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A trader came to me recently for some help with a struggle he was facing: after a period of winning trades, he would get somewhat exhuberant or excited, and would have the urge to trade more.

Sound at all familiar? If you’re facing the same situation or something similar, know that you’re not alone. We all face similar challenges because, at the end of the day, we’re all human and we all want approximately the same things.

In this blog post I will share my conversation with this trader, hoping that it may inspire others as well.

Satisfaction and Excitement

It’s natural to experience some positive emotions after a nice winning streak in the market. Trading is frustrating at the best of times, so when we do get that combination of preparation, skill and luck which produces a nice winning streak, it just feels good!

However, there is a difference between “satisfaction” for a job well done, and “excitement”. In the words of the trader:

…and then I am too happy, just like today [the winning streak] pushes me to trade more (tempting me to do so) but I did not. Resisting the urge was so hard. 

When we get excited or demoralized by a string of wins or losses, chances are that we’re no longer trading the markets and our plans. We’re starting to trade our emotions and our feelings. Here is how I approached the matter.

Step 1: Mindfulness

If you search for Jon Kabat-Zinn on Youtube, you’ll find everything you need in this matter. At it’s core, mindfulness combines deep diaphragmatic breathing and a calm mind. Put yourself in a relaxed condition, isolate yourself from distractions and start breathing deeply.

Then, concentrate on your breath. Bring your mind to a stand-still by focusing on your breath and the air going in and coming out. This will be extremely difficult initially, because the mind starts to wander. It doesn’t know time or space, so it may wander to what you ate yesterday, to the person you met last year or what you need to do tomorrow.

Let the mind wander, take note of what it does, but then bring it back without judging. Just let it happen, but bring the mind back and seek stillness.

Once you hav a calm mind, you can explore your impulse to put on more and more trades. You can also explore anything else by following pain/resistance: if you can’t stay seated and be mindful, explore WHY. Don’t judge it, just get to the source.

The bottom line is that we will be controlled by anything we are not aware of and funnily enough, the things that we are usually least aware of are our own thoughts, feelings and emotions.

When doing a little digging, the trader explained his feelings:

I have a very high drive to be successful, and I don’t really stand for criticism. When I do well, I am demonstrating my ability. When I fail, I feel like a looser. 

This is the demonstration that when trading results generate some kind of emotional response, it’s because we are “taking it personally” in some manner. It is our ego emerging.

Step 2: Question this Automatic Response

The automatic response of this trader is to feel like a loser when he loses a trade, and to feel exhuberant when he wins. It’s important to put things into perspective. The question is:

  • What is the net effect of this reaction? Obviously, the net effect is loss of confidence and self-criticism on one hand, and overtrading on the other. Both responses can create plenty of additional issues in trading so we need to dismantle them.
  • Let’s talk about your reaction to criticism. If nobody ever points out what you are doing wrong, how would you learn what works from what doesn’t? How would you grow personally or professionally?  The obvious answer is that it is impossible to learn without making mistakes. The reality is that gaining wisdom is a painful experience in life as in trading. As a professional trader pointed out recently:  I found my style of trading through a series of expensive mistakes.  The key here is that YOU (the trader) are not the mistake. You can make a mistake (objective reality) but you are not the mistake (subjective interpretation of reality).

However, the trader still needed more reinforcement and said “I really have trouble tolerating mistakes and failures. It is a weakness”.  

Once again the trader’s ego is in the way of his healing process. Pride (I’m too good to lose, I can’t show weakness) can keep us locked in disastrous patterns. There is much to be said about embracing humility, in life as in trading, in order to break negative cycles.

I proceeded to reframe the situation with the trader.

  • What would happen if you are returning from work exhausted, get home, have a shower, prepare to make dinner and you find out the fridge is empty?  The trader replied “I would improvise..it’s not a big deal”.
  • What would happen if, in the same situation, you were expecting a guest and the guest pointed out that you forgot? The trader replied “that would depend on the guest’s tone”.

This is very common: hide the “failures”. So long as I make a mistake and nobody is around, it’s not a big deal. But as soon as it becomes visible to others, my ego can be hurt. However, if I’m so concerned about protecting my ego, and I get into an argument in order to protect my own ego, I’ll probably miss the lesson alltogether.

Each mistake or failure contains a lesson. Each time we take it personally, we usually miss out on the lesson and the chances are that we will make the same mistake again and again, until we stop taking it personally and just view reality objectively.

Understand, deep down, that IT’S OK. We all make mistakes sooner or later! Ray Dalio dedicated a whole chapter of his book “Principles” to the importance of making mistakes and learning. The faster you can go through the cycle, the more cycles you can experience, and the quicker you can learn.

Step 3: Act Differently for 3 Weeks

After the conversation I gave the trader a couple of assignments:

  • actively seek criticism of your work, don’t go on the defensive, and simply thank the person for his input;
  • journal your thoughts and emotions while trading, and while being mindful.

It normally takes a person 2 weeks to create a new habit. So with 3 weeks of this, the intent is to consolidate the habit.

The trader needs to know he can make a mistake, and feel ok about it. After all, if it’s not a life-or-death situation, it’s all small stuff. There’s no need to show off, no need to be a superhero, no need to be pompous.

Just be yourself because, at the end of the day, we all face similar situations and undergo similar experiences in life. We’re all human and as such need to empathize (not criticize).

Over to You

As a final perspective, think about when you were learning how to walk, or when you were helping your children learn how to walk. Envision the reaction to the following situations:

  • Your son/daughter gets on his/her feet and takes a couple of steps, then falls. You see the frown on his/her face. You think “obviously he/she’s upset, and for good reason, he/she should be better than this already…I was certainly better at that age…” and you say “come on, get back up! You should be better than this! Get up and walk! Make me proud!”.
  • Your son/daughter gets on his/her feet and takes a couple of steps, then falls. You see the frown on his/her face. You think “poor thing, he/she’s upset, but it’s only natural”. You go towards your child and comfort him/her, and help get back on his/her feet.

Which child will learn how to walk sooner? Which child will learn that making mistakes is ok in life? Which child will know to reach out to others for support, when unpleasant things happen in life?

The key is once again, get over it. Don’t take it personally. Just learn and move on. If it’s not life or death, what are you really fussing over?

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals and Education from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

The post Facing Common Trader Issues: Excitement and Overtrading appeared first on FX Renew.

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We ended last week with big moves in FX: risk off (on worse China data and trade war jitters) and USD strength (on US Retail Sales). Over the weekend there was chatter from ECB that they “stand ready to act” if inflation does not rebound. This week is mainly about the FOMC meeting, with BOE and BOJ in the background.

Themes for the Week:

  • FOMC: the market is pricing in a rate cut in July but Vanguard is already saying they have enough excuses to cut in June. In any case, expectations are for a FOMC rate cut. Hence, everyone and their dog is expecting dovish remarks from Powell this Wednesday. There is much room for a surprize if Powell does not deliver.
  • US/China Trade War: the upcoming G20 summit on June 28/29 is quickly approaching and China has yet to confirm whether President Xi will meet Trump during the summit. No meeting would mean more tension and China appears to be preparing for a protracted trade war.
  • ECB’s Sintra Conference: two years ago Draghi used Sintra as a stage for forward guidance. Could it happen again this time round, given that it’s his last Sintra Conference?
  • In other markets, crure oil remains on watch after turbulent price action last week where it see-sawed between large inventory builds and shock attacks on tankers in the Gulf of Oman.
  • In the UK, Conservative Party candidates to become the next Prime Minister will be whittled down in successive rounds of internal voting by MPs until just two remain at the end of the week. They will then begin their campaigns with the wider Conservative Party grassroots members, which will go on until late July.
  • BOE and BOJ are expected to be non-events.

Data in the Week Ahead:

  • FOMC, BOE, BOJ Rate Decisions & ECB Sintra Conference
  • RBA Minutes
  • UK CPI and Retail Sales
  • CAD CPI and Retail Sales
  • NZD GDP
  • EU PMIs

On the Radar:

Evidently USD and JPY strength vs. Aud, Nzd, Gbp is at the top of the list. Things may change after FOMC but for the moment, those are the top picks in my book. For once, the clearest movers are in FX! No directional bets to point out in other markets as of yet.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals and Education from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

The post Weekly Game Plan 17 Jun 19 appeared first on FX Renew.

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Note that this is my current view, but if market conditions change my view can change too. Generally I will trade in alignment with what I have noted here, though I will wait for a set-up before I enter. I base my view on technical and fundamental information. This is my beliefs and you are welcome to have opposite ones. Having a plan is more important than the actual direction for me. 

I have an abbreviated report this week. Back to full service next week.

  • Wait DXY.  – MT is bear normal. While we remain in a bear MT price action is suggestive that we are back in a range trading environment. The key developments for the dollar are firstly that the US did not go ahead with Tariffs on Mexico, and secondly Retail Sales data came in strong. This week we have an important FOMC meeting where the Fed is expected to move from their current patient stance to a more dovish one.
  • Sell GBP/USD. – MT is bear normal. Sentiment remains bearish GBP. This is despite the BOE likely to indicate that they are more likely to raise than cut rates in this weeks meeting.
  • Sell USD/JPY. – MT is bear normal.  Rising stocks have put a halt to downward momentum, though we still remain in the bear MT.
  • Sell AUD/USD. –  MT is sideways normal. Concerns around China, weak Aussie data and an RBA in the midst of a rate cutting cycle are all factors driving AUD lower.
  • Wait EUR/USD. –  MT is sideways normal. We have moved back into a sideways MT. A re-test of the support near 1.1150 is not out of the question.
  • Wait NZD/USD. –  MT is sideways normal. A raft of poor data from NZ and China saw the Kiwi sell of dramatically.
  • Sell USD/CHF.  – MT bear normal. Watch-out for a resumption of the downtrend if stocks sell-off.
  • Wait USD/CAD. – MT is sideways normal. Despite better fundamentals out of Canada, positive USD sentiment has seen support hold and the pair is back firmly within the range.
  • Buy EUR/GBP.  – MT is bull normal. No reversal signals yet.
Crosses
  • Wait EUR/CHF. – MT is sideways normal.
  • Sell AUD/JPY.  – MT is bear normal.
  • Sell NZD/JPY. – MT is bear normal.
  • Sell GBP/JPY. – MT is bear normal.
  • Wait EUR/JPY. – MT is sideways normal.
  • Wait CAD/JPY. – MT is sideways normal.
  • Wait CHF/JPY.  – MT is sideways normal.
  • Wait GBP/NZD. – MT is sideways normal.
  • Buy EUR/NZD. – MT is bull normal.
  • Wait AUD/NZD. – MT is sideways normal.
  • Buy EUR/AUD.  – MT is bull quiet.
  • Wait GBP/AUD. – MT is sideways normal.
  • Wait AUD/CAD. – MT is sideways normal.
  • Sell GBP/CAD. –  MT is bear normal.
  • Wait EUR/CAD. – MT is sideways quiet.
  • Sell NZD/CAD. – MT is bear normal.
  • Sell GBP/CHF. – MT is bear normal.
  • Sell CAD/CHF.  – MT is bear normal.
  • Sell NZD/CHF.  – MT is bear normal.
  • Sell AUD/CHF. – MT is bear normal.
Other Markets
  • Buy Gold. – MT is bull normal.
  • Sell Oil. – MT is bear normal.
  • Wait S&P 500.  – MT is bear volatile.
  • Wait DAX. – MT is sideways normal.
  • Wait Nikkei. – MT is sideways normal.
  • Buy T-Notes. – MT is bull normal.
View bank reports and fundamental analysis in the chatroom (members only)

View the chatroom 

Economic calendar for the week ahead:

View economic calendar

(MT = Market Type: Click for more information on market types.)

About the Author

Sam Eder is a currency trader and author of The Consistent Trader and the Advanced Forex Course for Smart Traders (get free access). He is the owner of  www.fxrenew.com a provider of Forex signals from ex-industry traders (get a free trial). If you like Sam’s writing you can subscribe to his newsletter.

The post Forex Trading Opportunities for the Week Ahead 17 June 19 appeared first on FX Renew.

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Today’s blog post is in response to a client’s question: “How can I find the best instrument to trade each day?”. To confront this question appropriately, we need to distinguish between trade idea generation (what to trade and why), and setups (how to enter). Unfortunately most traders mix or confuse these two terms, and basically scroll through chart after chart “looking for setups”.

Fortunately there is a better way which is both more efficient and effective at selecting high-quality opportunities. Most professional traders use a very similar routine when preparing their day, so let’s explore how to generate high probability trade ideas.

Where is the Focal Point?

The first thing to do is think of creating a routine that allows you to scan for high-probability trade ideas. The first part of this routine consists in keeping up to date with market sentiment. Here are the key questions to ask:

What is the key theme for the week? This will direct trader’s attention. Recently the market has been concerned about President Trump’s Tariff War against China. Then there is the global economic slowdown which has been in the news for the past few weeks. How do you know what the themes are?

We wrote a detailed explanation of how to do this here.

Then, once you have the main picture created on a Saturday or Sunday, just update the picture each morning by reading through the overnight developments. A simple way to do this is to read our Morning Report in the Dealing Room.

Intermarket Capital Flows

Once you have the main themes and drivers in mind, the next step is to see how the market is reacting to those themes. We live in a global economy and as such, we cannot consider one market in isolation. To master the markets we must learn to view all markets together: this is the basis for intermarket analysis.

There are two key starting points for understanding Intermarket Analysis: the role of the US Dollar and the role of Commodity Prices (the CRB Index).

Bond and stock prices are both influenced by the dollar: usually bond yields (not prices) rise when the US Dollar is in demand. And when the US Dollar is in demand, stock prices usually drop (partially because they are priced in USD, so they become cheaper, relatively speaking).

However, the USD impacts bonds and stocks more profoundly through the commodity sector. Movements in the dollar influence commodity prices, because they are priced and traded in USD. Commodity prices influence bonds, which then influence stocks. To understand why this is the case brings us to the critical question of inflation.

The bottom line is that rising commodity prices are inflationary, while falling commodity prices are non-inflationary.

Here is the economic reasoning: during a period of economic expansion, demand for raw materials (Copper, Iron, Steel, Crude Oil, etc) increases along with the demand for money to fuel the economic expansion. Basically, commodity prices tend to rise alongisde interest rates. At a certain point, the rise in interest rates blocks further lending, and the subsequent economic slowdown follows, with lower demand for commodities and lower demand for capital. We went more in-depth on that here.

It thus follows that: rising commodities will make market participants discount future inflation and bond prices should rise. Stocks might follow with a lag, because usually bond markets anticipate stocks.

And then we have the more common and well-known correlations:

  • Gold UP = USD Down, AUD UP, CAD UP;
  • Crude Oil UP = USD Down, CAD UP;
  • Dow UP + Bond Prices Down = JPY Down (AudJpy Up, NzdJpy Up) = Risk-On
  • Dow Down + Bond Prices Up = JPY UP (AudJpy Down, NzdJpy Down) = Risk-Off

We wrote about some other correlations here. For a more in-depth read, I would suggest John Murphy’s book on Intermarket Analysis. You can setup a quick screen for intermarket analysis on TradingView.

Finding Common Themes

Once we know whether there is any particular theme playing out across the global markets, we can then focus on FX. Sometimes there is nothing really going on, and everything looks disorganized. Sometimes there is a clear risk-on or risk-off agenda. Other times the USD will be on a tear and put pressure on commodities and emerging markets.

This background information can help you understand where the higher odds plays may be, on any given day, within the FX universe and all you need is a simple heatmap (like our Market Type Heatmap) to verify that those themes are playing out in FX as intended.

For example, at the time of this screenshot, the Kiwi was having a good run. But before taking a position, I want continued confirmation that Kiwi is the flavor of the week or if something else is stealing the spotlight of late. So here are questions to work your way around the Heatmap:

  • What is the USD doing? Being the world’s reserve currency, it is often the main focus in FX..but not always.
  • Run the ruler across Gbp, Euro, Yen, Usd against their main trading partners. Is any of them dominant or passive across the board?

What we’re trying to do is make sure that the strength of NZD is not an exception limited to NZDUSD. Before buying the NZD, I’d prefer to see it strong across the board. It’s then a case of matching the strongest vs. weakest,  to see if an opportunity exists.

Obviously if the sentiment work in step 1 highlighted a certain theme on New Zealand, it gives you extra confidence. If you also see rising Gold prices or if there were a risk-on agenada playing out, things would look even better.

Over to You

Creating good habits is what this is all about. In order to find quality each day, you can simply create your own version of the 3-step process described above:

  • Identify Key Themes and Current Sentiment
  • Scan the Intermarket to view how these themes are being digested
  • Finally, zoom into FX and with the help of a heatmap identify common themes playing out.

Then, selecting the best setups to express the idea should be a piece of cake.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals and Education from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

The post How to Find High Probability Trades appeared first on FX Renew.

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A few hours after the markets closed on Friday,  US and Mexico agreed to call off the planned tariffs and avert a trade war. The market was already in a buoyant mood due to hopes the US Fed will commence with an easing cycle, so the US/MXN news will likely spur more positive sentiment, and fuel expectations of some kind of de-escalation of the US/China trade war.  This may also take some of the momentum out of the USD downtrend.

Also remember that there is a Bank Holiday in EU on Monday.

Themes for the Week:

  • The US-China trade war will remain in focus after US Treasury Secretary Mnuchin told reporters that US President Trump and China’s President Xi will meet at the G20 Leaders Summit June 28-29.
  • FED in focus: market expectations of multiple Fed rate cuts dominate the current landscape. After misses in NFP and ISM, the remaining data points before the June 19 FOMC meeting should be watched closely.
  • China data should also warrant focus in the following days as the markets will be watching for signs of recovery or further slowdown.
  • UK political noise will also reappear as the Conservative Party leadership race gets underway. Candidates need the support of at least eight MPs so the current line up is Boris Johnson, Michael Gove, Jeremy Hunt, Dominic Raab, Sajid Javid and Matt Hancock. First round of voting begins June 13
  • Italy headline risk continues. The European Commission recommendation to start the Excessive Deficit Procedure has to be ratified by the junior finance ministers committee (EFC), possibly this week. The EC then has to specify the parameters of the EDP – policy recommendations, fiscal targets, deadlines. The formal decision has to be formally approved by the Eurogroup, possibly at the July 9 meeting.

Data in the Week ahead:

  • UK GDP m/m
  • UK Employment Change
  • US CPI (influential in the current dovish environment) and Retail Sales
  • AU Employment Change (influential after the latest RBA minutes)
  • China Trade Balance, CPI, Industrial Production

On the Radar:

With the recovery in risk appetite, I like Dow and SP500 longs. Alongside that, I like pairing up Cad strength vs. Jpy weakness and perhaps USD weakness (if it continues despite the news). NZD also remains strong and I’d pair it up vs. Jpy and USD as well.  GBP is in need of a breakout, which may happen this week after very sluggish action last week.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals and Education from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

The post Weekly Game Plan 10 Jun 19 appeared first on FX Renew.

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Here is the video version of our Forex trading opportunities for the week ahead.

Forex Trading Opportunities for the Week Ahead 10 June 19 - YouTube

Please go here for the written summary: Forex Trading Opportunities for the week ahead

About the Author

Sam Eder is a currency trader and author of The Consistent Trader and the Advanced Forex Course for Smart Traders (get free access). He is the owner of  www.fxrenew.com a provider of Forex signals from ex-industry traders (get a free trial). If you like Sam’s writing you can subscribe to his newsletter.

The post Video: Forex Trading Opportunities for the Week Ahead 10 June 19 appeared first on FX Renew.

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Note that this is my current view, but if market conditions change my view can change too. Generally I will trade in alignment with what I have noted here, though I will wait for a set-up before I enter. I base my view on technical and fundamental information. This is my beliefs and you are welcome to have opposite ones. Having a plan is more important than the actual direction for me. 

  • Sell DXY.  – MT is bear normal. A minor double top and rejection of key resistance around the .98 figure has seen DXY shift into a bear MT. There should be more downside to come. If you recall, the main driver of the uptrend in USD was divergent monetary policy and economic performance. While the fat lady has not sung yet, this divergence is not as pronounced as it was. A simple glance at the bond market will tell you this. US yields have been plummeting and the market is pricing in three rate cuts this year. The caveat has been that the Federal Reserve has been stressing patience and there is a chance they don’t come to the party. Recent negative developments in international trade tensions and weaker US data have seen the Fed begin to murmur that perhaps there will be a cut – and soon. My thought is that the market is possibly over-shooting what the Fed will do, and that while we will have a cut or two, we perhaps won’t get a third. On the flip side of the coin, the counterparts are not performing that great either. So while we do have less divergence than before, it is likely US yields will remain appealing and economic performance will remain relatively strong.  In the meantime, sentiment is clearly bearish USD, and positioning has been overbrought. This is suggestive of further USD selling in the week ahead, but we may well see buyers return around 0.96 or 0.95. I will be waiting until then to get long USD. If these levels get broken I will re-assess. Watch for inflation data this week and then the FOMC meeting on the 18/19 June.
  • Wait GBP/USD. – MT is sideways normal. The temporary upside outlined in last weeks report has persisted and we are now in a sideways MT. Compared to other major pairs, the recovery has not been strong – but it has been enough to form a bullish engulfing weekly candle. Economic performance has been good and the BOE is one of the more hawkish central banks out there. Brexit concerns continue to hold the pair back with elections being held for May’s replacement. I would love to buy around 1.25 or 1.24 so will wait to see if those levels get taken out. Watch out for GDP data to be weaker and later in the week for Job numbers.
  • Sell USD/JPY. – MT is bear normal. Despite a recovery in stocks, the pair is sitting at recent lows. Firstly, this does beg the question of why stocks are recovering given the trade tensions and if the hints of further easing by the Fed going to be enough to break though the triple top that is forming. Secondly, JPY strength is a reflection of the bond market and the fact that convergence probably benefits the negative rate currencies more than the others (given they have little room left to ease). For now, there is nothing to knock us out of the short call so keep selling.
  • Sell AUD/USD. –  MT is sideways normal. In a classic expression of buy the rumor and sell the fact, the pair rose after the RBA cut rates. Of course, USD weakness was a driver here. AUDUSD could be one of the better plays for USD bulls. Data has been poor and AUD is traditionally exposed to a weaker China. The topping on the cake is that the RBA has room to cut rates further. The consensus is that rates will be cut once more this year, but there is scope for another cut on top of that. So if the Fed cuts rates twice rather than three times and the RBA cuts rates three times rather than twice, we have a mis-pricing which could see the AUD drift lower. So this bounce to the key .70 figure looks like a selling opportunity to me.
  • Buy EUR/USD. –  MT is bull normal. The pair has formed a bottoming pattern and broken out into a bull MT. The ECB, while dovish, was not as dovish as expected by market participants. This combined with the perception that the Fed will cut rates has lead to a recovery in the pair. A long-term change in trend is not a done deal. As well as the reasons outlined above for DXY, economic performance in the EUR region is tepid and the area is exposed to political risk with Brexit and conflict with Italy over it’s budget deficit. My belief is that there will be a temporary rise in the the week ahead, but after that the pair will top out around 1.15 which will provide a selling opportunity.
  • Buy NZD/USD. –  MT is bull normal. The Kiwi was one of the strongest currency pairs in the past week. This was despite a further fall in milk prices. Better than expected trade data, no further rate cuts and a robust NZ stock market perhaps make the currency one of the more appealing options from these levels. There is no bottoming pattern in place on the charts so I am a bit undecided where the currency is going to head longer-term. I do think it is a buy this week though.
  • Sell USD/CHF.  – MT bear normal. The bear MT continues. A bit of caution needs to be had until the pair cleanly breaks support. Given all the risk-off concerns, selling CHF remains an appealing option.
  • Sell USD/CAD. – MT is bear normal. As befitting such divergent fundamentals, USDCAD sold off aggressively to close the week. Poor employment data out of the US has contrasted with two months of very good numbers out of Canada. Yields spreads are well in favor of the CAD and do suggest the pair should be lower. Oil is struggling but some hope may be found, with OPEC holding course with their production cuts. I favor selling USDCAD in the week ahead. selling AUDCAD is also a good option.
  • Buy EUR/GBP.  – MT is bull normal. The trend is very strong in EURGBP. Sometimes on the crosses you can get these extended move. The first part of the move was on the back of GBP weakness. This next leg up will be on the back of EUR strength. There is not much resistance in the way. If we do get back to 0.91 I will be looking to short the pair.
Crosses
  • Sell EUR/CHF. – MT is bear normal. Watch for a bounce.
  • Wait AUD/JPY.  – MT is sideways quiet
  • Wait NZD/JPY. – MT is sideways normal.
  • Sell GBP/JPY. – MT is bear normal.
  • Wait EUR/JPY. – MT is sideways normal.
  • Sell CAD/JPY. – MT is sideways normal.
  • Buy CHF/JPY.  – MT is bull normal.
  • Sell GBP/NZD. – MT is bear normal.
  • Sell EUR/NZD. – MT is bear normal.
  • Sell AUD/NZD. – MT is bear normal.
  • Wait EUR/AUD.  – MT is sideways quiet.
  • Sell GBP/AUD. – MT is bear normal.
  • Wait AUD/CAD. – MT is sideways normal.
  • Sell GBP/CAD. –  MT is bear normal.
  • Wait EUR/CAD. – MT is sideways quiet.
  • Wait NZD/CAD. – MT is sideways normal.
  • Sell GBP/CHF. – MT is bear normal.
  • Sell CAD/CHF.  – MT is bear normal.
  • Wait NZD/CHF.  – MT is sideways quiet.
  • Sell AUD/CHF. – MT is bear normal.
Other Markets
  • Buy Gold. – MT is bull normal.
  • Sell Oil. – MT is bear normal.
  • Wait S&P 500.  – MT is bear volatile.
  • Wait DAX. – MT is sideways normal.
  • Wait Nikkei. – MT is sideways normal.
  • Buy T-Notes. – MT is bull normal.
View bank reports and fundamental analysis in the chatroom (members only)

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Economic calendar for the week ahead:

View economic calendar

(MT = Market Type: Click for more information on market types.)

About the Author

Sam Eder is a currency trader and author of The Consistent Trader and the Advanced Forex Course for Smart Traders (get free access). He is the owner of  www.fxrenew.com a provider of Forex signals from ex-industry traders (get a free trial). If you like Sam’s writing you can subscribe to his newsletter.

The post Forex Trading Opportunities for the Week Ahead 10 June 19 appeared first on FX Renew.

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 My greatest discovery was that a man must study underlying conditions, to size them so as to be able to anticipate probabilities. – Jesse Livermore

In this recurring monthly analysis, we will look at three global risk factors in order to assess the current market state and attempt to foresee risks on the horizon.  The factors that we will be using, in order of weight, are:

  • Global Monetary Policy
  • Global Volatility
  • Global PMI readings

Together, they can assist us in shaping up underlying macro conditions, so we don’t get caught off guard by some change in market dynamics that was foreseeable.

Global Monetary Policy Stance

Source: cfr.org

We use Global Monetary Policy to evaluate inflation risks, deflation risks, and interest rate risk.

Monetary policy is ineffective at this point in time. Central banks are easing but have no impact on the slowing global economy. The focus is on data (which is sour, like the PMIs) and market-based measured. Recently Ray Dalio and other gurus have been discussing the inevitable end of central bank efficacy. When rates have been lowered to 0% and QE (purchasing of financial assets) no longer works, what next?

Global Volatility Meter

Source: TradingView & NYU Stern V-Lab

We use the Global Volatility Monitor to capture economic growth risks and liquidity risks.Since we are tracking the implied volatility on the S&P 500, the Eurostoxx and Crude Oil, we can see the composite indicator as “the cost of hedging a price decline” in each market.

Volatility conditions are back in the “red zone” and this is mirrored by the breakout into a bear market by the Equity/Bond spread. Risk aversion is hitting the market although in it’s early stages.

We have introduced the FX Volaility measure also, as a tool for traders. Currently we are still in a downtrend in Vol, which means conditions in FX will be rather dull with intraday directional trading and more conservative targets the better option. We need volatility to break above the May highs in order to see some acceleration and “trendiness” in FX.

Global PMI Monitor

Source: IHS Markit

We use the Markit/JPM Global PMI analysis as a gauge for economic growth risks, inflation risks and deflation risks. PMIs are known to be a leading indicator for GDP growth rates.

Global PMI surveys signalled that manufacturing downshifted into contraction during May. Business conditions deteriorated
to the greatest extent in over six-and-a-half years, as production volumes stagnated and new orders declined at the fastest pace since October 2012.

To Sum Up

Our Macro Risk Monitor (MRM) is currently showing heightened degree of instability in the markets. There is more than a bit of risk-aversion here. The world is facing a global slowdown and policymakers do not have the tools to assist the recovery. Defensive assets would seem like the proper place to turn at the moment, but not wholeheartedly. We are not yet in a real bear market. It would take a break of December 2018 lows in the Dow to do so.

Right now we’re just seeing increased volatility – which has failed to materialize in FX. So better trading conditions are to be found in stocks and indices for the time being.

About The Macro Risk Monitor

What we are doing is neither new nor original. Anyone with a basic comprehension of macroeconomic theory, and a bit of real world experience, can do the same thing. We’re just doing it for you.  What follows is a brief explanation of why we are monitoring precisely Monetary Policy, Volatility and Purchasing Managers’ Index.

  • During periods of real (non-inflationary) growth, the main cyclical classes (Developed and Emerging Market Equities, Real Estate, High Yield Bonds) tend to have low volatility.
  • Vice versa, during periods of economic uncertainty or outright contraction, cyclical assets have high volatility.
  • However, we can also have inflationary growth, which is the best environment for Commodities (Energy, Industrial Metals).

When volatility is high, or global growth expectations (measured via the PMI) are low and monetary policy is tight/tightening, there is a collision of risk factors that produces a high uncertainty/high risk environment that is usually only favourable to fixed income and counter-cyclical assets.

When volatility is low, or global growth expecatations (measured via the PMI) are high and monetary policy is loose/loosening, there is a combination of easing factors that produces a low uncertainty/low risk environment that is favourable to cyclical asset classes.

By using just these three measures, we can create discrete market environments that can assist in selecting the right asset class to target given the current situation.

If any of this is a bit foreign or complex, our Forex Fundamentals Mastery course can bring you up to speed.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

The post Monthly Macro Risk Monitor – 5 Jun 19 appeared first on FX Renew.

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President Trump seems to act like a normal retail trader – emotionally, not logically. On Friday, Trump planned to place a 5% tariff on Mexican imports effective June 10 had this had a huge impact on markets. Comments made by Mexico’s President Obrador on Saturday might help to calm markets as he will take extra steps to curb migration. With bond markets pricing in a global slowdown and central bank easing, there will be keen focus on central banks in the week ahead. The RBA and ECB meet this week, while the Fed will be in focus with a speech by Fed Chair Powell

Themes for the Week:

  • Obviously the tit-for-tat  trade jitters will be top of mind. Markets were expecting Trump to come to an agreement sooner or later, but instead the trade debate just seems to be getting worse. Next week there will be a G20 finance ministers’ conference but who knows what will go down…
  • Dovish RBA: the RBA is widely expected to cut rates by 0.25%. So that’s priced in, and what will be more influential is the RBA’s statement.
  • Dovish ECB: the ECB will describe the details for another set of TLTRO lending operations at its meeting this week. The ECB will also release their economic forecasts which should help shape ECB expectations over the next few months. With worse data, and issues in Italy, the markets are pricing in dovishness all around. Watch out for surprizes.
  • Italy vs. Brussels: Italy’s Salvini is threatening to tear up EU fiscal rules. He argues the result gives his party a mandate to push through tax cuts and fight EU budget rules. The Rome-Brussels standoff will escalate after June 5 if the Commission decides to start disciplinary steps against Italy for failing to rein in debt.

Data in the Week Ahead:

  • AU Retail Sales
  • RBA Decision
  • AU GDP
  • US ISMs
  • ECB Rates Decision
  • CAD Employment
  • US NFP

On the Radar:

So long as the markets remain risk-off, JPY and CHF will be in demand vs. GBP, Cad and USD. Also, equities should also remain under pressure with strong negative action across the board. Expect AU and EUR to remain rangebound until after the respective central bank meetings.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals and Education from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

The post Weekly Game Plan 3 Jun 19 appeared first on FX Renew.

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Here is the video version of our Forex trading opportunities for the week ahead.

Forex Trading Opportunities for the Week Ahead 3 June 19 - YouTube

Please go here for the written summary: Forex Trading Opportunities for the week ahead

About the Author

Sam Eder is a currency trader and author of The Consistent Trader and the Advanced Forex Course for Smart Traders (get free access). He is the owner of  www.fxrenew.com a provider of Forex signals from ex-industry traders (get a free trial). If you like Sam’s writing you can subscribe to his newsletter.

The post Video: Forex Trading Opportunities for the Week Ahead 3 June 19 appeared first on FX Renew.

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