on the fire in my opinion.

For more information about the PREMIUM SERVICE check out the welcome page of <a href="http://www.weeklyfxdrivethru.com">www.weeklyfxdrivethru.com</a> situated on the top of the page there are a number of drop down menus that contain all the things required to join.

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<strong>2. THE VIEW FROM MY TRADING DESK:</strong>
<p style="text-align: center;"><strong>THE ECB - ARE WE ON A PROMISE…MARKET REACTION SAYS YES?</strong></p>
Another ECB press Conference goes by and despite many calls for action from within the Eurozone for the ECB to act on DEFLATION and the high EUR exchange rate that is in effect across almost all currencies, nothing was done.

However, Draghi admitted that the ECB Governing Body has discussed the matters and the ECB now has a green to go if it wants to, by the next meeting in June 2014.

The market reaction was immediate. The EUR/USD sell off started. In 24 hours we had a 200-pip fall. If you remember, the last time Draghi acted was to cut rates by 0.25% and we saw a huge 200-pip fall followed by, at the end of the day a much larger bounce. This time it’s different, well at least the market believes this time, that Draghi means business.

Draghi has backed himself into a corner. A few weeks ago I wrote about the DEFLATION issues in the Eurozone. It looks like inflation forecasts will be wound back lower next month, given the fact that The European Commission has recently revised expectations downward. So if Draghi does NOT act in June, then

Mr. “Whatever it takes” Draghi will lose all credibility.

What will he / can he do?

Well, he has really upped the ante this time:
<p style="text-align: center;"><strong><em>Governing body comfortable to act in June</em></strong>
<strong><em> The Euro exchange rate is a serious concern</em></strong></p>
The issue / problem as I see it, is that no matter what the ECB decides to do, and there a few options, none of them are in the same league as the BOJ QE programmes of Quantitative easing and Qualitative easing, that was able at the launch to move the YEN by about 35% in a few weeks.

The structure of the ECB, albeit, allegedly independent of political influence…(and if you believe that you would also believe that I am running for President!), simply does not allow them game changing, large-scale measures like the FED or the BOJ.

The list of options hasn’t really changed from what I have written previously: -
<p style="text-align: center;"><strong>LTRO - (Longer Term Refinancing Options). </strong>
<strong> Lowering its Refinancing rate to zero.</strong>
<strong> Negative overnight ECB Deposit Rates.</strong>
<strong> QE (Quantitative Easing).</strong></p>
I think that whatever is decided it has to show strength of commitment from the ECB otherwise if it is a “wishy-washy” attempt to ease, it will be responded to that way and the EUR/USD, in particular, could once again strengthen.

There are 4 weeks between now and the next meeting for all the debates on the options open to Draghi and his peers to take hold. Let the merriment begin.

From a trading perspective, we have seen pretty much a universal EUR fall across all cross-rates as well as the EUR/USD.

Where do I see the EUR pairs falling to? This is dependent on the reaction with the EUR/USD, but do not rule out the EUR/JPY. The Eurozone trades heavily with Japan and to some extent the EUR/JPY cross-rate could pull the EUR/USD. Do not rule this out.

I include a monthly chart of the EUR/USD below. I think that 1.3436 (76.4% Fibonacci level) (1.3450), is probably where my thoughts are at the moment as a possible short target.

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<a href="https://weeklyfxdrivethru.com/wp-content/uploads/2014/05/EURUSD-MONTHLY-10052014.png"><img class="aligncenter size-large wp-image-3641" src="https://weeklyfxdrivethru.com/wp-content/uploads/2014/05/EURUSD-MONTHLY-10052014-1024x424.png" alt="EURUSD MONTHLY 10052014" width="1024" height="424" /></a>

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Possible lows on the crosses if the EUR/USD targets the 1.3450 area are: -

EUR/JPY: 132.00 (The 50% Fibonacci retracement of last big move)

EUR/CAD: 1.4400 (If the CAD rallies back towards 1.1200, this may not happen)

EUR/AUD: 1.4000 (If the AUD breaks lower, this may not be achieved)

EUR/NZD: 1.5000 (If the NZD breaks lower, this may not be reached)

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Referring to the prices above, a great deal depends on how the cross-rates react. The Commodity crosses may hold up the EUR/USD fall if the commodity currencies also weaken in line with USD strength. But the levels above are very much in the target zone in my opinion.

<strong> </strong><strong> </strong>

<strong>3. LOOKING FORWARD…THE KEY SUPPORT &amp; RESISTANCE LEVELS WITH THE USD MAJORS:</strong>

<strong>EUR/USD: Closing Price 1.3757.</strong> Following the ECB Press Conference the EUR/USD has slid about 250 pips from almost touching 1.4000. Now the question is how far will it fall ahead of the next ECB Press Conference in June. My medium term target from my short EUR/USD trades of late has been 1.3450. Right now, I see no reason to change that goal. However, in the short-term, I am expecting some consolidation next week and I think we may have a little range bound activity to work off the oversold conditions that you can see on the charts. I am thinking that for this coming week the range will be around 1.3700 to 1.3840. I could be wrong, but this is what I think as of now.

<strong>GBP/USD: Closing Price 1.6847</strong>. This pair almost got to 1.7000, and then it fell from grace like the EUR/USD. It too has pulled back about 250 pips off its highs. Over the coming week I see 1.6750 to 1.6920 as the range to break out of. Ultimately, if the EUR/USD falls so will the GBP and I expect us back around 1.6500.

<strong>AUD/USD: Closing Price 0.9360</strong>. This pair is not reacting the way that I thought it would. I am staying away for a little while until it makes its mind up if it is moving lower or going to attack 0.9500. The RBA needs to get stuck in with the AUD and be firmer on what it sees as the target. The AUD/NZD is affecting this pair, the cross-rate has come alive with the demise of the NZD/USD and this has a great deal to do with the current elevated price of the AUD/USD, probably to the annoyance of Governor Stevens. The range is 0.9300 to 0.9450.

<strong>NZD/USD: Closing Price 0.8609</strong>. The big number that I was working with last Friday (9<sup>th</sup> May 2014) was 0.8615 as support…look where it closed the week. I am short this pair and intend to remain short for sometime to come; I struggled with much higher levels and was patient. Now I am hungry for my pips. I will add again to my position on a break below 0.8600. The range is 0.8600 support to 0.8780 resistance.

<strong>USD/CAD: Closing Price 1.0897.</strong> The crazy "loonie", I got stopped out on Thursday for a 221-pip loss and then the next day we got a rally on really poor employment data. I did not see that coming. We have a “tweezer” candlestick pattern pretty much in play. The move with this pattern is to 1.1000. Support is at 1.0840.

<strong>USD/CHF: Closing Price 0.8862</strong>. As the EUR/USD falls the inverse relationship with the USD/CHF is in play. One of my long term trades, still with it over a month now and patience is paying dividends. If we can get above 0.8950, I think we are going to head much, much higher. Support is really good at 0.8800.

<strong>USD/JPY: Closing Price 101.86. </strong>Very interesting, JPY crosses had a bad day on Friday last week, the EUR/JPY in particular. The USD/JPY held up very well and this is a pair as you now from TRADES ON MY RADAR SECTION that interests me along with the other JPY pairs. The range is 101.40 to 102.10.<strong> </strong>

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<strong>4. MAJOR FOREX NEWS THIS WEEK THAT INTERESTS ME:</strong>

SUNDAY: CNY – HSBC Manufacturing PMi.

MONDAY: N/A.

TUESDAY: EUR – German ZEW Economic Sentiment.
TUESDAY: AUD – Annual Budget Release.
TUESDAY: NZD - RBNZ Wheeler speaks.

WEDNESDAY: GBP – BOE Carney speaks &amp; BOE Inflation Report.
WEDNESDAY: NZD – Annual Budget Release.

THURSDAY: USD – Core CPi.

FRIDAY: N/A.

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<strong>5. FINAL THOUGHTS:</strong>

I am expecting more of the same over the coming week, the only difference, and, it could be a big difference is we may have direction following the ECB Press Conference last week. Additionally, there are moves now out of tight ranges and this should help with momentum.

However, you still have to be ready for false breakouts and false breakdowns. There are so many inflection points close by in equities and bonds that the potential spikey moves could impact the Forex markets, despite it’s recent moves out of ranges coupled with the momentum directional moves of the EUR.

Take care and good luck. Be careful with position sizes.

Scott Pickering
The Pip Accumulator
Saturday May 10th 2014

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