28 / 02 / 2017 | Market News

(Another) busy day for Donald Trump

As the month draws to a close, attention is squarely going to be focused on the US with a busy legislative and economic calendar slated. The dollar, US equities, US treasuries and quite possibly energy prices will find some direction off the back of the day’s events depending on the extent of detail we see, especially regarding the proposed US tax reform. Further afield, the catalysts for direction are going to be harder to call, although with the election season looking in Europe, the spectre of further bouts of populism remains front of mind and this could certainly serve to unsettle the Euro in the near term, too.
 
The Traders’ View
 
Our prop desk is selling the Aussie dollar against both the greenback and the Yen, whilst we’re also seeing some support for gold with buys coming in around the $1251.50 level. Wariness over the equity market rally is also in evidence.
 
Fundamentals – (Another) busy day for Donald Trump
 
Following a subdued Asian session, attention is focusing squarely on Donald Trump and comments he’s expected to make during the day ahead. We saw those headlines spending plans being floated yesterday, but detail was lacking so the scheduled interview on Fox News at 11am GMT, then his first ‘State of the Union’ address of a joint session of Congress at 2am GMT Wednesday will both be closely followed. Resulting sentiment might not only hit dollar crosses, but could also provide some fresh direction for equity markets – Wall Street limped higher yesterday, but as we’ve been noting for some time now, confidence in the rally does seem to be running rather thin and as it stands, futures markets currently point to the DOW opening a shade lower.
 
In addition to Presidential comments, the US also releases its latest update on Q4 GDP at 1.30pm GMT today and again this number will be closely followed as the market continues to hunt out clues over the Federal Reserve’s likely stance over a rate hike next month. Conviction over policy tightening has been ebbing of late so anything that looks a little weaker than may have been expected could well serve to pump US treasuries.
 
The US genuinely is dominating the agenda for the day ahead, with February’s consumer confidence figure on the table at 3pm GMT. This will be the first such print covering an entire month since Donald Trump took office so will again be worth watching. In addition to potentially providing direction over the timing of any rate hike, it will also reflect the health of the US economy, which is so reliant on consumer spending to maintain growth. Having already seen earlier this week how the Japanese Yen still holds a safe haven allure, any shortfall here could help drive USD/JPY back below the 112.00 handle.
 
We have some Australian data due for release later this evening including the AIG manufacturing index at 10.30pm GMT, but by all accounts the more interesting point for the Aussie dollar is a survey of economists that has just been released by the Wall Street Journal. This showed comprehensively that the country will now avoid falling into recession this year, not least because of rising coal price. AUD/USD is little changed in recent trade, but anything that raises questions over whether the Fed will need to pare its planned three rate hikes for 2017 could be precisely the sort of news to help drive the pair beyond recent highs. 

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
 
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28 / 02 / 2017 | Technical Analysis

Cable struggling

Look for further weakness on GBP/USD as it is heading towards the 100 day moving average, in line with recent support around the 1.2400 level. Resistance around recent highs of 1.2550 should remain in place.
 

 
EUR/JPY rebounded off the 38.2% Fibonacci retracement of last year’s rally, but downward momentum remains. Look for support at 118.40 then September highs of around 116.20.
 


This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
 
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27 / 02 / 2017 | General

Long Term Forex Trading: Position Traders

Forex trading can be an exciting, fast-paced type of trading, but it can also be treated like other long-term trading. Taking the exact opposite approach to day-trading or swing trading which assumes risk can be lowered by short-term positions – position traders assume that the small fluctuations of currency pairs will be normalized over a longer period of time if trades are kept. Position traders will usually hold for weeks, months or even years instead of committing multiple short-term trades.
As the alternative name for position traders indicates: buy and hold traders purchase a currency pair and hold on to it until a major trend is observable that they can take advantage of. As you can extrapolate from what has been said - implementing position trading as your primary strategy means having the discipline not to exit and enter trades when small fluctuations are observed.

Position Trading Basics

 Another benefit of position trading compared to intraday trading and swing trading is that its much less time consuming. Intraday and swing trading requires traders to spend the majority of their day sat in front of a computer, with trading software flickering on their screen – position traders on the other hand do their research ahead of time and then wait. From there a trader can monitor the movement of their trade periodically, but otherwise it is left alone for the duration decided by the trader. There are multiple ways to position trade, although most of it involves speculating on a currency pair which will trend in the future.

Position Trading Pros

Position trading is much more economic in regards to time, compared to intraday or swing forex trading. Most of the research and decisions are made before entering the trade and then held for a significant amount of time. Also position traders’ trades aren’t as heavily effected by small price movements as short-term traders’ trades are. Finally commissions accrued by committing multiple smaller and more rapid trades are negated since the trades are held for longer amounts of time.

Position Trading Cons

Beyond the normal risks of any type of trading carries, position trading’s main risk is underestimating a movement that becomes or evolves into a full-blown reversal causing the trader significant loss.   
No matter what way you choose to trade, STO’s multiple account types allow you to choose the best fit for you. Sign up today and start trading.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
 
 
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27 / 02 / 2017 | Market News

Cable rattled by domestic uncertainty

The idea of another Scottish independence referendum is having a surprisingly broad impact on currency markets with Sterling rattled and the Yen even finding some safe haven support. However this may prove to be little more than a side-show, with concern mounting over the length of time it’s taking the Trump administration to come up with any meaningful stimulus or taxation policies. Not only is this dragging on the dollar, but it could prove to be the catalyst for killing off the equity market rally, too. Dow futures show the index floundering around last week’s highs and with valuations so inflated, a wholesale reversal to knock some froth out of the market would be of little surprise.
 
The Traders’ View
 
Our prop desk is shorting assorted sterling crosses and retains is scepticism over the equity rally with limited short DAX and SPX positions being added overnight.
 
Fundamentals – Cable rattled by domestic uncertainty       
 
The Pound has lost ground in the first few hours of the week’s trade with GBP/USD and EUR/GBP both posting notable swings. There’s little in the way of fundamental data to support the move although some are attributing the swing to the idea that another Scottish independence referendum could be on the cards. Given the pushback we’ve seen already from the rest of the European Union over allowing such a move – it would set an uncomfortable precedent for other regions seeking independence – and also research showing that many of those who voted for independence in 2014 would now reject the idea, pricing this idea in too aggressively may seem rather premature. However, with little UK economic data on the table today, recovering the losses in the short term could prove challenging.
 
USD/JPY briefly touched 112 during the Asian session with the Yen picking up some credit for its safe haven status ahead of the aforementioned Scottish independence referendum, but the bout of dollar weakness came to an abrupt end in the wake of news that the Bank of Japan had been undertaking another round of government issued bond buying during the session. We do however have some key economic releases due from Japan later in the day with January’s Retail Sales and Industrial Production prints due at 11.50pm GMT. The potential here is that given the currency’s safe haven pull, anything that comes in even just in line with expectations could be sufficient to extend support for the Yen.
 
Dollar crosses in general are struggling somewhat, with the market losing patience over Donald Trump’s lack of action both in terms of stimulus measures for the economy and declaring the radical tax overhaul that had been promised. On top of this we have the chances of a March rate hike receding seemingly by the day, although a flurry of US economic data that’s scheduled for later in the session could initiate something of a turn around here. January’s Durable Goods Orders at 1.30pm GMT will be the key number to watch and a healthy tick higher is forecast here. If this is delivered then it could be sufficient to reignite some enthusiasm for the greenback that has been rather lacking in recent days. 

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
 
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27 / 02 / 2017 | Technical Analysis

US Crude poised for breakout?

Crude oil prices are consolidating within the price action seen at the start of the new contracts last week. This could be paving the way for a break higher with recent highs just short of $55 as the target. Look for support at around $54 then $53.6
 

 
USD/JPY may have paused for breath overnight but another move lower would take out the 100 day moving average, opening up the 38.2% retracement level around 111.15.
 


This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
 
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24 / 02 / 2017 | Technical Analysis

AUD/USD resumes up trend

The ascending triangle that has been established for AUD/USD is falling back into place and the pair is now threatening a test of year to date highs. If this falls around 0.7735, look for a move up to 2015 highs at 0.7785 the 23.8% retracement of the 2011-2015 sell-off around 0.7850.
 

 
EUR/JPY continues to edge lower with the 38.2% retracement of the rally from last year providing meaningful support for now. If we see this broken at the 119 level, look for a move down to the 200 day moving average currently around 117.5.


 
This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
 
 
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24 / 02 / 2017 | Market News

Whitehouse Jawboning Rattles Greenback

Tucked away in yesterday’s data was a US 7 year Treasury auction and with concern building over the Trump Administration’s ability to deliver a meaningful boost for the nation’s economy, bond yields came under pressure. Investors were clearly keen to get a slice of the action with the offer covered almost two and a half times, underlining their uncertainty over just how rosy the outlook might be for the US economy. With a flurry of fresh releases due out of the US later today, the potential has to be for any overshoot to be received with some dollar buying – and the potential bidding up of bond yields, although sustaining any move like this may be the difficult part.
 
The Traders’ View
 
Our prop desk is currently shorting the Yen off both the Kiwi dollar and the Pound, whilst there’s also notable interest in long cable positions, with buying having been seen above 1.2525.
 
Fundamentals – Whitehouse jawboning rattles greenback
 
Over the last 24 hours we’ve seen some across the board dollar weakness emerging as the market responds to two key messages emerging from the White House. US Treasury Secretary Mnuchin’s comments over limits as to just how much the administration can do to bolster growth in the near term have been combined with Donald Trump’s musings that he wants to see a weaker dollar to encourage exports from the USA. As a result the dollar index is languishing round levels not seen since the start of the week, whilst other major currencies have also found meaningful support against the greenback. With a flurry of data releases due this afternoon including Michigan Consumer Sentiment and New Home Sales all at 3pm GMT, anything that looks a bit hotter than expected here could offer the dollar a shot in the arm.
 
The outlook for the Canadian dollar is being very much overshadowed by Donald Trump’s proposed border tax plans that would see imports hit with a notable levy, whilst exporters would receive the proceeds in the form of a rebate. As with many of the new President’s policies, there’s a lack of clarity over the detail or indeed the exact timing of any change, so since Trump’s inauguration, USD/CAD has traded in a relatively narrow channel. We could see something of a short term break out of this today however with January’s inflation data due for release at 1.30pm GMT. Whilst the border tax has the potential for the bigger overall impact, a notable contraction below the -0.1% that’s forecast for the core month-on-month reading could well see USD/CAD break out of the current range on the upside.
 
That talking down of the dollar combined with the lack of clarity from the Fed earlier in the week has served to help propel gold to pre-US election highs in recent trade. We noted the technical drivers behind this move yesterday, too, although if we do see this afternoon’s US economic data come in a little better than forecast, the potential for a dollar correction will likely take the shine off these latest gains. 

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
 
 
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24 / 02 / 2017 | General

Forex Trading Strategies: Swing Trading

Our previous article spoke about intraday or day trading, which is a trading strategy that involves committing all transactions within the duration of a trading day. Swing trading is also a short term trading strategy like intraday trading, but lasts longer than a day, usually between two days to six days but can extend beyond a few weeks. Swing trading’s main focus is following potential emerging trends and trying to take advantage of them.
Often people implementing the swing trading strategy will employ technical analyses to forecast or interpret potential trends that they can use for gains. Much like day trading though, swing trading usually accrues increased commission fees due to many short term trades and transactions.

What is Swing Trading

Usually swing traders will follow the main trend of a chart, an attempt to follow strong trends – or an obviously observable movement either upwards or downwards. Much like day-trading this mandates constant awareness of the market and the movement of the instruments you are trading. This means that swing trading like intraday trading requires a relatively large investment of time. This is why this type or form of trading is preferred by stay-at-home traders and day traders generally.

Multi-Day Patterns

Generally traders employing this strategy will need to extrapolate multi-day patterns, which can be a much more involved, technical and complex method of trading, compared to its closest trading system “cousin” day-trading. Not only do swing traders need to watch the market they are trading in very closely, they also need to be extremely familiar with the daily and weekly economic calendar.

Swing Trading Pros

Because swing trades are generally smaller, they are quick and nimble – this is basically what the entire strategy is based on. Large institutions with larger trades – makes moving in and out of trades extremely difficult – this “protects” swing trader’s smaller trades from having to compete with these larger organizations and their substantially larger capitals. 

Cons of Swing Trading

Swing traders generally take on a higher risk that is negated or minimized by day trading – i.e. the overnight movement of traded items. As mentioned previously swing trading carries and increased cost from incurring commission fees due to multiple short-term trades.

No matter what style, strategy or type of trading you prefer, you can chose one of our four STO accounts to create a truly bespoke trading experience. 

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
 
 
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23 / 02 / 2017 | Market News

Federal Reserve fails to deliver clarity

Activity is likely to be weighted to the latter part of the European session today, with a slew of economic releases due from across the Atlantic. Oil prices are set to find some volatility off the back of the crude inventory release, whilst US equity indices also continue their seemingly relentless march higher with investors flooding into stocks. This trend is one that is likely to remain in tact especially with doubts starting to build over whether the Federal Reserve can still manage to deliver three rate hikes this year. That inaction from the Fed has by all accounts helped prop up the price of gold, with the precious metal holding in that tight range we’ve seen established over the last week. Again anything that points to a slowing of the pace of the Fed’s policy tightening will be positive for the asset, which also stands to gain ground if there’s further uncertainty over the policies of the new US administration.
 
The Traders’ View
 
Our prop desk is favouring the New Zealand dollar, with long NZD/JPY positions being picked up along side short GBP/NZD and AUD/NZD. We also have the ongoing theme of wariness over equity indices at these current levels.
 
Fundamentals – Federal Reserve fails to deliver clarity
 
Yesterday’s FOMC meeting minutes were eagerly awaited by the market but fell some way short of giving traders any fresh clarity over whether we will actually see a US rate hike next month. There’s evidently some concern over how Donald Trump’s assorted polices will impact economic growth and this is contributing to the Fed’s inertia. The dollar is off a little as a result, but with the rate hike still being very much a case of ‘when’ not ‘if’, downside pressures on the greenback are likely to be short lived.
 
The weekly US oil inventory data is due for release at 4pm GMT, coming a day later than normal as a result of the holiday weekend. Contract expiry in recent days has produced some modest volatility but with US front month crude repeatedly failing to tackle the $55 level the risk does seem to be that increased shale output is still countering the effect of the Opec-led production cuts. Expectations are for a modest build in reserves to be posted, but if we do see a drop, look for crude to stage a rally – although a sustained break above $54.50 could remain something of a challenge in the short term.
 
The Aussie dollar has seen some volatility in the last few hours with the release of mixed corporate investment data leaving AUD/USD to whipsaw within the range that has been established over the last week or so. After the bullish comments of the RBA Governor mid-week, Phillip Lowe testifies before parliament starting at 10.30pm GMT today, although whether this can bring anything new to the equation remains to be seen. The GDP forecasts are upbeat but this comes with the caveat that the economy still faces headwinds. Technical indictors may point to AUD/USD preparing for a break higher, but by all accounts, the confidence to deliver this is lacking.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
 
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23 / 02 / 2017 | Technical Analysis

EUR/GBP tests Fibonacci level

EUR/GBP bounced off the 50% retracement of the post-Brexit referendum slide during yesterday’s session. The pair is trending lower, but this level is likely to provide further support, followed by the December lows around 0.8300
 

 
XAU/USD is consolidating inside the price action of two weeks ago and could be poised for a break higher. Look for resistance at $1255, the 50% retracement of the 2016 sell off, support at the January highs around $1220.



This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.

 
 
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