This past Monday a financial channel was discussing the currency markets. They were running a bearish story on the euro and highlighted how one particular fund manager was expecting EUR/USD to start heading towards parity. One manager alone doesn’t stand out in the largest market in the world, but the thrust of the report was focused on the challenges that the Euro Zone was going to face and had to be considered bearish.
On Tuesday, that same financial channel ran another story on the currency markets. This time they catered to the euro bulls, stating that most currency traders were expecting the US dollar to stem its gains and start to reverse course. Did this financial channel bother listening to their report on Monday? One of their reports has to be right, right?
This is no way to enter a trading day. Certainly markets will zigzag throughout a trading day, leading to counter-trend trades but understanding the underlying market trend should prove to be helpful as you enter each day. Conflicting information will often times lead to poor decision making.
Let’s return back to Tuesday morning: there was a story on the wires that the Confidence Board revised lowered their April economic reading for China. This is no small deal; in fact, didn’t China just come back from the G-20 meetings touting their strong growth strategies? The Shanghai Composite lost 4.3% on Tuesday and global equities all followed lower. It seems as if Tuesday had turned into thought-reversal day.
Wait though, because there was yet more to come on Tuesday. A meeting with the boss should be no big deal. A meeting with the boss who proclaims afterwards that things are OK is a worrying sign. Apparently President Obama receives a daily update from Ben Bernanke on the state of the US economy. But on Tuesday, after the meeting President Obama, found it necessary to state that things are OK in front of the microphones. Just making sure that we all heard him in case you missed the FOMC or G-20 meetings last week, where both individuals were telling us how good things are right now.
This also happened to be approximately 72 hours before the US NFP report is to be released. Expectations are still for a loss of 110k jobs. The last time the president spoke ahead of a NFP report, he stated how “strong” it would be and then we were all left with crumbs – the creation of forty one thousand private sector jobs to be precise. If I can read between the lines here, it seems as if the president received the jobs number on Tuesday (the BLS takes the surveys in the week of the 12th each month and tabulates the figures in the days that follow) and it was not good.
Americans do not agree that the US economy is OK right now. This was evident in the June Consumer Confidence reading that came out on Tuesday. The Present Index fell to a miserable 25.5 reading. Not good.
Nobody said that currency trading would be easy, especially when you hear flip-flopping information on economies of China and the US, not to mention that the financial channels delivering the news are anything but consistent as well. Understanding the underlying trend will help you become a more consistent currency trader. After all, we need someone to be consistent around here.
This report is for your information only and does not constitute investment or business advice or an offer to buy or sell securities.
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