The Fundamental Wrap
The PBOC altered the CNY trading range three times this week – which had a lot of impact on the markets. European and US indices fell as their exports to China are likely to reduce on the basis of the Chinese currency being worth less. Thus the profits for all the corporation should decrease. Consequently there were significant drops in instruments like the DAX and the S&P. The US dollar weakened as the PBOC’s action created more uncertainty for the Fed, which led to the market delaying its expectations for the start of the US interest rate rise cycle. US Treasuries (US government bonds) rallied a lot – because why?. EUR rallied over the past three sessions too – why?
Tuesday’s trading (0-4, -2.64R)
This was somewhat of a tough day. I reviewed my trades carefully. I considered three of them to be valid setups. Only one of the $-Yen traded should have been avoided. So that day things just didn’t work out. Still, overall I was trading ok.
No chart for the EURUSD trade!
Wednesday’s trading (2-2-2, +1.24R)
Initially I got very frustrated. I had tried to short the DAX and the EURUSD and both times my pending orders didn’t get filled, just because price didn’t retrace. Then I got unlucky with my tightened stop on the 1st Cable trade. Then on the 2nd Cable trade, it slammed into my stop, and then the EURUSD went into huge profit (+30 pips) before it returned to my entry level – all this whilst I was out for lunch. By this stage I was fairly fuming and swearing and stomping around the office – to the amusement of my trading colleague. However I let the emotion motivate me in the right manner by hitting good trades on Cable and the DAX to not only recover all of the losses but end up with a profit for the day. We certainly had a lot of banter and laughs during the session. So much for “emotional-free” trading.
Thursday morning (2-1-0, +0.67R)
The moves this morning were more muted so I took off a little when the market offered it to me. At the peak I was up around 1.6R across my four open positions (after having locked in some to ensure that my overall market exposure was limited to 2R), but for now I am up 1R on the day.
I made a point of trying to get in early on the trades and USDJPY did look promising and trending from the Asian session. EURUSD was my second trade after locking in on USDJPY – to bet on continuing dollar strength – after the dollar index put in a nice double bottom on the 1H timeframe, and on a key level.
I also opened a short position on NZDUSD, with a 100 pip stop. I intend to keep that one open for longer and trade in and out of it as time goes. The reason for this short trade is the clear divergence in central bank policy between the Fed and the RBNZ. The same could be said for BOE/RBNZ, however GBPNZD just feels a bit too volatile for me. I prefer the slower but more consistent movers, regardless what timeframes I am trading on (makes me think back to the TY [US 10-Year treasury bond) v S&P500 comparison when trading futures).