Connect with us

Trading

CONSOLIDATION IN RANGES AS MARKET BRACES ITSELF FOR NEXT WEEK, OIL ENDS A 3-DAY RALLY

Published

on

CONSOLIDATION IN RANGES AS MARKET BRACES ITSELF FOR NEXT WEEK, OIL ENDS A 3-DAY RALLY
  • Market sentiment may continue to remain weak and ranges will consolidate as the reality of the magnitude of the UK referendum on EU membership and FOMC meeting begins to hit investors
  • Developed markets interest rates may continue to dominate conversation as rates position lower on event fears
  • USD may strengthen against most G10 and EM currencies
  • USDJPY held near the top of 106.85 to 107.30 range on short covering, yet with Fed next week and Brexit fears high, traders are vigilant for a quick reversal
  • USDSEK exhibited a strongly bullish, engulfing pattern on the daily charts suggesting further upside
  • Emerging markets weakness, led by oil and metals despite solid demand and supply disruption worries suggests a $52.86 peak
  • We do not expect the BoJ to meaningfully adjust monetary policy next week as data continues to disappoint policy makers we are inching towards a fiscal version of “helicopter money”
  • Due to impending desperate action by Japanese policymakers we like a long gold, short JPY
  • Oil: We feel that selling pressures are growing as oversupply continues and an agreement from OPEC members to stop it is not yet on the table
  • $50 mark is a key price for OPEC as it would keep its market share intact and we should not see it going higher within the next few weeks. We would instead target a retracement towards $45

Asian equity markets declined for a second straight day as commodities fell on the back of lingering growth and fed policy. The reality of the magnitude of the UK referendum on EU membership and FOMC meeting is beginning to hit investors. We anticipate sentiment to remain weak and ranges to consolidate. Developed markets’ interest rates continue to dominate conversation as rates positioned lower on event fears. UK, German and Japanese 10-year bond yields fell to a historical low. 10yr JGB yields fell to -0.155% and investors now have to go out 20 years on Swiss government bonds to secure a positive return. The Nikkei and Hang Seng declined -0.60% while the Shanghai composite remained closed for the Dragon Boat festival. Notably, MSCI will decide on whether to include China’s A shares in the index on 15th June. The USD strengthened against most G10 and EM currencies, as the DXY rose to 94.21. The AUDUSD reversed yesterday’s gains from 0.7505 to 0.7407 as commodities sold off (despite reports that Chinese demand for crude is on the rise). USDJPY held near the top of the 106.85 to 107.30 range on short covering, yet with Fed next week and Brexit fears high, traders are vigilant for a quick reversal.  Finally, USDSEK exhibited a strongly bullish, engulfing pattern on the daily charts, suggesting further upside. In emerging Asian markets, KRW and MYR led the decliners against the USD. Weakness in commodities was led by oil and metals as Brent declined to $51.61, despite solid demand and supply disruption worries, potentially suggesting a $52.86 peak.

Japan reports indicate that producer prices increased 0.2% m/m in May, above an expected read of 0.0% (-0.4% prior read). Export prices came in flat on a monthly basis, but -4.5% y/y, import prices rose 0.3% m/m, putting the yearly read at a massive -13.1%. Clearly this significant deflation will not make for a happy BoJ. However, we do not expect the BoJ to now meaningfully adjust monetary policy next week (higher probability of a July easing and fiscal measures). As data continues to disappoint (highlighted by the collapse of machine tool orders) policy makers, we are inching towards a fiscal version of “helicopter money”. Due to impending desperate action by Japanese policymakers we favour a long gold, short JPY to harness this opportunity.

Yann Quelenn, market analyst: Oil ends a 3-day rally: WTI oil’s low 2016 prices now seem like a distant memory. On February 11 one barrel of WTI Crude oil was worth $26.05. Since then, the rise has been continuous despite some bearish retracement such as at the end of March when it dropped from $41.90 to $35.24 two weeks later. As long as crude prices increased, volatility also declined and while it was common to see 10% change in a single day, this is no longer the case as selling pressures grow.

Although the price of a barrel is now above $50 we believe that fundamentals at this level are quite fragile. Oversupply continues and an agreement from OPEC members to stop is not yet on the table. At the OPEC meeting on June 2, production levels were maintained as members claimed that the market is in a “rebalancing process”. Yet at $50 a barrel, shale gas production is profitable again. For the time being the wildfires in Alberta, Canada as well as the attack on American producer Chevron in Nigeria are reducing the supply. The loss from these two independents is assessed to be between 800’000 barrels and one million barrels per day. From our vantage point, the $50 mark is a key price for OPEP as it would keep its market share intact and we should not see it going higher within the next few weeks. We would instead target a retracement towards $45.”—

Today traders are expected to see UK construction output, France manufacturing production, the Canadian employment report and US Michigan Sentiment index. With the Fed policy decision, BoJ monetary policy meeting and China real activity data looming next week, we anticipate liquidity conditions to thin and ranges to contract.

Trading

How has the online trading landscape changed in 2020?

Published

on

How has the online trading landscape changed in 2020? 1

By Dáire Ferguson, CEO, AvaTrade 

This year has been all about change following the outbreak of coronavirus and the subsequent global economic downturn which has impacted nearly every aspect of personal and business life. The online trading world has been no exception to this change as volatility in the financial markets has soared.

Although the global markets have been on a rollercoaster for some time with various geopolitical tensions, the market swings that we have witnessed since March have undoubtedly been unlike anything seen before. While these are indeed challenging times, for the online trading community, the increased volatility has proven tempting for those looking to profit handsomely.

However, with the opportunity to make greater profits also comes the possibility to make a loss, so how has 2020 changed the online trading landscape and how can retail investors stay safe?

Lockdown boost

Interest rates offered by banks and other traditional forms of consumer investments have been uninspiring for some time, but with the current economic frailty, the Bank of England cut interest rates to an all-time low. This has left many people in search of more exciting and rewarding ways to grow their savings which is indeed something online trading can provide.

When the pandemic hit earlier this year, it was widely reported that user numbers for online trading rocketed due to disappointing savings rates but also because the enforced lockdown gave more people the time to learn a new skill and educate themselves on online trading.

Dáire Ferguson

Dáire Ferguson

A volatile market certainly offers great scope for profit and new sources of revenue for those that are savvy enough to put their convictions to the test. However, where people stand the chance to profit greatly from market volatility, there is also the possibility to make a loss, particularly for those that are new to online trading or who are still developing their understanding of the market.

The sharp rise in online trading over lockdown paired with this year’s unpredictable global economy has led to some financial losses, but with a number of risk management tools now available this does not necessarily have to be the case.

Protect your assets

Although not yet widely available across the retail market, risk management tools are slowly becoming more prevalent and being offered by online traders as an extra layer of security for those seeking to trade in riskier climates.

There are a range of options available for traders, but amongst the common tools are “take profit” orders in conjunction with “stop loss” orders. A take profit order is a type of limit order that specifies the exact price for traders to close out an open position for a profit, and if the price of the security does not reach the limit price, the take profit order will not be fulfilled. A stop loss order can limit the trader’s loss on a security position by buying or selling a stock when it reaches a certain price.

Take profit and stop loss orders are good for mitigating risk, but for those that are new to the game or who would prefer extra support, there are even some risk management tools, such as AvaProtect, that provide total protection against loss for a defined period. This means that if the market moves in the wrong direction than originally anticipated, traders can recoup their losses, minus the cost of taking out the protection.

Not a day has gone by this year without the news prompting a change in the financial markets. Until a cure for the coronavirus is discovered, we are unlikely to return to ‘normal’ and the global markets will continue to remain highly volatile. In addition, later this year we will witness one of the most critical US presidential elections in history and the UK’s transition period for Brexit will come to an end. The outcome of these events may well trigger further volatility.

Of course, this may also encourage more people to dip their toes into online trading for a chance to profit. As more people take an interest and sign up to online trading platforms, providers will certainly look to increase or improve the risk management tools on offer to try and keep new users on board, and this could spell a new era for the online trading world.

Continue Reading

Trading

Trading Strategies

Published

on

Trading Strategies 2

By Paddy Osborn, Academic Dean, London Academy of Trading

Whether you’re negotiating a business deal, playing a sport or trading financial markets, it’s vital that you have a plan. Top golfers will have a strategy to get around the course in the fewest number of shots possible, and without this plan, their score will undoubtedly be worse. It’s the same with trading. You can’t just open a trading account and trade off hunches and hopes. You need to create a structured and robust plan of attack. This will not only improve your profitability, but will also significantly reduce your stress levels during the decision-making process.

In my opinion, there are four stages to any trading strategy.

S – Set-up

T – Trigger

E – Execution

M – Management

Good trading performance STEMs from a structured trading process, so you should have one or more specific rules for each stage of this process.

Before executing any trades, you need to decide on your criteria for making your trading decisions. Should you base your trades off fundamental analysis, or maybe political news or macroeconomic data? If so, then you need to understand these subjects and how markets react to specific news events.

Alternatively, of course, there’s technical analysis, whereby you base your decisions off charts and previous price action, but again, you need a set of specific rules to enable you to trade with a consistent strategy. Many traders combine both fundamental and technical analysis to initiate their positions, which, I believe, has merit.

Set-up

What needs to happen for you to say “Ah, this looks interesting! Here’s a potential trade.”? It may be a news event, a major macro data announcement (such as interest rates, employment data or inflation), or a chart level breakout. The key ingredient throughout is to fix specific and measurable rules (not rough guidelines that can be over-ridden on a whim with an emotional decision). For me, I may take a view on the potential direction of an asset (i.e. whether to be long or short) through fundamental analysis, but the actual execution of the trade is always technical, based off a very specific set of rules.

To take a simple example, let’s assume an asset has been trending higher, but has stopped at a certain price, let’s say 150. The chart is telling us that, although buyers are in long-term control, sellers are dominant at 150, willing to sell each time the price touches this level. However, the uptrend may still be in place, since each time the price pulls back from the 150 level, the selling is weaker and the price makes a higher short-term low. This clearly suggests that upward pressure remains, and there’s potential to profit from the uptrend if the price breaks higher.

Trigger

Once you’ve found a potential new trade set-up, the next step is to decide when to pull the trigger on the trade. However, there are two steps to this process… finger on trigger, then pull the trigger to execute.

Paddy Osborn

Paddy Osborn

Continuing the example above, the trigger would be to buy if the price breaks above the resistance level at 150. This would indicate that the sellers at 150 have been exhausted, and the buyers have re-established control of the uptrend.  Also, it is often the case that after pause in a trend such as this, the pent-up buying returns and the price surges higher. So the trigger for this trade is a breakout above 150.

Execution

We have a finger on the trigger, but now we need to decide when to squeeze it. What if the price touches 150.10 for 10 seconds only? Has our resistance level broken sufficiently to execute the trade? I’d say not, so you need to set rules to define exactly how far the price needs to break above 150 – or for how long it needs to stay above 150 – for you to execute the trade. You’re basically looking for sufficient evidence that the uptrend is continuing. Of course, the higher the price goes (or the longer it stays above 150), the more confident you can be that the breakout is valid, but the higher price you will need to pay. There’s no perfect solution to this decision, and it depends on many things, such as the amount of other supporting evidence that you have, your levels of aggression, and so on. The critical point here is to fix a set of specific rules and stick to those rules every time.

Management

Good trade management can save a bad trade, while poor trade management can turn an excellent trade entry into a loser. I could talk for days about in-trade management, since there are many different methods you can use, but the essential ingredient for every trade is a stop loss. This is an order to exit your position for a loss if the market doesn’t perform as expected. By setting a stop loss, you can fix your maximum risk on a trade, which is essential to preserving your capital and managing your overall risk limits. Some traders set their stop loss and target levels and let the trade run to its conclusion, while others manage their trades more actively, trailing stop losses, taking interim profits, or even adding to winning positions. No matter how you decide to manage each trade, it must be the same every time, following a structured and robust process.

Review

The final step in the process is to review every trade to see if you can learn anything, particularly from your losing trades. Are you sticking to your trading rules? Could you have done better? Should you have done the trade in the first place? Only by doing these reviews will you discover any patterns of errors in your trading, and hence be able to put them right. In this way, it’s possible to monitor the success of your strategy. If your trades are random and emotional, with lots of manual intervention, then there’s no fixed process for you to review. You also need to be honest with yourself, and face up to your bad decisions in order to learn from them.

In this way, using a structured and robust trading strategy, you’ll be able to develop your trading skills – and your profits – without the stress of a more random approach.

Continue Reading

Trading

Economic recovery likely to prove a ‘stuttering’ affair

Published

on

Economic recovery likely to prove a ‘stuttering’ affair 3

By Rupert Thompson, Chief Investment Officer at Kingswood

Equity markets continued their upward trend last week, with global equities gaining 1.2% in local currency terms. Beneath the surface, however, the recovery has been a choppy affair of late. China and the technology sector, the big outperformers year-to-date, retreated last week whereas the UK and Europe, the laggards so far this year, led the gains.

As for US equities, they have re-tested, but so far failed to break above, their post-Covid high in early June and their end-2019 level. The recent choppiness of markets is not that surprising given they are being buffeted by a whole series of conflicting forces.

Developments regarding Covid-19 as ever remain absolutely critical and it is a mixture of bad and good news at the moment. There have been reports of encouraging early trial results for a new treatment and potential vaccine but infection rates continue to climb in the US. Reopening has now been halted or reversed in states accounting for 80% of the population.

We are a long way away from a complete lockdown being re-imposed and these moves are not expected to throw the economy back into reverse. But they do emphasise that the economic recovery, not only in the US but also elsewhere, is likely to prove a ‘stuttering’ affair.

Indeed, the May GDP numbers in the UK undid some of the optimism which had been building recently. Rather than bouncing 5% m/m in May as had been expected, GDP rose a more meagre 1.8% and remains a massive 24.5% below its pre-Covid level in February.

Even in China, where the recovery is now well underway, there is room for some caution. GDP rose a larger than expected 11.5% q/q in the second quarter and regained all of its decline the previous quarter. However, the bounce back is being led by manufacturing and public sector investment, and the recovery in retail sales is proving much more hesitant.

China is not just a focus of attention at the moment because its economy is leading the global upturn but because of the increasing tensions with Hong Kong, the US and UK. UK telecoms companies have now been banned from using Huawei’s 5G equipment in the future and the US is talking of imposing restrictions on Tik Tok, the Chinese social media platform. While this escalation is not as yet a major problem, it is a potential source of market volatility and another, albeit as yet relatively small, unwelcome drag on the global economy.

Government support will be critical over coming months and longer if the global recovery is to be sustained. This week will be crucial in this respect for Europe and the US. The EU, at the time of writing, is still engaged in a marathon four-day summit, trying to reach an agreement on an economic recovery fund.  As is almost always the case, a messy compromise will probably end up being hammered out.

An agreement will be positive but the difficulty in reaching it does highlight the underlying tensions in the EU which have far from gone away with the departure of the UK. Meanwhile in the US, the Democrats and Republicans will this week be engaged in their own battle over extending the government support schemes which would otherwise come to an end this month.

Most of these tensions and uncertainties are not going away any time soon. Markets face a choppy period over the summer and autumn with equities remaining at risk of a correction.

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Call For Entries

Global Banking and Finance Review Awards Nominations 2020
2020 Global Banking & Finance Awards now open. Click Here

Latest Articles

86% of UK businesses face barriers developing digital skills in procurement 4 86% of UK businesses face barriers developing digital skills in procurement 5
Technology10 hours ago

86% of UK businesses face barriers developing digital skills in procurement

A shortage of digitally savvy talent, and a lack of training for technical and soft skills, hinder digital procurement initiative...

ISO 20022 migration: full speed ahead despite recent delays, says new Deutsche Bank paper 6 ISO 20022 migration: full speed ahead despite recent delays, says new Deutsche Bank paper 7
Finance22 hours ago

ISO 20022 migration: full speed ahead despite recent delays, says new Deutsche Bank paper

Today, Deutsche Bank has released the third installment in its “Guide to ISO 20022 migration” series, which offers a comprehensive...

What Skills Does a Data Scientist Need? 8 What Skills Does a Data Scientist Need? 9
Business23 hours ago

What Skills Does a Data Scientist Need?

In this modern and complicated time of economy, Big data is nothing without the professionals who turn cutting-edge technology into...

The importance of app-based commerce to hospitality in the new normal 10 The importance of app-based commerce to hospitality in the new normal 11
Technology4 days ago

The importance of app-based commerce to hospitality in the new normal

By Jeremy Nicholds CEO, Judopay As society adapts to the rapidly changing “new normal” of working and socialising, many businesses...

The Psychology Behind a Strong Security Culture in the Financial Sector 12 The Psychology Behind a Strong Security Culture in the Financial Sector 13
Finance4 days ago

The Psychology Behind a Strong Security Culture in the Financial Sector

By Javvad Malik, Security Awareness Advocate at KnowBe4 Banks and financial industries are quite literally where the money is, positioning...

How open banking can drive innovation and growth in a post-COVID world 14 How open banking can drive innovation and growth in a post-COVID world 15
Banking4 days ago

How open banking can drive innovation and growth in a post-COVID world

By Billel Ridelle, CEO at Sweep Times are pretty tough for businesses right now. For SMEs in particular, a global financial...

How to use data to protect and power your business 16 How to use data to protect and power your business 17
Business4 days ago

How to use data to protect and power your business

By Dave Parker, Group Head of Data Governance, Arrow Global Employees need to access data to do their jobs. But...

How business leaders can find the right balance between human and bot when investing in AI 18 How business leaders can find the right balance between human and bot when investing in AI 19
Business4 days ago

How business leaders can find the right balance between human and bot when investing in AI

By Andrew White is the ANZ Country Manager of business transformation solutions provider, Signavio The digital world moves quickly. From...

Has lockdown marked the end of cash as we know it? 20 Has lockdown marked the end of cash as we know it? 21
Finance4 days ago

Has lockdown marked the end of cash as we know it?

By James Booth, VP of Payment Partnerships EMEA, PPRO Since the start of the pandemic, businesses around the world have...

Lockdown 2.0 – Here's how to be the best-looking person in the virtual room 22 Lockdown 2.0 – Here's how to be the best-looking person in the virtual room 23
Top Stories4 days ago

Lockdown 2.0 – Here’s how to be the best-looking person in the virtual room

By Jeff Carlson, author of The Photographer’s Guide to Luminar 4 and Take Control of Your Digital Photos suggests “the product you’re creating is...

Newsletters with Secrets & Analysis. Subscribe Now