Toil and Trouble

Dollar weakness continues to dominate the global currency markets, will the seasonal trend of global accumulation of the greenback pre-election change the course of the decline? The FED printing presses are at full tilt so who knows..?

Pulling back against the weakness

The weeks still continue to test my strategies and resolve as a trader. You either have already developed a mental toughness to survive or you need to. Dealing with the inner turmoil when things aren’t going to plan is where you need to be on high alert to making decisions on the spur of the moment. It is very easy to do and often (if you are lucky) a confirmation that you have made a good decision when in fact all you were was just lucky. If you make that call, get unlucky, then that is when you can spiral out of control.

As a discretionary trader I plan trades based on systematic entries and the statistics of past outcomes to provide a level of probability for the trade idea. The markets in 2020 will be remembered for testing every trading idea I have ever come across and executed.

Working through sustained and deep drawdowns despite all of the macro and fundamental data being in your favour defies the logic, the intelligence and eventually the endurance you have invested in the time putting it all together. Oh and it costs money!

I have been working my plan to pull back into the green and on every occasion of just about getting there the market draws away from me, literally within a few points…. So the evolution continues to play out with my trading plan and strategies are scrutinised as objectively as I can manage under the circumstances. Each time we should continue to chip away and the evidence of growth is beginning to show its tender shoots of promise.

As we move into Quarter 4 my intention is to eliminate direct USD exposure before the crazy lead up to the US Presidential elections and have positions in cross pairs which can be hedged out nearer the time. The investor value at risk for my Darwin WET has been much too high and I will attempt to bring that back down in the next 3 months.

With Covid, US Elections, futile FED and ECB battles of inflation management, potential regional unrest with Turkey(as well as a failed Lira which Europe has exposure) Brexit and more economic/political pressures for the Euro looming on the horizon we will have to be patient for trade ideas to play out long term and mature in our outlook when trading or investing in such an arena.

Dollar Weakness Continues to Test

COT Report Study – Potential Exhaustion Point

August has continued to be a difficult month for me. The dollar weakness has exposed my EURUSD position and the speed of the move up from 1.14 prevented what seemed like an unnecessary hedge at the time.

Part of this reasoning was the extreme exposure of Asset Manager Commitment currently at all time highs. When these extremes get tested it is a reliable sign that a longer term reversal is forming.

We could be at this point at 1.19 or 1.20. The fleeing from USD to Gold and combined with a likely trillion + Euro bailout has maybe contributed to the momentum of the move. I am not convinced that this is a sign of Euro strength and I still feel Euro bearish at least short term.

Comparing EUR with other crosses, especially EURCHF indicates that a EUR bullish outlook isn’t a valid one…yet.

With the Gold rush taking a breather the USD still remains weak as the China trade deal and further Covid stimulus packages are stymied by Washington politics. Although the core fundamentals of the greenback do appear to be strengthening against this bearish backdrop of overall opinion and media consensus.

I am actively re-balancing my USD exposure although whilst we still close below 1.20 currently comfortable managing my position which still has bags of potential for a positive close in August.

EURUSD Levels Shaping Up For Summer

EURUSD Breaking 1.1250 Crucial Level

I trade EURUSD extensively and the break of 1.12500 level this month positions me well to plot my levels and consolidation areas. I’m expecting a longer term neutral bias now we are at this level between 1.1100 and 1.1400 with a possible stretch to 1.1500 for the summer months.

This pitches us squarely at Pre-Covid levels in Quarter 1 and we can now establish trade set ups with more confidence.

Hedge shorts will be in place to cover the 1.0950 areas and long plays targeting 1.1350 to 1.1400 areas. Hopefully for the next couple of months I can continue to pick off 60 to 120 pip range trades.

NO FINANCIAL ADVICE IS GIVEN IN.

April Close +3.4%

April close returning 3.4% for WET

The plan for April was to track and trade EUR crosses which worked out pretty well for the month with some early results in for EURUSD. I traded only a couple of pairs to limit risk exposure while the markets establish obvious zones for me to assess. So margin use for this month has been conservative.

The huge expansion on EURUSD has set my levels further out than I have ever traded within but this presents me with more opportunity to plan set ups. My current level high of 1.12 takes me back right to Sep 2018 and the sell side level at 1.0627 goes way back to Feb 2017. So until these break I have plenty of price lattitude to play with.

April closed as another profitable month returning a 3.4% on my Darwinex Asset WET. Slightly lower than I anticipated given that my underlying strategy returned 7.83% to my account. This is where the risk manager throttles in or out for the investor and I think it could be accountable to the intra day trades I take on mainly GBP. These trades often have a lower take profit and because of the short timing are inherently more volatile compared to my longer term trades.

I am working on the intra day plan to add bigger take profits to hopefully fill in these risk management interventions.

All in all it has been another great month and May is already lining up on my charts for set ups. I’m looking forward to the next 4 weeks of potential.