Daily Alert – Friday 30th October 2020: FX very profitable despite the gloom

Mark NugentDaily Alert, Oct 2020

Daily Alert – Friday 30th October 2020: FX very profitable despite the gloom

This week sees month end and the final full business week prior to the US Presidential election. The first three days were moderately or strongly risk-off. In what would normally be a quiet week in the run up to the election, Covid concerns filled the vacuum. Record infections in Europe and the US combined with re-imposition of lockdowns soured the mood. Thursday and Friday saw an improvement in risk sentiment but only to “indecisive.”

The ECB stated that risks are tilted to the downside (duh) and declared that more monetary policy action will be required. The politicians in the Eurozone failed yet again to agree the fiscal stimulus package that the ECB sees as being essential to complement their monetary policy actions. It appears that on both sides of the Atlantic we have politicians getting in the way instead of doing their job. It is truly shameful.

On a bright note, it has been reported that the three days of Brexit trade talks went well. If there’s one upside to the pandemic, it must surely be that the chances of no deal are zero. Not small. Zero point zero, repeater.

Global equity indices are well down on the week, as per the sentiment. Oil has broken down through support and is currently around 10% down on last week’s close, despite the Gulf of Mexico being on 67% shut-in as what was hurricane and now simply “non-tropical gale-force low” Zeta blows in. GOLD is also down, on the strong USD.

In the currency markets, the good-old highly predictable JPY is well up on the week, as per sentiment. All commodity currencies are down, as per sentiment. The EUR has been hit by the lockdowns in Germany, France and Spain, and the mood was not assisted by the latest Islamist terrorism in France. The GBP crept upwards on positive Brexit news and the USD rose on the sentiment. Trading forex on sentiment has been fabulously profitable for a long time now.

I took my cue from the sentiment on Monday and bought the JPY. The pair I chose was AUDJPY and as the JPY is the second currency in the pair, trading JPY strength amounts to a short. I risked 1% of my capital and I got out for a profit of 3.33% before sentiment turned indecisive.

For VIP Club members, there is a brief video of this trade in the members area.

Have a great weekend. Wash your hands. Often.

I’ll be back on Monday with my thoughts on what the various election outcomes may mean for the markets.

The VIP Club members area is HERE