What I Wish I Said

I was honored today to be on @spz_trades’s last show on BFTD.tv with @NicTrades. @NicTrades is a superwoman who chatted markets in the middle of a power outage. She rocks. Some of her key observations for 2014 that I took away:

  • $AUDUSD to 0.9000 off the double bottom
  • $USDJPY to 112
  • USD lower and USD pairs higher
  • $EURUSD to 1.43
  • Correction in $SPX, $DAX and $FTSE
  • Stocks will have to rally on their own merit, not QE

I was clearly the student in the room and now in hindsight there are a number of thing I WISH I could say now. SMH. Face plant. So I’ll say them here.

  • I do see $EURGBP higher to 0.8600. I also still see heading lower in 2014 to 0.8000. It might happen way sooner than I imagined if current price action is any indication.
  • $GBPAUD is due a correction lower. Much lower. But if it were to correct to 1.7670 the 50% Fibonacci level, hold, and rip to new highs at 2.10, it would be the trade of the year.
  • Other great follows right now on Twitter for new traders that I didn’t mention: my traders list

I love that this blog gives me the opportunity to reflect on myself and remain true to who I am. I don’t know if it was nerves (Nic is a rock star!) or because I had company the night before, but I don’t feel like I came off myself today. Hopefully, you all can enjoy listening in on this chat about markets and trading for 2014.

Central Bank Tailspin

Like I said this morning, I don’t trade with central banks. When a central bank is actively manipulating their currency, that is a currency that I will not trade. As of last week, the Australian dollar was officially listed on my no-trade list.

And you can see from price action. Of the 4 GBP pairs I actively trade, $GBPAUD is the only one that has remained buoyant. It has even hit the long-term bull target I pointed out weeks ago at 1.8250. Last week, RBA Governor Stevens openly admitted to intervening in the forex markets to deliberately weaken the AUD. He even went as far as to tell markets that his preferred level in $AUDUSD is 0.85. That’s 500 pips away so you can imagine what has to happen to the AUD from current levels. Though technicals had pointed to a significant dip in the $GBPAUD below the big 1.80 psychological level, I suspect that the $GBPAUD remains bullish as dips will be aggressively bought in anticipation of RBA intervention.

Despite the tinkering in the AUD markets, GBP remains on the back foot as this new trading week opens. Even as a general GBP bull, I still remain bearish sterling near term as I believe these monster rallies are also deserving of some monster corrections. After last week’s action, the weekly chart is now my chart in play.

Mentioned above: BTFDtv.com Fx Update Desk interview

$GBPUSD

$gbpusd_12_17_13_5_38_AM

$EURGBP

EURGBP WEEKLY CHART

$GBPNZD

GBPNZD WEEKLY CHART

$GBPAUD

GBPAUD WEEKLY CHART

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GBP/AUD Tests The Top

$GBPAUD ripped higher on the back of a AUD weakness-GBP strength double whammy. During the Asian session overnight, the Reserve Bank of Australia Governor Glenn Stevens jawboned the Aussie off a cliff. In fact, the market is now pricing in an increased 60% chance of a RBA rate cut in August. As a result, the AUD was throttled across the board allowing the $GBPAUD to rally to 1.6750. Then UK services PMI surprised to the upside and further carried the $GBPAUD to new highs at 1.6858.

GBPAUD 4hr chart

With this news-induced rally, one would anticipate that the $GBPAUD would have broken to new highs on the daily chart. After all, the fundamentals just laid out should support such a breakout. The $AUDUSD certainly did break down to lows not seen in 3 years. The $GBPUSD found a bottom at new lows to break above 1.6250 resistance that had capped price all week. And yet we find the $GBPAUD struggling to take out the top at 1.6877. Perhaps the market awaits the BoE decision tomorrow. Perhaps the market will wait for the 4th of July holiday to pass. Whatever the reason, bulls should be cautious. This rally is looking exhausted with the weekly chart is still working out overbought conditions. All of which makes the $GBPAUD very toppish at these levels.

 

Mentioned above: