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EXY

Weekly Geopolitical Fundamental AnalysisGeo-Political Analysis Headline risk out of Asia has been the Coronavirus. The Shanghai composite dropped along with iron ore, reaching their daily limit and risk aversion. Interesting enough this wasn’t spilled over to FX markets which I think stem from traders staying out of the market prior to the amount of event risk inhabiting traders to what could be volatility across assets. USD/CNY climbed to the highest point since December of last year spiking over 1%. This was the single greatest single day change going back to August 5th of 2019 as risk aversion from the Coronavirus grips Asian-Pacific markets. Oil Taking a lot at crude, we’re seeing price bounce after its low at 55.90; the same point from the August swing low. If this price is broken, the next area of support will be around 2- year lows so I think a bounce here combined with the technical from my other article will hold steady with former support possible turning into resistance. The $55.6 price will be an interesting price to watch. This is also earnings week which could move equity markets from companies like GM, Uber, Twitter, Disney, etc. Robust earnings could offset the risk-aversion that we’ve seen because of the coronavirus which is important to remember. Overall the Corona virus seeks to disrupt global supply chain networks powered base line to growth Gold Gold price could decline more from here. The State of the Union Address is given this week by President Trump and will likely cover topics on his achievement on trade, record high markets, unemployment rate, as well as other statistics. He may further touch on the tax cuts which he mentioned at the World Economic Forum. If he hints at more expansionary policy it could ease the against seen with the rise in FED funds rate expectations. The implied policy rate is rapidly declining, which a 50-basis point cut by the Jan 2021 meeting. This picked up significantly in the last week with the Coronavirus. Since the start of the China trade war, almost like the coronavirus we’ve seen the U.S. China trade war a political virus that’s spread throughout the world. Iowa Caucus The first caucus in the dem nomination takes place in Iowa this week. Victory in this particular state can give a candidate (theoretical) enough votes to win the DNC. In the fast 5 DNC’s the winner has gone onto be the party’s nominee. I will go over some candidates and their fundamental impact on the market in another article. As we’ve seen under Trump, global growth has fallen below the benchmark set by the IMF and leading institutions, we’ve seen the U/. S. China trade war create disruptions in manufacturing and supply chain networks and manufacturing and overall lowered the projected baseline for growth. This was a big reason for the demand for dollar, and the surge to 100 that I think is in the near future with the amount of geopolitical uncertainty currently in the marketplaces. As candidates progress towards election day, here’s a refresher of the candidates’ stances and the market moving potential: Regardless of the political spectrum; the only question that markets care about is do they bring more or less certainty to the global economy? Generally speaking, markets don’t care about political categorization. Markets are more concerned the economic policies intended (and truly intended) by the leader of the free world. The only factors that investors look at is the degree of severity in their policy. Biden/ Buttigieg: Market sentiment would be risk-on (relatively moderate in policy compared to trump or warren or sanders). We could see them calm market worries because it removes uncertainty. AUD/USD, NZD/USD higher, JPY and CHF lower (risk-off) Biden/ Pete These would be seen as figures of certainty. Risk-on; “relief rally”. I say relief rally because of the amount of turmoil that Trumps administration has caused through its protectionist inclined policy has falling below the baseline compared to the IMF and other reputable institutions and is in need of an improvement. This would be seen as a suppressant for VIX. Biden: His policy on trade is more moderate based off of what he’s said. He’ll be likely to deescalate the Iran deal and reinstate 2015 ‘nuclear agreement’. This would be bad for BRENT, good for equities, and bad for risk-oriented assets. As we saw crude in 2019 in large point were manipulated by disruptions in supply chain, this would further crush an already over-demanded commodity. Bloomberg: Just like Biden and Buttigieg, he’s also moderate and would be positive to risk sentiment (risk-on). More “market friendly”. As the candidates narrow down, we haven’t seen the poles have an impact on markets. That’s because the field of the democratic candidates are too broad; now we should see more and more impactful market moving volatility. In the eyes of the markets, do they bring uncertainty or certainty? It boils down to that. International Trade Conference The uncertainty during this time by the public debt reached a record high of 17$ trillion (negative yielding debt) and gold followed suit. If there’s a return to necessary to a return to multilaterals and away from protectionism at the next meeting and it could ease this and offer relief to the Aussie dollar the NZD/USD. This comes as the IMF just put out the world economic last week in Davos and said that while growth is anticipated to slow, their seeing “moderate “signs of stabilization. However, the coronavirus could derail this. Corona Virus: Considering the frontier and emerging market economies are much more vulnerable to economic systematic risk such as the coronavirus, countries such as Vietnam, Malaysia, Philippines, India, Hong Kong, and China could have a significant negative cascade data from emerging markets inflation (PMI). This can be used to gauge the health of emerging markets when we are seeing global equities stabilize. If we see weak data out of the emerging markets, we could see outflow from the economies. While we may expect these numbers to be higher, what we’re seeing is that paranoia about the coronavirus gave purchasing managers caution that may have been productive rather than the true intention. Yields Looking at yields from France, Germany, Canada, and the U.S, yields have broadly declined back to short minus longer term bond yield inversion. . It could be that the virus resumed the downward resumption as investors seek safer assets such as equities. Interestingly enough, declining bond yields (US sovereign debt) it has its own risk. As the leveraged loan market and debt in the market in general is rising to new highs, it should be brought to our attention with the FED quoting it “elevated” and the concern about the stability of the actual economic machine lays in question. A leveraged is a loan to a highly in debt company with a poor credit history. It allows barrows to magnify projected earnings. This leads to a distortion in the ratings attached to each loan, which has various degrees of risk rated with something who’s risk is not properly reflected in the rating. This, called collateralized loan obligation, is similar they aren’t the same as a mortgage back obligation (MBO). My point is, is that an implosion of this leveraged market could drive investors who want to purchase bonds from a comparably higher rate secured, we could see the AUD/USD, NZD/USD, and emerging markets fall thus further. Taylor Norboge
TVC:DXY
by TayFx
1
Euro - Outlook Q1 BEARISHNote** If the Index is going up it means that this currency as actually bearish, and vice versa. Pretty much the same as my USD and GBP outlook overview, just different structure. These three typically move in a similar fashion, with the USD being the outlier when they diverge. For the EUR we need price to close outside of the teal box, ideally I'd like to see the day close completely bullish and then bullish another day. This idea is still in development. I have two blue arrows marked on the bottom. The one on the right is a liquidity grab I believe. Price made a new low and quickly reversed which shows me banks faked a new low, and bought against everybody. Then when we retested that exact price it held up as support. Only they have the strength to make it act as support against those sell orders. If we get a pullback I'm looking for the same thing to happen but this time with the yellow box. I'd love to see price test the top of it as support. This is another spot where sellers recently got triggered and if my assumption is correct about where the banks want to go, they will keep this people trapped and reverse up on them. The next targets would be that double top (pink triangles) swing high's. There should be stops sitting just above those two swing highs, especially the first one...so many people see that as the double top retest. We also have retracement fib levels and harmonic projections that complete exactly at these swing high spots. I trade based off of a few concepts, fibs/harmonics, volume/liquidity, and structure. That's pretty much it. Here is how I use them: Harmonics / Fibs : I use them for algorithms. I project them into market maker zones because they trade based off algorithms. Volume & Liquidity : Find where the big money is sitting at, and their orders (general area). This gives you big reactions as orders flood in. Structure : Gives me confirmation my idea was right, I use it for entry, and a few other things.
Short
by elevatedinvestor
6
Euro Long Setup for this Next Week. I will be providing an in-depth report on the fundamental events that are going on today. I want to make a point in saying that these situations — from my experience— can take multiple days to even remotely settle— and therefore is PRIME example of when not to hold a trade over the weekend. My guess is we could open down -3% or more on Monday for the U.S. equities; spilling over to all USD based pairs and it's dependable. Trade safe, we will still continue to monitor the market for opportunities that are intra day but will not be looking to hold over the weekend with the on going key event-risk. 14:11:05 (UTC) Fri Jan 3, 2020
Long
by TayFx
24
VIX: Record net-short options (fundamental analysis)Although we primarily trade FX contracts, staying on top of the equity markets around the world can have huge advantages when trying to identify opportunities preparatory to them even showing validity. The CBOE Volatility Index, known by its ticker symbol VIX, is a popular measure of the stock market's expectation of volatility implied by S&P 500 index options. Put simply, this chart represents volatility in the most widely used benchmark in equity markets (SPX). As you can see, over longer term time frames price has compressed. This can be proven by looking at the average true range indicator (ATR) and historical range percentage indicator (HRP) on the daily timeframe. You will see levels very low; significant because the last time these two indicators were this low on the daily chart the VIX was prior to big spikes in volatility. These are incredibly complacent and quiet markets. There's nothing wrong with equity markets hitting new highs, however the more risk-appetite that traders have in their books and the further it deviates from what we would construe as a well founded risk position. Traders are carrying assets this high up in the market know that their exposure at these prices is risky. This is more of a risk when you consider the representation of volatility seen in the chart above. Looking at futures for the VIX, there is a net short position on the derivatives currently not expired. What's significant though is that the amount of contracts net short is 218,000 a new record. This shows the willingness of the market to take on risk through leverage. Keep in mind, the amount of free cash for Wall Street is at record lows, as the complacency of it itself can be seen just by considering this fact.
TVC:VIXLong
by UnknownUnicorn3442968
11