About optimism, faith, and facts, as well as trading on the news

10 gen 2020

Optimism and belief in a bright future are generally quite positive things, but you should not abuse them, because this is fraught with a separation from reality. What we observed in the last couple of days in the financial markets, in our opinion, was that separation from reality.

Asset prices are as if there were no killing of Suleimani, mutual threats from the United States and Iran, Iran’s missile attacks on US military bases. All at once forgot about the billionth injection of the Fed in the Fed market, the trade wars and the slowdown of the global economy. By the way, the World Bank just a few days ago lowered its forecast for world economic growth in 2020 from 2.7% to 2.5%. But this is part of reality, from which there is no escape. Failure to think about these things does not mean that they cease to exist. That’s why we will continue to sail today against this stream of optimism and will buy gold and the Japanese yen, as well as sell the dollar.

In general, the dollar today can be a very defining day. The release of statistics on the US labor market is always an occasion for a sharp increase in volatility. Given the importance of the data, our position on the NFP and the reaction of the dollar will be presented in a separate review.

In general, the best option for trading today, in our opinion, is trading on the news. That is, do not try to guess what data will be released and how the dollar will react to it, but act on the fact. And there is just a great candidate for the deal - we are talking about a pair of USD/CAD. The fact is that today not only statistics on the US labor market but also on the Canadian labor market will be released. That is, a couple can undergo either a double positive (as it was a month ago) or a double negative. In any of these cases, the movement will be quite strong and unidirectional.

So we offer the next trading plan for today. 1-2 minutes before the release of data in the USD/CAD pair, we place orders like BUY STOP and SELL STOP at 20 points from the current price at that time. And then we just wait for the news. If the option “bad data for the USA/good for Canada” is triggered, pick up SELL STOP. If the game has the option “good US data/bad Canada data”, BUY STOP will work. In both of these cases, it is recommended to hold the position until the end of the day. If the data come out less clear and the situation is unclear - remove orders.