Weekly Review
The S&P hit another record high during the week starting Monday 27 April as the market continues to look through higher oil prices. And unlike the previous week, the currencies by and lare adhered to 'risk on correlation'.
Although there was a couple of volatile moments along the way.
The week began serenly enough, Monday and Tuesday's 'price action' was consistent with a mildly positive market mood. It was particularly pleasing to see the JPY and CHF weak, with 'actual interest differentials' seemingly in play. The BOJ followed the pattern of recent rate meetings, the statement suggesting a 'hawkish hold' was once again tempered during governor UEDA'S press conference.
Things really started to hot up on Wednesday and Thursday, there was a lot of information to take in. President Trump got the ball rolling, his words suggesting the Hormuz strait won't be open for sometime, oil rose and sentiment turned a little shaky. Compounding the negativity, the FOMC offered a slightly hawkish narrative, the FED switching from an 'easing bias' to 'no bias'. By early Thursday I was starting the think 'long USD trades' were on the table, it even appeared that very good earnings (GOOGLE, META, MICROSOFT) couldn't save the day. But that all changed as USD JPY swiftly dropped during Thursday's European session. USD liquidity caused the dollar to weaken against everything, there was also a suggestion month end flows were in play and I spent Thursday and Friday trying to desipher if USD weakness was valid.
By the time Friday's ISM data (below forecast) came around, I succumbed to the USD short narrative. But by that point I felt it was too late to get involved in a trade. Despite my feelings that the market is getting ahead of itself regarding the war / oil narrative, having read articles suggesting other central banks are more likely to hike than the FED (ECB, BOE, RBA, BOC), until 'stagflation' fears arise that is seen as USD negative. I will begin the new week with a risk on bias. But aware that anything can happen.
On a personal note, it was a week of three trades. Sticking with my 'session by session' trading, I placed two JPY 'post press conference short trades' on Tuesday, one during the European session, which I closed for break even, one during the US session, which I closed in profit.
On Thursday, post FOMC and following the negative Hormuz news, I thought sentiment was going to deteriate more than it did, placing a GBP USD short, which I closed for a small loss.
A bit of a messy week, highlighting why I much prefer to let trades complete one way or another, which makes the mathematicss lot clearer. But for the time being I will continue with the session by session trading.
Please feel free to email any thoughts or questions: johnelfedforexblog@gmail.com
Results.
Trade 1: AUD JPY 0
Trade 2: AUD JPY +0.8
Trade 3 GBP USD -0.2
Total = +0.6%
Total since start of blog = +54.6% (risking 1% per trade).