How Do We Make Money Today?
The Japanese Yen raced to its highest level in more than 16 months and the Swiss franc surged as the growing threat of a U.S.-China trade war prompted traders to take shelter in perceived low-yielding currencies.
U.S. President Donald Trump signed a presidential memorandum on Thursday that will target up to $60 billion of Chinese products with tariffs, but only after a 30-day consultation period that starts once a list of goods is published.
Trade wars, the spike in dollar funding costs and a tricky quarter end means that currency markets may become a bit messy going into next week.
The USDJPY fell to as low as 104.63 on Friday, the lowest level since November 2016, before bouncing back to 105.30.
A gauge of stress in the U.S. money markets climbed to its highest level in nearly nine years on Tuesday on concerns about growing costs for banks and other companies to borrow dollars and further interest rate increases from the Federal Reserve.
In a week that the U.S. Federal Reserve broadly stuck to its “dot plot” on future interest rate moves and signaled a relatively upbeat outlook for the economy, 10-year U.S. Treasury yields are on track to post its second biggest drop so far this year, further weighing on the USD.
The Swiss franc was also a notable winner in currency markets this week with a 0.6% rise.
In other currencies, sterling edged higher in the backdrop of an EU summit with the British currency changing hands at 1.4160, but there are substantial downside risks over the weekend if the talks fall apart.
USDCAD dropped almost 100 points from 1.2920 to 1.2825 after Canadian CPI data came in much higher then expectations, raising the possibility for further rate hikes by the BOC in the coming months.
The US equity markets are rallying once again and that’s seeing the unwind of the USDJPY shorts from yesterday as “Risk On” hits the market. AUD, NZD and most of the other majors are back trading higher and recovered most, if not all of yesterdays’ losses.
BEWARE: Trump-a-mania – there is a 60 Minutes interview going to air in the US this weekend with ‘Stormy Daniels’ (porn star) who apparently had an affair with Trump (which is a nice way of saying Donald paid for her services). But Donald is the biggest ‘deflector’ in the market so I’m expecting a massive international ‘Trump’ blow up this weekend to take peoples attention away from this.
If that does happen we could see some wild moves on the Monday open …. so be careful if you’re thinking of running positions over the weekend.
The USD looks like it’s going to continue sliding lower into the close.
Trading Pairs to Focus On
With all the focus on Risk-on/Risk Off the JPY & CHF are the obvious currencies to focus on.
Also the CAD comes into play as it has clear downside bias after the stronger CPI data today.
USDJPY, JPY Crosses, USDCHF & USDCAD
Check our Next Best Trades Watchlist for full details as to which specific pairs we are focusing on.
Technical Set Up – What’s Happening with the USD
The USD is sliding in line with the US 10 Year Treasuries. It’s coming up to what looks like the last level of support for the USD Index at 89.45.
It’s holding at the moment but Trump-a-mania may blow this level apart so keep an eye on your news headlines.
Today’s Fundamental Drivers
Plan the Trade, Trade the Plan!
The idea of our “Market Insight” is to give you some guidance into your daily preparation.
Your Daily Analysis needs to become habitual – For full guidance on our daily routine click here.
Make sure you don’t waste unnecessary time in front of the screens.
Remember you need to be fresh, confident and ready to trade and by sitting aimlessly in front of your screens you will become stale and uncertain.
The key to your success: Isolate the opportunities that work for you and focus on them.
Don’t worry about things that you can’t make…..chasing them will only cause problems (tiredness & irrational behavior will take over).
Tune up your charts & get ready to trade….