Weekly Review

There was a 'last week of vacation feel' about a large part of the week starting Monday 24 August. Throughout the week I was commenting how amongst the back and forth war headlines and generally low volatility, it just felt like there was always something on the horizon to stop the market committing. Be it CORE PCE DATA, NVIDIA EARNINGS or the week's main event, CHAIR WARSH'S speech at JACKSON HOLE.

Although we did get a couple of headlines to chew on whilst we waited. Namely 'hot' AUD INFLATION data, which keeps a RBA rate hike firmly on the table and ensured the AUD was the week's best performer.

Recently, sentiment has been slowly turning positive for the CAD, data has been gradually improving. But US / CANADA tariff negotiations hit a stalemate and the CAD suffered, especially during the early part of the week.

Once again, the BOJ was unnervingly quiet. JPY intervention strength continues to unwind, even strong suggestions a rate hike is highly likely at the September meeting hasn't supported the YEN. I continue to see the JPY as a potential short opportunity. But as ever, 'out of the blue JPY strength' remains a risk to any YEN short trade.

In-line with expectations CORE PCE data and positive NVIDEA earnings, although good news, both events passed without much fanfare as it transpired there was really only one thing on the market's mind....CHAIR WARSH'S JACKSON HOLE speech.

Given the new fed chair's reluctance to give specific forward guidence, it was questioned just what we would be able to gleen from the event. But specific forward guidence and implied forward guidence are two different things, with the same outcome non the less. And the market was left in no doubt of MR WARSH'S hawkish intentions. Dismissive of recently soft inflation data and suggesting policy is not yet restrictive, yields reversed recent losses and the probability of a September rate hike increased. The USD strenghtened accordingly.

As we enter the new week, where does that leave us?

Once again, at a time it looked like the USD was about to significantly weaken, the dollar fought back. And once again, all eyes revert to upcoming data for signs of, if any, or how many hikes the FED has left. For now, I have to assume the USD will maintain it's strength, at least until the next round of significant data. With yields back on the rise, it leads me to think the market, specifically the currency market, will focus on interest rate differential. And all roads lead back to CHF short (or JPY short if you have the stomach for the intervention / rate hike / merry go round).

On a personal note, I spent a lot of the week waiting. I had ideas of what I'd like to do but didn't have confidence in certain charts making new highs or breaking out of tight ranges. Arguably the CAD was shortable on Monday but I didn't trade it. And arguably the AUD was longable all week but as mentioned, I was reluctant to ask for new highs ahead of the slue of risk events.

I did manage two trades, although I must say that I got very lucky with one of them.

Following the hot inflation data, I had a firm eye on AUD NZD long, especially as New Zealand had reported it's own softer data earlier in the week. I traded AUD NZD long on Wednesday, which in itself, I would suggest was a good trade. My mistake was that I placed the trade during Wednesday's European session and took the risk of trading through US CORE PCE data. The trade hit profit. But historically, I don't trade through red flag events and with retrospect, I should have stuck to that rule, it was too much of a risk to run the gauntlet of the reaction to the data and the potential of widening spreads as the data was reported. Just like good decisions have bad luck, bad decisions can have good luck. And I'll thank my lucky star that I got away with that one.

Friday's trade was much more straightforward. USD CHF long, shortly after chair WARSH spoke. 'in the moment news trades' are perhaps not as relaxing as a straightforward trade with a lot of support to hide a stop loss behind. But I felt the USD momentum was too strong to ignore, placing the trade with a stop loss behind the open of the initial speech candle. Which will suffice in the absence of a swing. The trade hit profit and my good run from the last 6 weeks or so continued. Which is a reminder that the losing trades are never far away.

Let's see what the new week brings, until I'm proven wrong, I'll continue to focus on potential CHF short trades. Vs whichever currency I feel is the most suitable at the time.

Results:

Trade 1: AUD NZD +1.3

Trade 2: USD CHF +1.2

Total = +2.5%

Total since start of blog = +73.4% (risking 1% per trade).