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Plenty of Data from the U.S and China Should be Anticipated

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Plenty of Data from the U.S and China Should be Anticipated

As the last week of August trading gets ready to begin, day traders may be glad to put the past month behind. The BRICS Summit and Jackson Hole Symposium delivered soundbites as promised last week, but there were few surprises. Forex, equities and commodities have been supplying a bumpy road for a while and may continue to do so.

Behavioral sentiment in the broad markets remains fragile, this as short-term U.S Treasuries continue to allure institutional players looking for solid returns. Some well known market players continue to issue cautious words regarding U.S equities, but the three major indices are still near mid-term highs. We have yet to experience a blood curdling selloff in the U.S equity markets. This maybe producing choppy results for some day traders pursuing CFDs while betting against higher moves.

Which brings up the question, which quantified analysis do you want to act upon? While the major U.S indices are up, a lot of the market action in these indices are driven by the ‘top performers’ which have ‘floated the boat’ while many other stocks have not performed handsomely.

Retail traders who are wagering on daily fluctuations need to understand there is a vast difference between short-term speculative positions and long-term investments. Hence the reason day traders are reminded to only bet money on what can be lost without a great deal of discomfort. Speculation should only be done with a very limited amount of cash, because day trading never offers guaranteed profits.

The next handful of days will deliver plenty of important data. The question is how financial institutions will react as they weigh the coming results against their own sentiment and outlooks regarding mid-term interest rates via the U.S Federal Reserve’s rhetoric. Market nervousness remains on edge as more tranquil days are certainly sought via risk adverse financial decisions.

The cryptocurrency market should be watched carefully by participants within its volatile assets. Bitcoin continues to trade near the 26,000.00 level and this is considered important support by many. And Binance coin has failed to inspire a sustained upwards reversal as Binance exchange remains under legal and regulatory shadows.

Traders are also advised to note the U.S will be on holiday on the 4th of September, the coming long holiday weekend could spark rather dynamic market action Thursday and Friday as financial institutions trade in advance of Labor Day.

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AUD/USD One Year Chart as of 27th August 2023

Monday, 28th of August, Australia Retail Sales – the numbers will cause a reaction in the AUD/USD and the result is expected to be slightly better than last month’s outcome. The AUD/USD is near important long-term lows.

Tuesday, 29th of August, U.S Consumer Confidence via The Conference Board – the anticipated result is lower than last month’s reading. However, the past three months have done better than expected, which may put some analysts on edge before the publication.

Wednesday, 30th of August, Germany Preliminary Consumer Price Index – the inflation numbers are expected to match last month’s gain of 0.3%. The EUR/USD will react to the outcome with momentary volatility. German economic data has been a concern in the European Union for a handful of months.

Wednesday, 30th of August, U.S Preliminary Gross Domestic Product and GDP Price Index – the numbers from the GDP reports will be watched by most financial institutions. Last month’s numbers surprised traders, this as growth remained quietly stubborn and inflation crept higher. The USD has been a powerhouse against the GBP and EUR recently. If these GDP reports surprise to the upside again, this could spark more buying of U.S Treasuries which could create additional strength in the USD.

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USD/CNY One Year Chart as of 27th August 2023

Thursday, 31st of August, China Manufacturing PMI – the results from the Purchasing Managers Index from China since April have been lackluster and showed weak export demand globally. Economic data from China has sparked concerns from international investors, and the USD/CNY has certainly received attention as it has risen steadily and is now challenging highs from late October and early November 2022.

Thursday, 31st of August, U.S Core PCE Price Index – the Personal Consumption Expenditures data is expected to match last month’s gain. This inflation data, and the GDP Price Index numbers from the day before will certainly get a reaction from financial institutions which would prefer to see no surprises higher.

Friday, 1st of September, U.S Non-Farm Employment Change and Average Hourly Earnings – as always these reports could shake market sentiment instantly. However it is the wages data which will likely be a focal point for investors. If wages can come under last month’s gain of 0.4%, this would be welcomed by investors and they may go into the long U.S holiday weekend a bit more calm regarding the Federal Reserve.

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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.

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Day and Institutional Traders Suffering Nervous Conditions

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Day and Institutional Traders Suffering Nervous Conditions

Market price action has caused quite a few interesting interpretations of the prices being demonstrated in Forex, gold and equity markets recently. The USD/INR is now at record heights, the USD/ZAR is back above 19.00000 and the USD/BRL is again near the 5.0000 ratio.

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USD/INR One Month Chart as of 16th August 2023

While Forex traders around the world look for clues as to why their local currencies are suffering and are likely blaming domestic policy from their own governments and central banks, they should remember the larger global financial markets tend to move in a unified sphere. Domestic concerns are a real cause for market action often, but when global sentiment becomes nervous the larger force of institutional financial houses shake the ground.

Correlations exists worldwide because of behavioral sentiment ruling outlooks over the near, mid and long-term in the marketplace. While we like to put our faith in the financial markets as an all knowing entity, this is far from the truth. Humans who react to nervous conditions and also have bias are the ones still making decisions in financial houses, they are the ones giving orders to their programmers via their trading software which is largely geared to follow perceived trends these institutions deem important.

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USD/ZAR One Month Chart as of 16th August 2023

Most financial institutions are not speculative in nature, day and even longer term retail traders should remember this point. Most institutions are trying very hard not to ‘speculate’, they are simply positioning per their outlooks based on their understanding of the trading landscape. Whispers of potential downgrades from U.S rating agencies on larger corporate banks yesterday sent a shudder through the broad markets, economic data and rumors swirling about China are not helping either. The current volatility in the broad markets is not welcomed warmly by financial institutions.

When price velocity accelerates and volatility flourishes in highly charged trading situations, this suggests financial institutions are nervous and not able to find comfortable positions. Conflicting ‘opposite’ positions from other larger players are causing market chaos in Forex, equities and other financial assets. There is a herd mentality in trading and when the herd doesn’t march in an unified direction chaos happens.

Most institutional players want calm, they want tranquil trading conditions so they can manage their clients’ money quietly. Bonds, equities and indices, real estate holdings via REITs, and gold make up a large part of their holdings.

Most U.S pension funds for instance have mandates to be positioned into a large amount of quiet investment vehicles which do not trade with wild price ranges. They seek steady returns from their institutional investors that can be counted on in a quantitative manner to demonstrate to their clients.

Large financial institutions are allowed sometimes to trade 2 to 4% of their holdings in different categories of speculative investments – such as start-ups, allocate cash to hedge funds they trust, small cap stocks they might know about, etc., depending on the exact mandates agreed upon.

Yes, hedge fund managers like Bill Ackman and investor Michael Burry get a lot of attention when they bet against the markets, but believe it or not they are small fish in a large ocean a lot of the time. They are good at what they do, but their speculative positions cannot be mirrored by most financial institutions or small day traders.

Ackman and Burry may be trading billions, but remember institutional financial companies including pension funds when combined total approximately 80% of market cap. Institutional trading decisions can cause massive waves in the financial world, but they actually seek calm seas.

When markets become volatile this often means institutional traders are not comfortable and their behavioral sentiment is fragile. Forex for example is often affected by financial institutions moving money as they handle export and import transactions for companies, but transactions are often done to buy and sell equities too. The Bank of International Settlements estimated an average around 7.5 trillion USD in value was traded in Forex everyday in 2022.

Day traders should not take it personally when the markets move against them, instead they should look to try and mirror the sentiment of larger financial movers. However, knowing and timing financial institution decisions is elusive because short term compared to long term considerations are often different.

Most traders are merely betting on the price action the large institutional funds are undertaking via the direction of the marketplace. Day trading for most retail speculators remains dangerous. A solid fundamental understanding of market ‘forces’ can allow smaller traders to feel more comfortable.

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Anxiety and Surprising U.S Data for Day Traders to Consider

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Anxiety and Surprising U.S Data for Day Traders to Consider

Global central banks stayed in their anticipated lanes last week as the Fed and ECB raised their key lending rates. The BoJ has admitted it is allowing its yield curve to increase, meaning the Japan government is cutting back on purchases of Japanese bonds. Forex produced anxiety and choppy results for day traders.

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Gold 6 Months Chart as of 30 July 2023

Economic data from the U.S last week provided a strong Gross Domestic Product result on Thursday, and followed with weaker than expected Personal Consumption Expenditures and Personal Income statistics before going into the weekend. Meaning the U.S economy appears to be surprisingly solid, while inflation pressures do indicate they are in decline. The Forex market turned volatile on Thursday and Friday, gold which traded at nearly 1980.00 USD on Thursday went into the weekend near 1959.00.

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VIX Index 1 Year Chart as of 30 July 2023

Stock markets in the U.S via the major indices continue to incrementally rise and folks waiting for a big sustained selloff are having their patience tested. Perceived volatility in U.S markets is very low and the VIX (Volatility Index) indicates many investors are not taking the time to hedge with options because their confidence is remarkably high. A cautious reminder for traders, one bad day could change all of the optimistic sentiment.

In the cryptocurrency world, folks should continue to keep their eyes on the Binance exchange and its Binance coin. Many digital assets seem to be suspiciously close to important support levels as this week begins and appear vulnerable.

Monday, 31st of July, China Manufacturing PMI – while U.S data surprisingly improves, China has not begun to show signs of a positive turnaround quite yet, and this reading is expected to be below last month’s outcome. China data is a solid barometer of global economic health and traders should give these results proper attention.

Monday, 31st of July, E.U Consumer Price Index Flash Estimates – the European CPI numbers are expected to come in slightly below the previous month’s reading. If for some reason these inflation numbers are higher than expected, this could cause some chaos briefly for the EUR/USD. A weaker number however offers no sound wagering basis for short-term day traders either. Behavioral sentiment appears to be ruling the EUR/USD landscape for the time being, and technical levels should be watched.

Tuesday, 1st of August, Australia Reserve Bank Cash Rate – the RBA is expected to follow in the footsteps of the Fed and ECB and raise its lending rate by 0.25%.

Tuesday, 1st of August, E.U Manufacturing PMI – Germany and France are anticipated to produce similar results to last month’s outcomes. Recessionary pressures are a concern in the E.U and better than expected numbers would be welcomed, but this may prove difficult to demonstrate as economic conditions remain challenging.

Tuesday, 1st of August, U.S ISM Manufacturing PMI – the results from the manufacturing sector in the States should be watched. A slight improvement is expected, but the reading is not expected to produce a wildly optimistic result. An outcome which slightly beats expectations, but is not too strong might make the USD slightly weaker. Global investment institutions are likely hoping for any signs that the Federal Reserve will have to become less aggressive. A lackluster to ‘fair’ ISM Manufacturing PMI result could be evidence larger Forex traders want to see if they are aiming for bearish momentum in the USD.

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NZD/USD 3 Months Chart as of 30 July 2023

Wednesday, 2nd of August, New Zealand Employment Change – the jobs statistics are expected to show slightly weaker results from the nation. The NZD/USD remains within the lower elements of its long-term price range. There are many NZD/USD bullish traders waiting for a sustained reversal higher, but it is unlikely to be produced from these New Zealand jobs numbers.

Thursday, 3rd of August, U.K BoE Monetary Policy Summary and Official Bank Rate – the Bank of England remains in a difficult spot and it will likely raise interest rates by another 0.25%. Criticism of the Bank of England has been loud in Britain, but the BoE likely feels it has to remain in line with the Fed and ECB. Recessionary pressures continue in the U.K and inflation remains problematic. Concerns will be heard regarding property mortgages for home owners if the BoE hikes. The GBP/USD will certainly move depending on the rhetoric from the Monetary Policy Summary and talking points delivered by BoE Governor Andrew Bailey.

Friday, 4th of August, U.S Non-Farm Employment Change and Average Hourly Earnings – the jobs data parade will climax at the end of the week, this after starting on Wednesday via the ADP jobs numbers. Investors will watch the Non-Farm Employment Change data carefully and correlate them to the better than expected GDP results from the 27th of July. The wages data from the Average Hourly Earnings is expected to come in with a slight decrease. A weaker inflation result from the wages statistics could cause additional softness in the USD. However, recent data from the U.S has been hard to predict correctly, and day traders may want to sit on the sidelines until all the jobs numbers are digested.