Weekly Review

Central banks took centre stage during the week starting Monday 8 December. My interpretation was that each one offered a slight twist on the markets thoughts leading UK to the event.

Starting with Australia, a hawkish hold was expected. And that's what we got, the twist being the RBA 'overdelivered the hawkish tone', indicating the next move will likely be a rate hike. Later in the week 'soft' employment data took the shine off the AUD. But hasn't altered the RBA'S view and as things stand, I envision the AUD to be on the 'to long list' during the weeks ahead.

Next up, the market was expecting a 'neutral / mildly hawkish hold' from the BOC. And that's what we got, the twist being comments suggesting the Canadian economy isn't out of the woods yet, taking the shine off the CAD. Although sentiment has slowly been turning this past few weeks and I wouldn't be surprised to see USD CAD grind down the the bottom of its weekly range.

Speaking of the USD, the market was expecting a 'hawkish hold' and that's what we got, the twist being, it wasn't 'too hawkish', particularly given the announcement of a resumption of asset purchase (US YIELD negative). Ultimately, FED rate pricing for the coming 12 months pretty much ended the week where it began, throw in PRESIDENT TRUMP'S wall street journal interview (suggesting rates will be a lot lower next year) and I envision the USD to remain on the 'to short list' over the coming weeks.

Finally, perhaps the biggest beneficiary of the week's rate decisions was the CHF. In the lead up to the event, the market was anticipating a 'neutral / dovish hold, with a possibility of the door opening to negative rates. The twist being, we got a 'hawkish hold' with the negative rate door firmly closed for now. And it's difficult to ignore the possibility of a long CHF 'interest rate narrative trade'.

In other news, the JPY remained soft (particularly during the early part of the week) despite increasing suggestions the BOJ will hike at the upcoming meeting. A quick look at the chart does suggest CHF JPY long would have been a shrewd trade.

More soft data from the UK puts the spotlight firmly on the BOE, making it increasingly difficult to maintain the hawkish rhetoric, which could put pressure on the GBP moving forward.

Finally, post FOMC, the S&P pushed all time highs, the positivity was wiped out on Friday, which I'm currently putting down to profit taking. (Traders using a bit of hawkish FED speak and BROADCOM earnings as an excuse to take profits). Maybe the AI bubble concerns will flare up again but for now, I begin the new week with my 'risk on', in particular 'short USD', bias in tact. Although it may be difficult to have conviction ahead of Tuesday's NFP, where a 'hot number' could flip the USD narrative on its head.

On a personal note, it was a slightly disappointing week, three trades two stopped out, one hit profit. The AUD JPY long hit profit by the skin of its teeth, which is a reminder we do get good luck sometimes. I dysn by the principle of both 'risk on' AUD CHF (Tuesday) AUD USD (Thursday), perhaps my 'currency selection' could have been different. But what's done is done and we move forward.

All eyes on NFP.

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

Results:

Trade 1: AUD CHF -1

Trade 2 AUD JPY +1.2

Trade 3: AUD USD -1

Total = -0.8%

Total since start of blog = +48.3% (risking 1% per trade)