Today’s Key Market Drivers: 18th July 2019

Could this be the turning point?

The safe havens rallied and US stock markets fell for a second day on concerns US company earnings have the potential to be weaker than expected in future quarters. The Yen and Swiss Franc were strongly supported as the “risk-off” trading session saw the Euro and Pound make fresh new lows and the Aussie and Kiwi Dollars continue their sell-offs from recent one-week highs. Two of the catalysts for the “risk-off” trading session were comments from Bank of America CFO and weaker than expected earnings from one of the USA’s major railroad companies CSX.

A one-day sell-off doesn’t make a new trend and whilst I am betting on FX markets being bearish in the short to medium term the facts point to a company earnings season that at this point is factually showing better than expected earnings overall. CBNC reports on Thursday morning. “More than 7% of S&P 500 companies have reported second-quarter earnings thus far, according to FactSet data. Of those companies, about 85% have posted profits that beat analyst expectations. The reported earnings growth of those companies is about 3.1%.

What we are seeing is a good example of traders pricing in future expectations and ignoring the facts as they are now. This is a common theme in financial markets and in the case of today’s price action, the rally on safe-haven currencies and sell-off on US stock indexes have more to do with how traders see the economy in six months rather than how it is right now.

When you think about it, it makes sense to price in your expectation for what future company earnings may be just like a clothing retail store is not going to be buying summer clothing half way through summer, they are likely going to be placing forward purchases for their Autumn and Winter season.

Look out for a potential impulsive move on the Aussie Dollar today.

The latest official jobs numbers are due for Australia today with economists expecting 9,000 jobs to have been created in the month of June and the official unemployment rate to remain steady at 5.2%. If the data shows the unemployment rate has ticked up to 5.3% or less jobs have been created then expect a move lower on the local currency.

The AUD v USD has fallen over the past two days and weaker than expected economic data out of Australia would give traders a reason to continue to sell the Aussie Dollar in the short to medium term.

Markets are likely to remain bearish through the Asian trading session.

The fact that we have no potential high impacting economic data through the Asian trading session to change the market’s sentiment (the Asian trading session rarely does) I expect markets to remain in a bearish mood today with safe-haven currencies being supported and a general risk-off trading day.

The European and US trading sessions have a sprinkling of medium economic data but nothing that is likely going to take trader’s focus away from the current US company earnings season reports.

Focus your attention on a set of numbers over time.

Trading is simply a game of numbers and if you took away from the money and you simply played with chips instead of the value of money there is no question you would play the game better over time. This is why I don’t like traders using demo accounts for anything more than learning to use the platform. Thinking you will learn how to trade using a demo account is silly because there is zero emotion and you will act very differently when you have real money on the line. Anyone who thinks or says differently has never traded real money.

Your attention must be on a series of trades over time and the #1 focus on each of the individual trades must be no major drawdown. If you can detach yourself from the money (and you can) and play the game of trading over a series of trades with the sole objective of winning greater than you risk, provided the strategy you are using is consistently applied each time, you will ultimately come out on top with a meaningful return on investment.

Don’t allow yourself to get distracted by things that have nothing to do with your goals and what needs to happen to achieve them. Remain steadfastly focused on the correct process.


About the Author: Andrew Barnett

Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).

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