Weekly Review

I think it's fair to say I'm glad to see the back of the week starting Monday 26 October. It happens occasionally, there is so much going on that you spend your time waiting for an event, only for there to be another upcoming event soon after. But let's have a look at the week as it happened: The week began simply enough, EUR weakness from the previous week carried over into Monday and Tuesday and any war escalation fears subsided. We had to wait until Wednesday for the ‘main events’ to begin. And all in all, I found those events left me feeling a bit ‘stuck in the middle’. The market expected an RBNZ hike, but the bank held interest rates. The NZD weakened but the hawkish guidence gave pause to any thought the weakness would be sustained. And moving forward, I anticipate the NZD will be on the ‘to long list' in the right the environment. The BOC hiked rates, with hawkish guidance. Which is a turnaround from just a couple of months ago, and the CAD could find itself in the unusual position of being a potential long opportunity in a ‘risk on’ and ‘risk off’ we environment. The FED held rates, similar to the NZD, the USD initially weakened. But expectations of a December hike maintains the FED’S hawkish bias, the next question becomes how many, if any, hikes will come next year. The ECB was another central bank that held rates with hawkish forward guidance. The EUR initially strenghtened. But Ms Laggarde stepping down earlier then expected and continued political uncertainty in France, leaves me sceptical EUR strength will last. And ‘fading EUR strength’ could continue to be a strategy moving forward. The final central bank decision was the BOJ. Very often the BOJ deliver a dovish surprise, but this time it was quite the opposite, a hold but a dissenter with a preference to hike, combined with a declaration that 2% inflation has been sustainably hit (to stop inflation rising further another hike is likely required). Leaves me thinking that the JPY could be quite strong over the short the medium term. Especially if the risk environment remains subdued. In other news, the UK budget passed by without much fanfare, perhaps the only takeaway being the significant upward change to inflation expectations, the GBP had a other fairly solid week as it's expected that multiple rate hikes are still required. Finally, I was quite surprised by the overall sluggish price action of the AUD considering hot inflation data, maybe pricing for future hikes has reached a peak, maybe it was the overall subdued risk environment holding the AUD back. Speaking of the risk environment, aside from some ‘lack of escalation relief’ at the start of the week, the main driver of sentiment continues to be a combination of war negativity and AI infrastructure negativity'. Although not disastrous, company earnings haven't quelled the AI issue, I continue to suspect that war negativity will particularly benefit the USD and CAD. Whereas AI negativity is likely to benefit the JPY and CHF. On a personal note, as mentioned, I just felt there was too much going on to form a sustained opinion, it could well be that month end and the approaching US midterms also contributed to the markets lack of conviction. But I did manage to book-end the week with two trades. Mondays EUR AUD short hit profit. Friday's EUR AUD short stopped out before eventually rolling over. As I've said many times recently, it happens and is just something you have to move on from, at least my original bias was eventually proven correct. As the new week begins, I continue to prefer to trade pull-backs in the currencies I have a preference for, rather than chasing strength or weakness (such as trading the EUR short after a period of strength that looks like it will roll over). Results: Trade 1: EUR AUD +1.4 Trade 2: EUR AUD -1 Total = +0.4% Total since start of blog = + 77.2% (risking 1% per trade).