Calmer Markets


Calmer MarkersMarkets are relatively quiet right now. Although yesterday saw the S&P 500 Index, WTI Crude Oil and Bitcoin all make new multi-month highs, they were all (except Bitcoin) made on well below-average volatility. Breaks to new highs on low volatility are typically unreliable.

The market really is holding fire until the Non-Farm Payrolls data release bundle due tomorrow (Friday) in the U.S.A. There is a near-total absence of scheduled news/economic data so it is likely that markets will remain dull until New York gets underway that day. The U.S. Dollar has moved little this week, and lacks any real direction, so this batch of releases is likely to produce the major movement of the week.

If you are going to be spending some time trying to catch this major move which I anticipate tomorrow, what instruments are most likely to be best to trade? A good principle to apply is to trade what has recently been strongest against the weakest. Applying this rule, if the data is better than expected, this would be likely to boost the S&P Index and WTI Crude Oil, but it would probably also boost the U.S. Dollar, so it could be wise to try to get long of those paired against a relatively weak currency, such as the Euro, or perhaps even a precious metal such as Silver. If the data is worse than expected, the trade will be more difficult to construct. It is not clear to me now what would probably increase the most against a weakening greenback.

Yesterday saw the British Parliament pass a law requiring the British Government to request a Brexit delay from the European Union by a single vote, although it still must be passed in the upper house, and some constitutional experts believe the government could effectively overrule it. This does not make a lot of difference to Brexit as the Government announced it would be pursuing this policy anyway. I have been saying for months that “no deal” would not happen under any circumstances and I think I have been proven correct.

Adam is a Forex trader who has worked within financial markets for over 12 years, including 6 years with Merrill Lynch. He is certified in Fund Management and Investment Management by the U.K. Chartered Institute for Securities & Investment.