EURUSD- Ready to Crumble?

EURUSD- Ready to Crumble?

Chart Of The Day

Mario Draghi destroyed the euro today but essentially telling the market that despite the best economic growth in years, he wasn’t ready to pull the plug on QE just yet. By extending QE to 9 months into 2018 Mr. Draghi dashed any hopes of an early taper and broke the hearts of euro bulls.

The damage done to the currency today wasn’t just fundamental but technicals as well as it broke the 1.1700 figure and now rests just ahead of the key 1.1650 support. With Fed clearly on a path to more rate hikes, while the ECB remains a non-player for all of 2018, the prospect of further interest rate differential between the two currencies will only expand and could push the EURUSD quickly towards the key support at 1.1500 level.

Today’s policy courses suggests that the euro is strict sell on rallies trade for now, unless US policy suddenly turns dovish as well.

CADJPY – Ready to Drop?

CADJPY – Ready to Drop?

Chart Of The Day

Tomorrow the market will get a glimpse of Canadian GDP and inflation data as well US Personal Consumption Expenditure reading which is the Fed’s favorite measure of inflation. Both data points could disappoint leading to a steeper selloff on CADJPY.

The loonie has already been hurt by less than hawkish comments out of the BOC and if the growth data shows a further decline -- or worse a negative reading -- USDCAD could easily scale the 1.2500 level and beyond.

Meanwhile, USDJPY has run into serious resistance at the 113.00 figure and with US yields starting to back up any soft reading in US inflation data could sow doubt about Fed’s ability to hike rates in December. All of this leaves CADJPY very vulnerable to a selloff especially because the pair appears to have found distribution at the 90.00 level. If it breaks to the downside, 88.00 could be soon in view.

Trader – Get Ready for Takeoff

Boris Schlossberg

What do you think is the third largest cause of death in the United States of America?

Respiratory disease?

Stroke?

Accidents?

Nope.

The third largest cause of death in America is medical errors.

BK.7.31-08.04

Try us out

That’s an astounding fact because it means hundreds of thousands of people in America die needlessly.

The number would be even higher if it weren’t for Peter Pronovost a critical care specialist at Johns Hopkins Hospital who 2001 decided to make a checklist to tackle just one problem that killed many patients -- line infection. As detailed in the New Yorker article, “On a sheet of plain paper, he plotted out the steps to take in order to avoid infections when putting a line in. Doctors are supposed to (1) wash their hands with soap, (2) clean the patient’s skin with chlorhexidine antiseptic, (3) put sterile drapes over the entire patient, (4) wear a sterile mask, hat, gown, and gloves, and (5) put a sterile dressing over the catheter site once the line is in. Check, check, check, check, check. These steps are no-brainers; they have been known and taught for years. So it seemed silly to make a checklist just for them. Still, Pronovost asked the nurses in his I.C.U. to observe the doctors for a month as they put lines into patients, and record how often they completed each step. In more than a third of patients, they skipped at least one.

The next month, he and his team persuaded the hospital administration to authorize nurses to stop doctors if they saw them skipping a step on the checklist; nurses were also to ask them each day whether any lines ought to be removed, so as not to leave them in longer than necessary. This was revolutionary. Nurses have always had their ways of nudging a doctor into doing the right thing, ranging from the gentle reminder (“Um, did you forget to put on your mask, doctor?”) to more forceful methods (I’ve had a nurse body check me when she thought I hadn’t put enough drapes on a patient). But many nurses aren’t sure whether this is their place, or whether a given step is worth a confrontation. (Does it really matter whether a patient’s legs are draped for a line going into the chest?) The new rule made it clear: if doctors didn’t follow every step on the checklist, the nurses would have a backup from the administration to intervene.

Pronovost and his colleagues monitored what happened for a year afterward. The results were so dramatic that they weren’t sure whether to believe them: the ten-day line-infection rate went from eleven per cent to zero. So they followed patients for fifteen more months. Only two line infections occurred during the entire period. They calculated that, in this one hospital, the checklist had prevented forty-three infections and eight deaths, and saved two million dollars in costs.”

The checklist became standard operating procedure in many hospitals across the US and is probably responsible for saving countless lives. It is also an idea borrowed from the aviation industry which despite all of our complaints is the safest mode of transportation in the world precisely because of its near religious adherence to the checklist.

Over my more than twenty years in the business, I’ve met a lot of pilots who were also traders. The job, with its large layover times (pilots on average only work 10 days per month) lends itself to trading. Pilots were fascinating because generally, they were very good traders. This wasn’t because they were necessarily more creative or more knowledgeable about the markets, but because to the man (they were all men) they followed a checklist and only took trades that met all of the setup criteria.

Although trading problems are trivial in comparison to those of critical care professionals, the process of failure is the same in both disciplines. How many of our trades die an unnecessary “death” because we enter them by mistake -- i.e. when all of the rules of the setup have not been met?

About two weeks ago I forced both K and myself to write out a checklist for each one of our setups. It wasn’t a very complicated checklist, but it made us focus on trades that were truly legitimate rather than just “close enough”. Much like with Dr. Pronovost the BK results have been nothing short of remarkable. This week and last I have gone more than 20 straight trades without a loss and K has been profitable almost every single day since then. Furthermore, as I continued to focus on only taking the trades that checked every box, I was able to refine my exits strategies allowing me to reduce the risk even further. And best of all, I was able to program these tweaks into my EA so that now they are part of the overall trading structure.

At its most basic level, the checklist helps every trader to create best practices for each setup which ultimately creates sustainable, repeatable profit opportunities.

So, trader, get ready for takeoff with a checklist in hand -- otherwise, it’s going to be a bumpy ride.

FallPreviewBannr (2)

GBPNZD – Ready to Bounce?

GBPNZD – Ready to Bounce?

Chart Of The Day

GBPNZD is one of the most volatile pairs in the forex market, and yesterday was no exception to that rule as it dropped nearly 400 points in one day. And yet the looks ready to bounce as it approaches key support at the 1.7200 level.

The trade in GBPNZD is really a bet on the bounce in cable as kiwi remains moribund with a slight negative bias in the market. Sterling, however, has absorbed 3 attempts to take it below 1.2100 level and so far has been able to withstand all the selling. Although the prospect of hard Brexit hangs over the currency, the ebbs of flows of negotiation have a long way to go, but any upside surprise in data could create a squeeze in cable over the next few days. As long as 1.7200 holds GBPNZD remains a buy.

AUDNZD – Ready for 1.0600?

AUDNZD – Ready for 1.0600?

Chart Of The Day

Unless all the tracking exit polls are wrong it looks like Hillary Clinton will win and that means most of the pro-Clinton FX trades have been priced in and attention will turn back to day to day affairs.

Tomorrow the marquee event of the day will be the RBNZ decision as the market prepares for yet another rate cut. Although general economic growth and inflation gauges in New Zealand have been above estimates the central is still very likely to lower rates as inflation remains low and most importantly the kiwi remains high. With risk trades catching a bid the kiwi is now near the yearly highs of 7400 and the RBNZ is likely to talk the currency lower as it prefers the exchange rate to be closer to 7000.

That means that AUD/NZD which has found strong support at the 1.0450 level may be ready to rally with 1.0600 the most immediate target of the longs in the aftermath of the RBNZ rate decision.

GBPJPY – Ready to Bust?

GBPJPY – Ready to Bust?

Chart Of The Day

One of the better trading signals out there is when fundamentals move one way and technicals the other. For the past week UK data has been nothing short of horrid yet cable has stopped falling and has actually remained relatively bid against most of the majors.

One of the stronger crosses over the past few days has been GBP/JPY which has been fueled not only by relative strength of cable but by the breakout in USD/JPY. With the pair now approaching the 135.00 figure it stands on the cusp of breakout that could propel it towards the 140.00 level over the next several weeks if US data proves positive and UK data simply beats the lower expectations.

GBPJPY – Ready to Rumble?

GBPJPY – Ready to Rumble?

Chart Of The Day

The whole week has been building up to this. The BOJ announcement tonight is sure to move the yen and the yen pairs as the market awaits the decision about the size and scope of monetary stimulus.

Any number less than 20T yen is likely to disappoint and could send the yen several big figures lower, but if the BOJ brings the bazooka and surprises the market to the upside yen pairs could skyrocket higher. Although cable has been weak today the pair continues to hold the 1.3000 barrier and a pop in yen could take GBP/JPY right back above the 140.00 figure.

If on the other hand the market is disappointed GBP/JPY could quickly drop to 1.3500 and perhaps even 1.3200 over the next few days.

EUR/JPY – Ready to Tumble?

EUR/JPY – Ready to Tumble?

Chart Of The Day

The ECB meeting today offered little fresh information to the market, but Mario Draghi clearly stressed that the risk were still skewed to the downside and that council was open to further stimulus down the road if need be. That is likely to put downward pressure on the euro, especially if tonight’s flash PMI data misses estimates.

On the other side of the world, the BOJ has tried to make it abundantly clear that they will not engage in unconventional monetary policy known as “helicopter money” and that has taken the wind out of the sails of the USD/JPY rally.

All of this suggests that EUR/JPY is likely to have topped at the 118.00 level and may now drift towards 115.00 as risk aversion flows and weaker economic data exert their influence. The pair does not have any serious support until the 114.00 level while 118.00 looks to be solid resistance for now.

GBP/USD – Ready to Rock?

GBP/USD – Ready to Rock?

Chart Of The Day

After months of seemingly endless selling, cable appears to have finally found a bottom and may be ready to stage a short covering rally. The pair has been under unremitting pressure from fears of a Brexit as the majority of British public appeared to be ready to exit from EU, But over the past several weeks, much to the relief of investors sentiment has started to shift towards staying in the union and Brussels has made some conciliatory noises with respect to accommodating UK demands.

Against this backdrop UK eco data has been improving as well boosted by the weaker exchange rate as PMI Manufacturing surprised to the upside. If today’s PMI services report also beats consensus the pair could make a break for the 1.4500 as the short covering rally starts in earnest.

EUR/GBP – Ready To Rally?

EUR/GBP – Ready To Rally?

Chart Of The Day

What’s happening with the pound? At one time the market was convinced that the the BoE would be quick to follow the Fed in hiking rates. Indeed the UK economy has performed even better than the US economy, but you would never know that if you listened to members of the MPC. Today Andy Haldane sent tremors through the market when he noted that inflation risks were skewed to the downside and most importantly stated that the central bank must be prepared to act in either direction in order to combat any weakness in the economy.

Although Mr. Haldane is the most dovish of BOE members, even a mere suggestion of possible easing at a time when the market anticipates only tightening from the BoE sent cable lower creating jitters amongst currency traders. Governor Carney offered no help to cable bulls when he reaffirmed that rates are likely to remain low for a considerable period of time.

With UK monetary officials striking a decidedly dovish posture in their most recent comments to the market the prospect of further losses in GBP/USD is high and the pair could test the 1.5000 level before the week is over and that in turn is good news for EURGBP bulls. With euro finding support at the 1.0600 level the pair looks to be carving out a higher low near the .7000 mark and could rally to .7200 if cable continues to sink further.

Is AUD/JPY Ready for a Breakout?

Is AUD/JPY Ready for a Breakout?

Chart Of The Day

Over the past week, Aussie has been the one currency that has stood its ground against the buck. There is are several good reasons for this. Much to the surprise of the market the Australian economy is not collapsing despite the slowdown of growth in China. In fact the latest jobs data from Down Under showed a massive increase.

All of this has led the RBA to remain decidedly neutral and the central bank is not likely to lower rates this year or for the foreseeable near term horizon. That fact should help to preserve the Aussie yield especially against the yen which continues to weaken as the market becomes more and more convinced that the Fed will normalize rates in December.

Technically with the pair making higher lows and price curled around the key 85.50 level the pair looks to be on the cusp of breakout which can propel it to eventually close the three month old gap around the 90.00 figure.

Is GBP/CAD Ready to Rally?

Is GBP/CAD Ready to Rally?

Chart Of The Day

Both the pound and the loonie have made their turns rallying strongly over the past few days, but while one may continue to rally, the other could be facing the end of its run. Cable remained strong today boosted by generally hawkish rhetoric from BoE Chief Mark Carney who acknowledged that wage pressures are rising. It appears to be only a matter of time before UK central bank decided to tighten monetary policy.

Meanwhile on the other side of the Atlantic the loonie has also performed well as oil prices have jumped over the 50/bbl level. But the rise in oil prices looks to be nothing more than a short covering rally as global demand remains muted. Meanwhile data out of Canada has been soft and if tomorrow’s employment numbers miss their mark the loonie is likely to unwind much of its recent gains as markets begin to speculate about further easing from BOC.

All of this leads us to believe that the rally in GBP/CAD may just be starting. The pair has support at 1.9800 and could move all the way towards 2.0200 before encountering any serious resistance