Lets talk about trading. Is the market going up or is it going down? What is forex doing? Short-term scenarios are much different from long-term estimates. And what we have seen as of this morning is a standard bounce for many of the major currencies against the USD. While the Greenback has recently done well against the GBP, EUR, and JPY there comes a stage when a natural progression of correlation takes place and value stabilizes. If it didn’t happen there would be no forex market, there would be no need to purchase currencies because there would only be one domain to go to – the one that is always getting stronger. But this doesn’t exist, and no matter what mistakes or policies politicians and their officials are crafting behind closed doors, nothing is going to change that. Why? Because real business is always being conducted, and nations need to maintain their own currency in order to keep some semblance of governing. The give and take of negotiation resulting in international purchases, export and import, and investments in global infrastructure are just a few examples which keep banks busy with foreign exchange.
The EUR for all of its warts still finds comfort (and value) in the fact that other currencies have problems too. Thus when the Single Currency traded upwards to one year highs in late January and early February of 2013, it soon found that a natural progression of supply and demand came into focus and took it lower again. This is why technical traders proliferate and often think there is magic within their charts. And now that the EUR finds itself near lows it may be time to believe that some type of demand will be seen again.
A problem for most traders is that most analysis is hindsight. Most people or companies find it hard to tell you what they believe the markets will be doing in the future. Lets not use code here, we believe short-term the EUR should gain over the next few trading sessions.
Wall Street climbed again yesterday and it faces a big amount of data today. But this rally has hardly been about data. Optimism is a key ingredient of investing, most people hope that tomorrow will be a better day, this is a natural instinct for survival. Equities have climbed based on this natural instinct of optimism and a strong dose of not so subtle monetary policy from the Fed. Hey, but wait, we just said that there is a natural give and take, and that values seek correlations. Going into the weekend will traders on Wall Street start to cash out and take short-term profits? While we believe strongly that the markets have been over bought and that there is little in the way of quantified logic for the widespread gains, there is no denying that the trend has been up. But how long will it last? Digital Markets Advisor still believes that plenty of dangers are ahead for the equity markets, but short-term we would be hard pressed to wager against this trend.
Gold has shown some upwards movement today and stands near 1591.00 as of this writing. Crude Oil has also seen some gains the past twenty-four hours. Again, important data will come from the States today, but while poor outcomes are completely possible an army of ‘positive spin doctors’ appear to have the upper hand in the market place short-term. The Empire State Manufacturing Index and Industrial Production counts will be of interest for those trying to get a pulse of the U.S. economy.
‘Confidence game’ aficionados should watch what becomes of the European Economic Summit underway and the news it generates today and this weekend. Which allows us to reiterate that no matter what the current data says, or what governments fail to achieve, that calm words and monetary policy from some central banks are achieving rallies in many of the global equity markets. But beware of the bounce folks, because just as sure as the ball goes up, eventually gravity makes the ball come back down.