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Frexit Update

By | Euro, FX Trading, Opinion, Government | No Comments

1st round occurs April 23

Volatility has hit Markets hard in the lead up to the first round of the French Elections. The stock market was sold off to the tune of 1.6% in yesterday’s trade, whilst a scramble to buy Yen against Euro was evidenced as a risk off strategy in currency markets.

One thing for certain in markets is, uncertainty creates volatility.

Monday morning in early Sydney trade will be less than pleasant for traders and participants jump at shadows as exit polls reveal who the front runner/s are.

The big fear is that far-right National Front candidate Marine Le Pen will win, since she has run on a platform to divorce France from the euro — an action that could threaten the future of the entire euro zone. As it stands now, there is a good chance Le Pen will emerge from the first round pitted against one of three candidates: far-left candidate Jean-Luc Melenchon, conservative Francois Fillon and centrist Emmanuel Macron, a former economy minister.

Buckle up for some extreme volatility over the next month. The runoff election is set for May 7.

Over the next few days, you may see the risk off trade continue, however, remember the Trump victory. All the value was in the 2nd phase trading. Buy the rumour, sell the fact.

Adrian Jones

FREXIT and Euro Exit……Anyone for Dominoes?

By | USA, China, FX Trading, Opinion | No Comments

More Currency Pairs to Trade. Go the Le Pen.

CNBC 3/4/17

French presidential candidate Marine Le Pen told a political rally on Sunday that the Euro currency which she wants France to ditch, was like a knife in the ribs of the French people.

The leader of the eurosceptic and anti-immigrant National Front (FN) also told the rally in the city of Bordeaux that the forthcoming election for president could herald a “change in civilization”.

Encouraged by the unexpected election of Donald Trump in the United States and by Britain’s vote to leave the European Union, Le Pen hopes to profit from a similar populist momentum in France, though opinion polls suggest she will lose the May 7 run-off.

“We are at the mercy of a currency adapted to Germany and not to our economy. The euro is mostly a knife stuck in our ribs to make us go where others want us to go,” Le Pen said to loud cheers and applause.

A government under Le Pen’s presidency would take France out of the euro zone and bring back a national currency, hold a referendum on its EU membership and slap taxes on imports and on companies hiring foreigners.

Adrian Jones

China 2017

By | USA, China, FX Trading, Opinion | No Comments

As the analogy goes…..If the United States coughs…We in Australia catch a cold. So, what happens if China gets a cough…or worse the flu? You would think we in “The Lucky Country” are toast! How many countries would be infected? A Plague perhaps?

China represents a massive 26 % of our Trade Weighted Index, whereas the United States is at 11 %.

Any decline in this number would be detrimental to our economic health. You can see the importance of China firing a shot across our bough recently suggesting siding with the U.S. would not be such a good idea.

The dilemma we have is on multiple fronts, what if, or what happens to Australia, if China’s growth comes to a standstill? Economically, China is looking vulnerable at the moment.

Here are some of the concerning headlines of late:

  • Chinese capital controls bite
  • China slams brakes on outgoing investment.
  • China tightens capital account again.
  • What would a U.S-China Trade war look like?
  • China property correction imminent.
  • Shrinkflation comes to China
  • China is wrestling with a building financial crisis.

At home, here in the land of milk and honey, a GDP print of -0.5 was less than acceptable. Another negative print in the March release and we are officially in a recession.

I don’t even want to think about what is on the horizon for interest rates and the Housing Market bubble.

As in Europe, we are in for an interesting 2017. So, buckle up folks we are approaching some turbulence.

The good news is Trading FX is recession proof.

Adrian Jones

Italian Referendum 4th December 2016

By | Euro, FX Trading, Opinion, Government | No Comments

Crisis ? What Crisis ? ……..Supertramp 1975 !!!

Italians will goes to the polls on Sunday, December 4, to vote on whether to back reforms of the country’s constitution.

Why is the referendum important?

Firstly, the reforms are significant, so significant, some have argued, that if they are approved by the electorate, they would represent the birth of Italy’s third republic.

Secondly, Italian PM Matteo Renzi has staked his future on the vote, saying he would quit if he is unable to secure a victory for his constitutional changes. That could have wider implications for the European Union, because it would open the door to the possibility of the Eurosceptic Five Star Movement getting into power, who have made no secret of wanting to hold a referendum on Italy leaving the Euro.

The reforms propose drastically diluting the power and size of the senate and replacing elected senators with representatives from the regions.

The other main pillar of the reforms is to rebalance the power of the regions, bringing more areas under the control of central government and removing any duplication.

So, What happens if Renzi does quit?

The paradox is a referendum that is seeking to bring stability of government to notoriously volatile Italy could in fact plunge it into a fresh crisis.

As it stands, Italy’s unemployment rate was 11.4 percent in August and has debts of 132.7 percent of GDP, the second highest level in the EU, after Greece.

Italian banks have massive bad debts, and may need a significant injection of funds. Italy is in a vulnerable position.

This referendum could lead Italy to another, that being, should Italy remain in the “Euro”?, which in turn, could have a contagion effect on the entire Eurozone.

This does not bode well for the Eur/Usd. Sub 1.0000 prices should follow. The USD is King for now.

It’s building folks, Brexit, U.S. Election Surprise, Italian Referendum and Frexit. Hold onto your hats, future volatility is a given, which in turn creates opportunities.

Adrian Jones

Frexit the new Brexit?

By | FX Trading, Opinion, Government | No Comments

Frexit in 2017 could be the new Brexit?

Is it all too soon? I know right……We are still getting over Brexit and Trump’s victory.

Well Frexit could potentially break up the European Union. Brexit opened the gates for unexpected change and it looks like the people have spoken.

Marine Le Pen the leader of the Front National Party has proposed a referendum if she were to win power in the 2017 elections. Support for the bloc is declining across many of the 28-member-states with referendums and elections opening up across the continent.

Referendums have rocked the EU over the last few months with Brexit, the Dutch refusing an EU treaty with Ukraine and the coming votes in Italy and Hungary. The floodgates will open in the 28 member union, that’s 11 more currencies to trade if the Euro$ breaks up.

I might be showing my age, but this is back to pre 1999, and the volatility and uncertainty that goes hand in hand. I forsee dark clouds accumulating in the not too distant future, watch this space.

Adrian Jones

Election Blog Update: Opinion

By | FX Trading, Opinion, Government | No Comments
What will happen to the USD on a Trump victory.

On election day, the Forex Markets are open, as well as the Futures Markets, the NYSE and the NASDAQ. However, that’s not the problem, the elections results will become apparent during the Asian time zone.

There is a window between New York close and Tokyo opening affectionately known as the “ Twilight Zone” where volume represents only 2 percent of maximum turnover. As a result, any transactions in that period are vulnerable and can hit the market awkwardly. Let alone any major news event, such as, a lopsided or unexpected election result. So, hold onto your hats. Wednesday Asia time could be similar to a “Brexit style” and “Flash Crash” currency moving Market all rolled into one. The market hates uncertainty.

Trump Victory and the USD

A few months ago nobody gave Donald a snowflakes’ hope in hell of winning the election. Today however, is a different story. It’s neck and neck.

We have already a selloff in stocks globally in the lead up to the election. Be certain, there will be more volatility to come in both currency and stock markets. Trade agreements worldwide could be in jeopardy with a Trump win as he wants to renegotiate NAFTA and scrap the TPP – most certainly harm developing nations who export to the U.S.

Uncertainty almost always spells negativity in markets. Initial reactions to a Trump victory would see an exaggerated USD and stocks selloff globally. Markets tend to react in a “shoot first- ask questions later” fashion, especially if the results happens in the “Twilight Zone”.

That said “fortune follows the brave”. There is always opportunity in the contrarian approach to overreacting moves in markets.

Trade selection is the key component in these exaggerated events.

Either way, Hillary or Donald, brace yourself for years of uncertainty.

 

Adrian Jones

Market Opinion

By | FX Trading, Opinion, Government | No Comments

Non Farm Payrolls or Friday Night Lotto.

The markets are focused on next weeks’ NFP numbers in the U.S as the “make or break” decision for a much anticipated rate hike.

Is this really the confirmation the Fed needs to pull the trigger?

Surely not, there are bigger fish to fry.

The markets (and the Fed) are looking for excuses to do nothing until the election results are in.

Talk about 2 underwhelming Candidates. Which way will America vote.

Hillary, with all her experience in political office, can she deliver on her economic policies of Economic Growth, Fair Growth and Long Term Growth. You would think she already has Foreign Policy down pat, despite Donald’s call of the commencement of WW3 in Syria should Hillary win.

Donald, on the other hand, says he will create 25 million new jobs over 10 years. Create a pro-growth tax plan, an America first trade policy and an unleashed American energy plan. Not to mention boosting growth by 3.5% per year on average.

Could this be a “Brexit” like scenario in the making?

Meanwhile, markets continue to jump at shadows.

Adrian Jones

GBP Flash Crash 7th of October, 2016

By | FX Trading, Opinion | No Comments

How this happen to a major currency pair in a mature market in 2016.

Complacency, that’s how.

In the period in between NY close and Asia open proper, there was a distinct lack of buy orders placed in the GBP across the various electronic platforms. Liquidity was virtually zero. The buyers were no match for the sellers. It didn’t help matters when the market is nervous due to ongoing negativity and uncertainly over Brexit.

Enter the “Algorithmic Traders”. Electronic systematic traders, sometimes referred to as “black box” traders are programmers dressed as traders. These automatic traders chase the best bids and offers in the markets. Occasionally, when is little liquidity in the market “the Algos” chase the market down or up, in this case down causing a “Flash Crash”

The sterling traded from 1.2600 to 1.1800 in minutes.

Stop sell orders were triggered initially to 1.2200 where the first pocket of liquidity/buyers was found. Between 1.2200 and 1.1850, 4 billion GBP traded hands.

The commentators are screaming for an investigation, and regulation. Too late boys and girls. It’s history now.

My workshop will teach you when to stay out of vulnerable currencies pairs and markets and the reasons why.

Protect you Capital

Adrian Jones

The U.S Presidential Election – Nov 8th 2016

By | FX Trading, Opinion, Government | No Comments

Clinton VS Trump

As the U.S election is almost upon us, expect periods of extreme volatility as the election polls swing from candidate to candidate.

Markets hate uncertainty, and there is plenty of uncertainty surrounding this election. Hold on to your hats folks.

There seems little attention to the real issues, The Economy, Foreign Policy and Immigration. All the focus seems to be about mudslinging and discrediting each other.

Stay tuned for the debate debacle, or is it as simple as Clinton = stability = $+ and Trump = chaos = % -.

One thing for certain a December US rate hike is more likely under a Clinton administration. Ohhh and more volatility.

AJ

 

Brexit Turmoil

By | FX Trading, Opinion | No Comments

 

Britain’s surprise historic decision to leave the EU left currency markets in turmoil.

The uncertainty factor saw risk sold across the board as Markets digested the unexpected move, with Sterling hitting new lows of 1.2775, its lowest since 1985.

Currencies, oil and stocks markets were extremely volatile and fell victim as a result, as did PM David Cameron who promptly resigned.

The clear winner was Gold, rallying to $1,360.

In the ensuing weeks, all markets returned to normality, GBP rallied, as did the stock markets.

The issues now are recession, or no recession, immigration and new trade agreements. Not to mention the UK has lost its AAA rating.

Uncertainty in the UK, could develop into falling house prices and job cuts as business activity declines.

One thing is certain, volatility in Currency Markets will prevail, so let’s navigate your Foreign Exchange journey together.

You are in safe hands.

Adrian Jones

 

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