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

Quite often I start off my blog with phrases such as “Well what a week that was” or “That was a great week for trading I hope you made some good pips”…I always end my blog by saying “Take Care” or “Good Luck” I nearly always have in my final thoughts and comments section words along the lines of “Trade small with wider stops to cope with volatility”.

What about Thursday just gone?

Holy Mother of God…talk about volatility…many people are saying the collapse of the USD longs on Thursday was in the main due to the fact the BOJ has the market one sided. The correlation of the Equity markets rising as the USD gained strength created an unbalance based upon a flawed theory that eventually something had to give. Well it did it in style on Thursday late morning after the ECB press conference had completed. That itself was a bit of non-event news wise, but the USD had started to weaken after Draghi had packed up and finished.

Parabolic moves across all the USD majors 250 ATR’s in minutes incredible…The last time I saw this was a couple of years ago on the fake crash, when the majors in particular the JPY pairs dropped 400 pips or so and pulled right back in 30 minutes. The pullback was not a complete reversal on Thursday but the squeezes were fast, hard and directional. I lost and made money trading as I was initially caught the wrong side.

There was so much heavy news this week it was predicted that there would be volatility, but I thought it would be limited to the AUD/USD and NZD/USD in the main with the USD/JPY still trying to find support and then possibly making a move higher again.

We got a lot more than that, some sweeping moves across all the majors, and the USD/JPY sell off, and then move higher yesterday just incredible. After Non-Farm, the USD/JPY moved up 60 pips then down 160 pips and then rallied up 250+ pips all in 3 hours.

I hope those of you who trade took advantage of the volatility and weren’t caught too much the wrong side of trades that were not too painful to get the right side of.

&nbsp;

&nbsp;

<span style="text-decoration: underline;"><b>2. MY VIEW ON THE NEWS SEEN FROM MY TRADING DESK:</b></span>
<p style="text-align: center;"><strong>WHATEVER DRAGHI IS SMOKING…GET ME SOME OF IT!!</strong></p>
I must be missing something. I thought that I was wide-awake for the ECB rate decision and ensuing press conference last Thursday.

I thought I made reasonable notes of what was said, and, when viewing the TV coverage I once again thought that Draghi looked a little squeamish when reading his prepared statement. In the Q &amp; A at times, he looked to me as being decidedly uncomfortable. Maybe he was not on board with what Angela and Bundesbank had told him to say? He looked nervous and uneasy to me.

I know that these guys want to paint a brilliant picture of achievements that they have been associated with connected with their jobs. However, Draghi’s role goes beyond this, and if he is heavily directed by Berlin he needs to take a step back and look at his position. He emphasized a little longer than usual this month about the improving economic data in the region.  This is a bit rich in my opinion; we have seen modest improvements in quite pathetic PMi data across most of the region in the past week. The underlying picture, however, is so poor it’s hard for me to comprehend how anything other than more help is required to stimulate the region. This to me can be the only course of action or option available, and the 100% focus of all parties who should make things happen, this includes Draghi and his chums at the ECB.

A rate cut is the obvious method that is direct that can help all the ailing Eurozone economies, in particular, those in the south of the region and those bordering the Mediterranean, namely, Spain, Portugal, Greece and to some extent Italy, not forgetting Cyprus. Focus needs to be directed into those countries that are struggling. The whole of the Eurozone needs to be working at the same time. To me the Eurozone project just looks like a three-tier system from the Agricultural revolution, but instead of fields being sectioned we are looking at countries. Allegedly, the Eurozone is one country one vote.....hmmmn...how does that work with Germany?  Oh yes, I remember they run the Eurozone like a region similar to Bavaria. The only difference - they all talk a bit funny!

All of the named countries above have most of the following issues: -
<ul>
	<li>There are record figures of high unemployment. In particular record numbers of young people not able to find employment.</li>
	<li>The banking sector causes many concerns over being under-funded. If a bank stress test took place tomorrow in Europe, instead of the “wishy-washy” affairs of late, a true test, how many of the struggling countries banks do you think would be capitalized sufficiently?</li>
	<li>A depressed housing sector with high levels of mortgage arrears and defaults. This places a further burden on banks and I really wonder are the true levels of bad and doubtful debts being reflected.</li>
	<li>Social Welfare costs rising due to high unemployment.</li>
	<li>There are sooooooo many issues of social welfare etc,. Both health and education departments suffer intensely as cutbacks due to lack of cash available to Finance Ministers bite. This is due primarily to a lack of income in taxes, as people are not working, and families cut back on spending. Both direct and in-direct taxes are producing less revenue for governments to spend, even in key areas.</li>
</ul>
Both Spanish and Italian Manufacturing PMi’s improved but both are still below the key 50 level (recession/growth) Spain 48.1 and Italy 47.3. Services PMi were a little different, the Spanish improved to 47.3 and Italian services PMi actually dropped to 46.5.

Please don't called me a “kill–joy”, but let’s face facts, it’s stimulus to promote growth which is required in the Eurozone, not a pat on the back to say that we hope to see a gradual recovery in 2013…this is bulls**t. It’s all a game, one-minute growth and inflation targets are reduced, and then these new numbers are talked about as a beat if they are achieved a few months later.Recently the ECB cut their growth and inflation objectives, but they raised the GDP forecast for 2014. Now they are predicting the Eurozone economy to contract in 2013 by -0.6%, previously -0.4%. They expect GDP growth next year to hit 1.1% instead of 1.0%...crack open the Bollinger!!

However, the outlook remains to the downside because of reforms, they do however hope that exports and monetary policy will be the key drivers of the area moving forward. I get it, but tell this to the thousands and thousands of people waiting in unemployment lines for benefits, trying to keep their house around them and children fed. It’s not that good Mr. Draghi, I believe you are not pushing the politicians to act correctly to ensure your schemes to support the Eurozone financially are being utilised properly.

Such a shame, but it is so Eurozone. There is no harmony in approach, there is no pulling together to ensure core strength and total unity in direction. I have said it on many occasions before that I believe the Eurozone project introduced by Germany and France, whilst a brilliant conceptual idea in principle, it is totally flawed because there are 19 different countries with differing needs, differing cultures, different wants and totally different mentalities.......all using the same cheque book.....come on...give me a feck**g break and smell the coffee!!

Onwards and upwards, moving on, as Fx traders,  given what happened on the squeeze Thursday and after yesterdays Non-Farm payrolls, next week is another opportunity.

Without doubt the EUR/USD looks tasty for short up around 1.3280 – 1.3340. However, we are caught in the middle of quite a range at the moment so be careful, the range being 1.3150 to 1.3340. We are towards the lower end closing yesterday at 1.3215. Fundamentally, all is not well in the Eurozone.  There are so many cans kicked down the road, we need “Waste Management” to come and collect them!!

I would personally wait until Monday and let the Asian and European Monday trading pass by before getting stuck in once again. I think given the underlying volatility that is around, let the market try to settle and get directional again.

I am still a USD long trader at the moment. Without doubt Thursday’s squeeze should have balanced the Fx trading balances somewhat. Longer-term, before the year-end, I still see the EUR/USD much lower, sub 1.2650.

Patience is what is required. Remember, the Eurozone, is one calamity after the next and there is so much bubbling just under the surface right now, just give it a little time.

&nbsp;

&nbsp;

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

<span style="text-decoration: underline;"><strong>NZD/USD:</strong></span>

I did not tweet this entry yesterday after Non-Farm payrolls.  The break of 0.7900 was a very key level; previously 0.7925 had been holding this pair. A close yesterday below 0.7900, makes the outlook for this pair very bearish.

Given that the RBNZ has intervened directly in the Fx market to weaken this pair and the fact that there is a RBNZ Rate Statement and Press Conference this week, this added to my decision to enter and hold.
0.7500 is my initial target. I feel this pair could have 0.7000 written all over it soon, although I will be looking for guidance from RBNZ governor Wheeler on this point, I think an orderly decline towards somewhere between 0.7500 and 0.7000 may be their target.
<p align="center"><b>NZD/USD
Short
Entry/Cost Average: 0.7935
Stop Loss: 0.8050
Limit: 0.7500
Closing Price:
Position Size: 40%
Present Position: +52 pips.</b></p>
<b> </b>

<b> </b>

<span style="text-decoration: underline;"><b>4. LOOKING AHEAD INTO THE NEXT 5.5 DAYS OF TRADING:</b></span>
<p align="center"><b>THE MAJOR SUPPORT AND RESISTANCE LEVELS WITH THE USD MAJORS:</b></p>
<b>EUR/USD: Closing Price 1.3215. </b>We are caught in the middle of quite a range 1.3150 to 1.3340. Personally, I would wait for a move out before entering a trade, or, alternatively my preference would be to establish a short position around 1.3300.

<b>GBP/USD: Closing Price 1.5552. </b>What a wild ride this pair has been on over the past two days. I think we are pretty much caught dead centre of a range 1.5500 to 1.5600. Wait for a confirmed directional breakout.<b> </b>

<b>AUD/USD: Closing Price 0.9493. </b>There was a good bounce off the lows yesterday but the downside pressure still remains intact. 0.9400 now looks like the next support to break through. Resistance is at 0.9600.<b> </b>

<b>NZD/USD: Closing Price 0.7878. </b>We closed below the key 0.7900 level, I think this pair for reasons already mentioned before in the blog is heading much lower and the support to weaken this currency from the RBNZ should not go unnoticed. Like the Aussie we bounced a little from the lows but I think 0.7800 will be not too far away maybe even overnight Sunday into Monday this week. Resistance should be at 0.7925 then 0.7950.

<b>USD/CHF: Closing Price 0.9357. </b>I have not been following this pair much over the past few days.  Yesterday morning, I made a note in my trading log to watch the levels 0.9200 to 0.9400 for breakouts. We almost broke out to the high side yesterday but not quite I recall highs of around 0.9375 or so.

<b>USD/CAD: Closing Price 1.0193. </b>Some great numbers on Canadian jobs strengthened the CAD yesterday and pushed the pair below 1.0200. I think we are now back in the following range 1.1050 to 1.0240. We need a break to give us a clue of what the next move is going to be. I would use this pair next week as your guide on how the USD is going to perform. This is a good/lead indicator to use. Normally, I would say watch the AUD/USD but that pair is on a one way track lower, so at this stage the CAD should provide better guidance.

<b>USD/JPY: Closing Price 97.51. </b>This pair has been like a “Six Flags” roller coaster over the past week. I really do not know how to play this pair as it’s all over the map. Moves of 200+ pips a day one way then the other. It is a big range on my charts 96.20 to 99.00. Good luck with this one!

&nbsp;

&nbsp;

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

MONDAY: JPY - Monetary Policy Statement
TUESDAY: JPY – BOJ Press Conference

WEDNESDAY: GBP – Claimant Count changes (Unemployment numbers)
WEDNESDAY: NZD – Cash Rate, RBNZ Press Conference and Rate Statement.
WEDNESDAY: AUD – Employment Change and Unemployment Rate.

THURSDAY: USD – Core Retail Sales.
<span style="text-decoration: underline;"><b>6. FINAL THOUGHTS &amp; CLOSING COMMENTS:</b></span>

So looking ahead, maybe not as full as last week on the news front, but I still think that there may be some unfinished business lurking in the JPY pairs. This means that we should always trade smaller with wider stops and protect ourselves as traders.

I am expecting pressure to continue to the downside with the AUD/USD and NZD/USD and these pairs will be the main focus of my attention in the coming days, hopefully weeks.

Take care and good luck,

Scott Pickering
The Pip Accumulator
Saturday 8th June 2013.

&nbsp;