Ranges tested on a “stop hunt”
It seems that provision of ample liquidity and narrowing spreads are not enough for certain market participants and they must “flex their muscles” by hunting out stop loss orders to try to drive currencies out of entrenched ranges
On the face of it, Sterling benefits from several positive factors which have led it to recover from the shock of the Brexit vote, yet it tested its recent lows yesterday without any real fundamental reason. It is true that I had been short, but I often find myself being counter-consensus. While I couldn’t really see any reason for the pound to trade much higher despite an imminent tightening of monetary policy, neither could I see it falling through the support at 1.4020 given the markets growing optimism over Brexit.
So, in a classic right yet wrong scenario I took twenty pips more profit on my short trade than I had expected but am now long, against my better judgement.
The single currency had a similar and possibly more radical day. 1.2240 had been my back up support should 1.2260 be breached and both levels were broken but with little follow through which surprised me as I expected more stop losses and a more violent reaction.
Not all stop hunts are successful!
Brexit optimism; will we ever learn?
Am I mistaking grudging acceptance for brazen optimism? The Brexit negotiations, we all assume, are taking place behind closed doors and we have now become conditioned to a feeling that “everything will be alright” following the Government’s capitulation, thinly disguised as a negotiated agreement, over stage one and the transition.
What is being discussed in Brussels are two vital pieces of the Brexit jigsaw that have been removed from both stage one and the transition to find an acceptable path. It is hard to imagine a settlement of the questions over the Irish border not simply because the two sides are so entrenched in their views but because the consequences of the two most likely outcomes are so unimaginable.
So, now that we have reached a point where the difficult questions need to be addressed, will David Davis stand up to Michel Barnier? A settlement of the final bill will bring short term consternation to leave campaigners, but it is any compromise over the Irish border that will have serious long-term consequences. A general election could easily be the outcome if the nationalist DUP Party in Northern Ireland withdraw their support for the Government. But with the opposition Labour Party weakened by its leaders’ refusal to blame Russia for the use of nerve agent on a former spy in the UK, and its criticism over anti-Semitism have severely weakened its position.
Oh Donald, Get a Grip.
President Trump has labelled China’s reprisals on trade “unfair retaliation”. So, in what he must believe to be “fair retaliation”, he plans to slap tariffs on a further one hundred billion dollars a year of Chinese imports.
I call it childish petulance.
The way this whole trade row is escalating it can only get worse and it could easily reach the point of no return. It needs to be understood that the relationship between China and the U.S. is symbiotic. The U.S, whether the President likes it or not has exported most of its manufacturing capability as globalization becomes a reality. China has based its development on its manufacturing sector and has the resources (and markets) to be successful.
Trump clearly believes in free enterprise as a businessman but rails against it as a politician. The U.S. now needs to import finished articles it never had to previously and China needs a market for its goods. Taking it one step further, the U.S. needs buyers for its debt, to finance the twin deficits and China has the cash to be that buyer.
Trump’s trade rhetoric is simply his campaign bluster manifesting itself as seriously flawed policy.
