Weekly review
The week starting Monday 21 October was another week I found difficult to form a concrete conviction in the direction of the currencies, all in all it was a fairly subdued currency space. As the market waits for 'bigger fish to fry' over the next couple of weeks.
The early part of the week did see USD JPY quickly rise above 150, the BOJ are apparently in no rush to hike rates again. Of course, the inevitable back tracking began soon after, with comments such as "monitoring rapid currency moves". My preference remains for short JPY, but the threat of intervention, verbal or actual, will hang over any short yen trades.
It's becoming increasingly difficult to ignore AUD weakness. I'm very reluctant to short the AUD, based on the underlying fundamentals of the hawkish RBA and positive data. Is the AUD a victim of 'the Trump trade'? Is the market anticipating the RBA is 'behind the curve' with rate cuts? Whatever the reason is, it appears it's going to take a fresh injection of positivity from somewhere to re-ignite AUD strength.
Opposite to the AUD, the fundamentals for the EUR remain tentative. Although, the EUR had a resilient end to the week. I've read an uptick in German PMI data was an excuse for traders to take profits from 'oversold' short EUR positions.
All in all, I begin the new week with only the potential of USD longs on my mind. Whether that's Vs the JPY or any of the other currencies depends on the charts and the narrative of the moment. And I'm increasingly content to stay patient and wait for 'a cluster' of 1hr swings to place a stop loss behind.
Although, those 'bigger fish' are imminent. I keep reading the next two weeks will be pivotal for the narrative into year end.... It's a big week for tech earnings (will the likes of Microsoft and Amazon re-ignite the soft landing risk on trade?). Or will another 'hot NFP' number induce the potential for a FED pause? Which would keep the USD on the front foot.
It's been particularly difficult to get to grips with the market narrative lately. But take heart, there will be easier times ahead.... Once the US election and the next FED meeting are out of the way, I'm hopeful things will settle into a groove one way or another.
On a personal note, my reluctance to trade the JPY short whilst USD JPY was at 150 meant I didn't catch the initial yen weakness. But it was a week of two trades non the less. An AUD CAD 'relative fundamental' trade, I was anticipating CAD weakness into the BOC meeting. But the trade stopped out very quickly when the CAD tracked a burst of USD strength.
The BOC did cut rates by 0.5bp, the Cad initially strengthened. But once that strength reached 4hr support (CAD resistance) Vs the USD, I placed a long USD CAD 'support and resistance' trade, which went on to hit profit.
Results:
Trade 1: AUD CAD -1
Trade 2: USD CAD +1.5
Total = +0.5%
Total since start of blog = +33.7% (risking 1% per trade).