Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
The Big Criss Is Here - Everything Is Falling, Only The Dollar Is King
OK guys, the big crisis that I have warned about several times in our newsletters and analysis articles is finally here.
For the moment, this means that finding trades in Forex can be extremely risky and dangerous. Volatility is surging through the roof, and historical levels are reached on several different currency pairs. Central banks are stepping in and intervening against the sharp movements, causing sudden sharp reversals. Trading in such a market, you can easily suffer huge losses or even get completely wiped out of the market in just
minutes.
While not to say that it’s not possible to make money in this environment (quite the opposite as the movements are large), but the risks for gigantic losses are extremely high. Thus any trades should be picked extra carefully.
We’ll discuss the movements in Fx and other markets below, but first, let’s look at what is happening with the global economy and why this is so serious.
COVID-19 Coronavirus - The Trigger For A Deep Global Recession
The cause of this crisis, the coronavirus, however, surprised many market participants and caught most investors completely off guard. Only two weeks ago, no one was serious about the risks of the coronavirus epidemic, causing a major global crisis.
But now, with the whole of Europe in quarantine and the lockdown extending to North America in the war against the COVID-19 pandemic, economists are pretty dismal with their estimation of the severity of the upcoming global recession. First and second-quarter GDP in Europe and the United States are expected to cut off 15% - 20% of growth, and possibly 2020 yearly GDP could shrink by 5 - 10 percent.
Now we are pretty sure about it - it’s going to be a severe recession, possibly like the 2008 financial crisis. Right now, the only question is, “how big this crisis will be?”. If the coronavirus can be contained in a few weeks from now, then the hopes for a quick rebound in the economy will be alive. But the longer this lasts, the more economic damage it will do, and the longer any recovery will take. Also, watch out for the upcoming crisis to possibly
reveal additional cracks in the economy, which could chop off additional percentages of world GDP and prolong the crisis.
In either case, one thing is certain - the world after Corona will be different from the one we knew before, just as after the 2008 crisis. The extraordinary times have already triggered massive easing and money printing from central banks all around the world, led by the giant - the Fed.
The US Federal Reserve committed on Sunday evening to unleash over 700 billion USD in quantitative easing, while the European Central Bank (changing its mind after only one week) announced today a €750 billion Pandemic Emergency Purchase Programme (PEPP).
Whether all this money printing and government-funded bailouts of large corporations will do the trick to calm the markets remains to be seen. But, if it doesn’t, then policymakers may be in for real trouble. In either case, all this printed money won’t go away, just as it never did from the post-2008 QE programs.
Why Is The Dollar Surging Thorugh The Roof?
Now that you know you should prepare for a colossal crisis ahead, (and don’t forget to buy your stockpile of toilet paper also :-D ), let’s take a brief look at what is happening with the markets and why the heck is the US Dollar surging as we’ve never seen before.
The main reason is the so-called “dash for cash.” Basically, as stock markets and other assets are falling, investors need cash to cover their losses and stay liquid. The USA has the largest capital markets in the world (stocks and bonds combined), and thus the USD is the primary currency when it comes to investing in capital markets. With markets now falling, the Dollar is the currency most in demand as those investors rush to the
exit.
Furthermore, for the same reasons, investors are selling off other assets they own and covering losses in stocks and elsewhere. This is why Gold and other precious metals are getting dumped too these days (despite being the safest of safe havens).
There is a multitude of other reasons for the surge in the Dollar, but practically all related to the panic-driven movements in markets. Until stock and bond markets stabilize, the demand for Dollars will likely remain high, and the Dollar will remain King.
However, this is not to say that you should jump in and buy the Dollar with everything you’ve got right now. In fact, this Dollar strength is causing a lot of pain for the world, including the USA. Thus, with so many policymakers disliking a sharp appreciation of the Dollar, the risk of coordinated intervention against Dollar strength is increasing.
What About The Other Currencies?
We are seeing all the other currencies getting completely whacked by the Dollar. As noted above, that is likely to remain the case for as long as markets are in turmoil even versus the safe-haven Yen and Swiss Franc. The biggest sufferers, of course, will remain the risky currencies like AUD, NZD, CAD, as well as all the emerging market currencies.
GBP has also suffered badly due to a combination of factors, including its large current account and budget deficits (also known as the twin deficit).
The Euro is also losing against the ultimate reserve currency of the world. EURUSD is down more than 250 pips today and below the 1.0775 low from February 20. The fact that Europe is the epicenter of the COVID-19 pandemic is surely adding additional pressures on the single currency as the economy is expected to contract most severely in this region. The speed of the decline in EURUSD suggests that reaching the 1.05 - 1.03 lows from 2016/17 is likely. EURUSD
can then sink to parity as well.
Our CADJPY trade didn’t work exactly as planned last week, although USDCAD surged higher as expected. Surprisingly, the Yen has also suffered badly in front of the USD train wreck, and that has caused CADJPY to move sideways instead of continuing lower. Nonetheless, once USDJPY turns lower, CADJPY will likely follow lower too, as we discussed in the newsletter last week.
Note: Given the extraordinary circumstances in markets at the moment, I am not recommending a specific trade idea this week, and instead, we thought such a general overview (analysis) would be more appropriate.
Our trade signals from the past week
- March 12 – Short CADJPY from 75.50, stop taken out at 77.00 = -150 pips
TOTAL: -150 pips in the past week
TOTAL: +2825 pips profit since October 1, 2018
If you have any questions or feedback, don't hesitate to reply to this email.
Thank you!
High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
|
|
|
|
