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

I have been back in Canada about 5/6 days following our vacation in Ireland and the UK, which allowed us to attend a good friends wedding in the scorching heat and humidity in London. We packed coats and sweaters for our trip…we were in Europe’s heatwave the entire time we were away. Moving on from the pleasantries, I want to just put on paper in a few paragraphs my current thoughts on where we are in the Fx market, what is on my mind, both at the front and deep in the back!
<ul>
	<li><strong>TRADING THE SUMMER MONTHS: -</strong></li>
</ul>
I hate this time of the year from a trading perspective. The markets tend to offer thinner liquidity and thus moves are exaggerated and with the increase (so we are told) in high frequency and algorithmic traders the individual trader is being screwed. Not sure whether I am being screwed. I am getting on a bit in age, but I still think I have the wherewithal to realize if I am f***ed or not. Joking aside, automatic systems are talked about more, and their influence is debatable but this is progress and “we” as traders have to adapt. In thin trading markets that means care. Like a lot of people I look at the summer months of mid-June through to early September as the “silly season”. The one thing that I have learned in life, never mind  from trading is that “Nothing ever stays the same”. Things change and we (you) adapt accordingly.

So if you have been pinched by the markets take a step back, take a deep breath and decide whether you trade the summer months or not. If you decide that you do, you need to trade smaller position sizes and take wider stops to allow for thin trading patterns. Remember, if it’s thin trading in Europe and North American trading sessions, the Asian session will be a complete nightmare at times. At the best of times these markets can be illiquid.
<ul>
	<li><strong>THE EUROZONE: -</strong></li>
</ul>
It still beggars belief why the EUR/USD is pressing 1.3300, when in most people’s minds, mine included we should be more like 1.2000 or below.

My thoughts on this question are that it’s down to just one man……that is the most powerful man in the world…….Ben Bernanke. Single-handedly, he is supporting the equity markets via QE. His targets for the U.S. economy and unemployment in particular, to halt/reduce support and to start “tapering” are such, <span style="color: #000000;">that a continued financial accommodation to the markets is on-going for the foreseeable future. </span>

<span style="color: #000000;">This weakens the USD, and, as much as I have talked about the USD eventually reacting against the QE push and strengthening, this is short-lived most of the time and the underlying trend</span> is long, ignoring the little hiccups that are seen from time to time. The only exceptions have for the most part been the commodity based currencies AUD, NZD, CAD and NOK.

The EUR/USD is the most heavily traded pair in the Fx market and the phrase “Never fight the FED” comes to mind loud and strong. Fundamentally, the Eurozone is in recession, unemployment is at highs in many countries, social services are poor and under-funded, mortgage arrears are high and growing, social unrest with austerity measures create a very uneasy atmosphere to say the least and political unrest is evident in many countries.

Mario Draghi, in my opinion is not as independent as his says he is, he has his strings controlled by Berlin and although his has several initiatives in place to help the Eurozone countries if required, the area struggles as the EUR strengthens and the German governmental policies are such that his hands may well be tied when push comes to a shove…so to speak! Even with poor economic data the Eurozone marches on and the EUR/USD marches onwards and upwards, whilst I think 1.3300 offers good resistance a break above and we could squeeze to 1.3400 very quickly.

So, the FED with its domestic monetary initiatives is controlling the movement of the most active currency pair in the Fx market, and the economic position of the Eurozone is to a large extent irrelevant to the movements of the EUR/USD currency pair. Trading this pair should therefore be pretty simple and straightforward. There will be news events that halt it, in, what seems a relentless move higher but overall the EUR/USD seems pretty directional and should a squeeze be on above 1.3300, it could get interesting with the correlations in the market.
<ul>
	<li><strong>AUD/USD: -</strong></li>
</ul>
I must briefly mention this pair. Although the RBA has announced a steadying of policy regarding additional interest rate cuts, this pair is still very responsive to news from China, the movement in Copper and raw materials. The S&amp;P 500 will keep it inflated to a point and it will not sell off aggressively when the S&amp;P moves higher, but the correlation is not as strong as it used to be. Australian domestic policy trumps all other cards, and, Australian economic data is very closely scrutinized as a result, much more than before to attempt to gain an advantage on future currency movements. You must be aware as the S&amp;P is close to all time record highs the AUD/USD is not near 1.1500, far from it, it is well below parity close to testing the key 0.9000 level once again. China and Copper are key drivers of this pair. If Copper drops below $3.00….look out in the AUD/USD.

&nbsp;

<b> </b> <b><span style="text-decoration: underline;">2. MY VIEW ON THE NEWS SEEN FROM MY TRADING DESK:</span></b>
<p align="center"><strong>IS THE NEXT STOP FOR THE  USD/JPY  SUB 95.00 IN THE COMING SESSIONS?</strong></p>
Despite Japanese Prime Minister Shinzo Abe winning elections that have given his ruling party control of both parliamentary houses in the Japanese parliament, and the fact he has his man (Kuroda) in the BOJ and the fact that Japan has the equivalent of more than double the QE <span style="color: #000000;">given</span> the per capita size/economy etc ……..the JPY will not weaken.

Last weekend after the elections I saw calls for the USD/JPY to be trading at 102.00 and above!!  What happened…….profit taking. I heard this morning that only 10% of the Japanese people believe Abe’s view that he can weaken the JPY and remove deflation from the Japanese economy. Holy mother of God…if they do not believe in him, why did they vote for him? From my perspective it was like turkey’s voting for Christmas. Economic data released Thursday evening showed that the CPI (Core Prices Index) rose 0.4%, this shows some momentum gains over recent data, which, does show that maybe Abe has stated to succeed in finally breaking the deflationary hold that has been in the Japanese economy for the best part of two decades. These figures should drive growth and wages higher in the coming quarters.What happened on the release of this data, the USD/JPY broke down through 99.00 and then 98.57 a previous closing level. Abe’s policies would appear to be getting a footing but the USD/JPY strengthens. He must be scratching his head and drinking plenty of Sake.

The Nikkei 225 index has seen wild fluctuations over recent weeks and this plays hard on the JPY.

The Nikkei has moved a huge amount in 2013 alone some 37.20% to be exact.

The current Nikkei 225 statistics are: -

Close yesterday: 14.129.98
Down 432.95 (2.97%)
52 week move = +70.71%
2013 move = +37.20%
52 week range 8,358.91 – 15,942.50

Sometimes it is very confusing to follow. The Nikkei is down hence pressure on the USD/JPY in North American trading, then you read the USD/JPY fell in North American trading hence the drop in the Nikkei 225 in the Asian session that followed. Then sometimes the USD/JPY drops on the back of movements lower in the U.S equity markets, in spite of a previous rise in Japanese equities the prior overnight session. It would be very straightforward if it were just Nikkei lower, USD/JPY falls and Nikkei 225 higher therefore USD/JPY higher as the JPY weakens. This is what Abe wants!

The JPY has always been sensitive to the US equity markets and that relationship is still there….more or less. As with most trading today we just have to be careful.

The chart below is the Daily chart of the USD/JPY.

<a href="http://www.thepipaccumulator.com/blog/wp-content/uploads/2013/07/USDJPY-MONTHLY-27072013.png"><img class="aligncenter size-large wp-image-1891" alt="USDJPY MONTHLY 27072013" src="http://www.thepipaccumulator.com/blog/wp-content/uploads/2013/07/USDJPY-MONTHLY-27072013-1024x655.png" width="1024" height="655" /></a>

It shows a wedge triangle pattern that has been broken to the downside. These patterns when broken usually offer up big moves. There are however several trend lines on the lower side of the triangle that are muddying the waters for me a little as I do not know which one is in play at the moment and what measured move lower I should be looking at.

The profit opportunities if these moves happen are both large and very large. The lower end move could be as low as 88.50 if the widest triangle is in play or just below 97.00 at the narrow end. The point is we could have a nice move in play or a super duper move in play of 1,000 pips or so. The chart above looks good but beware.

For the life of me I cannot see in a month of Sunday’s Abe allowing the USD/JPY to trade back to sub 90.00….I cannot see him allowing sub 95.00, without him green lighting direct intervention in the Fx market by the BOJ over and above the current QE facility that is there. Trade the JPY very carefully. The moves can be sudden and very, very volatile. There is so much at stake here, not just billions and billions of Yen. The third largest economy in the world has been given a blueprint for the medium and long term ahead and political reputations, as well as longevity of governments at stake. Draghi once said recently “Whatever it takes”…he meant to say when talking about the EUR currency “Whatever it takes and as long as the Bundesbank and Angela agree it’s OK, and then we will promise but never deliver, kick another can down the road…same old same old…” <span style="color: #000000;">With reference to Japan, this is such a huge deal that…”Testicles are in a vice”….the heavily advertised QE policy has to work no B.S. is allowed to intervene. Volatility in extremes can come with such a critical economic goal and path that Abe and Kuroda are taking, it is inevitable. No mater what is needed is the Japanese policy. In the past they have behaved like wets when it came to follow through. This time it's real and if for any reason Abe and Kuroda fall short. For years to come and policy from the BOJ will be deemed similar to "The boy that cried wolf". </span>
<p style="text-align: left;"><span style="color: #000000;"><b>3.   </b><b>MY LONGER-TERM TRADES: -</b></span></p>
<p style="text-align: center;"><b><span style="text-decoration: underline;">USD/CAD:</span></b></p>
<p style="text-align: center;"><b></b>I have been in this trade with a small position for just two days. I tweeted my entry. It is just a small position but I do feel that the CAD has not been acting in parallel with the AUD and NZD in recent days. There have been <span style="color: #000000;">huge gains in both the AUD/USD and NZD/USD pairs testing resistance levels in the past few days. Whilst the USD/CAD moved down about 40 pips in total. Above 1.0300 with the USD/CAD and I feel a squeeze coming on!!
Longer term, I think that this pairs resilience is worth persevering with as it is a prime candidat</span>e amongst the majors for a larger move.</p>
<p style="text-align: center;" align="center"><b> Long
Entry/Cost Average: 1.0285
Stop Loss: 1.0180
Limit: 1.0750
Closing Price: 1.0274
Position Size: 40%
Present Position: -11 pips</b></p>
<p align="center"><b> <span style="text-decoration: underline;">AUD/USD:</span></b></p>
<p align="center">I did not tweet but I entered the AUD/USD short yesterday, taking on what I believe to be a great risk/reward ratio in the long term. It is only a small position and well within my trading parameters/guidelines on money management.</p>
<p align="center"><b>Short
Entry/Cost Average: 0.9252
Stop Loss: 0.9350
Limit: 0.8850
Closing Price: 0.9263
Position Size: 20%
Present Position: -11 pips</b></p>
<b> </b> <b><span style="text-decoration: underline;">4. LOOKING AHEAD INTO THE NEXT WEEKS TRADING:</span></b>
<p align="center"><b>THE MAJOR SUPPORT AND RESISTANCE LEVELS WITH THE USD MAJORS:</b></p>
<b>EUR/USD: Closing Price 1.3278. </b>As I have mentioned already, 1.3300 is a big number for this pair in the coming sessions. I suspect we may hang around where we are, up to “Super Marios” press conference on Thursday. In my mind I cannot see him trying to talk EUR strength but stranger things have happened. He has looked very uncomfortable to me in recent ECB Press Conferences so it will be all eyes and ears open for me on Thursday this week at 08.30 eastern. As stated already above 1.3300 and I think there is a potential for a squeeze to 1.3400. On the support side 1.3250 is first then 1.3160.

<b>GBP/USD: Closing Price 1.5381</b>.<b> </b>I have a trade in mind with this pair and I am scared to place it. Every trade in the recent past with regards cable has gone mental for me not in a nice way. My trade is sell at 1.5430 with stops at 1.5475 looking to get back to 1.5250. Now I’ve written this trade down….ignore it, as it will never happen. GBP/USD is probably either going to gap lower by 100 points on tomorrow night (Sunday 28<sup>th</sup> July) or it is going blast through 1.5500. The range for me is 1.5250 to 1.5450.

<b>AUD/USD: Closing Price 0.9263. </b>This pair is still weak whichever way you slice it up. 0.9310 offers good resistance going forward and it would be a great area to enter short if you are not already in an Aussie trade. Support is good at 0.9130 down to 0.9000. We are still very close to full on break down in this currency. Keep your eyes on Copper. If it sells off, AUD short should be a winning trade.

<b> NZD/USD: Closing Price 0.8082. </b>I am starting to dislike this currency. <span style="color: #000000;">I was once like a "nap" bet for me,</span> a racing cert to go the way I thought it would. Nowadays, Wheeler (Governor RBNZ), is on to me and seems hell bent on screwing with my trades. I think that I have had a lot more failures than successes of late with this currency. I know that Wheeler has said no more interest rate reductions in 2013, but give me a break. This must be the most over-priced currency in the Fx market. What the bloody hell is it doing over 0.8000? When reality sets in this fecker is on its way much lower. Reading the charts however, we need to break 0.8000 as support to get a bearish tone and 0.8100 offers good resistance, prior to 0.8175. If it gets to 0.8175, I am off to trade Cattle and bloody hogs..feck these currencies!!

<b>USD/CHF: Closing Price 0.9283. </b>This pair is acting like the JPY at the moment. The SNB is very quiet at the moment but never rule out intervention from them in particular. They never pre-warn or make mutterings that they are not happy with life. 0.9250 and 0.9200 are key support levels with this pair and things do not in my opinion turn bullish unless we crack over 0.9300 maybe up to 0.9340 is the number to note for a bullish sentiment to return.

<b> </b> <b>USD/CAD: Closing Price 1.0274. </b>So close……I believe a break above 1.0310 gets us a squeeze higher. We hit just over 1.0300 yesterday but could not sustain the move. It’s a pity as I am long….. but enough about my own book. The range is 1.0240 to 1.0310.

<b>USD/JPY: Closing Price 98.27. </b>Holy Mother of God….what the hell is happening with the Yen? That’s just me writing, can you imagine Abe and Kuroda? I fear that direct currency intervention will be ordered in addition to the QE to prevent the JPY strengthening too much. <span style="color: #000000;">What is the level that the BOJ will raise their alert status to red on? Is it  USD/JPY 95.00 or maybe as low as USD/JPY 90.00? </span>They may intervene straightway at the open tomorrow night. <span style="color: #ff0000;"><span style="color: #000000;">The BOJ have had a Sunday opening intervention stint before.</span> </span> We closed to the point on the breakdown key level of 98.27. Tomorrow’s Asian session will be interesting, particularly as trading levels will be thin. If we break below 98.00 with conviction it will get ugly.  I think 96.50 to 99.00 are the numbers to keep is sight. A break back above 99.00 should place the JPY bulls back in control…..for the time being anyway<b>.</b><b> </b> <b> </b> <b> </b>

&nbsp;

<b>5.  <span style="text-decoration: underline;">MAJOR NEWS EVENTS IN THE COMING WEEK THAT INTEREST ME:</span></b>

For me, it will be a quiet start to the week with all the events that interest me coming in the last three days with Non Farm ranking the obvious choice for the most important event in the week.

WEDNESDAY: USD – ADP Non Farm Employment Change
WEDNESDAY: CAD – GDP
WEDNESDAY: USD – FOMC
WEDNESDAY: CNY – Manufacturing PMi

THURSDAY: GBP – Asset Purchase Facility and Interest Rate
THURSDAY: EUR – Interest Rate and Press Conference
THURSDAY: USD – ISM Manufacturing PMi
THURSDAY: AUD - PPi

FRIDAY: GBP – Construction PMi
FRIDAY: USD – Non-Farm Payrolls.   <b> </b>

&nbsp;

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

There is a massive week coming up for Fx related economic data.

Because it’s the summer we really have to careful as many of the larger institutions will have key staff away on vacations and moves will be limited or else wayward and out of control as a result.

Trade carefully and watch out for elephant traps being set on low liquidity false breakouts.

Take care and good luck,

&nbsp;

Scott Pickering
The Pip Accumulator
Saturday 26<sup>th</sup> July 2013.

&nbsp;

Follow me on Stock Twits: www.stocktwits.thepipaccumulator
Follow me on Twitter: <a href="http://www.twitter.com/pipaccumulator">www.twitter.com/pipaccumulator</a>