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New Year’s Thought on AUD/USD Potential Intervention by RBA

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

New Year's Thought on AUD/USD Potential Intervention by RBA

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AUD/USD One Year Chart as of 1st January 2025

1 year chart of AUDUSD showing decline and lows as rumors swirl about the Reserve Bank of Australia contemplating intervention due to weak Australian Dollar.

AUD/USD and AMT thoughts: Australia’s govt is led by the Labor party which is socialist based, so it would be no surprise if they and the Reserve Bank of Australia believe (wrongly) they can intervene to help the strength of the AUD, when actually they should work on improving the fundamentals of their economy with solid fiscal policy. But being socialists they don’t know how to do that. Labor is going to lose big in the next Australian federal government election.

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Central Banks Noise: Holiday Trading Put on Hold For a Bit

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Central Banks Noise: Holiday Trading Put on Hold For a Bit

As suspected the Federal Reserve sounded more cautious than many analysts expected yesterday. While the Fed did cut the Federal Funds Rate by 0.25 to 4.50%, they essentially opened the door to allowing the current borrowing rate to simmer over the mid-term. Yes, they did suggest they would like to lower interest rates, but it sounded more like wishful thinking. In response to the more aggressive rhetoric (hawkish) from the Federal Reserve financial markets became volatile in equities, Forex and bonds.

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GBP/USD Three Month Chart as of 19th December 2024

The show is not over yet ladies and gentlemen, this morning the Bank of Japan repeated their typical historic stance of proving cautious, and later today the Bank of England will step onto centerstage with their Monetary Policy Summary and Official Bank Rate. And here is where things may get more odd, the BoE in many circles is not expected to cut its interest rate even though the U.K economy has been struggling and continues to publish lackluster statistics. The current borrowing rate via the Bank of England stands at 4.75%. Though the BoE should consider a rate cut of 0.25 certainly, and may even have enough reasons to decrease by 0.50, they may do absolutely nothing and that would be a mistake.

If the BoE decides to remain overtly guarded this will cause some bedlam with the GBP/USD. Large commercial players may choose to punish the GBP/USD as they consider their cash forward positions. Retail traders should be extremely careful if they choose to speculate on the British Pound in the coming hours. Not to say the GBP/USD is going to have a Liz Truss like moment from September 2022 today, but Forex traders have been selling the currency pair based on nervous outlooks over the past three months. If the Bank of England looks at the incoming headlights via the GBP/USD bearish trend and does not move, they might get run over by the truck.

Big and small traders certainly have the approaching holiday season on their minds and they might be getting things in order to take a break for the next couple of weeks, but financial markets because of the central banks actions yesterday and today will not allow for comfortable thoughts. And this is important, because some financial institutions are shuttering for the long holiday starting this Friday, they may be more prone to being quite cautious going into a period where trading volumes will light and assets will be exposed to the potential of sudden gyrations caused by large positions being placed in unbalanced markets. In other words, equities, Forex and bonds will be dangerous today and tomorrow. Behavioral sentiment will be the power.

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Federal Reserve Expected to Sound Guardedly Cautious Tmrw

by with No Comment Behavioral SentimentCentral BanksFeatured Highlights

Federal Reserve Expected to Sound Guardedly Cautious Tmrw

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EUR/USD Five Day Chart as of 17th December 2024

Large traders are clearly bracing for the Fed tmrw as Forex produces volatile tight ranges. A rate cut is expected, but cautious Fed rhetoric will likely follow.

Forex has been a dangerous wagering ground for retail traders since the end of September. Financial institutions which clearly were betting on a more dovish Federal Reserve starting in early summer becoming a central theme into 2025 have been proven half right, this as the Fed has cut interest rates and is expected to do so tomorrow. However, being half right leaves the door open to also being half wrong, and financial institutions have reacted to this by becoming aggressive buyers of the USD since late September as perspectives have changed. The strong USD trend the past two months plus has hit some speculators hard.

The election of Donald Trump added a strong dose of impetus for USD buyers, this as the President-elect’s tough rhetoric regarding tariffs caused reactions and fear of unknown consequences. In the past couple of weeks more tranquil Forex trading has emerged and the USD finally started to give back some of its gains, yet the USD versus most major currencies, like the EUR/USD, remains within the the stronger elements of it range. While the Fed is expected to lower its Federal Funds Rate tomorrow by 0.25 to 4.50% tomorrow, traders need to remember this has been priced into Forex already. Tranquil trading the past two weeks indicates financial institutions have readjusted their outlooks to the incoming White House administration.

Now it is time to see if the U.S Federal Reserve has started to adjust their outlooks to what a Trump Presidency means. And financial institutions are keen to better understand the outlook of the U.S central bank. Inflation numbers while traversing lower are still rather stubborn and this may will not help the Fed’s mid-term mindset regarding interest rate cuts. GDP in the U.S has remained steady, and there is the potential the economy in the States will improve under Trump. Unemployment numbers while showing signs of weakness have not been terrible either. So while the Fed’s current Federal Funds Rate is higher than normal taking into consideration the historic average the past ten years, they still may not feel they have enough ability to cut interest rates too much more without sparking inflation.

A January rate cut seems unlikely at this time. If the Fed does sound guardedly cautious tomorrow, retail traders may see the USD get initially weaker due to the Fed rate cut, but then see a storm emerge and USD centric strength reappear all in the same day – perhaps in the span of minutes. Speculators need to understand that financial institutions have already baked tomorrow’s interest rate cut into the cake. So it isn’t the rate cut tomorrow that is important if it happens (if it doesn’t then that’s another story); it is what the Fed says and traders should expect them to be very cautious – because per the recent trading of the USD and a barometer it appears financial institutions are bracing for a more vigilant Fed.

Just like he has with many folks he views as uncompromising before, Donald Trump may begin to feel Federal Reserve Chairman Jerome Powell is not on his side regarding interest rate policy. If the Federal Reserve chooses to sound hesitant to cut interest rates in early 2025, it will be rather intriguing to see President-elect Trump’s response. Could a confrontation between the White House and Federal Reserve be in the cards over the next six months?

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Cocoa Surges Past 11,500 per Ton, Coffee Flying High Too

by with No Comment AMT MarketsCommoditiesFeatured Highlights

Cocoa Surges Past 11,500 per Ton, Coffee Flying High Too

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Cocoa above 11,500 per ton as of 10th December 2024

Holiday chocolate about to get more expensive? Cocoa and Coffee futures are hitting highs again. Someone, somewhere is making a lot of money off of the surges.

If you are a day trader trying to pursue these commodities you need deep pockets and conservative leverage (if at all). The reversals higher in Cocoa and Coffee futures since November have been fast and dangerous, even for the large players. The notion the market is overbought is logical, but it has also been fatal for short sellers.

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AMT Top Ten Miscellaneous Reckonings for the 8th of December

by with No Comment Behavioral SentimentCommoditiesFeatured Highlights

AMT Top Ten Miscellaneous Reckonings for the 8th of December

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10. France Falls: President Macron’s leadership is in peril after his anointed Prime Minister, Michael Bernier, suffered a no confidence vote outcome. French politics and finances are in shambles. Life for French citizens goes on as their politicians battle for their jobs, supremacy of voice and egos. With the restoration and presentation publicly of Notre Dame Cathedral yesterday, Macron now has to find something else to divert attention away from his misappropriation of power.

9. 100,000: Bitcoin came within sight of the 104,000 USD vicinity this Thursday, then sunk with a rapid pace and challenged 92,000. Once again traversing near 100 grand, large BTC whales and MicroStrategy’s Michael Saylor and his cult of followers are likely celebrating. However, if the wind changes direction what kind of damage will the low tides create this time for Bitcoin and speculative leveraged positions? The price of BTC/USD as of this writing is near 99,500.

8. Al-Assad: The Syrian regime is apparently coming to an end after 50 plus years in power. Bashar al-Assad’s whereabouts are unknown. Russia, Iran and Hezbollah appear for the moment to be big losers in this power play. The many factions will now have to see if they can create a semblance of government, but that remains doubtful. Syria will be a quagmire in the coming months as its cauldron stirs.

7. Martial Law: South Korean President Yoon Suk Yeol startled Asia and foreign investors by declaring martial law this past week, making one of the worst political miscalculations in recent memory. Yoon was quickly forced to rescind the decision. The USD/KRW spiked and KOSPI Composite sank via the instability. However, the South Korean National Assembly has shown the ability to provide leadership and display power of law prevails, this as they try to calm their citizens concerns and investor sentiment.

6. Roasted: Coffee Arabica has boiled again and commodity’s price is fighting within apex levels. Like Cocoa, both Arabica and Robusta Coffee have surged the past year as large players have created a strangulated grip which suggests the markets may be ‘cornered’. While some analysts are quick to point out weather conditions as a reason for the higher prices, the tenacity of Coffee and Cocoa to sustain upwards momentum is intriguing but also suspicious.

5. FX and Data: U.S jobs numbers this Friday were marginally better than anticipated and the Average Hourly Earnings came in slightly above expectations. Economists from different schools of thought are debating the potential of recession and inflation concerns, versus those who believe growth, greater transparency of U.S fiscal mandates and elimination of a bloated budget will be achieved when Trump’s economic policies takeover. Globally Forex conditions are showing signs of fragility because of the threat of tariffs and trade concessions by nations which may need to be made. Yet, it is quite possible the ‘bad news’ consisting of accusations of unfair trade agreements by Trump, and the reactions which have been cooked into the EUR, GBP, JPY, ZAR, MXN, CAD, NZD and others is overdone. While there could certainly be more weakness in major global currencies paired against the USD, upside potential mid-term may be more positive compared to near-term drawdowns. Retail traders still face difficult technical perceptions in the days ahead because financial institutions also remain shaky regarding their outlooks.

4. Pardon Me Joe: President Biden has forgiven his son, Hunter Biden, for crimes known and unknown for an eleven year period – that is not a round number ladies and gentlemen, with a Presidential Pardon. Why 11 years? Why not 10 or 15? There is conjecture that Joe Biden is also considering preemptive pardons for people his administration feels may face the wrath of the incoming Trump White House. However, if pardons are given to the likes of Anthony Fauci, won’t the pardons awarded to those who have not been charged with a crime yet look like an admission of guilt?

3. Central Banks: The ECB will deliver their interest rate decision on the 12th and the Federal Reserve will announce their Fed Funds Rate on the 18th. Behavioral sentiment however is seemingly more focused on the threat of potential storms that could suddenly appear due to the Trump effect. The ECB and Fed are both expected to cut their interest rates by a quarter of a point, while it appears many financial institutions no longer believe the Fed will cut again in January.

2. Chinese Gold: Tucked away in the quiet corners of the business news has been the discovery of a massive gold ore deposit in China. Some geologists claim the Wangu gold field could have up to 1,100 tons of the precious metal. If correct and the amount of gold meets or exceeds the expectations of the experts, the question about this becoming a deflationary event for gold is intriguing but likely wrong. Importantly, the gold will be a long-term benefit for China and potentially create a stronger national currency via the Renminbi (China Yuan). Perhaps also solidifying the idea of using the reserve as part of the backbone for a potential BRICS ‘Unit’ currency if and when that day ever arrives. Gold closed at nearly 2633.00 USD per ounce before going into this weekend.

1. Trump Effect: WTI Crude Oil is around 66.78 USD as the promise of easier energy production for U.S companies has created the conviction of steady and less expensive supply. The USD remains in the stronger elements of its long-term Forex range, and folks betting against the strength of the USD need to remain cautious. BRICS has been warned about not infringing on the USD by Donald Trump, and some member nations of the organization have affirmed they do not seek a BRICS currency (yet). Tariffs have been threatened, but China has responded by showing it has the ability to create potential hinderances this week via a tough negotiation stance by threatening to stop export of rare earth metals to the U.S. Mexico and Canada have felt the verbal wrath of the President-elect already and started to react. All of this while Donald Trump still has six full weeks before taking power.

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Forex: Trump Effect and Reasonable Trading Caution for All

by with No Comment Behavioral SentimentEconomic CalendarFeatured Highlights

Forex: Trump Effect and Reasonable Trading Caution for All

The Forex market the past two months has created a profoundly stronger USD against many major currencies. The combination of late September intrigue regarding U.S Federal Reserve outlook, then nervousness about the approaching U.S election, followed by the subsequent results have been a dumpster fire for many speculators looking for a sustained return to USD centric weakness. Hopefully risk taking tactics have included a solid dose of caution.

This week’s Non-Farm Employment Change numbers scheduled for Friday may give financial institutions a moment to focus on economic data instead of President-elect Donald Trump’s loud pronouncements, but the effect may prove to only be momentary. It isn’t data that is driving Forex for the moment it is nervousness and fear of the unknown.

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USD/BRL Three Month Chart as of 3rd December 2024

While many financial institutions and speculators trade only the major currency pairs, taking a look at the less obvious and more infrequently transacted major currencies may provide retail traders additional perspectives regarding the fragile nature of Forex. Many nations and large institutions are demonstrating concerns about possible sea changes to U.S foreign economic policy. Yes, the EUR/USD, GBP/USD and USD/JPY have all seen volatility via USD strength the past two months, but price velocity in the USD/BRL, USD/RUB, and USD/INR may be equally intriguing. And prove that mid-term forecasts (or lack of them) are causing bedlam for all.

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USD/RUB Three Month Chart as of 3rd December 2024

While it is more than probable calmer heads will start to be seen in Forex and weakness eventually will return to the USD, trying to pick the exact moment this is going to happen remains a guessing game. Financial institutions via evidence in current Forex pricing remains rather cautious regarding their cash forward commercial enterprise. President-elect Donald Trump has certainly been dealt with before and his negotiation style is that of a businessman, it is not a coincidence that some global leaders who do not exactly see eye to eye with Trump are giving him respect because they understand he will act upon threats if not dealt with fairly.

Trump’s recent brief rhetoric regarding BRICS and the organization’s public consideration of creating a new currency to compete with the USD did not go unnoticed this weekend. Critics may want to proclaim Trump’s threats as belligerent, but BRICS is free to create a new currency still if they wish. While Trump cannot stop the birth of a BRICS currency, he can certainly try to initiate actions (via sanctions) against nations that attempt to create a new unified currency which tries to curtail the dominance of the USD. It would certainly help Trump’s bargaining position and the USD also, if better fiscal policy is practiced by the U.S Treasury and government.

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USD/INR Three Month Chart as of 3rd December 2024

It needs to be pointed out that Trump’s warning to BRICS may not be needed. Even though the organization may be able to create a currency based on a commodities backbone, the lack of trust many financial institutions and nations would feel towards a non-transparent fiat currency powered by the fiscal monetary policies from the likes of Russia, China, Brazil and South Africa remains a difficult sell. Until many changes happen domestically within these nations via governance, creation of a BRICS currency remains wishful thinking.

Getting back to the big picture and the volatility recently seen in Forex. While the major currencies teamed against the USD have certainly faced hectic conditions, the fluctuations have not been unexpected. Day traders need to understand the month of December is likely going to remain choppy and see a test of technical support and resistance levels that are wide and full of fast reversals.

The question for the EUR, GBP, and JPY is if most of the negative inputs into these currencies has been factored into value. The suspicion may be yes, and that strength may rightfully appear in these big three sooner rather than later. However, the approaching holiday season and potential bluster from President-elect Trump will not make this a comfortable or easily wagered avenue.

Short-term retail traders looking to take advantage of the bloodbath created in Forex the past two months who seek opportunities should focus on perceived targets which aren’t overly ambitious. The coming U.S jobs data this Friday may allow the U.S Federal Reserve room to cut the Federal Funds rate on the 18th of December by another quarter of a point. As a point of attention, the European Central Bank will announce their Main Refinancing Rate on the 12th of December. The ECB’S actions may be a solid clue regarding the Fed’s approach to upcoming policy.

However, even if an interest rate cut were to take place via the Federal Reserve, it is likely the cut has already been factored into Forex. Which also highlights the high degree of nervousness that exists because of fears which permeate due to Donald Trump’s tough negotiation stances which have been made public. Meaning those who are looking for USD centric weakness to emerge still need to rely on a shift within behavioral sentiment to occur that is not generated because of the Federal Reserve. Nations need to show a willingness to amend existing trading agreements with the U.S, allowing for changes to internal policies regarding exuberant price duties they place on U.S goods in their own countries.

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MSTR fell from 400.00 USD yesterday to the 350.00 level.

by with No Comment AMT MarketsAssetsFeatured Highlights

MSTR fell from 400.00 USD yesterday to the 350.00 level.

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MicroStrategy One Month Chart as of 27th November 2024

MicroStrategy went from above 400.00 USD yesterday to the 350.00 level. MSTR is a Bitcoin proxy and speculative. Michael Saylor, the Chairman of MSTR, takes many risks as its leader and appears to have a lot of decision making power when it comes to the company’s corporate treasury purse strings.

MicroStrategy if pursued by retail traders as a CFD or held as a equity in a portfolio needs to be treated as a speculative asset that is highly volatile. Technically MicroStrategy has seen its value correlate to Bitcoin in a well defined manner over the past handful of years. Per current accounting MSTR holds over 386,000 Bitcoin, this per MicroStrategy’s own reporting and publication of a Form 8-K via the SEC.

Its corporate governance has essentially allowed MSTR to become a company that while listed as a data provider including business intelligence, mobile software and cloud based services for users is for all intensive purposes now ‘married’ to Bitcoin as a main driver for its value. MSTR is traded on Nasdaq and the Russell 1000. The company is based in Virginia, USA.

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AMT Top Ten Miscellaneous Musings for the 18th of November

by with No Comment AssetsBehavioral SentimentFeatured Highlights

AMT Top Ten Miscellaneous Musings for the 18th of November

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10. Election Results: The U.S election concluded almost two weeks ago and there is no discussion this time around of mischievous results, which we can all be thankful. However, there is still talk about results from the past, but perhaps these folks should be thankful for the prospect of a serendipitous outcome this time and get to work.

9. Conspirators: The Onion has tried to buy InfoWars via an auction which is now under review by a court to judge if the procedure was undertaken fairly. Alex Jones’s InfoWars and its sometimes other worldly offering of bizarre and misguided notions is in bankruptcy. The Onion wants to turn the tables on InfoWars and dedicate the ‘purchase’ of the site to ridiculing media and conspiracy folks who produce mindless gobbledygook.

8. From Beyond: The UAP, unidentified aerial phenomena, hearing before Congress last week led to a variety of questions and answers which rehashed known ‘unknowns’ while discussing orders of magnitudes of speed and g-forces that humans and machines can endure. The UAP (UFO) hearing didn’t disclose much in the way of developments regarding alien crafts visiting Earth, except to make it obvious to some that if ‘they’ are out there, we had better hope they are friendly. And if it is earthly corporations or nations testing and displaying new technologies, there seems to be little information publicly available about who may be playing in the skies and waters. Optical illusions?

7. Polymarket Raid: Many folks started pointing fingers when the CEO of Polymarket, Shayne Coplan, had his home raided on the 13th of November, claiming the FBI was politicizing Polymarket’s prediction that Donald Trump would win the U.S President race. But after further review, few have pointed out that Kalshi Inc., which also operates in the U.S and allows sentiment betting was not raided. The difference perhaps being that Kalshi is regulated via contract markets with the CFTC, and Polymarket is not and appears to be potentially operating in non-accordance to U.S laws.

6. Bitcoin & Coffee: BTC/USD continues to tread within the highest of tides and is slightly below 92,000 as of this writing. Coffee Arabica and Robusta are boiling within apex price ranges. Cocoa also remains rather impressively expensive. Which one of these speculative assets has no intrinsic value?

5. Buyer Remorse: At some juncture votes may start to feel a bit of angst per their recent voting decisions. We suggest to Polymarket and Kalshi to allow wagers on when this might be displayed in mass. However, in a very real way the U.S election in two years will be the key instrument to gauge the reaction to what is about to come from the new White House administration. Who will control the House of Representatives in two years time?

4. Forex: Foreign exchange should likely be placed in a number two or one AMT ranking, except to say we do not think retail traders should be enticed by being told no. Volatility that has pervaded the FX markets is not finished quite yet. While USD centric strength continues to cause upheavals against major currencies, and technical support and resistance levels are testing mid and long-term considerations, there still may be a week or so left in swirling whipsaw storms. Risk management has hopefully helped retail traders survive to wager again, but it shouldn’t be today.

3. Fed Donations: Federal law mandates employees of the U.S government, https://www.commerce.gov/sites/default/files/2023-08/political_activities-dos_and_donts-2022.pdf, must disclose their political donations. Recent studies indicate that approximately 90% of Federal Reserve employee donations to political candidates go to Democrats, https://www.yahoo.com/news/federal-employees-overwhelmingly-donate-democratic-175055289.html. This highlights the possibility that many current Fed employees have different perspectives regarding economics compared to those about to take positions of power in Washington D.C.

2. See No Data: U.S economic statistics have been rather tame recently, but financial institutions clearly are not paying much attention to near-term considerations about the potential influence of the Federal Reserve and interest rates. Instead behavioral sentiment appears anxiety laden. Retail traders and large speculators may be getting crushed together in a cyclone of certain assets, particularly if they are trying to fight short-term trends while infatuated with mid-term outlooks. The Fed may cut interest rates again in December.

1. The Clash: The highs in U.S Treasury yields and record territory of U.S stocks being traversed together indicates we will see a rather violent collision when one of these investment pursuits likely capitulates to market dynamics, allowing the other to take precedent. Some long-term investors may be nervous about President-elect Trump taking power in the third week of January, but it would be unwise to bet against him in the next six months. Meaning stocks may ultimately win this battle of attrition against bonds and prove they are more appealing.

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Forex: The Art of Not Making Sense and Accepting Price Values

by with No Comment AssetsBehavioral SentimentFeatured Highlights

Forex: The Art of Not Making Sense and Accepting Price Values

Retail traders are likely learning the hard way that attempting to trade in Forex for the moment is more than dangerous, it is expensive. The U.S Consumer Price Index numbers yesterday met expectations, which essentially allows the Federal Reserve to remain in a cautious dovish stance. However, after an initial show of USD weakness upon the data in many FX pairs, USD centric strength quickly returned.

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USD Cash Index Six Month Chart as of 14 November 2024

Short and near-term trading for speculators who do not have deep pockets and are suffering from whipsaw movements are creating the need to take a step back. As many major currencies have suffered losses against the USD since late September, the tendency is to likely think a reversal is going to develop sooner rather than later. However, until financial institutions become comfortable with the notion President-elect Trump’s policies aren’t going to harm economic prospects in a variety of nations regarding tougher trade agreements, risk adverse trading is going to remain a key in Forex.

Yes, at some point the USD will start to give back some value, but timing the moment this is going to start and become sustained for day traders is simply betting. Financial institutions are feeling anxious about their commercial forward positions in Forex too, which will continue to create volatility for all trying to predict where the USD will be mid-term. Federal Reserve policy may actually be able to deliver a 0.50 basis point total cut over the next few months, but this notion has had almost no impact on USD strength short-term. Perhaps financial institutions do not feel the Fed will be that dovish through February, but if inflation remains tame the Federal Funds Rate still has room to decrease.

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Gold Three Month Chart as of 14 November 2024

Today’s Producer Price Index inflation reports will be watched, but like yesterday the results are unlikely to be a key which will suddenly ignite strong reversals in Forex. In the meantime traders need to practice solid risk taking tactics and patience. Retail Sales figures will come from the U.S on Friday, but again day traders should expect financial institutions to remain risk adverse until there is an event which changes their cautious mindsets.

Gold is noteworthy because it has struggled since early November. There is the possibility the precious metal has turned lower because investors feel more sure about their long-term bets in the U.S equity markets for a moment, but that is likely wrong. It could also be argued speculators are cashing out winnings they have made the past handful of months. The point being that explanations for price movements are tenuous. False narratives abound. Fundamentals like behavioral sentiment are shifting because new economic policies from the U.S are going to develop and market participants want greater clarity.

Like the major currencies suffering significant declines versus the USD, the value of gold can be argued, but the market is telling us what participants are willing to pay for assets whether we agree or not. Let there be no doubt that the highs being produced in U.S Treasury yields which are near early summer values, the USD Cash Index reversing towards technical levels seen in early July, gold recently losing value, and U.S equity indices being near all-time highs makes it particularly difficult for predictions regarding what is next. Except to say the Trump victory in many ways has sparked a buy American parade for the moment. If you want to bet against the trends you are free to do so, but behavioral sentiment is proving once again the king of the hill.

While the broad markets may not feel like they are making much sense to some, as traders we need to be able to put our bias to the side and accept the markets as they are, not what we think they should be. There is a significant difference between near-term and long-term targets. Day traders need to understand they are wagering in markets that will remain dangerous for a while. Nothing is guaranteed, but the idea that U.S equities may continue to rally into the New Year is being wagered upon by larger players and they might be proven correct.

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CPI Meets Expectations but Caution Remains as USD Stays Strong

by with No Comment AMT MarketsAssetsFeatured Highlights

CPI Meets Expectations but Caution Remains as USD Stays Strong

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EUR/USD One Day Chart on 13th November 2024

Initial jump in EURUSD, but caution returned after U.S CPI data met expectations. This was a tame outcome for inflation and Fed doves, but financial institutions in Forex remain risk adverse and USD centric. When will tide turn to bullish perspectives vs. USD? PPI tmrw.

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Return to Normal Market Conditions and a Trump Outlook

by with No Comment AssetsBehavioral SentimentFeatured Highlights

Return to Normal Market Conditions and a Trump Outlook

Retail speculators can now expect a return to calm and clear financial market outlooks, knowing that potential influences from new U.S policies will start to be considered. With the U.S elections in the rear view mirror and a Trump mandate delivered by many U.S voters, global financial institutions and traders will again be able to focus on a combination of technical perspectives, current behavioral sentiment and outlook.

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USD Cash Index Six Month Chart as of 10 November 2024

Some technical traders may believe behavioral sentiment has nothing to do with the long-term prospects of studying charts, but price action last week in FX and equities clearly showed why traders must be attuned to storms created by human emotions. Risk adverse trading has been prevalent since the end of September. A glance at the six month USD Cash Index demonstrates the extent of behavioral sentiment causing volatility the past handful of months. After believing the U.S Federal Reserve was going to become dovish which propelled the USD lower in many Forex pairs in early July, financial institutions expressed concerns about political outlook the past handful of weeks as a lack of clarity started to shroud their perspectives. USD centric positions have powered Forex.

And now that there is a Trump administration coming, and the U.S Fed has remained cautiously dovish this past Thursday, financial institutions may exhale with relief. The election on November the 5th has delivered a clear message regarding the potential for changes to U.S administration mandates regarding trade. Whether a stronger U.S economy is attained because of these hopes is not the question, it is the perception new policies will be initiated which try to deliver results which have been promised. Yes, promises can be broken.

However, the ability to believe changes are coming will affect behavioral sentiment. The Trump soundbites may prove to be rather weak in the future, but there is a chance he will also get things done regarding stronger trade agreements which protect U.S business enterprise and manufacturing. Folks can argue until they are blue in the face regarding the prospects of all things, but the U.S major equity indices rising like a rocket ride in the middle of last week is clear evidence that many believe the prospects for U.S corporations is better. No matter if it is only hopes about tax laws changing, less regulation, and better U.S trade agreements, investors are clearly betting on optimistic outlooks for the mid-term.

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Dow Jones 30 One Month Chart as of 10 November 2024

Improved attitudes are great for the prospect of financial institutions, but traders still have to certainly protect their positions against volatility developing. Markets should start to return to tranquil conditions in the days ahead. U.S data will come this week which will be important via the CPI numbers on Wednesday and PPI figures this Thursday – the combination of these inflation reports will be important. Friday will see Retail Sales from the States.

The return to data as a guideline for financial institutions teamed with the Fed’s rate cut this past Thursday may be an ointment for retail traders who seek a return to normal conditions. Nervous behavioral sentiment could remain a factor in the coming days as people adjust their outlooks to a Trump White House, but the coming week should be relatively quiet regarding surprises.

It isn’t a question of liking or disliking the outcome of the U.S election, it is a question about how behavioral sentiment will now be affected. While some bring up potential tariffs as a major risk for the U.S and global economy, we have been down this road before with Trump. The risk of inflation if trade disagreements flourish should be taken seriously, but Trump has dealt with China in the past and both sides did find a way to do business in many respects. China is probably worried about Trump being in the White House again, but they likely have a gameplan for the tough business discussions ahead. The experience of having dealt with President Trump before allows China and others to know what they may face this time and empower them to be prepared.

It should be noted that Trump has shown in the past a tendency to enter negotiations with a difficult offer and permitting the other side to counter. Trump then might turn down a proposal, but often shows he is open to discussing things further and reaching a compromise. And that is the crucial word – compromise. It is about business and geopolitics. Financial institutions have dealt with a Trump White House before. This time around there is a hope Trump’s naming of a White House cabinet will not be as messy an affair as it was the first time.

The naming of Susie Wiles as the White House Chief of Staff last week looks like a good first step, also having strong Republican leadership in the Senate and House of Representatives may make things easier. While some are worried about a slew of loud rhetorical stances by Trump, perhaps pragmaticism will be practiced. And based on that rather optimistic viewpoint, retail traders may also feel businesslike conditions are ahead and that the financial markets will be a safer place to pursue speculative wagers again in the near and mid-term.