Today’s Key Market Drivers: 4th October 2018
“US Dollar strengthens as US stock indexes reach all time new highs. US Dollar strengthens as US stock indexes reach all time new highs.”
A private US unemployment report called the ADP Employment Change was one of the catalysts for the US Dollar rallying so strongly on Wednesday. Each month, two days prior to the official jobs report from the US Labor Department we get the release of a private jobs report which suggested the US economy added another 230,000 jobs in the month of September. I must stress that when I first started following economic data numbers about 12 years ago the private and official jobs report for the US was generally very similar. As time has gone on the difference between the private and official jobs number is often substantially different and whilst traders have jumped on the US Dollar on the back of the private jobs report on Wednesday it would not surprise me to see the official jobs numbers substantially different when released on Friday.
At the start of this week, I predicted that the US Dollar may fall along with US stocks and I have been wrong with these predictions. US stocks have rallied to new all-time highs and this has helped strengthen the US Dollar in the short term. I did predict the Yen would remain strong this week and overall it has held up against most of its rivals. The USD v JPY has continued to rally, however, most of the other currency crosses are off their highs. I will give you some tips today in my daily video update on how you can look at your trading positions from a time standpoint to ensure you don’t get impatient after a number of days in the market. As I remind traders each week self-sabotage is common and you must avoid this at all costs.
The Aussie and Kiwi Dollars are now back at their 2018 lows against the Greenback and once again are looking very weak. In today’s video update, I share with you key pricing levels across all 4 currency pairs and where skewed risk and reward trading opportunities may present in the coming days.
Today sees the release of Australian Trade Balance numbers in the Asian trading session and US Durable Goods and Factory Orders in the US trading session. German Construction data is also set for release but I doubt any of these data numbers will move markets much. The current themes are based around a strong US stock market and ongoing concern surrounding Italy’s debt and the UK’s Brexit negotiations and this is the reason why we are seeing increased selling pressure on the EUR v USD and GBP v USD. The current market conditions are feeding into a strong US Dollar particularly after US Fed Chairman Jerome Powell remarked on Tuesday in Boston that the US economy had a “remarkably positive outlook” and that he feels it is on the verge of a “historically rare” era of ultra-low unemployment and tame prices. Source CNBC.
There was every chance the Euro, Pound, Aussie and Kiwi Dollars were about to make a break to the upside however they sit precariously close right now to levels that could trigger another leg lower and traders will view any moves lower from here as signs of serious bearishness.
With US stock markets hitting record highs, we head into Thursday with stock markets bullish and the US Dollar supported. Traders remain concerned about Italy’s financial position which is heavily weighing on the Euro. The reason the AUD and NZD are falling so sharply is because of the upward pressure on the US Dollar with expectations US interest rates will continue to rise and the differential between US rates and Australian and New Zealand rates widens. Why would you want to buy Australia Dollars at 1.5% return on investment or New Zealand Dollars at 1.75% when you can buy US Government Bonds right now and get 3.1% return on investment and the currency is rising in value? I was optimistic about a rally on the AUD and NZD in the short to medium term, but like a duck, in a doona factory, I’m nervous about their immediate futures.
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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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