Weekly Review
The USD is never too far from the centre of attention. But the spotlight shone even brighter than usual during the week starting Monday 17 August.
Softening data and growing calls for a September pause, ensured the USD began the week on the back foot. Then Wednesday's surprise announcement that the US TREASURY will double long end bond purchases, bought an extra leg of USD weakness as bond yields fell. The underlying reasoning is quite complicated as the treasury essentially plays pass the parcel with debt. All we really need know as short term traders is the cause and effect. And then discern whether the momentum makes it tradeable. When new things happen, it always helps if the movement alignes with the recent tide of sentiment.
There was a very brief period on Thursday when it looked like fresh middle east agitation looked like it could escalate. But if there was a chance this could support the USD, it was dashed when Treasury Secretary BESSENT, reaffirmed long term bond purchases, even saying it could be more than the initially stated double the current amount.
It was interesting that at the peak of USD weakness, it was the CHF that benefited the most against the other currencies. I noted during the week that I felt this was 'fake strength' based on USD liquidity. Which made sense as the CHF had previously been very weak, so there was 'more to unwind' if that makes sense. Moving forward, I still consider the CHF a very good short opportunity, in fact, this week's bout of strength could ultimately do us a favour bringing a nice pullback from overbought conditions.
In other news, soft data from China and Australia dented sentiment for the AUD. But I think ultimately, a positive risk environment, high inflation in Australia and a pledge from China to support the economy, will keep the AUD on the 'to long list'.
Mixed data from the UK keeps us guessing if the BOE will hike again. But similar to the AUD, a positive risk enviroment and a mild BOE hiking bias, keeps the GBP on the 'to long list'.
It was an interesting week in Canada, recently, higher than forecast data has slowly started to turn sentiment for the CAD. But uncertainty surrounding a tariff deadline that came and went without resolution and uncertainty in the price of oil, makes it difficult to have true confidence in the future direction of the CAD.
It was another quiet week on the JPY intervention front, as strength from the recent intervention continues to unwind. I continue to have the JPY on my 'to short list' as part of a 'risk on trade'. But imminent rate hike or intervention chatter could give the JPY bouts of strength at any moment.
In summary, Treasury bond buying may only have a short term effect, US data (and Hormuz strait news) is likely to be the long term driver of the USD. As discussed, recent data suggests a prolonged FED pause, although Fridays ISM SERVICE data may provide the USD with a bit of respite. But I begin the new with with a continued bias for 'risk on trades', which could involve, CHF, USD or JPY short trades.
On a personal note, I think it was my best ever week as a trader. Five trades, four closing in profit.
It was interesting that three of the trades were placed during the Asian session. Starting on Sunday, I already had a bias for USD short and I just felt the charts aligned for an entry following a little pullback on the previous Friday, placing EUR USD long.
By Monday morning, still with a CHF short bias, I placed GBP CHF long during the European session. The trade was closed in profit before end of day.
Once the hand-over had passed, noticing the USD had now pulled back and created support. I placed AUD USD long as Tuesday's Asian session was getting underway, the trade hit profit. And that was a remarkable 3 trades in 24 hours, something I doubt I will ever repeat.
Once the Treasury bond buying announcement hit home, I felt the CHF was too strong to short. And it was a case of waiting for a USD pullback. Eventually placing a NZD USD long during Thursday's European session, this was the trade that stopped out. I noted at the time that the support wasn't perhaps as strong as I'd like. And it's a reminder to myself not to be too confident. But I got a second bite of the cherry, as Friday's Asian session was getting underway, I felt the deeper USD pullback had created substantial enough support to place another NZD USD long.
On Friday, I passed on what I thought was a potential CHF short opportunity. I felt the higher than forecast SERVICE ISM data would return focus to interest rate differential. And I begin the new week with short CHF at the top of my list. But also, 'risk on' trades in general. Although the ending of the 60 ceasefire in the middle east could create volatile headlines.
I think it's important to note that it was a good week, it's actually been a good couple of months, to date I've surpassed last year's yearly percentage gain. But it's important to rember that just like winning streaks, losing streaks happen. Losing trades happen every week and losing weeks happen. Over time, the win / loss percentage always balances out to around about 50%. And that's all we need to have a successful year.
Results:
Trade 1: EUR USD +1.5
Trade 2: GBP CHF +0.7
Trade 3: AUD USD +1.2
Trade 4: NZD USD -1
Trade 5: NZD USD +1.3
Total = +3.7%
Total since start of blog = +70.9% (risking 1% per trade).