Today’s Key Market Drivers: 9th January 2019

Trump pleads his case on National Television as the US Dollar falls.

The US President took to the airwaves on Tuesday evening to plead and scare the American people that the money for the border wall is non-negotiable and a must. If the partial government shutdown is to end, he must have the money to build his election promising wall that will protect lives. The US Dollar weakened as Trump spoke and whilst the government shut down is having a negative impact on the greenback these events are often more theatre than anything else. In saying that this government shut down has dragged on for more than two weeks with the Democrats refusing to approve money for Trump’s wall until he reopens the Government. If the shut down drags on for another two weeks and Trump chooses to call a National emergency it could have a short sharp negative response on financial markets but generally speaking such events come and go without too much impact on currency or stock markets. But this is not Obama we are talking about here, this is Trump and he’s got his heels dug in and he isn’t budging.

US and China trade talk optimism continues to prop up markets.

Financial markets have been in a risk on mood since Monday as optimism builds that the US and China trade talks happening in Beijing will conclude with both parties saying positive progress has been made. Trump wants structural reforms in China and I doubt he’s going to get them as the Chinese have been steadfast in running their own agenda on productivity growth and reforms. CNBC reports the China Daily as saying, “Although China is keen to put an end to the trade war, it will not make any “unreasonable concessions” and compromise must be made on both sides.” US officials say the talks are going well and that progress is being made. My expectation is that markets will remain positive until a clear statement has been made by both countries and markets will take another leg higher or reverse course once traders have had time to digest the likely economic outcomes down the track. Until this happens I suspect the “risk-on” mood will continue.

How traders should and should not behave.

The first positive behavioural trait you must have as a trader is to preserve capital at all times. It must become your #1 priority so it will allow you to stay in the game long term. What is interesting to me is that traders will trade very cautiously when they are winning but when they are losing will often increase their volume on trades. This is the exact opposite of what you should be doing.

When you are hot and you are winning, if there is a time to increase volume then that is the time. When you are losing consistently you need to be honest with yourself and eat humble pie, lower your volume and ensure you can stay in the game. One of the attributes of a successful trader is being able to recognise when you are on a winning streak and reading the market well and when you are not on your game and analysing and executing poorly.

For example, I was reading the market beautifully from August to October but lost my mojo and form in November. If you are a trader who is blindly copying someone (like me) then you will never be able to learn to recognise when you are hot and when you are not. It is imperative in my view that you learn to trade over time otherwise there will be times you get frustrated and emotions lead to poor volume sizing on trades.

Traders need to behave in a rational and logical manner and look at their performance in terms of return on investment over the long haul and not day to day, week to week or month to month. The market has been moving plenty since the New Year, but I haven’t been remotely interested in taking a position. Why? Because my fundamental and technical strategy has not presented itself and I won’t trade until it does. Unless you stay within your circle of competence you are taking higher risk and I am just not interested in that game. I have no issues with traders trading smaller time frames and taking trades in the current market conditions but please ensure they are in line with your personal trading plan and you manage the risk appropriately.

Canadian Dollar continues to gain traction at the expense of the greenback.

In the lead up to the Bank of Canada’s January statement this week the CAD has been rallying against a basket of currencies and the fading greenback. The market appears to be split down the middle on whether it expects the BOC to raise the official cash rate on Wednesday with some websites posting an expectation of a 0.25% increase now suggesting the BOC will remain on hold. The Canadian Dollar will be volatile post the statement at 2.00pm AEDT Thursday morning and it will be the statement traders will be reacting off and not necessarily the rate adjustment. No doubt if they increase rates by 0.25% the CAD will rally but even if they leave the cash rate on hold at 1.75% it could still rally strongly if they say they will raise rates in coming months. Either way, the trend on the USD v CAD continues in the downward direction.

Australian Building Approvals Data Misses Estimates.

The AUD v USD pulled back around 20 ticks this morning following a weaker than expected December Building Approvals number. My expectation is this data number will continue to weaken over the coming 12 months as Australia inches closer to a recession towards the end of 2019. I am based in Melbourne for January and running the streets of the city, particularly down St Kilda Rd, and it has shown me just how many luxury apartment buildings are still being constructed and about to start construction. The apartment market in Melbourne, Sydney and Brisbane is saturated and the downturn in prices and weaker demand for construction is going to mean hundreds of more builders out of work and closing up shop. This story in my view will only gather more momentum as the year goes on and won’t be the last time we discuss it.

A concentrated effort over time just works. AB

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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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