Market commentary and analysis insights. Brought to by FM Capital Group.
Author: @faithmight
Lydia Idem is an investment advisor who has been an investor and trader for 23 years. She has been a special guest on TD Ameritrade Network and Benzinga’s #PreMarket Prep Show; featured in FORBES Magazine and CNNMoney; and co-author/contributor to The StockTwits Edge and Trading: The Best of The Best. In 2014, she launched FM Capital Group LLC, a registered investment advisory firm serving people of color. Lydia was recently named #22 of the Twitter Accounts Investors Need to Follow in 2017 and #3 of the Top 10 Women To Follow In Finance for 2015.
Lydia has a Master of Science in Management (Georgia Institute of Technology) and a Bachelor of Science in Computer Science (Vanderbilt University).
Follow me on Twitter: @faithmight
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Last week, I was back on the air with Futures with Ben Lichtenstein. Since we are still in the new year season, it was a great segment that they produced as a trip around the world in currencies. Starting with the U.S. dollar, Ben and I talked about the fundamentals that are really driving currency flows in the market right now.
This morning, traders were greeted by news that the EU and UK trade talks are deteriorating. I actually mentioned this fundamental risk last week in my segment with Ben. Check out more of my thoughts on all the major currencies below. My accuracy coming to fruition this week is even amazing to me 🙂
I was happy to be back with Dale Pinkert at the ForexAnalytix Community Experience last Thursday morning. But super bummed that we got cut off due to technical difficulties. It was my fault (note to self: always charge up the computer before a show).
Amongst our forex talk, Dale and I also started talking about the coronavirus’s possible effects on the markets. As of last week, the markets had not really reacted to the news. However, I mentioned that I thought we would see a sell-off eventually induced by the coronavirus outbreak. So I welcome today’s price action. I don’t think it is a time to panic. It is a time to put orders in place and trigger your trading and investing plans.
The New Zealand dollar has been in perpetual downtrend for much of 2019. It didn’t start the new decade any differently as the kiwi has slid almost 300 pips agains the U.S. dollar and a whopping 1,000 pips against the Great British pound.
On the bigger timeframes, it is clear that the $GBPNZD is finding resistance at the big 123% Fibonacci extension level. The 2.05 resistance level is also not too far from that level giving some strong resistance confluence for bulls. This area continues to provide a headwind for bulls, even in this new week of trading.
A key driver of NZD weakness last year was the slashing of interest rates by the Reserve Bank of New Zealand (RBNZ). The RBNZ cut interest rates by 100 basis points last year with two 50 basis point cuts. That’s a lot. And those 2 interest rate cuts came within 3 months of each other. So the RBNZ really surprised markets last week. Though they kept interest rates on hold at 1%, they were more hawkish than expected in their monetary policy statement. Despite the coronavirus outbreak worrying central banks around the world right now, the RBNZ is more optimistic about employment and the economy than it had been in 2019 as inflation moves closer to the RBNZ’s target. The biggest influence to this change in outlook, however, has been new fiscal policy from the New Zealand government around infrastructure spending. The central bank expects this to boost consumer spending and GDP which is only good news for the NZD.
Despite the rosier fundamentals, the market has not taken much notice. Yet. The $GBPNZD remains rangebound between the 123% Fibonacci level at 2.0409 and the major 2.00 support level. The shift in fundamentals favors more downside moves in the $GBPNZD as the NZD should start to move higher. Look for rallies to continue to be met with sellers at the resistance level. Only a hold above the 2.05 level changes the downside bias in $GBPNZD.
?I did this interview 18 months ago. And it resonated with Mike TODAY. • “The older I get, I realize my 10+ years in this business has been a roller coaster ride that many other people can, in fact, learn from.” (http://bit.ly/2yG8YNH) •
This made me think about legacy. I did this interview during a very rough season in my life. I never thought to cancel. Work was therapeutic, not a distraction, for me in that storm. The storm focused me on building a business that would support myself and my family. And this interview turned out to be a real pleasure.
On today’s observance of Rev. Martin Luther King, Jr, I like to point out Rev King’s work for economic equality. America focuses so intently on his work for social justice. The protests and non-violent marches he led against racisim to gain equality for Black people in America are hugely important. But we cannot forget that Rev King’s message quickly evolved into one for economic justice. Rev King began calling for fair wages, fair working conditions and better distribution of wealth to all people. This call for economic justice included all poor people, regardless of ethnicity or race.
Money is a very powerful unifier. And his enemies knew it. Not long after this speech, he was assassinated. So when we remember Rev. King, let’s remember him right. He wanted ECONOMIC justice in America beyond his desire for social justice.
At FM Capital Group and Bay Street Capital Holdings, we work with clients who otherwise would not receive investment services. We look for investment opportunities that enable wealth creation in communities that capital flows have largely ignored. We endeavor to make Rev. King’s dream for economic equality a real one.
I had the pleasure of speaking with the guys at Yahoo! Finance this past Friday. It was my first in studio appearance! Even though it was simply a live feed into the NYC HQ studio, it was very cool to visit the Yahoo! campus and record from a legit television studio.
As I mentioned on the show, I do believe the U.S. dollar can fall more from here as risk appetite continues to run through the U.S. equity markets. The $SPX continues to make all-time highs, making any downturn simply a correction at this point. Brexit continues to dominate sterling news despite the Parliament-majority outcome from this month’s general election in the UK. As such, watch the GBP continue to sell-off as the market has new concerns with HOW the UK leaves the EU in 2020. I also opined on how China and the U.S. election cycle could play out in markets and what traders and market participants need to watch for.
I had a good time at Yahoo. I got to take my eldest with me as my social media assistant and my producer treated us to a campus tour and lunch at the amazing Yahoo cafeteria. I look forward to speaking with the guys at The Final Round again in 2020.
Watch my full interview below. Enjoy!
Highlight: "A lot of what we're seeing with the dollar has been first interest rate expectations from the Fed," @FMCapitalGrp CIO @faithmight says. "Now what we're seeing is risk." Also talks about Brexit's impact on the global economy. pic.twitter.com/328vssmqtu
More than ever, since I have been trading the forex markets, elections matter. The GBP has been stuck in ranges versus every major currency for months. Months! It’s been maddening. You can see these large ranges especially in the $GBPUSD, $GBPJPY, and $GBPAUD.
But during the last week of November, the GBP started to break these ranges. The culprit was the early polls in the UK showing that the PM’s political party, the Conservatives, would likely win a majority in Parliament. Months (years!) of British government gridlock, that prevented the UK and EU from coming to an agreement, looked to be over. And the markets began to get euphoric with increasing buying momentum building in the GBP across the board. The GBP exploded higher when exit polls confirmed the early poll results: Tories won an overwhelming majority in Parliament.
With such strong moves to the upside, it seems that the election has set the midterm direction in the GBP. However, this trading week has seen all of the post-election euphoria completely undone.
So now what? Well, the Bank of England (BoE) is slated to announce its last monetary policy decision of 2019 this Thursday morning. The BoE has been surprisingly hawkish all this year as they have allowed the economic data persuade them that the British economy has remained much more robust than they expected after the 2016 Brexit vote. I expect them to remain hawkish with the Brexit uncertainly largely assuaged with this general election. A hawkish BoE will see the GBP gain some support after the week’s corrective selloff. However, if the BoE suddenly changes its tune, the GBP correction lower will turn into rapid selloff.
Looking at the charts, the GBP is clearly waiting on the BoE. Trade what you see!
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I think the Federal Reserve, once again, may have started a trend. When they cut interest rates a few weeks ago, they also signaled that rates would be on hold going forward from here. The market has since priced in a hold on interest rates for the new year 2020. But even more interestingly, central banks around the world have also followed suit with hawkish rhetoric and no-moves on rates.
Today, I was back on the air with Ben Lichtenstein talking currencies on his FUTURES show with the TD Ameritrade Network. We discussed the central banks, what the impending general election in the UK could mean for the GBP and what’s going on with the Canadian and U.S. dollars.
On Monday, October 14, 2019, I joined Dale Pinkert on the Forex Analytix Community Experience to speak about the rally in the GBP at the end of the last trading week. I spoke about how the GBP had much more room to run given how the new turn of events in Brexit has changed the fundamental landscape for the GBP.
Unbelievably, all of my calls made on Monday have already been hit and this trading week hasn’t even ended yet. Better yet is news that hit the wires this morning that the EU has accepted the UK’s deal. Now, it is in the hands of the UK Parliament. Keep eyes on how this plays out. It will most certainly drive market flows in the short term for the GBP.
Check out also my levels and technical analysis during my segment and enjoy the show! Make sure you watch to the end to hear my commentary on the S&P 500 and equity markets.
