Welcome back again,
Yesterday, you got to see what I looked like when I had a beard. What was I thinking? Today, you get to see what I look like in Movember.
As the pic suggests, today’s post will have all the qualities of a bad 1980’s porno: Big moustaches, corny jokes, and a disappointing plot!
The anti-climax in today’s plot will be: the Euro. Don’t say you weren’t warned.
So, let me take the chance to offer a shameless plug for yesterday’s post. It was just after Lunch, for those of you in Ireland or Britain, but we got it out there. In it, I cover the Singapore Dollar (the “Sing”) and my thoughts on working environs. Much more interesting than the Euro.
I suggested that today I might talk about risk and income management. I’m going to apologise and move that to tomorrow to give me more time to write it. I have some more personal thoughts for today.
I had a couple of interesting conversations this week. One of them was with a very talented musician (while we were on the subject of the “sing”). What was interesting was that she was very clear about passions in life (obviously music) and why she was pursuing her musical career. I’ve heard her play, and she’s very good. That’s the result of focus and hard work over a long period, to be sure.
For my par, I had more difficulty articulating what got me interested in foreign exchange trading. Its hard work, but I do enjoy it. It was only later that I thought of what my interest might stem from.
I’m fascinated with politics and economics, and constantly keeping tabs on current affairs. I fancy myself as a bit of a policy wonk on the intersection of social and economic policy. Keeping up with the economic part at least is an essential part of the forex game. In fact, as a trader, it’s become interesting to see just how much lazy copy (and late copy) gets put out by journalists about the financial markets in particular. The lack of understanding of market drivers is just as pervasive in financial journalism as it is everywhere else.
I’ve started spotting balderdash everywhere, and much of that is on account of the information load (and the raw nature of much of it) that we all follow every day. Reading the papers certainly takes less time than it used to! Forex doesn’t exactly keep you close to economics’ intersection with social policies, but this endless supply of new places to spot bollocks in economic writing isn’t limited to copy about currencies.
There’s always something I’ve picked up keeping up with trading news that helps me spot crap somewhere else. Besides, I get to be the master of my own time, without putting up with demanding or unreliable customers.
Oh, and remember that I mentioned hard work. That wasn’t related to the analogy I just made. I inserted it so I could come back to it on a different point. Trading really is hard work. Whoever decided that it was a simple hour a day routine was dreaming. I imagine they were dreaming of how to con as many mugs out of their money selling useless seminars.
I like this video of New Zealand Prime Minister John Key, when he was a 25 year old senior forex dealer at Elders Finance in Wellington. It’s from the TVNZ programme “Close Up” in 1987.
Onto the Euro
So, it seems that every pundit wants an excuse to short the euro. I recall seeing notes from investment banks flagging yet new euro shorts even as they were stopped out of their previous positions. It almost seems like when we were at 1.2 and everyone was bearish, yet we kept seeing scary short covering rallies but no downside follow through.
The latest big excuse for a short was a head and shoulders formation.
It’s pretty neat (I’ve cut off the subsequent price action, so you can see the formation at the time). As I understand the head and shoulders pattern, it’s designed to be a powerful signal at the very end of a big bull run. I decided to zoom out to show that big bull run.
Anyone else thinking “balderdash”? It looks like there’s some clutching at straws to justify personal beliefs. We’ve seen all this before.
On the other side, there’s some trend lines. There’s a nice steep upward sloping support on the hourlies, for example. If I take every trend-line I can find with three touches my chart looks like this:
There are two things I picked up. Firstly, I can’t get three touches on any resistance lines. I’m sure they’ll appear eventually, though. Secondly, what a mess. I’m not trading those with a barge pole.
What is looking better though, is Ichimoku support.
Look at how the blue kijun line has supported the Euro all the way up this rally on the H4 chart, and the fat rising cloud below. The red lagging line has support from the candles of 26 days ago also.
We have a upcoming cloud support on the weekly too, currently rising and widening and remaining supportive all year around the 1.315 mark.
The hourly cloud is not particularly fat, but look at how it’s supported the rally for a fortnight.
I’m unconvinced by big short calls on this pair, but I’m not adding any positions. Right now, I’m going with the adage of “play the edges or get cut up in the middle”. I think we’re long term range trading, and we are right in the middle.
The track record on recommendations for Euro shorts overall is appalling. There’s plenty of crosses looking attractive longer term for a long (Hello, Aussie and Kiwi, not to mention Swissie). These have all been good to me recently. I’m happy to wait patiently for another long entry in any of these.
My take: This pair is generally one to avoid for now. For my core portfolio, I’ll wait for signals on the crosses for a Euro long.
I declare this bad 1980’s porno over! The pool has been well and truly cleaned (Sorry, that’s the best cliché I could think of).
Comments welcome. Bad Eighties clichés also welcome.
