“Traders are eagerly waiting to see the next set of inflation figures.”
Monday’s trading session showed that traders were prepared to buy back into the stock Market in the face of the 10 Year US Treasury Yield reaching 2.9% less than 48 hours away from the next US inflation figures. The Dow Jones rallied 410 points and what is worth noting is the fact there was zero high impacting economic news to speak of. That begins to change today with UK inflation figures released today only days after the BOE said they intended to lift the official cash rate from 0.5% sooner than expected. The Pound remained subdued through Monday’s trading session with traders no doubt waiting for Tuesday inflation report. A better than expected CPI figure will likely see the Pound rally back higher. When you are reviewing your charts technically it’s important to understand that price is not moving on the chart because of “the chart” the price on your chart and the technical pattern it is making is due to the fact traders are expressing their opinions with buy and sell orders based on something fundamental.
A good lesson to take away from Monday is the correlation between AUD and the Dow Jones US stock index. The Aussie Dollar has been rising and falling along with US stock indexes and on Friday and Monday as the Dow Jones rallied higher the AUD v USD also rallied. Learning how currency and stock index markets are correlated can often assist you from a fundamental directional view and assist in the conviction and discipline that you will need to win big and lose small. I spoke about a number of important facts that make up successful trading during Friday Live last week and if you missed it or would simply like to review it again you can watch via this link.
NAB Business Confidence data is due for release today and it has the potential to move the AUD up to half a cent if out of line with expectations. With stock indexes in the US and Europe sharply higher and no high impacting news for the Asian trading session, I would expect to see a positive day on local stock indexes in the region and both the AUD and NZD to hold their ground for the time being. I would welcome the AUD v USD moving a little higher up to around the 0.79 level, suck a bunch of buyers back into the market before its next leg back lower. Please review today’s video update as to why I would like to see the AUD rally to 0.79c vs the greenback.
Early this week for me feels like being in the eye of a storm. There is a calm across financial markets since last Thursday. The panic selling has stopped, for now, traders are coming out of their bunkers and some are buying back in. But the fundamental facts remain and the eye of the storm will pass today and on Wednesday there is the potential for significant volatility again with US inflation figures due. I will eagerly watch and see how the market reacts to the UK inflation data due today as this could be a sign of how they react if US inflation data also beats the market’s estimates on Wednesday. If inflation is rising, so will fixed income returns and this will likely trigger another wave of selling on stock indexes.
I love trading! For me, it’s an incredible intellectual challenge every day. And the challenge is only won by applying a level of discipline that can be tough to stomach. The constant challenge to suppress natural human emotion and instinct makes it a game that only few will win. But you can do it, you can win but it’s likely going to take you longer than you think to learn to understand and respect the discipline that is truly required. A level of discipline that you’ve unlikely every applied before.
About the Author: Andrew Barnett
Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).
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