Today’s Key Market Drivers: 19th February 2019

US markets relax for Presidents’ Day.

US markets were closed on Monday for Presidents’ Day so you should discount the back and forth swings in price action as novice traders dusted their money in between professional traders who are simply waiting for some high impacting news that will create some impulsive moves.

I suspect 90% or more of novice FX traders that placed currency orders into the market on Monday had no idea it was a US Federal holiday and the volume and volatility would be significantly lower. This sort of information is a small piece to the puzzle of trading but it’s an important one that you must not ignore.

Don’t be fooled into thinking technical patterns drive the value of currencies.

It is the weekly economic data that is released each week that forces investment banks and hedge funds to trade currencies and it is their volume that drives prices higher or lower. Technical patterns in financial markets will show you where the price has been previously and what I want you to learn with me over time is how economic data around certain price formations causes traders to capitulate and give up or it drives them to trade more volume forcing an impulsive move higher or lower in a new trending direction.

It is extremely important as a trader you understand why the price is moving rather than sit and wonder by looking at a set of charts. Understanding why price moves will greatly help you understand the mindset of traders and how they will likely react based on a fundamental news announcement around a certain pricing level.

UK Unemployment and Weekly Earnings data is due today.

The Pound will likely see increased volatility at 8.30pm AEDT when official jobs numbers and weekly earnings data is released. Bank of England Governor Mark Carney expects UK economic growth and inflation to slow in coming quarters so there is a probability the data could disappoint to the downside. Traders are expecting December weekly earnings based on a year on year basis to have risen 3.5% so anything either side of this number would be considered out of line with expectations.

Learning to read economic data numbers is relatively easy when you think about it. Is a higher unemployment rate or higher weekly earnings good news or bad news for the UK economy? If the unemployment rate kept declining and wages kept rising what is the likelihood the Bank of England will raise interest rates? Each time a data number is released ask yourself the question. “Is that good news or bad news?” If it’s good news, the probability is traders will be buying the currency and if it’s bad news they will be selling. When the data is wildly out of line with economist expectations like the RBNZ unemployment rate a week or so back, the price moves are more aggressive.

The Euro held its ground on Tuesday before sentiment surveys.

Today sees the release of both German and Euro Zone economic sentiment surveys which will give us an indication on how the average German and Euro Zone business sees economic conditions across the largest economic region in the world. Recent surveys have not shown any positive signs and if anything, business owners and investors are becoming more pessimistic and this has weighed on the Euro.

On Friday an ECB Central Bank official hinted that fresh new loans may need to be handed out to European Banks and if this actually happens then it’s a signal the weak economic conditions that have persisted across Europe for some 10 years is continuing.

The Euro will likely be in a very tight range until the surveys are released which is at 8.00pm AEDT.

Where your mindset needs to be.

Successful traders stick with sound trading principles through good times and bad. Losing traders react to how things feel and trade re-actively and not pro-actively.

If you want to succeed forget about trying to go it alone. AB

 

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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