Gary Comey / Profil

Just as I was getting ready for the double bottom formation taking out the April lows at 0.8471 we get a decent up day and if the market closes up around here a weekly hammer formation which is sort of bullish though realistically we need to break out of the declining trend, which now sits about 20 pips higher in the 0.8580's to begin our rally, so I'm cautious about today's positive price action as officially it's a good day but still in a down trend. Today Sterling is weaker against the dollar too so today's move is Sterling specific whereas earlier in the week the weakness of EURGBP was actually down to dollar strength against the Euro driven by US Inflation and yield differentials. When you are in a position for this length of time the original idea behind the trade has long since passed and therefore we fall back on the strategy. Some strategies say "get out". Our strategy calls for two baskets at most and our second baskets have been increasing the cash all the while allowing us to be wrong for longer and be increasingly safe as time passes. Cash is higher by circa 2% so far in July.

With my one hand free to trade the cash advanced 1.44% this week. At least for now our EURGBP breakout has to wait for another day. After breaking out yesterday it fell back into the descending channel that it's been trading in since March/April. It's a bit disappointing though the extra trade I placed yesterday coming so long after the first trade was placed will I'm sure help pay for the SWAP's. With the cash ahead another 1.44% this week the high risk Alpine account actually hit a new all time high in terms of cash. What we are looking for is a new equity high of course because that's ultimately what we get to withdraw. In the meantime higher cash balances = more protection from EURGBP.

EURGBP remains at the upper end of it's descending channel with resistance at circa 0.8610. It has challenged that technical level over the last few days with support at 0.8565 but now we also descend into the July 4th bank holiday weekend and liquidity dries up. Managed to at least push the cash higher by 4.24% in June and the prospects for USDCHF look good this evening. At least having one hand freed the cash can continue to grow so to some extent it is business as usual but with the caveat that we are all keen to see the back of the EURGBP trade. It's been a real test. George F. Kennan the American historian says "Heroism is endurance for one moment more."

Since the break of 0.8560 EURGBP has resumed it's down trend in the channel marked "A". I said during the week that it was possible we are in for another double bottom circa 0.8471 being the previous June low, but we could easily say a break to the upside at 0.8620 and this market has broken out of it's descending channel up towards 0.87, and if it did that I wonder would one more EURGBP trade help pay for the SWAPs in addition to improving the average entry. Anyway it's officially more risk but food for thought and to quote the Federal Reserve Chairman "I will be guided by the data". In the meantime once again I have one hand free to trade other baskets and have used it to guide cash higher by 4.25% in the high risk account with all other accounts obviously higher too. I am $100K short of a new high in the cash taking account of a loss I took plus client withdrawals. $100K is less than I've made in that account in June so far so it's within reach. All other things being equal higher cash improves the DD in EURGBP, adds to the safety of that position and frankly makes us all feel good and more confident. I'm meeting an oil trader in Dublin city tonight for a pint. We met a few years ago through a mutual friend when I was giving a presentation on position size. Weather permitting I will drink Guinness outdoors as a COVID safety measure. Have a good weekend.

EURGBP WEEKLY

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It was definitely nice to get out of the USDCAD with an okay profit. Had I given it a few more hours every trade in that basket would have closed in profit but alas it's not easy to time the perfect entry or exit hence position size is my "super power". As you know the strategy calls for no more than two baskets at any one time and getting out of USDCAD freed my hand to take profit in a few Yen pairs and to improve the cash by 2.4% this week in the high risk account. That obviously improves the DD all other things being equal. Speaking of DD EURGBP threaded support at 0.8560 on multiple occasions likely stopping out traders with tight stops using other strategies and now finishes the week close to 0.86 so today's move was useful! It would continue to be useful if next week we could take out the high of this week's weekly candle at 0.8628 and I'll be watching for that. SO, now we finish the week Long EURUSD and long EURGBP....both EURO pairs. This does not concern me too much because I notice volatility picking up a bit as the equity markets convulse so I am hopeful that this volatility will give us a nice run.

While victim to summer low volatility EURGBP continues to hold above support around 0.8560 and resistance of 0.8725 though I note it is now meeting shorter term resistance via a series of lower highs going back through May into April. Likely to help our trade we will need a fundamental development, for example a delay to the June 21st "Freedom Day" in the U.K where the newest (delta) variant of COVID-19 is now the dominant and most contagious variant to date, causing hesitation about a full reopening in spite of the very successful vaccination program https://www.bbc.com/news/health-57434493. Or a trade war with the E.U over the Northern Ireland Protocol of the BREXIT agreement https://www.irishtimes.com/news/politics/leaders-in-complete-harmony-on-belfast-agreement-says-johnson-after-biden-talks-1.4589507. Obviously Euro strength would help too but the frankly I don't know what will be a catalyst which should not surprise anyone. If I knew what would happen next I would own the world by now. So we continue with the strategy which will increase the cash and reduce the DD caused mostly tonight by EURGBP while we await an erm.... favourable wind. That opportunity to increase the cash looks better this evening than it has in some time given the developments in USDCAD. USDCAD has put in it's strongest weekly candle in ten weeks and is now in the happy position of oversold weekly but overbought hourly. This was the development I thought would come sooner given the US Dollar index has already broken out of resistance and I find it a bit odd that it didn't happen for USDCAD with yesterday's CPI data which showed hotter US inflation than expected but the market Gods obviously needed today's less significant Consumer Sentiment Index or perhaps traders woke up from their summer rest in the Hamptons or some such place and decided to buy USDCAD. Either way it's going up and I am inclined to sit tight and let it.

There is both USD and CAD data today with Non-Farm Payrolls out of the U.S being a big driver. The USD appears to be finally waking up driven by yields which are showing an increased likelihood of rate rises driven by expectations of higher inflation. I think if USDCAD can break out of it's congestion today this could be a real mover and I am comfortable to let this run a bit to make up for the extended period we are stuck in EURGBP. EURGBP itself is continuing to be lethargic and it continues into the second half of the year I may begin using profits from other trades to reduce some of the biggest losers but not for now and not using USDCAD profits. If I have to cut losers in EURGBP it would be preferable to cut at higher levels and when the cash is higher too. I think we could do with a few winners psychologically and USDCAD is looking good this morning.

It feels a bit like the summer doldrums where volatility is drying up a bit as the market settles into June long weekend mode. USDCAD will continue to be driven by inflation news and EURGBP is fairly directionless. I would not be surprised if the Fed begins hinting that they are taking inflation more seriously soon enough though hopefully USDCAD won't even wait for that. This market has made a few attempts to rally already and this weeks weekly candle is something of a doji and inside the range of last weeks candle. A bullish argument could be made of that technical development so what the market needs to show some follow through is the slightest hint that inflation is not just transitory but actually a bit of a problem. I continue to take smaller timeframe USDCAD trades in the Alpine Managed Account. That's been worth a 2.5% improvement to the cash in May while we wait for the bigger picture trades to resolve themselves. I'm afraid some of my own accounts trade FIFO (First In First out) so Alpine has a level of flexibility that some of the other accounts don't have.

My optimism around Wednesday's USDCAD move was premature. It was a weak rally and basically a false start. I am not great at picking tops or bottoms but the strategy is designed to compensate for it. The rally in EURGBP off the lows provided a bit of wiggle room to improve the cash situation and by default improve the DD situation however in order to do this I must trade and trading is more risk even while we wait to get out of EURGBP at breakeven. Again the USDCAD move remains quite extended as it meets longer term support touched in 2015 and 2017 and you can see this in the monthly graph. It would be easy to let frustration about the extended EURGBP DD spill over into the fact that USDCAD has not provided immediate psychological relief but to be fair to the strategy it never turned on a dime but always did turn. Any talk about higher inflation is good for our trade but the market owes us nothing and it is our behaviour when things get frustrating that will win or lose the day. I will be keeping an eye on Canadian retail sales at 13:30 London time. Weather it's a strong number or a weak number it will provide some visibility and either way the USDCAD move is still quite extended and I am quite comfortable with the trade even if I also wish it would hurry up and turn back towards the moving average.

Picking USDCAD first that pair has been showing some signs of exhaustion and may be forming a bottom via 1.2050. Separately to our grid, I have been trading this pair in and out in the Alpine client account only, slightly improving the average entry and slightly increasing the cash. This market remains deeply oversold with prices not seen since 2017 and with a monthly 14 period RSI measure not seen since 2007. I am quite optimistic on this trade and in my FXCM account I am actually trading this at three times the position size of the client Alpine account which is a deviation from the existing position size strategy though it will mean fewer total positions. EURGBP is now officially a pain in the butt and I will get out at not much more than breakeven when the opportunity arises. The SWAPS are adding up though it's not exactly an exotic pair so the SWAPS are still tolerable. 0.87 continues to be strong resistance and we probably need a EURUSD rally above 1.2180 plus a piece of fundamental news to get EURGBP above 0.87 with conviction. Technical analysis is a sort of self-fulfilling strategy though. We all see the same line in the graph making that line almost physically real. A daily close above 0.87 would be very useful technically and therefore in reality and we are less than 100 pips from that this evening. If EURGBP does not close first then in the meantime the USDCAD will likely bring the cash higher.

Our USDCAD is working out okay with a few winners. Right now it's deeply oversold hourly, four hourly, daily, weekly and almost at RSI 30 on a monthly timeframe. The plan is to be a bit greedy here. I am hoping to close this with all positions in profit. EURGBP is simply range trading between 0.86 and 0.87. The results of the Scottish elections will become more obvious over the weekend and perhaps that will be a catalyst for some movement next week in all Sterling pairs including our EURGBP.

EURGBP D1

On our Daily timeframe in the attached graph you can see EURGBP has been getting tighter into the apex of a wedge formation. EURGBP will need to resolve one way or the other and the excuse to break 0.87 may come from more optimism about the European vaccine rollout which up to now has been lacklustre at best. 0.87 has been quite strong technical resistance. My first preference is to get people back to cash for a few days to allow them to make decisions but as this trade goes on the balance of risks in my view is turning towards needing to place new trades to keep some momentum going. Getting the cash higher will reduce the DD anyway and keep us pointing towards our own personal goals. EURGBP WILLL RESOLVE ITSELF. I must admit small enough as the profit might have been, closing USDCAD in profit within 24 hours of opening it was satisfying. Having been down 10% in the high risk account we will finish April still down but less than 4%. No doubt the rest of the year will go better than Q1 so stay tuned.

In spite of the rally in equity markets today the Yen did manage to strengthen a bit pre-US equity markets open but is now more or less back to it's opening price. I got out. 1. It gives us more breathing room with the large number of EURGBP trades. 2. It gets us closer to being flat which is my goal. 3. In terms of Blackwave Alpine MAM account it more than halves the loss I took at the beginning of the month. So far this month after being down 10% in the cash we are down 4%. Who knows what EURGBP will give us with a week to go to the end of the month. This period has been the most difficult that I can recall including the big USDZAR DD of a few years ago. What saved us again was position size and the willingness to take a loss even if it was not a hard stop, it was more nuanced. If it had been a hard stop the loss would be 50% to the cash instead of 4% to the cash with a 2% DD and with a week to go to month end. The probability is that nothing like this happens again for years but it can happen. The likelihood is that it will spark withdrawals just like a good January brought on deposits. People try to game the system and generally underperform me. When things were bad I added $10K. When things are good I do nothing or withdraw. As you know I am contrarian. Obviously you must make the best decision given your circumstances but it's something worth considering. Anyway the goal is to get back to cash and with luck by month end. EURGBP has the wind in it's sails this evening. To the people who did not offer me advice. Sincerely thanks guys. :-) Even without your saying so I am usually thinking about you and your family.

In spite of the rally in equity markets today the Yen did manage to strengthen a bit pre-US equity markets open but is now more or less back to it's opening price. I got out. 1. It gives us more breathing room with the large number of EURGBP trades. 2. It gets us closer to being flat which is my goal. 3. In terms of Blackwave Alpine MAM account it more than halves the loss I took at the beginning of the month. So far this month after being down 10% in the cash we are down 4%. Who knows what EURGBP will give us with a week to go to the end of the month. This period has been the most difficult that I can recall including the big USDZAR DD of a few years ago. What saved us again was position size and the willingness to take a loss even if it was not a hard stop, it was more nuanced. If it had been a hard stop the loss would be 50% to the cash instead of 4% to the cash with a 2% DD and with a week to go to month end. The probability is that nothing like this happens again for years but it can happen. The likelihood is that it will spark withdrawals just like a good January brought on deposits. People try to game the system and generally underperform me. When things were bad I added $10K. When things are good I do nothing or withdraw. As you know I am contrarian. Obviously you must make the best decision given your circumstances but it's something worth considering. Anyway the goal is to get back to cash and with luck by month end. EURGBP has the wind in it's sails this evening. To the people who did not offer me advice. Sincerely thanks guys. :-) Even without your saying so I am usually thinking about you and your family.

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Remember to close one of these baskets relieves some of the anxiety of having so many open positions. The question as with most things in life is not what happens but how you control your response to events.

USDJPY is looking encouraging and having gotten everyone on the wrong side of the fence by breakout out of longer term resistance it broke convincing back below and that is WITHOUT even a slight pullback in equity markets which will strengthen the Yen. Gold has been moving a little high in recent weeks while some stocks away from the headlines are not performing well. All is not well in the S&P500 under the hood I think.