Well I thought Clinton was a sure thing. But the anti establishment feeling is just to strong and the master now becomes the Apprentice. Apprentice President that is. But the point I want to highlight today is how geopolitical events can swing the markets and currencies. Take a look at the USD/JPY movement yesterday and that is all you need to demonstrate the risk in currency trading. The good thing is volatile movements like that remind you of the importance of capital management and the proper use of leverage or when things are going crazy to just stay out and watch from the sidelines. I know I did, and now when we get some direction it is time to get back in on a cautious basis.
The Hawk flew the coup for a while on an extended holiday. That promised European trip for the family finally came true thanks to a few months trading Yen. So now its back to business.
So what am I excited about at the moment. Well I need to do a bit of catchup first but if we look to the markets we have some interesting movements. Oil for one is still worth tracking with OPEC promising to cap production yet again but one can never take that for granted. US election is looming and as a non American it has become more farcical to watch then ever. I still in disbelief that Trump is the republican candidate and his debating skills IMHO are as good as his diplomacy (hint of sarcasm there). However the US election will have an impact on all markets so we need to keep a watchful eye on and not get caught out on the wrong side of over-exhuberance.
Central banks never go away and the great debate of when the US will next hike continues. I think all will remember back at the end of last year when FOMC bulls were looking at 3 or so hikes in 2016.
Stay tuned for updates.
NFP didnt just come in below expectations it was quite abysmal which should have the Fed thinking whether all the hawkish comments were just a bit early. If Fed is data dependent then I would suspect the hike will now not come until after the election in September or perhaps even a bit later if data does not show vast improvement.
Whilst NFP was expected around 158+ it only came in at 38+. The employment rate dropped to 4.7% however this was on the back of a much lower participation rate thus more negative news.
Given the market was quite short the reaction saw the shorts scrambling for cover with most currencies up over 100bps and significantly more in case of Yen.
This week we should see further upside to the currencies however just be aware on the higher yielding currencies that the market can interpret as bad news is bad and therefore after the short squeeze play is over a retracement to the downside may come into play. Specifically on the aussie where the minutes of the upcoming RBA meeting will be important to see whether they are on hold for a while, to let the recent cut and other measures play out, or they are still very dovish. The former should help boost the aussie over 74 and up toward 75 whilst the latter could see the aussie fall back down toward 7270, in the near term.
Happy to announce that soon I will be providing a daily and or session video update as warranted. Will be available in the sidebar or on the Daily Video page where you will be able to view all past videos.
If you see the odd video popping up its just a practice run, with a the plan to make the videos available from next week onward. Also feel free to suggest any improvements or let me know of any suggestions you may have.
What are the charts telling me this week - lots of sideways trading so sitting on the sidelines waiting for some clear direction.
DXY up from 92 early May to 94.xx. RBA - well aren't they decisive, not. Unless economy deteriorates from here would not expect another rate cute for a while. Market still focused on oil and Brexit - so keep an eye on.
Lets see how I have been going.
If you follow my twitter feed you will see that I am up +780 pips (realised) in the first two weeks of trading which is nice given the equity market meltdown.
The best trade to date was a Long euro/aussie which netted close to +320 pips. There has been no loss trades so far although my Long $ yen trade is currently -67 pips under. I have held this one open on the basis I dont believe China economics are as bad a shape that every one says. Sure growth is slowing but the economy is 10x larger then it was 10years ago. The issue as I see is the fixation on commodity prices however this was bound to happen as China move to a more services orientated economy.
If China data this week is off then I may get smashed - its a risky play given the last two weeks and we will monitor closely to limit any damage.