Weekly Review
AI concerns once again dominated the narrative during the week starting Monday 9 February. The week started fairly serenly as the previous Friday's positivity was carried over. But by Wednesday, concerns over how many jobs AI will ultimately replace started to grip the market. Sentiment remained subdued for the rest of the week and it appears the AI euphoria stage has been replaced with confusion and uncertainty. Making an already difficult environment that little bit harder to navigate.
The JPY was also in the headlines this week, immediate post election weakness turned into a week of strength. Contary to the standard inverse correlation, the yen strengthened alongside the NIKKEI. The government toned down potential stimulus, Japanese bonds stabilised (which is confusing because in general, rising bonds = currency strength, but bonds rising too rapidly = worry).
USD JPY unwound, which is likely a big contributor to overall USD weakness throughout the week. Even very positive NFP data couldn't give the dollar sustained strength. And attention slowly turns to how many rate cuts the FED will implement this year.
Ordinarily, a below forecast US CPI print would induce a 'risk on tone'. But overhanging AI concerns stunted any positivity.
Finally, continued hawkish rhetoric from the RBA 'should' keep the AUD supported, particularly in a risk on environment. But I begin the new week without a clear bias, my preference remains for risk on trades but I'll be keeping an eye on the VIX to determine if the negative AI narrative will linger. I'm not adverse to placing an AI based 'risk off' trade.
With the S&P closed on Monday for Presidents day, we might have to wait until Tuesday to know what the market really thinks.
On a personal note, it was a week of two trades, both taken during the relatively calm early part of the week when the USD was particularly weak. a GBP USD long on Monday and AUD USD long on Tuesday. Both trades hit profit.
I spent Wednesday perplexed by the USD post NFP reversal. And the rest of the week trying to guage whether the AI concerns would continue or reverse. Ultimately not gaining enough confidence in either direction and sitting on the sidelines.
That's actually now five trades in a row that have hit profit. I think it's very important to note, that is very rare, it's easy to feel invincible during a winning run but important to remember that no matter how well you think you are trading, a 50% win ratio over the course of a year is extremely good. Losing trades will never be too far away.
The exact opposite can be said during losing runs.
Thank you to everyone for your support, please feel free to email any thoughts or questions: johnelfedforexblog@gmail.com
Let's see what the new week brings.
Results:
Trade 1: GBP USD +1.5
Trade 2: AUD USD +1.3
Total = +2.8%
Total since start of blog = +55.6% (risking 1% per trade)