Trade Plan: 2018/09/16 — USD.CAD back in handle, GBP.JPY breakout

Situation

Calendar

This Week

Monday:
– 0830 USD Empire Mfg Index (medium)
– 2130 AUD Monetary Meeting Minutes
Tuesday:
– Evening JPY Rate Decision
Wednesday:
– 0430 GBP CPI
– 0830 USD Building & Housing (medium)
– 0900 EUR Draghi speaks
– 1845 NZD GDP
Thursday:
– 0430 GBP Retail Sales
– 0830 USD Philly Fed Mfg Index (medium)
Friday:
– 0300-0430 EUR news
– 0830 CAD CPI, Retail Sales & more

Pending News

– US & Canada NAFTA talks pending resolution
– $200B in new China tariffs

Next Week

– Federal Reserve Rate Decision (Wednesday)

Indicators

News Sentiment: USD BEARISH, GBP BULLISH
– China tariffs (Bearish) are the lead story; expect Chinese tariff talk (USD currency management) to step up after the FOMC
– Article on Bond Market Betting on Hikes mentions deficit spending (Bullish), a key topic that I expect to see more of following the election. Fed has signaled that deficit spending is a threat to our economy. I expect the Fed to raise rates until Congress has difficulty paying the bills in order to force hard decisions on healthcare and Social Security.
– GBP headlines, Sterling Benefits on Lack of Bad News, is begging for bad news on Brexit

Formation Status:

USD.CAD

Breakout on the handle failed. Price action is back within the handle, poised for a second breakout in anticipation of a hawkish Fed.

GBP.JPY

Price Action: Sitting just below upper handle trend line resistance at 1.3036. Weekly chart shows another possible drop to 1.2850. Monthly chart sitting above 9, 20 & 50 period. Daily is neutral. 4HR appears bullish.

Key Questions:
– Will China news be enough to push USD.CAD lower to the bottom of the channel in a week light on data?
– Will Wednesday’s GBP data push GBP.JPY through resistance or will headline risk sink it?

Scenario Plan: Play the formations and expect headlines to reverse breakouts.

Trade Plan

Monday:
– GBP.JPY – High base on 4Hr
– 0830 USD.CAD, Bullish setup on 4Hr
Tuesday: No news. Scan the 0800 4HR
Wednesday to Friday: 0830 News

Action:
– GBP.JPY Short at 147.90
– USD.CAD Short at 1.3080

Trade / Results:

Position: Short USD.CAD
Entry: 1.3070
Target Exit: 1.2850
Exit: 1.3069
Gain / Loss: Breakeven

Position: Short USD.CAD
Entry: 1.3062
Target Exit: 1.2850
Exit:
Gain / Loss:

Weighted Average Result:

Update:

2018/09/19 Larry Kudlow signals entitlement reform is coming, as we stated earlier this week in this post. Read more here. Success on entitlement reform will be enormously bullish for the USD.

Analysis
Coordinated currency management on part of the US, Britain and Europe through headline manipulation. Both USD and GBP should be higher, if not for headline risk.

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.