Fed Week

Situation

Calendar

This Week

Monday:
– 0900 EUR Draghi speaks
Tuesday:
– 1000 USD Consumer Confidence
Wednesday:
– 1030 USD Crude Oil
– 1400 USD FOMC Rate Decision
– 1430 USD FOMC Press Conference
– 1700 NZD Rate Decision
– 1800 NZD Press Conference
Thursday:
– 0830 USD Core Durable Goods & Final GDP
– 0930 EUR Draghi speaks
– 1630 USD Chair Powell speaks
– 1745 CAD Gov Poloz speaks
Friday:
– 0830 CAD GDP, US News (medium)

Pending News

  • US & Canada NAFTA talks pending resolution
  • Fed Decision, Bank speak every day

Next Week

  • New monthly candle on Monday
  • Friday news for USD and CAD

Indicators

Formation Status

USD.CAD
  • Monthly – Pullback to support
  • Weekly – MACD showing bearish bias, possible breakdown below 50-period support and retracement to the 1.2500 area.
  • Daily – 5 waves complete without a reversal candle, possible 7 wave cycle
  • 4HR – pending breakout either way

News Sentiment: USD NEUTRAL
– No significant news bias

Price Action: Formed a new 4Hr triangle for 60 pips at 1.2920. This could break down to 1.2840 or pop to 1.3000.

Analysis

The FBI and Fed are engineering a Democratic takeover of Congress in order to have Democratic ownership / buy-in on the changes to healthcare and Social Security. (These legacy programs are the greatest threat to our financial stability. I believe Trump was elected specifically to address this budget problem. GWB couldn’t get it done with a majority. Trump has pulled the carpet out from enough Dem programs to give them bargaining chips to run on when then inevitably concede ground on healthcare and Social Security.) With that in mind, polls are showing the Dems with a 12-point lead, more than the Republicans had in their 1994 takeover or the Dems had in 2006. With that in mind, I expect the Fed to apply pressure on the Congressional purse strings over the first few months of next year in order to force Congress to deal on legacy programs. However, in order for this plan to work, the Dems need to win. So, because the economy is humming along and voters are loath to change with good economic news, I expect the Fed to come out hawkish ahead of the election this week in order to manifest a market pullback on a higher USD and an inverted yield curve.

Adjustments

I added a News Trading button, that adds a 10-pip trailstop with a 5 pip stop loss for planned news trades.

Key Questions:

  • The Weekly chart shows a USD sell-off against CAD. Does this reverse or follow through?
  • How will NAFTA news be used to manipulate price?
  • How will Fed and BOC speak affect the market overnight on Thursday and Friday?

Scenario Plan: Bracket trades may come in handy this week.

Trade Plan

Monday: 0800 No news, trade the 4Hr
Tuesday: 0830 news ahead of FOMC; expect light reaction, use the trail stop.
Wednesday: 1030 news, 1400 FOMC; expect little action ahead of 2pm meeting
Thursday & Friday: Look for follow through

Action:

Trade / Results:

Position: Long USD.CAD
Entry: 1.2927
Target Exit: Trail
Exit:
Gain / Loss:

Position:
Entry:
Target Exit:
Exit:
Gain / Loss:

Weighted Average Result:

Update:

The 5 & 15 minute charts showed a short, but I expected 4Hr support to prevent a large move so I went long. My stop was appropriately placed, so the position is rallying, but in the future on light news days within a formation, I’ll play the short term direction for a 20 pip gain.

After Action Review

Lesson Log

  • Maintain tighter stops on charts that are elevated well above the Daily MA in order to lock in gains.
  • The Administration is working in concert with other officials to actively manage the currency and prevent aggressive breakouts. Active management is required.
  • Patience. When a pair is extended and you anticipate a pullback, set the ambush and wait to trigger. Allow for enough room to not be stopped out. The pair will likely regress too fast to get the ideal entry without the ambush limit entry order.
    • Huge measured moves that seemed highly unlikely have occurred on two occasions, both of which, had I set the ambush entry and waited patiently would have yielded enormous gains. Set the ambush and wait.
  • On light news days, play the 5 & 15 minute chart with a News Trail (10-pip trail on a 20-pip trigger).