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The Butterfly Effect

Predicting-Forex_FXPIG

Use of Brain - optional

I got into a “discussion” this week with a “trader” who was publicly berating his broker for being a “robber”. I was intrigued by the guys choice of Social Media for his tirade and was keen to find out from him what had happened.

It seems that the market commentator from his broker, when analysing a move for the Eur/Usd the rate the previous day, had failed to identify or even mention, the fact that a key uptrend line for the dollar index had been broken which had sent the dollar lower and therefore since the common currency makes up 57.6% of the index it broke higher.

For this “omission” the broker was tarnished as a robber, but the trader was keen to “tar the whole” community as “robbers” since they apparently only provide analysis that suits them and not their clients’ positions. I became a little defensive at this statement only to be told that the reason I was defending analysts was that I probably never even knew about the trendline.

I tried to provide some analysis of my own as to the purpose of market analysis and the use of opinion. This simply drew another tirade, so we went our separate ways, the robber and the fool like characters from a medieval play.

Three sixty-degree vision

The FX market is not only the market with the highest dollar volume of trades daily it is the most susceptible to outside influences. In fact, traders need to be able to balance the effect of Kim’s nuclear ambition with Draghi’s benign monetary policy vision or Brexit versus China’s influence over the Australian GDP to make sense of a lot of what is happening.

Most if not all of you will by now know that I am a fundamentalist! I trade (occasionally) using my interpretation of long term influences. For example, in January this year, the Euro opened at 1.0518 and fell to a low of 1.0340 as President Trump made a few promises about fiscal reform and economic stimulus. Here we are in November and Congress is still wrangling over taxes and the economic stimulus package is still to see the light of day. So, in January, the trade was to decide just how Trump would achieve, or otherwise, his promises. Since the Euro has traded as high as 1.2093, the answer is clear. But wait, what happened above 1.2000? Perception of divergence of interest rate differentials led the dollar to start to rally. Goodbye short dollar, hello short Euro.

Meanwhile in Brussels and London (and Dublin)

The countdown has begun! But wait I hear you saying didn’t the countdown begin last March? Well, yes but this is the countdown within the countdown. Now that the date for Brexit is enshrined in law, we can all relax and concentrate on the relationship between the EU and U.K. following the divorce.

How many books have you read where the reason for the major global disaster was formed from some seemingly minor event that no one really saw coming. Well the plot for he Brexit movie has just been written as Ireland, one of the small nations in the EU threatens to veto talks if there is anything other than an open border between the North and South of the Island.

With all due respect to our Irish cousins, it seems that the fate of the Irish border, when produced as one of the three basic negotiating points by the EU could have been a bit of an afterthought. Now Ireland is saying that unless the border if 100% open they will veto any agreement. This could be a significant turning point as it provides massive leverage to the U.K. who have seen no issue with an open border in the hundred years since Irish Independence

Use of Brain - optional

I got into a “discussion” this week with a “trader” who was publicly berating his broker for being a “robber”. I was intrigued by the guys choice of Social Media for his tirade and was keen to find out from him what had happened.

It seems that the market commentator from his broker, when analysing a move for the Eur/Usd the rate the previous day, had failed to identify or even mention, the fact that a key uptrend line for the dollar index had been broken which had sent the dollar lower and therefore since the common currency makes up 57.6% of the index it broke higher.

For this “omission” the broker was tarnished as a robber, but the trader was keen to “tar the whole” community as “robbers” since they apparently only provide analysis that suits them and not their clients’ positions. I became a little defensive at this statement only to be told that the reason I was defending analysts was that I probably never even knew about the trendline.

I tried to provide some analysis of my own as to the purpose of market analysis and the use of opinion. This simply drew another tirade, so we went our separate ways, the robber and the fool like characters from a medieval play.

Three sixty-degree vision

The FX market is not only the market with the highest dollar volume of trades daily it is the most susceptible to outside influences. In fact, traders need to be able to balance the effect of Kim’s nuclear ambition with Draghi’s benign monetary policy vision or Brexit versus China’s influence over the Australian GDP to make sense of a lot of what is happening.

Most if not all of you will by now know that I am a fundamentalist! I trade (occasionally) using my interpretation of long term influences. For example, in January this year, the Euro opened at 1.0518 and fell to a low of 1.0340 as President Trump made a few promises about fiscal reform and economic stimulus. Here we are in November and Congress is still wrangling over taxes and the economic stimulus package is still to see the light of day. So, in January, the trade was to decide just how Trump would achieve, or otherwise, his promises. Since the Euro has traded as high as 1.2093, the answer is clear. But wait, what happened above 1.2000? Perception of divergence of interest rate differentials led the dollar to start to rally. Goodbye short dollar, hello short Euro.

Meanwhile in Brussels and London (and Dublin)

The countdown has begun! But wait I hear you saying didn’t the countdown begin last March? Well, yes but this is the countdown within the countdown. Now that the date for Brexit is enshrined in law, we can all relax and concentrate on the relationship between the EU and U.K. following the divorce.

How many books have you read where the reason for the major global disaster was formed from some seemingly minor event that no one really saw coming. Well the plot for he Brexit movie has just been written as Ireland, one of the small nations in the EU threatens to veto talks if there is anything other than an open border between the North and South of the Island.

With all due respect to our Irish cousins, it seems that the fate of the Irish border, when produced as one of the three basic negotiating points by the EU could have been a bit of an afterthought. Now Ireland is saying that unless the border if 100% open they will veto any agreement. This could be a significant turning point as it provides massive leverage to the U.K. who have seen no issue with an open border in the hundred years since Irish Independence

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