Geopolitics – where we going !!

Well we can think all we like about Trump but the fact remains US is still the major economy so whenever US matters a word the markets react. US economy in a healthy state and looking good - one only has to look at employment numbers to gauge that - so the way markets reacted to talk of Tariff wars tells us that US equity markets may be a bit toppy with players looking for any excuse for a correction. The problem we have is the fear of the unknown with policy flip flop which is never going to end well. Then on the other side of the pond we have the UK whose economy is chugging along nicely but the Brexit overhang is still a big unknown. Then Europe - the union still has a few problem children. At the same time we have Libya, Iran, Venezuela, shale and OPEC and China.

Ok, alot to think about and we didn't even mention Nth Korea. So whats all this mean. Well volatility is back and its only going to get higher - not so bad if you know what you're doing. My plays at moment is still short the dollar against euro and sterling. JPY, sitting on the sidelines at moment.

Good luck all.

Trump Trumped, Trumping

What is going on...POTUS has become the largest market distraction since well.... anything. Its been quiet difficult the past month due to the geopolitics everywhere from France, to Germany, Italy, US etc etc. So how should we play the market when the usual correlations are not driving and the whim of politicians make it difficult to know which way markets are likely to move.

Quiet simply markets work on fear, the fear of the unknown. So without throwing the baby out with the bathwater, we need to look for the largest unknowns and where we surmise the largest fear factor is. For example, if we look at Brexit we are only at the very beginning of a transitional phase. The full impact of the economic realities of Brexit is yet to be felt and how they will manifest themselves in jobs, inflation, housing, trade agreements etc is at this stage, a very large unknown.

On the other side of the pond we have Trump who is an extreme wildcard. Of course coming from the business side where the first 90 days matter, he is applying the same principles to running the country and I think we can all agree he has made quiet an impact to date. Temper this with the actions of FOMC and where we thought the $ might be a month ago has certainly changed.

So to counteract this in our trading we scale back notionals a bit and go with short term momentum. Now is not the time to go all in but rather act tactically to dart in and out quickly and where we may have looked for 90 pips we might look for 40. In terms of pairs, stick with the majors and skew toward those where they are not under to much political stress - think kiwi, aussie etc. Traders will be searching for something to latch onto to give direction and we should do the same.

USD/JPY

Well we didnt quiet make 110 and now down a tad under 109 but I believe in this puppy so just placed another long at 108.93. Will use a fairly large stop because when this think runs again I can see my 114 objective being hit.

Because of the wide stop remember to think about your leverage and capital management plan. If all works out will scale in later. There is some resistance with USD index around 100 but in my view thats will only be temporary. When US raise rates again then north we shall go.

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USD/JPY

Well direction we were after and direction we got. USD has been on a runner since trump got in and pretty much everyone is jumping in on the trade given the hawkish stance of not just Trump but those that matter like the FOMC members. Doesnt hurt when retail numbers support so I will be looking to the utterances of Yellen and friends to see where going this year but lets face it we have been waiting all year and members like Fischer have been chomping at the bit. Think would be a fitting end to the year.

Wheres the hawk right now - well i went long at 108.33 and now have stop placed at 108.83 Pair is currently trading well over 109. Will be cautious around 111.07 if we slice thru 110 but objective is 114. 110 might be a hurdle but think there is to much momentum right now and should be a blip on the radar to travelling North.