One year has passed since President Donald Trump was elected to office. That month I wrote a post about copper’s ultimate monthly performance compared to other commodities thanks to the new president’s promises of huge infrastructure rebuilding.
Below is a 1-year performance chart of copper to see how the metal has been doing since Election Day.
Chart 1. 1-Year (from November 8th, 2016) Copper Performance
Ever since China's stock woes escalated it seems all commodity-related trades have sunk under water. The Aussie took a nose dive vs. the two dominant safe havens, i.e. the US Dollar and the Japanese Yen, and turned range bound vs. the Kiwi.
In the not too distant past, there had been some signs of a tentative recovery in the Aussie. However, those signs quickly became mixed messages, offering nothing but false hope. Simply put, China continued to lose its grip on its financial system. Now, as always, China has been the wild card for the Aussie. We've already elaborated on the fact that China can't keep the Yuan high; at best, it can only slow its depreciation. But can China's latest actions be the springboard for the Aussie to rally? Continue reading "Speculative Bets On The Aussie To Rise?"→
Will Oil continue to fall? That is still a question with no definitive answer. But as I emphasized in my latest article on Oil, there's a growing chance of an Oil rebound. And even if an Oil rebound doesn't eventually materialize it's prudent to have a strategy in place. In this article, we'll focus on a strategy that is slightly less common. Of course, you could just take a naked bet on an Oil-oriented currency, e.g. the Norwegian Krone or the Canadian Loonie. But those trades could easily and quickly tank if the signals for an Oil rebound turn out to be false. So what is this unconventional way? Don't short/buy a petro currency against a currency unrelated to oil (e.g. Dollar, Yen or Euro). Instead, buy or sell a petro currency vs. a peer that is deemed a commodity currency, but a non-petro one. That could prove to be a much safer play.
Trading Correlated Currencies Reduces Risk
When you trade correlated currencies against each other, such as the NOK and Aussie, you have a reduced upside. While that's a true statement, there are also big benefits. When there is a short-term gap in performance, there is a higher likelihood that this gap will close. And that provides an opportunity that is rather easy to spot. Then, too, the downside is also more limited, so while the profit might be reduced so are the risks. In fact, if you compare the potential of correlated trades vs. uncorrelated, those trends tend to be slower moving and generate fewer profits. However, it compensates the investor with more certainty (the gaps almost always close), making them less volatile and less risky. Continue reading "The Unconventional Way To Play Oil In FX"→
As many countries there are that have their own currency, there are currency pairs to trade. This does not mean you should start off studying the movements of the Guatemalan Quetzal. New traders need to stick to those currencies whose indicators and movements have been well documented.
The three major currency pairs are the EUR/USD, GBP/USD and USD/JPY. If you didn’t already notice, the US dollar is listed in each one. That’s because this it the most traded currency in the market, and the one that has been studied at length.
There are three very good reasons why you should stick with these three currency pairs:
• All of them are well established currency pairs that are traded widely. This type of liquidity guarantees that you are going to profit from price changes.
• They all have the US dollar, which means that the most amount of activity will be during the New York trading hours. This adds to the liquidity as this is typically when the highest amount of Forex trading is taking place.
• Since they are so popular, a new trader is going to find a wealth of Forex trading systems online that can help them in trading these pairs successfully.
Which Ones Should You Avoid?
Any currency that is considered to be exotic or uncommon should be avoided by new traders. In some instances the financial state of the country is too unstable to be able to read the charts properly. For others, there just is not enough information available to you. A new trader needs to use as many resources as possible before placing a trade. Unless you have some first hand knowledge of Guatemala and its future financial state, you should stay far away from trading the uncommon currencies.
In light of the news from the land of the rising sun and the sinking currency, let’s reserve NFTRH 315’s only real charting for a big picture monthly view of currencies, to which we usually give just a brief update, and then some misc. big picture monthly charts [not included in this excerpt] as we try to gain perspective on things that may seem illogical to our rational minds.
Yen is losing the next level of support. BoJ saw that support too. I’ll bet they also took note of the big October bounce and found it unacceptable.