Weekly Forex Trading Calendar for Week of 10.30.2017

Weekly Calendar Calls

We have just posted our weekly news trading calendar for the week of Oct 23 2017. You can download the pdf and excel file by clicking on the Read More Link. These are soft biases on economic data and not trades that we directly trade or track like BK Swing and News.

Excel version of calendar103017

PDF version of calendar103017

Three Simple Questions Every Trader Should Ask At The Start of Each Week

Boris Schlossberg

Plan your trade, trade your plan is an old maxim in the markets that almost everyone ignores.

The reason is obvious, of course. Financial markets are the least predictable environment there is. Every day is different from the last and anything can happen at any given time. Executives at Amazon, for example, can predict within a few packages, the demand for some product from a particular zip code at a particular time of the day. This is especially true for highly consistent products like soap, or cereal, or shaving cream that people reorder all the time.

In real life demand for goods is remarkably consistent since it must satisfy physical needs that are inviolable. In financial markets – especially in speculative ones – demand is totally mercurial. If you still believe that currency markets exist to help corporations and investors to settle their cross-border transactions or that oil markets exist to help producers and consumers find a settlement price – you are woefully naive. More than 97% of all activity in both markets is purely speculative in nature – meaning it does not emanate from an actual economic need for the product. The average daily volume on NYMEX for crude oil is 22 Billion barrels of notional value. The actual daily demand in the real world? 80 Million barrels per day.

Whether this is good or bad is a philosophical question that I will put aside for now. But the wide gulf between how real world markets behave and how financial markets function goes a long way towards understanding why traders have such a hard time “planning” their business. The volatility of trading simply does not have any legitimate parallels in the real world which is why almost all “real world” business advice is worthless.

And yet… the longer I trade the more I begin to appreciate the value of planning. As traders, we can never expect the kind of control that real world business people enjoy, but that doesn’t mean we should operate by the seat of our pants as a result. This is especially true if you are trading some sort of systematic approach on a day trading basis. Day trading systems have the very big advantage of the law of large numbers. The more trades you make, the more likely the possibility that the large volume will smooth out the volatility spikes of the financial markets.

If you are trading a system here are three simple questions you need to ask yourself at the start of each week.

How many trades do I expect to make this week?
How many winners versus losers do I expect will occur?
What is the pip target this strategy will likely produce?

This is hardly the Big Data-regression-driven-sophisticated-stat analysis that exists in the real world, but it’s enough to ground you in making much better trading decisions for the long term. Just asking those 3 simple questions can tell you if you are overtrading or not trading enough. If the volatility of the markets is aiding or destroying your win ratios and most importantly if you are actually following the system that you claim to trade.

Setting expectations doesn’t mean that you are now a prisoner of your rules – quite the opposite. It means that you can now exert a modicum of control over one of the most unpredictable human activities there is.

Forex Trading Tip – #1 Driver of FX Flows this Week

forex blog Forex News Kathy Lien

Between an emergency Fed meeting, the Bank of England and Bank of Canada monetary policy announcements, US retail sales, Chinese GDP, Australian employment, UK consumer prices and a host of other tier 1 event risks, there are no shortages of events that could drive big moves in currencies.

However, the #1 driver of FX flows this week will be risk appetite. That could be driven by the swings in commodity prices, the volatility in equities, Chinese and/or US data. At the end of this week on Sunday there’s a production freeze meeting in Doha and we are already beginning to see headlines about some producers refusing to cut production. One of the main reasons why commodity prices are performing so well this morning is because crude oil is above $40 a barrel.

Chinese data will also be important. Consumer prices were released last night and the stronger report propelled AUD/USD above 76 cents. Tuesday evening, Wednesday morning local time Chinese trade numbers are scheduled for release and on Thursday evening / Friday morning, Chinese industrial production, retail sales and Q1 GDP numbers are due. We are beginning to see signs of stabilization in the world’s 2nd largest economy but according to China Premier Li, the downside pressure on the economy remains.

And of course there’s Wednesday’s U.S. retail sales report – the market detests dollars but a blowout report could help to turn things around.

Keep an eye on the VIX:

Screen Shot 2016-04-11 at 11.26.33 AM

China’s 2016 Yuan Policy

china chinese yuan Kathy Lien

What is China doing with the Yuan?

1. Front loading yuan weakness

2. Yuan depreciation is a policy tool. With SDR decision in the rearview mirror, China is stepping up their currency reform. Its the first year of their 5 year plan to rebalance the economy

3. Yuan intervention overnight is a familiar tactic used by the PBoC. Back in August, they weakened the Yuan 2% and then intervened by ordering state banks to buy yuan in an effort to drive out speculators.

Why are they doing this?

1. Currency is Overvalued

2. Weaker Currency is Consistent with Monetary Easing

3. Its Competitive Devaluation

4. Necessary part of their plan to provide underlying support for their economy as they shift from export to consumption


Consequences

1. These actions will flame the currency war in the region

2. Kills the Fed’s chance of tightening in March

3. More outflows

4. More yuan weakness with intervention to slow the decline

5. Yuan weakness is one of the greatest risks for the financial markets in the near term because a weaker yuan means less purchasing power for Chinese individuals and businesses = weaker profitability for US businesses selling to China

6.75 is our target for USD/CNY