Weekly review.
Sometimes you look back on a Forex week and think, goodness me, that was easy. Three 'no brainer' trades fall into your lap and everything happens as you think it will. Other times, you look back and think, wow!, that was difficult! And the week starting Monday 8 January definitely comes in on the more difficult end of the scale. The difficulty comes from uncertainty, the uncertainty comes from 'the market' trying to price in rate cuts and a disinflationary soft landing environment. But the FED pushing back, suggesting everything isn't quite as good as the market thinks. And then the data is coming in mixed, which leaves us stuck in the middle.
The early part of the week was very flat and it became apparent that everyone was waiting for Thursday's CPI data. Fortunately, softer than expected wage data from Japan presented a Yen short opportunity on Wednesday. Then it was time for Thursday's CPI data, which came in higher than forecast, combined with lower initial jobless claims released at the same time. It looked like the FED was winning the battle and the dollar initially strengthened as you would expect. Only for the move to completely reverse without a catalyst. Then on Friday, another inflation metric, PPI data was released. This time it was lower than expected and it looked like 'the market' was right after all. The dollar initially weakened, but once again the move reversed, although this time perhaps caused by fears over the middle east, soft bank earnings and a reluctance to hold trades over the weekend.
Moving into next week we have US retail sales and more earnings from the S&P 500, which will give an indication on the state of the consumer. The middle east tensions could flare up at any moment. An election in Taiwan could play a part if China doesn't like the outcome. And of course, we have the "when will they cut rates" question. There are a lot of moving parts and that's before we even consider the actual fundamentals of the individual currencies, which are playing second fiddle at the moment.
Like I said, it was a difficult week. But take heart, clarity will appear out of the blue and trading will seem easy again. And the good news is, we only need to win 50% of our trades to make money, even when it's a difficult market we can still do that. It just takes a little more brain power.
Please email if there's anything you're struggling with: johnelfedforexblog@gmail.com
Results for the week.
Trade 1: USD JPY +1.5
Trade 2: USD JPY -1
Total = +0.5%
Total since start of blog on 19 June = +20.5% (risking 1% per trade)