Today’s Key Market Drivers: 2nd October 2019
It was worth the wait.
Around 9.30pm AEST the Pound dropped nicely into my profit target on my short GBP v USD trade closing out a solid risk to reward trade. I trust you stayed with the trade if you took it and for those members that kept their hands off the mouse it was worth the wait. Did you see how price came right down to our profit target before reversing? I want to teach you why this happens and why I put my targets where I do.
It was not long after I exited my short Pound trade that Donald Trump launched another scathing attack on the US Fed calling them Pathetic!
Here is what Trump said. “As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!”
Aussie Dollar sinks as RBA drops rates again and signals that it won’t be the last.
The Aussie Dollar sank to a new 10-year low on Tuesday following the RBA’s decision to lower the cash rate once again to an all-time low of 0.75%. What triggered off the manic selling was written in the final paragraph. “The Board will continue to monitor developments, including in the labour market, and is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time.” What does this mean? It means that the RBA is likely going to continue to drop rates and my prediction of a 0% interest rate at the RBA by June 30, 2020, is looking more and more likely.
The RBA’s three rate cuts in 2019 are an admission of weakness in the local economy and their biggest concerns at present are a lack of jobs, low wages, high household debt and weak inflation. The jobless rate recently jumped back higher to 5.3% and wages growth has remained stubbornly low for 10 years. A weak economy means lower interest rates and a lower Aussie dollar.
US stock markets falter after poor US Manufacturing data.
Safe haven currencies rallied strongly on Tuesday and stock markets sank after the worst US Manufacturing numbers in 10 years were released. European markets were already weak but when the latest official US ISM Manufacturing number showed a contraction to 47.8 it was enough for traders to begin to buy more and more into the theory the US economy is indeed slowing. Any reading below 50 means manufacturing is contracting whilst any reading above 50 means expansion. The market was expecting a flat reading of 50 so 47.8 was far worse than expected.
Traders will now be questioning if the Trump trade war with China is now starting to bite the local economy, one more day of sharp declines and we could be off to the races.
Canadian GDP misses estimates.
The US Dollar was under so much selling pressure following the poor manufacturing numbers that Canada’s weaker than expected GDP reading hardly made a dint in the Canadian Dollar. Canada’s economic data has recently been holding up well so a fall in the expected GDP reading is another sign North American economic expansion may be contracting quicker than first expected. The USD v CAD is sharply lower this morning, however, this has more to do with weakness in the US Dollar than any strength in the Canadian Dollar in the short term.
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In other news.
Don’t forget what history tells us about the month of October. Stock indexes have fallen very sharply over the years in the month of October and whilst we are not capitulating yet we will only need one more consecutive day of big-selling and we could be on our way to new lows on stocks and new highs on safe-haven currencies.
There is no high impacting economic data scheduled for today so I expect the weakness we saw in the US trading session to radiate through the Asian trading session today. The AUD v USD is off its lows, along with the NZD v USD but this was due to US Dollar weakness, not any positive news all of a sudden out of Australia or New Zealand. In fact, RBA Governor Lowe speaking in Melbourne last night repeated what was in his statement earlier in the day.
I doubt Australian Trade Balance numbers set for release at 11.30am AEST today will reverse the course for the Aussie Dollar which will remain under pressure for the balance of the week.
Real change is not easy to achieve. You will be doubted, you will fail, you will try harder and fail again, but you must never ever give up. Because real success is only available to those who choose never to quit.
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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