What Happened Yesterday
The USD ratchets up, then down, then up, then down …and finishes where it started!
What a wild 12 hour trading session it was with several events colliding all at once. It was actually difficult to work out what was driving what.
The smart thing to do was sit back and watch….. as trading these markets with a lack of understanding of what is driving what …well that’s just gambling.
Major Geopolitical Events
Major issues in Middle East surrounding Qatar…. it looks like everyone is getting involved now.
US Oil inventories go through the roof …… sending Oil down $2/barrel and roasting the CAD.
Iranian parliament besieged by terrorists… 12 dead and loads injured.
ECB rumour floating around about decreasing inflation expectations…… sent EUR tumbling 100 points only to rally back.
UK election polls hype ….. results all over the shop plus still residual terrorists threats.
USA Trump issues surround Comey’s testimony ….. although it looks like the Donald sidestepped a bullet today.
Have I missed anything???
It’s completely nuts….. and with the Media hyping the….”Triple Threat Thursday”, it’s likely to continue or even get worse.
Calm Heads Please
Before you get excited and think this volatility is awesome, it’s really not. it would be good if we had one ‘driver’ but we don’t.
We have several forces pulling the currencies in all different directions so the chance of making odds and ends of it are slim.
Focus on the Big Events for Thursday
The three key events that could drive market direction are the European Central Bank meeting, the parliamentary election in the UK and testimony by former U.S. FBI Director James Comey to a Senate committee.
If the ECB go soft and cut inflation expectations then the EUR will get hammered. The last 5% rally in the Euro can be put down to a weak USD but mainly ‘tough talk’ from the ECB about future rate expectations. If that is downgraded then the EUR is in big trouble.
And despite the current USD weakness. if that occurs the USD will rally through the roof.
If the ECB maintain their stance then it’s business as usual and the EURUSD should rally…. major volatility averted for now.
Any result besides a majority to the Conservatives will be negative for GBP. If it’s close or hung then GBPUSD should drop 200-300 points. Recent polls suggest it will be close but we saw the same thing happen around the Brexit referendum…and the Polls were completely wrong. So brace yourself for anything.
Once again if the status quo is changed (i.e. Conservatives lose majority) then the USD will rally through the roof!
U.S. FBI Director James Comey testimony
The risk here is that Comey drops Trump in the doggy poop. If he states that Trump interfered with his investigation/work then it can bring major issues for Donald… impeachment??
That will be extremely negative for the USD. If Comey says nothing then it’s business as usual.
Triple Threat Thursday – Scenario Analysis
This is something we used to do all the time in the banks. We would go through all the possible scenarios with big events so that we would be prepared for anything.
1. ECB remain on track – UK election Conservatives win majority – Comey says nothing = USD maintains downward bias but not a crazy sell off.
2. ECB cut inflation – UK election Conservatives win majority – Comey says nothing = EUR sold aggressively & USD steady with slight downward bias.
OK we could be at this all day…. so let’s just go for the ‘Murphy’s Law’ scenario:
ECB cut inflation – UK election Conservatives lose – Comey drops Trump in it = HAHAHAHA LOL who the hell knows….. maybe they stay still as EUR, GBP & USD all can’t go down at once!
What’s Happening with the Majors
The EUR and GBP are anyone’s guess… so hang back and wait for the results of the events.
The AUD and NZD are cruising to the topside but look susceptible to a stop loss run to the downside.
The CAD well it’s shot up to the topside with the big sell off in Oil.
The Beast (YEN) isn’t sure what’s going on. It’s like someone walking into a bar and there’s an all in brawl….. who do you hit first???
The Next Best Trade
We had a few pending orders yesterday but they were cancelled after the ‘penny didn’t drop’.
The AUD GDP data wasn’t quite good enough to get me excited…. I took a quick 7 pips but left it alone as i was after +0.5% for the big move.
Since I didn’t get the numbers I closed it out and walked away from the trade.
The Swissie …I cancelled Pre-European session as it’s getting too close to the major events. It’s probably lucky I did as it too was caught up in the calamity.
Important Note: We’ll be updating the ‘Next Best Trade’ when the opportunity arises.
Pro Members keep an eye on the NBT List and we’ll also endeavour to get an email out to you with any updates.
I do not expect any NBT trades today.
What to Expect from the Market Today – Thursday 8 June
AUD – Trade Balance – in the past it hasn’t been massive but of late everything is moving the Aussie so check it out. Quick ‘snatch & grab’ perhaps!
CNY – Trade Balance – this one can move the AUD and NZD big time. If they are exporting or it’s worse then it’s bad news regardless of the overall Trade Balance number.
GBP – UK Election – massive!
CHF – Unemployment & CPI – check this out although it will more than likely be overlooked because of the ECB meeting
EUR – ECB Meeting – enough said. it’s a big event so prepare for volatility.
North American Session:
USD – Watch out for Comey’s Testimony as well as the weekly Jobless claims. The market is nervous so even little releases will impact somewhat.
CAD – Housing data plus BOC governor Poloz is speaking later on.
Forecast for Trading
All up it’s a pretty hectic 24 hours coming up which could have ramifications lasting weeks.
I will prepare to trade with the expectation that I won’t be.
Funnily enough the Asian data has got very little press because of the European events but I think the Asian session will be the best opportunity today.
We may not start to get the UK election results until this time tomorrow. So don’t hold your breath on GBP.
Now is the time to get serious about your capital management and trade plan.
If you don’t have a plan in these types of markets your account will be massacred!
Tune up your charts and get ready to trade, See you in the Live Trade Zone.