Good morning and welcome to episode 62 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!
Join us on Telegram for more content – https://t.me/signalcentre
AUD was the focus for us all yesterday. Joe made 0.73R on his AUDJPY short, Ian closed 0.68R lower at 9pm, while Steve was stopped on his AUDUSD long idea.
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 47.90% collectively since we began recording Talking Bull on the 30th October 2019.
US equities, however, posted fresh record highs and confidence strengthened in Asia on Tuesday amid hopes new coronavirus cases were slowing.
The dollar continued to gain from a lack of confidence in other majors with the currency index at fresh 4-month highs as EUR/USD approached 1.0900.
Sterling stabilised, but on-going trade reservations limited support. Commodity currencies regained some ground on Tuesday with AUD/USD back above 0.6700. The yen and franc lost some ground on Tuesday, but USD/JPY held just below 110.00.
The Euro-zone Sentix investor confidence index declined slightly to 5.2 for February from 7.6 the previous month, although this was slightly above consensus forecasts. German political uncertainty had some impact in curbing Euro support.
The US employment trends index strengthened to 110.2 for January from a revised 108.8 previously. Fed Governor Bowman reiterated that the US outlook was very favourable with inflation set to rise gradually to target. San Francisco Fed President Daly stated that inflation a bit above target is better than a bit below in today’s environment. Philadelphia head Harker stated that the central bank should hold rates steady for a while, watching how developments and data unfold before taking action.
Underlying concerns over the coronavirus impact on global growth continued to have a significant impact in currency markets. There were further expectations that the US would out-perform other major economies given its lower dependence on trade flows which continued to provide net dollar support. Commodity currencies retreated again during the day and the dollar index pushed to fresh 4-month highs as EUR/USD retreated to lows near 1.0900.
President Trump again called for lower interest rates and the issue of Fed Chair Powell will move into sharper focus ahead of November’s Presidential election. Powell will testify to Congress on Tuesday and will be reluctant to deviate far from recent commentary. He is, however, likely to be pressed on the external risks, including the coronavirus and may be cross-examined on the strong dollar with potential volatility. The US currency held firm on Tuesday with EUR/USD at 4-month lows just above 1.0900.
Chinese President Xi stated on Monday that the situation regarding the coronavirus outbreak is still severe. According to Xi, there will be more decisive measures to contain the spread in Hubei with increased spending on clinically-effective drugs.
There were further reports that many Chinese companies were looking for bank loans to soften the coronavirus impact. There were also cautious comments from WHO officials over transmission trends and the spread of the virus among people who had not been to China also raised concerns. In this environment, risk appetite was relatively cautious.
US equities posted limited gains, but bond Treasuries made net gains and lower bond yields undermined the dollar as USD/JPY was held around 109.75 at the European close.
Risk appetite was slightly more positive in Asia on Tuesday as the rate of new coronavirus cases slowed slightly. Equity markets made headway and Treasuries edged lower, although Japanese markets were closed for a holiday. USD/JPY traded just below 110.00 as the Chinese yuan held steady.
Sterling remained under pressure in early Europe on Monday as sentiment remained negative on underlying concerns over trade negotiations, especially with reports that EU governments would call for a tougher negotiating stance in forthcoming negotiations. There was a tentative recovery during the day with the currency gaining some support on longer-term valuation grounds.
GBP/USD peaked close to 1.2950 before fading again amid wider US gains while GBP/EUR rallied towards 1.1830. BRC data recorded no change in underlying retail sales for January and Sterling was unable to make headway in early Europe as GBP/USD held just above 1.2900 with firmer risk appetite having little overall impact.
The latest GDP and industrial production data will be released on Tuesday with market expectations of a limited recovery from November’s very weak release with global risk appetite also likely to have a significant Sterling impact.
Data – Day ahead
09.30: UK GDP (Dec)
09.30: UK industrial production
15.00: Fed Chair Powell testimony
15.35: Bank of England Governor Carney testimony
Gun to head trade ideas – Results so far
Gun to head trade ideas – Today
Have a great weeke everyone.