Wednesday 27 May:Two forces in play.

It seems to me that two narratives are battling it out to control the currencies so far this week.

1: It goes without saying: The positive US / IRAN rhetoric has provided a 'risk on' environment. Rightly or wrongly I've been reticent to get carried away with the positivity. Simply because of the recent up and down headlines, although I must say I've been extremely close to thinking we are at the 'end game'. Especially when reports from IRAN suggest the HORMUZ STRAIT will be fully operational within one month. That's what the market needed to hear. But, I do think President Trump's 'not quite there yet' comments justify my reticence.

2: Interest rates: The overall core driver of currency Vs currency has always been, and will likely always be: Interest rate differential. Sometimes it's the actual rate, sometimes it's 'forward guidence'.

Today, the astute among us would have jumped on NZD CHF long (surprisingly hawkish RBNZ Vs 'no hope of ever raising' CHF. Possibly even AUD NZD short following soft AUD CPI data.

The USD is tricky, caught between the possibility of higher rates (hawkish FED) and the 'war trade reversal' (weaker USD).

The JPY is also tricky: Don't want to raise rates but probably need to. Should the JPY strenghten on the likelihood of a rate hike, or should it weaken in the 'risk on' environment? And that's before we even think about the possibility of intervention.

As things stand I do feel like I've missed an opportunity so far this week, namely NZD long. But something I'd like to emphasise is "focus on the decision....not the outcome'. The outcome of your 'trade or no trade decision is irrelevant.' The only thing that's relevant is your profit to loss ratio when you do finally feel at peace with a trade.

I will delve deeper when I deliver my long overdue 'Thoughts after experimenting with AI'.

For now, Im waiting for the moment I feel confident in NZD CHF long. But of course, we are only a headline away from a change of course.

Please feel free to email any thoughts or questions: johnelfedforexblog@gmail.com