Introduction
Despite the intense political drama which unfolded last week, it was fundamental, economic news, which caused the dominant movements in the forex markets, leading to a post general election sell-off in sterling, a fall in the value of the Canadian dollar and increased speculation in the U.S. dollar. Forex markets reacted to the impeachment of President Trump, the realisation that the U.K. will finally divorce from the E.U. and Canadian data suggesting the economy may be flirting with recession.
The movements in many of the major currency pairs during the week, offered up tremendous opportunities for both Investors and Traders in the ZuluTrade’s community to bank considerable gains, having always in mind the losses that can also be made if they do not properly protect their account. In order to take advantage of the possibilities, it’s essential to maintain vigilance and remain aware of the upcoming events, as listed on the economic calendar. The proprietary ZuluTrade economic calendar provides Investors with the ability to customise and filter the information, to match their trading preferences. For example, you can isolate certain currencies, or tailor-make the calendar to deliver specific information, only relevant to high impact news events you’re likely to consider trading.
CopyTrade Economic News at ZuluTrade
Sterling
GBP/USD gave up all its general election gains during last week’s trading sessions, as FX Traders and market participants sobered up to the fact that the U.K. was finally and definitely leaving the E.U. The withdrawal agreement vote in U.K. Parliament was a formality, based on the Tory party’s 80 seat majority. However, Johnson’s government took advantage of their position to embed no delay into law, whilst hardening their Brexit stance. Consequently, sterling sold off sharply, as the probability of a no-deal Brexit outcome increased. GBP/USD closed out the week down -2.53%. GBP’s fall accelerated on Friday, despite U.K. GDP growth beating forecasts, business investment in the U.K. improving and government borrowing figures beating expectations, in both the third quarter and annually.
The 4hr chart, a popular time frame for both day and swing traders, demonstrates the GBP sell-off gathering pace, in tandem with Traders’ realisations. The bearish sentiment is illustrated by the stochastic and RSI readings, the Heikin Ashi bars’ price action and the MACD. The widening Bollinger Bands are also illustrative of the increased speculation and volatility.
Canadian dollar
On Friday December 20th CAD experienced whipsawing conditions versus its main peers, as various data suggested the Canadian economy is faltering. Retail sales came in at -1.5% month on month, CPI fell to 1.7% and the budget balance (deficits) increased sharply. USD/CAD ended the week down -0.14%.
CopyTrade Economic News at ZuluTrade
U.S. main market indices
Despite the impeachment hearings in Washington, and the decision by the House of Congress to impeach a President of the USA for only the third time in the country’s history, U.S. market indices reached record highs during last week’s sessions, as the Santa Rally and risk on sentiment continued to gather pace. Market participants appear to be impervious to the impeachment proceedings, believing that the rally will continue into the new year. The NASDAQ has risen a stunning 43.54% yearly, from the 2018 December China-USA related trade war sell off, with the SPX up 33.34% year on year. For any Investors who bought the dips, this current year on year rally represents a modern day record. The breadth and depth of the market recovery is best illustrated on the weekly chart, for the NASDAQ 100.
Despite the corrections experienced during 2019, any bearish sentiment was short-lived. The risk-on sentiment dominated the Investor landscape throughout the year. The NASDAQ 100 index contains technology firms, which are highly sensitive to international relationships, therefore, on each occasion the subject of tariffs and the Chinese trade war resurfaced during the year, the index sold-off. As is clearly illustrated by the weekly time-frame, any doubts quickly evaporated, to be overcome by the overriding bullish momentum.
CopyTrade Economic News at ZuluTrade
Weekly time frames, provide an ideal landscape for position traders
The weekly and daily charts are often preferred by what’s termed “position-traders”, who are often regarded as market investors, rather than pro-active traders. Fanning out to the largest time-frames, can provide a different perspective and it must be noted that many of the technical indicators we use for day-trading and swing-trading, were created in the decades before the birth of the internet.
Technical indicators were initially developed to be used on weekly, or monthly time-frames. As can be seen, indicators such as the PSAR and MACD, combined with other indicators, offered up text-book signals as to when to: enter, manage, or exit the NASDAQ market. If you wish to take a longer term investment approach, there will be Traders in the ZuluTrade community who match your preferences. By drilling down into the Trader rankings and ratings, you can establish who matches your trading style. https://www.zulutrade.com/traders
Will market indices continue to reach record highs in 2020?
It must be noted that the gains in U.S. equity market indices were speculative as opposed to earnings related, as according to many analysts the earnings of the NASDAQ firms do not justify the market rises experienced during 2019. One useful metric to gauge the value of a market, can be the PE Ratio (price versus earnings ratio), an explanation is given here regarding the measurement.
During the past 13 years, the highest PE Ratio of the NASDAQ index was 115.34. The lowest was 9.38. And the median was 18.14. The reading currently sits at 34.16, approximately twice the median level. As to where 2020 gains will come from is anyone’s guess and let’s be quite clear; it’s impossible for any analyst to deliver a medium to long term forecast for equity, or FX markets.
With hindsight, many predictions can be proven right, but only a brave or reckless market analyst would commit to a definitive prediction for 2020, given the potential for outlier events, such as the USA presidential election in November. The official NASDAQ site has published a commentary with regards to investing in 2020, which is worth reading However, for our traders in the ZuluTrade community who prefer closer to home trading ideas, our social charts section provides an ideal space in which to discuss the rationale for taking specific trades.
CopyTrade Economic News at ZuluTrade
High impact calendar news events and data to be published this week
In this Xmas week there are far less economic calendar events likely to move the FX, equity and commodity markets and the trading days are shorter, it’s important that Investors and Traders are mindful of the times markets are open. Similarly, the volume of trading will reduce significantly, therefore, any data which misses or beats the forecasts, could have a more dramatic impact on the value of the currencies in question. However, there are no reasons why market participants can’t remain active in the market, or trade during each open session over the holiday period.
Monday December 23rd primarily concerns North American data. During the New York trading session Canada’s annual GDP figure (up to October) is forecast to come in at 1.4%, falling from 1.6%. A result which could add to the recent falls in the Canadian dollar, on the basis that Canada’s central bank may have to lower interest rates, to ward off a potential recession. For the USA we receive the latest durable goods orders data, predicted to reveal a significant improvement to 1.5% in November. New home sales in the USA are expected to reveal a further drop into negative territory. In the evening sessions, Japan’s BOJ policy meeting notes are published, the detail could affect the value of JPY.
Thursday December 26th witnesses the publication of a slew of Japanese data. In the early morning session construction and housing data are published. In late evening the unemployment rate, the CPI figure and retail sales figures are released. Market focus will mainly concentrate on Japan’s latest industrial production figure, expected to come in at a disappointing -8.3% year on year, a metric which could cause yen to slip versus its peers.
Friday December 27th is a relatively quiet day for economic calendar events and data releases. In the London-European session the ECB will publish its latest economic bulletin for the Eurozone. For the U.K. the latest mortgage approval figures will be released. Both data releases could impact on the value of EUR and GBP, depending on the readings.
CopyTrade Economic News at ZuluTrade
Disclaimer
The views expressed do not constitute investment or any other advice /recommendation /suggestion and are subject to change. Reliance upon information in this material is at the sole discretion of the reader. Opinions expressed in the report do not represent the opinion of ZuluTrade Copy Trading Platform and do not constitute an offer or invitation to anyone to invest or trade.