What Happened Yesterday
Euro was primed for a move lower before geopolitics stepped in!
The USD fell to two-week lows against the safe-haven YEN and Swissie on Tuesday, as investors turned cautious amid political worries in Europe as well as weaker stock and commodity markets after a long U.S. holiday weekend.
In the Eurozone, falls in inflation in Spain and several German regions as well as ECB President Draghi’s commitment to continued emergency stimulus initially pushed the Euro lower. And signs that elections in Italy may come as early as September also added to the Euro’s early pressure.
And then the Trump woes started coming up again. The USD has been soft the past two weeks on concerns over U.S. President Donald Trump’s administration, citing an uncertain time frame for the passage of healthcare reform and difficulties facing the border-adjusted tax, let alone the issues with Trump getting involved in stopping investigations about relationships with Russia.
So it was mainly US geopolitics that burnt the EURUSD trade and sent the USD scurrying lower against most pairs.
But beware random election polls out of the UK as they will have a huge impact as well.
What’s Happening with the Majors
The big four: EUR, GBP, AUD & NZD all rallied against the USD although GBP was somewhat muted due to it’s own geopolitical issues.
It was a pretty brutal day of trading with most major pairs initially breaking lower, getting everyone bearish and/or short, before finally squeezing everyone out of their positions 15 minutes before the release of the US data.
The Beast (YEN) traded with a downward bias all day but surprisingly it hasn’t gone too far. Resistance now comes in at 111.13 and with multiple hits it is starting to look formidable.
The Loonie ..well yep it’s just Loonie. Traded sideways for the most part with one spike around the US data. Oil has gone stagnant around $49.60 and that’s slowing any moves in USDCAD.
I’d say most traders will now be taking a breather as geopolitics kicks in across Europe, UK and the USA and makes trading extremely unpredictable.
Plus you’ll need to spend another 30 minutes on your charts today as all charts are a mess after yesterday’s moves.
Well what can I say…I got burnt or a light singeing anyway! Geopolitical situations in the trading world are impossible to avoid (unless you don’t trade) as they are usually ‘random left field’ releases.
But that’s why we have a trade plan and set exit levels. It protects you from random events or even moves that you just got wrong.
In this case it could have been a bit of both on my part. But because I have a set structure and trading plan I am ready to now look for the next best trade.
I will be taking my time though to dig deeper into the geopolitics of each region to make sure I know where the ‘raw nerves’ are and what impact they could have going forward.
Important Note: We’ll be updating the ‘Next Best Trade’ when the opportunity arises. Pro Members stay tuned for email updates.
What to Expect from the Market today – Wednesday 31st May
It could be a bit of rough and tumble with RBNZ Governor Wheeler speaking first up. He loves to stir the market up!
Then keep an eye on the Japanese and Chinese data (AUD & NZD) as they could impact if somewhat variant from expectations.
Another swag of data is scheduled. Probably best to assess market conditions at the time and trade with the momentum.
I wouldn’t really be planning on holding trades for any major length of time beyond a few hours as geopolitics usually kicks in now and again screwing up the flow of the currencies created by the data.
North American Session:
Keep an eye out for Donald news. It’s negative USD and can turn the currencies on a dime.
I’m not sure if the CAD will do much as Oil seems to be dominating proceedings for now. But the GDP numbers are important so pay attention if you’re awake.
US Pending homes sales have impacted in the past so they are worth observing also.
That’s about it traders. Take your time re-doing all of your charts and be aware that geopolitics are impacting most markets.
Remember, Geopolitics dominates Economic data so don’t waste your time watching the data releases.
When that occurs I suggest doing one of two things:
1. Reduce your trade size
2. Stay out of the market until the markets settle down.