Forex Market Commentary For FX traders
FX traders need look at the bonds markets. How low can global bond yields go and how does that play out in the Forex markets? How can FX traders understand the ensuing directions in the currency markets?
This week in the world's largest economy saw the smallest amount of Americans filing for unemployment benefits at a 43-year low last week. that quickly translated into a US equities surge which saw the Dow hit records with a close at 18,516. In this same process, finally, US energy companies seem to be getting over the huge bruising they took over the last two years, with crude oil WTI stabilizing near the high 40's, which more or less gives a sign of defiance to the global mood of sweeping pessimism that pervades on every corner of the globe except in USA.
Whilst the prospects for lower bond yields from China to Japan to Europe continues the prospects for higher yields in USA grow which inspires the growth in demand for the USD.
Now, turning to Brexit and the implications for the UK economy and the value of GBP, the new government was installed and the hurrah is over. GBP/ USD slipped 200 pips and found itself pegged back against a wave of reality. QE or
quantitative easing, originally used in 2009 after the Lehmans crisis, is set to return to the UK as the Bank of England sets the tone of reality versus the ideas of the ruling politicians. The UK economy is going to hurt and the BoE needs to act to fuel the money markets to create a soft landing against a Brexit inspired recession. Most economists polled by Reuters are expecting the BoE to cut interest rates next week to a new record low of 0.25 % next Thursday. Should the UK cut rates next week in vain to try to avoid the economic crisis of Brexit then the UK would finally be approaching zero rate interest rate policy which is already being adopted across the European continent and Japan.
This is a real crisis. After nearly 8 years of collective central bank action after the Lehmans crisis still the global action of zero % interest rates is not helping the global economy to grow. Large corporations have reduced their work forces to the bare bone and increased their share buy-back programs by taking bank loans so where is the reality in global equities markets if companies from Europe to Japan struggle even in a zero interest rate climate?
For small traders a gently rising USD will play out across the currency markets and commodities markets. GBP/ USD back at 1.31 with our eyes for a retest of 1.29 next week where the 1.35 breech was a failure. USD/JPY we will be looking to 1.04 and EUR/USD a retest of 1.09 in the week ahead. Gold has lost its shine as the panic has ebbed away and traders look for US equities for investment and will come under pressure this week ahead.
This week in the world's largest economy saw the smallest amount of Americans filing for unemployment benefits at a 43-year low last week. that quickly translated into a US equities surge which saw the Dow hit records with a close at 18,516. In this same process, finally, US energy companies seem to be getting over the huge bruising they took over the last two years, with crude oil WTI stabilizing near the high 40's, which more or less gives a sign of defiance to the global mood of sweeping pessimism that pervades on every corner of the globe except in USA.
Whilst the prospects for lower bond yields from China to Japan to Europe continues the prospects for higher yields in USA grow which inspires the growth in demand for the USD.
Now, turning to Brexit and the implications for the UK economy and the value of GBP, the new government was installed and the hurrah is over. GBP/ USD slipped 200 pips and found itself pegged back against a wave of reality. QE or
quantitative easing, originally used in 2009 after the Lehmans crisis, is set to return to the UK as the Bank of England sets the tone of reality versus the ideas of the ruling politicians. The UK economy is going to hurt and the BoE needs to act to fuel the money markets to create a soft landing against a Brexit inspired recession. Most economists polled by Reuters are expecting the BoE to cut interest rates next week to a new record low of 0.25 % next Thursday. Should the UK cut rates next week in vain to try to avoid the economic crisis of Brexit then the UK would finally be approaching zero rate interest rate policy which is already being adopted across the European continent and Japan.
This is a real crisis. After nearly 8 years of collective central bank action after the Lehmans crisis still the global action of zero % interest rates is not helping the global economy to grow. Large corporations have reduced their work forces to the bare bone and increased their share buy-back programs by taking bank loans so where is the reality in global equities markets if companies from Europe to Japan struggle even in a zero interest rate climate?
For small traders a gently rising USD will play out across the currency markets and commodities markets. GBP/ USD back at 1.31 with our eyes for a retest of 1.29 next week where the 1.35 breech was a failure. USD/JPY we will be looking to 1.04 and EUR/USD a retest of 1.09 in the week ahead. Gold has lost its shine as the panic has ebbed away and traders look for US equities for investment and will come under pressure this week ahead.
Please turn to Bloomberg for global bond yields:
http://www.bloomberg.com/markets/rates-bonds
USDX 96.682 +0.582 +0.75%
EUR/USD 1.103700 -0.009385 -0.84%
GBP/USD 1.319450 -0.024800 -1.1%
USD/JPY 1104.8075 -1.3995 -1.32%
USD/CHF 0.982600 +0.002675 +0.27%
10 yr US T-Notes 132.046875 -0.343750 -0.26%
Crude Oil 46.61 +0.19 +0.41%
Gold 1337.625 +7.530 +0.57%
SP500 2161.74 -2.01 -0.09%
Dow 18516.55 +10.14 +0.05%
1. Always use your own better judgment as an FX trader and try to build a picture of trade logic combining both technical and fundamental understanding of the Forex markets.
2. Use Day Charts Japanese Candesticks as the preferred interpretation of daily price action.
3. Use FX trading as 50% of your trading plans and balance with safe conservative wealth building plans. Please read:
Consistent Wealth Building Program
http://www.bloomberg.com/markets/rates-bonds
USDX 96.682 +0.582 +0.75%
EUR/USD 1.103700 -0.009385 -0.84%
GBP/USD 1.319450 -0.024800 -1.1%
USD/JPY 1104.8075 -1.3995 -1.32%
USD/CHF 0.982600 +0.002675 +0.27%
10 yr US T-Notes 132.046875 -0.343750 -0.26%
Crude Oil 46.61 +0.19 +0.41%
Gold 1337.625 +7.530 +0.57%
SP500 2161.74 -2.01 -0.09%
Dow 18516.55 +10.14 +0.05%
1. Always use your own better judgment as an FX trader and try to build a picture of trade logic combining both technical and fundamental understanding of the Forex markets.
2. Use Day Charts Japanese Candesticks as the preferred interpretation of daily price action.
3. Use FX trading as 50% of your trading plans and balance with safe conservative wealth building plans. Please read:
Consistent Wealth Building Program
Proper Planning Prevents Poor Performance.
Do not rush but plan out your Forex trading career to consistently become profitable and successful.
Pieter Bergli - Trader X16
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