Weekly Review and Outlook 18th September 2017

Mark NugentSept 2017, Trading Plan

Weekly Forex Review – Week Commencing 11th September 2017

The key issue at the start of last week was to judge risk sentiment in the wake of Hurricane Irma and the feeling that North Korea may launch another missile to commemorate their Founder’s Day on Saturday 9th Sept. In the end, Irma was not as bad as feared and North Korea did nothing. So Monday started with risk sentiment very definitely “on”.

Positive risk sentiment continues into Tuesday and then went neutral on Wednesday.

Super Thursday at the Bank of England was fun. The MPC voted 2-0-7 (up-down-same) to keep rates unchanged and 0-0-9. It was the commentary that was interesting. It was noted that if the economy continues to perform as it has been doing, “some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainability to target” and “monetary policy could need to be tightened by a somewhat greater extend over the forecast period than current market expectations”. Further year-on-year inflation is expected to rise above 3% in October and to overshoot the 2% target over the next three years. So, a clearer message that interest rates will be rising sooner than the market expects could not have been made.

At the end of the week North Korea launched another missile over Japan. The markets wobbled for a short period before moving on. The markets are building resistance to North Korea.

On the calendar the news was all around GBP and USD. In the UK, CPI beat expectations and Average Earnings missed. In the USA, Headline CPI beat expectations and Core was on track. Both Headline and Core Retails Sales missed.

Equities gapped up on Monday morning and kept going in most territories. Gold dropped and consolidated. Oil gained on bullish commentary from the IEA. BoE Super Thursday caused the GBP to rise to a post-Brexit high. Predictably, UK equities dropped on the rate hike expectation. The US 10 Year yield rose every day of the week. The JPY weakened significantly, with only a slight and short-lived North Korea-inspired wobble. The EUR consolidates.

I enter three trades on Monday night. Trade 57 (GBPJPY long) gets taken out by volatility upon the BoE Super Thursday announcement for a gain of 0.88%. I re-enter immediately (Trade 61 – see later). Trade 58 (Japan225 long) is live and has 1x risk locked in. Trade 59 (Gold short) gets taken out at breakeven. Trade 61 (second bite at GBPJPY long) is live and the closing price on Friday night represents a gain of 4.3x risk.

Weekly Forex Outlook – Week Commencing 18th September 2017

Major Events

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