Today’s Key Market Drivers: 8th January 2019

The US Dollar continued its slide on Monday after traders unwound long US Dollar positions expecting the US Fed to halt any further rate increases until well into 2019.

Virtually all of the base currencies that trade against the US Dollar were higher with the Pound and the Euro gaining some solid momentum. The USD v CAD was a standout loser on Monday as traders continued to price in their expectation of higher rates in Canada later this week and rates on hold for longer in the USA. The Canadian Dollar was also helped higher by the 1.2% rise in the price of crude oil. Oil is a significant contributor to the Canadian economy just as Iron Ore and Coal are to the Australian economy.

US and China trade talks begin in Beijing.

The market’s reaction on Monday was twofold.

  1. Stocks were up on hopes US and China trade talks that got underway in Beijing progress positively.
  2. The ongoing sell-off on the US Dollar following Jerome Powell’s dovish comments on Friday about further rate increases and policy adjustments at the Fed in 2019.

Both the US and China have started to feel the pinch when it comes to the trade tariffs they’ve been slapping on one another and I believe they will both want to do a deal to ensure they sure up their export sectors before more damage is done. So, I am predicting the Beijing trade talks will end positively and this will likely support the AUD, NZD and emerging market currencies this week. Both the AUD and NZD vs the US Dollar are at key resistance levels and in my daily video update today I share with you how you can potentially take advantage of the next leg lower on both pairs.

The EUR and Pound threaten to break to new highs against the falling US Dollar.

Even under the pressure of Brexit and the likelihood of a slowing European economy in 2019 both the EUR v USD and GBP v USD have moved higher and are threatening to break out of month-long trading ranges thanks to a weaker US Dollar. Both are still well below their key 200 EMA’s on the daily chart however momentum is building and it is my firm view the EUR and GBP will move higher against the greenback in 2019. Provided Brexit can be sorted and a sensible conclusion reached the BOE will likely move quickly to raise rates in the UK and whilst the ECB I don’t believe will move on rates in the first half of 2019 the Euro I believe will appreciate against a weaker US Dollar. CNBC reports this morning that Money markets have priced out a U.S. rate hike this year and are even pricing in a small probability of a rate cut at the US Fed in 2020. If this trend continued the US Dollar would highly likely continue to weaken.

Train with Andrew Podcast this week.

In this week’s Train with Andrew Podcast I break down Ray Dalio’s Xmas market message into layman’s terms and also share with you why it is so important to understand interest rates and how they impact the global economy and asset prices. I am very concerned that two of the world’s biggest economies continue to have interest rates below zero and with global growth about to slow in 2019 having rates still at zero ten years on from the GFC is a major concern. This week’s Train with Andrew Podcast will be sent to all members of LTG GoldRock before Friday.

Why Money Managers are rubbish.

According to Bloomberg Hedge Funds lost an average 6.7% in 2018 vs the S&P 500 Index only losing 4.4%. Fund Managers and financial planners, in my opinion, are overpaid and have little clue what they are doing. They are the so-called experts but in Australian 10 of the biggest funds that have been in business for more than 10 years consistently fail to beat the Index. They raise capital to charge rip off fees and deliver on average less than what an investor could get simply buying Index ETF’s themselves and doing nothing. How they justify what the charge in fees vs what they deliver is mind-boggling. If only the average investor knew what really goes on. This year at Trading Mastery I am going to be showing attendees how to buy ETF’s and how they can encourage their kids and grandkids to begin to buy ETF’s when they begin their working life so they have the opportunity to retire very rich, without the need for Super or a Fund Manager well before they are 55. If you haven’t reserved your place at Trading Mastery go to www.trainwithandrew.com This is an unprecedented event never seen before anywhere in the world that focuses on every key aspect that will make you an outstanding trader and investor. Fundamental Knowledge, Technical Skill, Risk Management, Mindset and Meditation Skills, Trading Plan and Daily Market Agenda’s, Accountability Reports and Nutrition, Health and Wellbeing plans. If you truly want to get the best out of yourself then make sure you are at Trading Mastery 2019. March 16th – 18th Noosa Heads, Queensland. www.trainwithandrew.com

The Aussie Dollar may get busy at 11.30am.

Trade Balance data for Australia is due at 11.30am AEST today and if out of line with expectation has the potential to move the AUD up to half a cent. I have been predicting the AUD to move lower in 2019 and this is on the back of slowing growth in China and a weakening economy here in Australia. Sure, the US Dollar is falling at present and may continue to fall however if stock markets continue to move lower in 2019 and growth slows globally the probability is the AUD will fall over the medium to longer term. I have no issues in changing my view either and it will be fundamentally based. Other economic data to be released on Tuesday includes German Industrial Production and Swiss Retail Sales which neither are likely going to change the markets overall sentiment which is positive or as we traders like to say “risk on”.

Have a great Tuesday. AB

Any trade updates throughout the day will be sent via Trade Time. You can also follow my daily updates on Facebook, Twitter, Instagram by searching for TrainwithAndrew. Make sure you subscribe to the Andrew Barnett YouTube channel after watching today’s Sunrise video below.

 

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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