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Reactions and Risks as Trading Clarity Remains Hard to Grasp

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Reactions and Risks as Trading Clarity Remains Hard to Grasp

While many U.S government officials try to shrug off the downgrade of U.S Treasuries by Fitch Ratings last week, a warning shot has been fired regarding U.S spending and the nation’s growing deficit. Janet Yellen and others may believe the downgrade should not have happened, but the prospect that the U.S golden goose is going to stop eventually producing enough eggs is a realistic viewpoint from Fitch. Risk adverse trading on the news was seemingly sparked from the U.S Treasuries downgrade, while many prominent figures including Warren Buffet have claimed they are not worried. However, one thing that the downgrade did was certainly create more clouds for financial institutions which have already been suffering from a lack of clarity the past three weeks.

U.S economic policy remains troubling regarding its spending, and while the government believes its bonds will remain the best in the world for the foreseeable future, it would certainly help matters if responsible ‘adults’ would be allowed a voice regarding stimulus, expenditures and debt ceiling concerns. The U.S has been warned, but with a major presidential campaign approaching on the horizon, more promises to the U.S public will likely carry greater long-term costs.

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Gold One Week Chart as of 8th August 2023

While the USD did get stronger across Forex and gold finished last week near lows, some major currencies finished Friday with slight reversals higher against the USD before going into the weekend, based on the weaker than anticipated Non-Farm Employment Change outcome. However, Average Hourly Earnings came in slightly higher. The rise in wages for employees wasn’t expected, but the gains via the inflation number may not have been considered significant enough to cause a panic.

Day traders trying to navigate through the news of the ratings downgrade and the mixed jobs numbers from the U.S may have gotten ripped apart from the volatility late last week. Forex brokers likely had a good week if the majority of their speculators were ‘B’ book – virtual – traders. Survivors of last week’s dynamic price action should be aware that financial institutions do not have the best of outlooks for global central banks. This week’s coming data may help a bit, but trading could also remain rather dangerous and churn volatility.

Global Outside Influence to Give Attention:

Although Niger may seem like a world far away for most day traders, they should keep an eye on the developments of the African nation. A military coup has gotten the attention of global powers and there are threats of military intervention rattling. France, the U.S and Nigeria and other ‘Western’ leaning nations have a stake in the Niger drama, on the other side is Russia and its Wagner affiliated mercenaries. The potential for a war to to start in this landlocked northern African nation appears to be growing. A conflict in Niger could include a wide range of competing sides and create loud rhetoric and hyperbole. It could also cause uncomfortable feelings at the BRICS summit scheduled to begin on the 22nd of August in Johannesburg, South Africa.

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GBP/USD One Month Chart as of 8th August 2023

Monday, 7th of July, U.K Halifax Home Price Index – this data is expected to remain rather stable, but the past three results have been negative. Mortgages are getting expensive in the U.K and the pressure added from higher interest rates is not helping. The GBP/USD could react briefly to this outcome.

Monday, 7th of July, E.U Sentix Investor Confidence – the reading is anticipated to be worse than last month’s outcome regarding investor outlook. The past three months have been negative. The E.U is certainly facing recessionary pressure. Oddly enough, a poor outcome could spur on the belief the ECB may have to become less aggressive regarding their higher interest rates. The EUR/USD may see a flurry of reactions from this report.

Tuesday, 8th of July, China Trade Balance – the results will get plenty of attention because recent economic data from the nation has been troubling. Export demand is important for China’s economy.

Tuesday, 8th of July, Germany Final Consumer Price Index – the result is expected to match the forecast of a 0.3% gain. This inflation report will be watched by EUR/USD, but if expectations are met this could create rather consolidated trading until Thursday for the currency pair.

Wednesday, 9th of July, China CPI – the inflation data from the nation will be watched by global investors. Recent statistics from China have signaled concerns about ‘deflation’. An outcome of minus -0.5% is expected. Economic issues are shadowing China, this as it remains active in global affairs.

Last week Argentina announced China helped facilitate a ‘bridge loan’ for the South American nation so it could make a repayment to the IMF. Rising economic concerns in China could start to squeeze its ‘cash power’ as it tries to gain influence globally by pumping Yuan (CNY) into international finance. China has certainly been bold and is playing a ‘long game’, because its choice of Argentina as a nation to help can certainly not expect to produce short-term financial gains.

Thursday, 10th of July, U.S CPI – Consumer Price Index results from the States will cause potentially dynamic broad market movement. Inflation is expected to match last month’s rise of 0.2% via the broad and core numbers. However, traders should note that some analysts have voiced concerns rising energy prices the past month will hit the inflation numbers, if this occurs it could spark a volatile USD. Higher Crude Oil prices combined with a streak of U.S hot weather may create an intriguing outcome. Risk management should be used by day traders who are wagering in the markets as the CPI readings are released.

Friday, 11th of July, U.K GDP – the Gross Domestic Product numbers will be important immediately for the GBP/USD. Although last month’s outcome was slightly stronger than anticipated it was still negative with a minus -0.1% reading. The growth number this time around is expected to gain 0.2% per the monthly report.

Friday, 11th of July, U.S Producer Price Index – economic numbers from the States have been mixed recently. These inflation numbers are expected to show a slight rise, if the outcome meets expectations – the broad markets may remain calm. However, if inflation is stronger than expected, the result could set off fireworks if the outcome sets off fears about the U.S Fed maintaining it hawkish rhetoric.

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Dog Days of Summer and a Return of Calm as Storms Threaten

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Dog Days of Summer and a Return of Calm as Storms Threaten

With essentially two full weeks of trading until the end of August and the unofficial end of summer in sight, perhaps this week may be a good time for retail traders to be observers if they do not have the stomach for potentially noisy speeches and markets.

However, speculators who can block out media hyperbole and microphone soundbites from folks standing on podiums may find conditions rather attractive. As always outlook depends on perspective, time frames and managing risk. Behavioral sentiment has been rather chaotic the past month and some traders may suspect we are approaching the end of the loud spectacles of nervous drama in the markets.

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USD/ZAR One Year Chart as of 20th August 2023

The economic data this coming week should prove to be a rather mild schedule, but outside influences will certainly get publicity and get fanfare from talking heads who want 15 minutes of your attention. The BRICS Summit will get underway in Johannesburg, South Africa officially on the 22nd. Another big conference later this week will be the U.S Federal Reserve’s Jackson Hole Symposium. Both events will produce plenty of conversations about inflation, economic stability and a more cohesive global cooperation monetarily. This will also create many raised eyebrows among traders who are skeptical about these type of events.

While leaders of China, Russia, India, Brasil and South Africa get together in Johannesburg, it is likely we will hear talk about potential BRICS expansion and the pursuit of a new unified currency which doesn’t rely upon the USD. However, in the background there is likely to be plenty of distraction because of China’s faltering economic data and Russia’s Ruble which has been impacted severely in the past month. Plenty of large rugs will be needed to hide the dust which threatens to make this BRICS event rather memorable.

Add the ongoing saga of Niger and the absence of a political solution for the world’s fourth largest producer of uranium as a potential flash point standing on the side of the stage waiting to make an appearance regarding Africa news. Perhaps it is too cynical to wonder if coordinated military action within Niger will await the end of the BRICS Summit. This so China and Russia are not given an opportunity on the ‘world stage’ as a united voice to offer their opinions regarding an intervention.

The Jackson Hole get together of global central bankers from the Fed, BoE, ECB, BoJ and others will certainly grab headlines late this week, but the script is mostly known regarding the rhetoric to come from the Federal Reserve’s annual event. Forex may move based on comments from the central bank chiefs as they speak towards the end of this week, but it is unlikely anything surprising is going to be heard. U.S Treasuries will remain a topic because of the ability to lock in a solid return over the mid-term compared to betting on the outcomes of the stock market, but this scenario has been playing out the past month. Investors should prepare for a long line of speeches regarding economic outlooks from central bank officials all week. Day traders should also remember that the chatter starts to be ‘tuned out’ as the speeches grow longer.

Traders looking for other outside influences may want to look at the cryptocurrency market where major assets have shown signs of struggling. Bitcoin and Binance coin could remain in the headlines for all the wrong reasons, if their prices continue to challenge important support levels and become more vulnerable.

Monday, 21st August, China Prime Rates – economic data from the nation has caused concerns that real estate problems are spilling over into the domestic consumer market. The interest rates China lends money to consumers is expected to be lowered to try and spark spending. Recent economic reports from China have been bad, and readers who believe this is merely ‘Western’ bias being reported should be careful to look for other sources to confirm data. Investment within the second biggest economy of the world has become tentative, because there is a fear the ‘official’ China numbers may be worse than those being reported.

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USD/JPY Six Months Chart as of 20th August 2023

Tuesday, 22nd August, Japan Consumer Price Index – the Bank of Japan report is expected to show a slight decline to the inflation numbers. Last month’s outcome of 3.0% is expected to lower and produce a 2.9% result. The USD/JPY could react momentarily to the outcome, the currency pair is near highs it hasn’t touched since November 2022.

Tuesday, 22nd August, U.S Existing Home Sales – the data is expected to show a slight decline of purchases. Mortgage prices continue to climb in the U.S and homeowners are less likely to desire taking on a new higher mortgage, this if they already have a lower mortgage locked in from a few years ago within a dwelling they already live.

Wednesday, 23rd August, Flash European Manufacturing and Services PMI – the reports will come from the E.U and U.K. The German and British outcomes will stir the Forex markets. The manufacturing data from Germany and Britain are forecast to be slightly negative.

Wednesday, 23rd of August, U.S Flash Manufacturing and Services PMI – the U.S reports are expected to show a decline in the manufacturing sector. If a negative result materializes, this could actually spark a selloff of the USD – if the financial markets have returned to calm waters by the middle of this week. Weaker numbers might be interpreted as another reason for the U.S Federal Reserve to remain neutral and why they should consider becoming dovish over the mid-term.

Thursday, 24th of August, U.S Durable Goods Orders – the core and broad numbers are anticipated to show declines. If the Durable Goods Orders numbers are worse than expected this could spark more USD selling, particularly if financial institutions are already calm and feel the data is another step to ‘lowering’ the Fed’s hawkish interest rate rhetoric. However, for the USD to weaken the markets will likely have needed to be tranquil beforehand, without major surprises having happened earlier in the week that may have escalated nervous behavioral sentiment in the broad markets.

Friday, 25th of August, Germany Business Climate and GDP – the ifo Business Climate report comes from a composite of manufacturers, wholesalers, and other enterprises and is expected to be lower than last month’s outcome. The Gross Domestic Product results are anticipated to show no changes, which would mean Germany’s economy remains in the doldrums and is flirting with recessionary pressures.

Friday, 25th of August, U.S University of Michigan Consumer Sentiment – this revised reading is expected to show U.S consumers remain steady without significant changes compared to the previous outcome.