This week represents some decent opportunities for us as the market continues to come to terms with Friday’s spectacular US employment data.
The beauty at the moment is that the markets will be wavy as investors seek to either recoup losses or react to every piece of fundamental data that is coming out over the course of next week. Our plan of action is simple: We are going to aim to take advantage of the current market situation and open a few trades over the course of the next week with the target of increasing our overall portfolio value by between 5 to 12%. I know this sounds very ambitious, specially at a time when there is great uncertainty in the market, however with uncertainty comes movements and with movements comes the opportunity to profit. However do not be afraid, we will only trade when confident, as always!
I’m now going to explain to you my course of action as I feel that as copiers you have the right to know how your money is being handled and why certain decisions are made. You are smart enough to be curious and you deserve the truth, not blanket statements saying “this is strategy”.
At the start of this week, I will be looking to take advantage of investor sentiment turning to the Japanese Yen.
I wish to try to explain this to you further, so please let me give you a quick summary of why I feel that this is a good idea and an investment that has value:
(Please note that my comments are based on the assumption that the median consensus expectations of the economists who contributed to forecasting the following fundamental economic data are not far from the mark)
On Monday, it is expected that Japanese labour earnings will show improved growth. This bodes well for the Japanese Yen.
On Tuesday, the Japanese current account balance is expected to show considerable growth while in China inflation is forecast to show a slowdown. This may make markets grow concerned over China and once again try to diversify their risk, and turn to the yen as a haven currency. Again this is a positive for the Yen.
With all of this considered, let us look at a pair that we can profit by trading against the Yen. Let us look to the Euro that still has a downside to it. With the US rate hike looming and further easing by the ECB on the horizon, confidence in this currency is shot and it is likely to be sold lower. In addition to this, economic data from the euro zone countries (Germany, France, etc.) is expected to show that inflation will be virtually flat and there will be no remarkable change in gross domestic product. This will not provide any relief to the Euro and it should continue to weaken.
On the back of this, I see value in taking a sell position in the EUR/JPY pair and will be looking for a good entry point early next week.
Suggestion 2 is a little riskier than suggestion 1. It involves attempting to capitalize on the retracement’s that the Sterling will encounter at some point in this week, after having given up nearly 400 points. I feel that the Sterling still has a little further to fall, but that a slight recovery is on the horizon. I particularly like the GBPCHF pair and I feel that if one can obtain the right entry point for a buy, then there is good value to be had in such a trade. If I see an appealing entry point I will also enter the market in the spare early next week.
Hopefully as the week progresses and we see more developments in the markets and more movements, they’ll be far more opportunities presented themselves. I am sure we will be discussing my other ideas shortly on the forums.
Hope you all had a great weekend,