Good morning and welcome to episode 60 of ‘Talking Bull’.
In this video/podcast we cover the main headlines and what to expect from the day ahead. We take a technical look at key markets that are likely to be impacted by today’s events. Also, we participate in a ‘Gun to the head’ challenge where each of us calls a live trade. These will expire at 9pm tonight and we will keep track of the progress over time.
We hope you enjoy it!
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Ian ran out as the winner yesterday with a 1.23R win on EURCHF. Joe was short on DAX, which traded in an very narrow range and closed 1pip lower. Steve was stopped out on Oil.
We have included an illustration based on a £1000 account. This will follow the combined return of our morning trades by risking 1% of the trading capital per trade. The 1% risk is a variable monetary amount and will rise and fall based on the success of the calls.
We are currently up 50.53% collectively since we began recording Talking Bull on the 30th October 2019.
The Euro was hampered in early Europe by weaker than expected German industrial orders data and remained on the defensive ahead of the New York open. ECB President Lagarde defended low interest rates and denied they were responsible for rising house prices, but there was no direct commentary on monetary policy or interest rates.
US jobless claims declined to 202,000 in the latest week from a revised 217,000 the previous week, although continuing claims did increase. Unit labour costs increased a provisional 1.4% for the fourth quarter, in line with market expectations. Challenger reported a 29% increase in layoffs for January to an 11-month high with significant restructuring in the tech sector.
The data overall has little impact with the US dollar maintaining a robust tone while commodity currencies were unable to gain any traction. Overall, markets expected the US to continue its out-performance relative to other major economies. A decisive Euro break below 1.1000 also helped reinforce negative sentiment with 3-month EUR/USD lows below 1.0970 as the dollar pushed to 15-week highs. The latest US monthly employment report is due on Friday with consensus forecasts for an increase close to 160,000. Expectations of a strong figure have been boosted by Wednesday’s ADP data which will tend to underpin the dollar into the release.
Global equities were unable to hold their best levels ahead of the New York open and bond yields edged lower which prevented a further USD/JPY attack on the 110.00 level against the yen. The US currency held firm, however, and bonds lost some ground in early US trading. There was a decline in volatility across asset classes and defensive yen demand remained lower.
The WHO stated that it was too early to tell whether the coronavirus is peaking, but Wednesday was the first day when the overall total of new cases declined which offered some hope and the S&P 500 index posted a fresh record closing high.
Sterling remained on the defensive on Thursday with a lack of positive factors and further underlying concerns that UK/EU trade friction would have a damaging impact. Expectations of a tough negotiating stance by the UK government fuelled underlying market unease, especially with no domestic data releases to divert attention. There were also reports that the US Administration was furious at the UK government’s Huawei decision which could have a negative impact on trade talks. Sterling failed to draw support from the solid tone in risk appetite as underlying sentiment remained cautious.
The Australian dollar was undermined by a stronger US dollar during Thursday, although it did demonstrate some resilience as risk appetite held strong. Overall, AUD/USD settled close to 0.6740.
In its monetary policy report, the Reserve Bank cut its GDP growth forecasts in the year to 2020 to 1.9% from 2.6%, but also stated that unemployment would have to move materially higher to justify a further cut in interest rates.
Data – Day ahead
1.30pm – US non-farm payrolls (January): payrolls to rise by 156K from 144K. Unemployment rate to hold at 3.5%. Markets to watch: US indices, USD crosses
1.30pm – Canada employment report (January): 20K jobs expected to have been created. Markets to watch: CAD crosses
3pm – Canada Ivey PMI (January): index to fall to 50 from 51.9. Markets to watch: CAD crosses
Gun to head trade ideas – Results so far
Gun to head trade ideas – Today
Have a great weekend everyone.