Daily Alert – Friday 25th September 2020: Predictable markets deliver gains for traders

Mark NugentDaily Alert, Sept 2020

Daily Alert – Friday 25th September 2020: Predictable markets deliver gains for traders

The week started risk-off start as Covid-19 second wave fears gripped the markets. Global equity indices were down, GOLD broke support to the downside, the JPY and USD strengthened, and the commodity currencies all fell. Just as you would expect.

These moves and the sentiment resulted in me shorting AUDJPY at the Monday close (essentially trading JPY strength). I chose the AUD as counter-currency as it is more reliable than NZD and CAD. I don’t trade equities short, instead I use the better price to go long when sentiment improves. My bias for GOLD is long so I left that alone too.

From Tuesday onwards sentiment was either indecisive or moderately risk-off. Fed Chair Powell testified before various legislative groups for three days but he said nothing that troubled the markets.

My AUDJPY short was helped on Tuesday by Westpac forecasting the Reserve Bank of Australia would cut rates by 15 basis points at the next meeting. Then on Wednesday in Australia we had a miss on Retail Sales. These factors weakened the AUD yet further which is good for a AUDJPY short trade.

I may have jumped the gun a bit on Wednesday and closed half my AUDJPY short during a brief period of intraday JPY weakness. I exited the remainder of the trade on Thursday night after the JPY had a (just) down day. Total gain on the trade was +2.66%, taking the year-to-date gain to +160.7%. That’s 100 quid turned into 260 quid. And the nature of compounding means that the +2.66% from this week’s trade is actually a real gain of +6.7% on the money I had on Jan 1st this year.

As we get to the end of the week, equity indices are down, GOLD is down, spot oil is flat, the JPY and USD are up and the commodity currencies are down. This is all entirely in line with sentiment and there was money to be made this week without too much effort.

Trade of the week (in terms of size of move and coherent rationale) was to buy the JPY. The USD move over the week was greater, but it never tracks sentiment as well as the JPY.

There is a brief video of my AUDJPY short in the VIP Club members area under the “Trades” tab.

Have a great weekend and I’ll be back on Monday.

The VIP Club members area is HERE