Today’s Key Market Drivers: 18th September 2018

“Pound continues to gain momentum back higher.”

The reversal patterns I spoke about in Sunday’s Pre-Market Prep Video started to show some fruit on Monday with the US Dollar weaker across the board as an announcement about more trade tariffs on China seems imminent. Recently we have seen the US Dollar gain strength when trade tensions rise with China however as time has gone by traders don’t seem to be as concerned about a trade war and as a result, the US Dollar weakened on Monday.

Reversal patterns such as Head and Shoulders formations and price breaches in new trending directions appear when fundamental facts align themselves with human fear and greed. We’ve seen a sharp downtrend on the GBP v USD for six months and the fear in the market now for traders shorting the Pound is that a Brexit trade deal is getting closer so the probability of an extended slide lower on the Pound has diminished. The greed factor is the Pound now appears cheap compared to where it was 6 months ago and therefore traders are seeing an opportunity to get long with the opportunity of a healthy rise higher once a trade deal with the EU is done. Simply put the probability of a move higher now outweighs a potential move lower and this is where we see reversal patterns occur.

The US Dollar does have a nice shine about it with a strong economy and a Central Bank in an interest rate tightening cycle but that shine may be erased in coming weeks if the US Fed raises the official cash rate next week and signals that traders should not expect it to continue to lift rates at the same pace in 2019. As mentioned above the trade tensions with China also don’t seem to be forcing traders any longer into the safe-haven US Dollar trades when the word “trade tariff” or “trade war” is mentioned.

CNBC noted this morning. “Speculators in the FX market have begun unwinding some of their short bets against the euro and sterling, Commodity Futures Trading Commission (CFTC) data released on Friday, showed. Speculators’ net long U.S. dollar positions fell to an eight-week low.

Today sees the release of the RBA’s September monthly minutes which won’t likely move the AUD much more than 25 ticks. ECB President Draghi speaks in Paris and if traders hear anything from Draghi that suggests he’s bullish on the Euro Area economy then the Euro’s rise will continue and so will the Pounds.

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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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