This week has been a great one for our analysts's shorts on USD pairs. Trades took a little longer than expected as most of us were stuck in drawdown before we started seeing profits in GBP/USD and EUR/USD. We also looked at US30 and formed a short bias and some of us took some big gains on our trades. Overall, it was a good week, but what's going to happen next?
One thing that comes to mind as a huge market driver is US-China trade news. After President Trump threatened to cut ties with China this afternoon, it killed all the gains that futures made this morning. As soon as that happened, we saw a pop in USD/CAD prices while EUR/USD and GBP/USD tanked some more.
As I'm writing this, the SPX500 and US30 are dropping which is usually followed by buying pressure on the US dollar. If you follow the US stock market, you can tell that all USD pairs are correlated. With that in mind, watching the US-China trade talks are going to be very important is gauging where currency trades will go next.
The problem with trade talks is that one day they can be good, and one day they can be not so good. For example, last year, Trump and Xi Jinping were on and off in their talks. Sometimes, negotiations turned into arguments and trade threats were made, and the market paid for it. This "bad break-up phase" caused so much volatility in the market last year that the slightest news sharply moved prices up or down.
Just recently, Florida saw a huge spike in coronavirus cases as fears began to reappear. Because we all know about this issue, I'll keep this segment brief, but keep up to date on virus fears and cases. One thing that harshly drives price movement is fear; if fears return to anywhere close to what they were like in March, it's going to drive prices down again.
Another thing to look at when trying to trade USD pairs is sentiment. A lot of trades this Friday have been net short positions on the SPX500, and the number of shorts have been increasing on the trade news. Uncertainty is truly a factor in USD pairs because the market has been so indecisive in either direction.
What also helped cause this volatility today was that $1.8 trillion of options trades and futures trades expired today. This is called a quadruple witching on a CNBC article. They also mentioned that this was the "third biggest non-December expiration on record". Volatility is expected throughout the rest of the trading day which will take a toll on certain currency pairs. There will not be anything like this next week, so the only three key things to look out for are trade talks, sentiment and corona virus fears.
Trade Ideas For Next Week
Long Idea: Right now, the SPX500 is pretty much sitting on support in the $3,090s range. With only 2 hours left before the market closes, we're watching to see where the last 2 candles will end up. This level has been a pretty clean line of support that the price is likely to respect. However, any long trade will probably be a short term play, like intraday.
Short Idea: Looking at the hourly on EU. Prices are getting buried at the bottom of the falling wedge, showing some short interest there. If more bad news comes out on the US market, you can expect the pair to follow some more.
Short Idea: For the fourth day in a row, the US30 has failed to break above the 200 Day Moving Average. And it looks like today's candle may end in the red, but a lot can happen in the last thirty minutes of trading. If prices close with the candle showing selling pressure, there will definitely be some short interest there.
Remember to be careful with your trades in this uncertain time with lots of volatility. Don't over-leverage your positions, and be prepared to adjust entries with small lot sizes in every trade. Risk management is key especially now that the market and USD pairs are looking pretty volatile.
Thanks for reading! If you are interested in joining our trading community, we have chat rooms, trade alerts from our top traders, and educational content. You can join using the link below, and get a discount on your membership.
Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.
Bitcoin has been vastly oversold due to the fact of regulation concerns from the US government wanting to make a more controlled market just like stocks. For over 2 months, the crypto has fallen nearly 42% from the highs in November, but it looks like it has found a bottom in the $39Ks. Why Bitcoin […]
CPI numbers came in yesterday indicating a 7% climb in inflation from last month. This is some bad news for the Fed, USD, and stock market which could lead to a short term bearish trend until the Fed raises rates. This report should be bullish for the USD in the longer term since investors can […]
Trend trading is perhaps one of the most commonly used strategies in the forex world. In this article we will be sharing tips on how to determine the end of one forex trend and the potential start of a new one. We will share 3 specific clues that you should be looking for when trend […]
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
A1 Trading Company
A1 Trading Company is a financial services and media business founded in Atlanta, USA.