Today’s Key Market Drivers: 27th September 2018
“US says one more rate hike in 2018 and expect hikes each quarter in 2019.”
As the market expected the US Federal Reserve lifted the official US cash rate by 0.25% this morning at 4.00am AEST. The US Fed indicated to the market that it will likely raise the official cash rate every quarter in 2019 and one more time in 2018. The US Central Bank upgraded its outlook for the US economy and whilst not being overly hawkish I do think the statement showed a more positive tone than I expected. The US Dollar was initially lower in the 90 minutes post the statement release but some whipsawing back and forth is to be expected post such an important Central Bank report. Thousands of traders will be giving up their hard-earned money trying to trade the volatility jumping in and out but 95% of them will be losing money. Trying to trade short-term market volatility post an economic data number is frankly a mug’s game and you will never beat investment banking trades who use a Bloomberg Terminal and high-speed internet connections to enter and exit trades within milliseconds. I only remind you of this fact this morning because some LTG members are still getting sucked into trading volatility post news releases.
The RBNZ at 7.00am AEST released its statement for September and as expected kept the cash rate at 1.75%. The volatility in the Kiwi Dollar has been typical of what we often see when the market has priced in its expectations and those expectations are met. Investment banks often trade the market into liquidity pools created by novice traders trying to trade the news. As an example, if you look at a 15-minute chart of the NZD v USD you will see exactly what I am talking about. They rally it up, suck the punters into the market that the price is going long, the punters get long, use tight stops because they are scared of losing money and the investment banks sell off their long positions within seconds of getting long which forces the market back lower and straight into the stops of the punters who got long chasing price. This type of price action news driven volatility is something I will show you on Friday Live this week and you must avoid getting sucked into this type of trading.
Currency markets should have plenty of volatility in them for the balance of the week with a ton of high impacting data to come. Today the Bank of Japan Governor Kuroda is speaking in Japan, German inflation data will be released and if the ECB President Mario Draghi’s comments this week are anything to go by we should expect a positive inflation figure today for Germany. Draghi recently commented that he was positive about Euro Zone inflation and wages growth. I also note CNBC this morning said: “The outlook for the euro has brightened and market participants are positioning for a rebound.” A research note from US Bank Wells Fargo also said: “The pieces are steadily falling into place for a more sustained rebound in the single European currency, including more favourable capital flow dynamics and more balanced euro positioning.”
Although I am bullish on the Euro I will warn you that it can be fatal to fall in love with a trading position or directional view. Trade what you see, take the trades as they meet the criteria, look after your risk and expect to be wrong a lot. That is how I view my trading and my focus is to make more money on my winning trades than my losing trades. This is not a complicated game, win bigger than you lose, accept you will be right about half the time, you will have strings of losses during this process but it is how you behave after you have entered a trade that will determine your success.
ECB President Mario Draghi is speaking in Frankfurt today and I suspect he will continue to talk up the Euro Zone economy and won’t change his recent rhetoric. Thursday sees 3 pieces of high impacting data for the US economy released. US Trade Balance numbers, Durable Goods data and 2nd Quarter GDP figures. The Trade Balance and Durable Goods numbers won’t likely move sentiment on the US Dollar but what could send traders to sell or buy the greenback is an out of line with expectation GDP figure. I have not changed my view regarding the US Dollar and I think in coming weeks we will likely see a pull back.
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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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