Weekly Review
The week starting Monday 18 August began with muted sentiment as the market had CHAIR POWELL'S JACKSON HOLE speech on its mind. Uncertainty over what MR POWEll would say caused an overall lack of conviction in the market. Uncertainty surrounding ongoing UKRAINE peace talks added to the pensive mood.
We did get a couple of 'pre Powell appetisers' to keep us entertained, namely 'soft' Canadian CPI data, which put a BOC September rate cut firmly on the table, weakening the CAD. And a 'dovish cut' from the RBNZ.
But ultimately, JACKSON HOLE was the main event. And Mr Powell didn't disappoint. Walking a fine line between inflation and jobs stability. Putting an emphasis on the labour market and indicating rate cuts are coming, the speech was taken as 'dovish', all of the dollar's weekly gains were erased. And the scene could be set for further USD weakness.
Of course, it will still come down to the 'data'. But I'll begin the new week with a 'risk on' bias. Suspecting the USD could be the 'go to short', particularly since the BOJ still has a 'mild' hiking bias. But not ruling out potential JPY or CHF 'shorts'.
In other news, it was difficult to read too much into the GBP and EUR weakness 'pre powell'. I put the exaggerated weakness down to an unwinding (profit taking) of the previous week's strength and perhaps the mild disappointment over ongoing UKRAINE peace talks.
On a personal note, I felt it was going to be difficult to have confidence in a bias 'pre Powell' and I was pleasantly surprised by the CAD opportunity caused by Canadian CPI data. Placing a CAD JPY short. Which turned out to be my only trade of the week.
On Wednesday and Thursday I must confess I rested on my laurels and took the opportunity of a couple of days mental rest, I hope you'll forgive me that. It did mean I missed a potential RBNZ catalyst trade. But it does open up the question, why not just shut up shop every week if you have a trade hit profit by Tuesday? Ultimately, you have to work of the assumption that over the course of a year, 50% of your trades will stop out. Therefore (placing only one trade per week) you'd have to risk a much higher percentage each trade maybe 5%. And that's not something I'm willing to do. Plus overall, it bodes well to maintain a daily stream of market knowledge, soaking up the information like a sponge. I find I feel 'too out of the loop' if I only read for two days a week.
On Friday, I would suggest there was a USD 'in the moment news catalyst'. Where a USD short in the immediate aftermath (10/15 mins) of the speech was viable. Unfortunately, I arrived at the charts a little while after the speech, and because it was Friday, I felt the opportunity had gone.
But, as mentioned, I'll begin the new week with a bias for 'risk on trades'. Particularly USD short, I'm very curious to see if the US 10YEAR YIELD falls below 4 .2 over the coming weeks.
Please feel free to email any thoughts or questions: johnelfedforexblog@gmail.com
Results:
Trade 1: CAD JPY +1.5
Total = +1.5%
Total since start of blog = +42.5% (risking 1% per trade).