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Daily thread to exchange ideas and to share your thoughts

Major currency movement has been a little more subdued to start the day but the action should pick up soon enough and more so as we look towards North American trading later, following the moves that we saw in overnight trading.

WCRS 22-07

Dollar pairs are the heavy focus as the risk mood remains more positive for the most part, despite the Nasdaq seeing a bit of a setback yesterday.
EUR/USD broke above 1.1500 for the first time since January 2019, GBP/USD moved above 1.2700 and its 200-day MA, USD/CAD fell below 1.3500 and its 200-day MA, AUD/USD aiming for 0.7200 on a break to fresh highs since April 2019, and NZD/USD firmly broke above 0.6600 to its highest levels since January.
As such, the focus remains on risk sentiment as we look towards the sessions ahead. European trading may be more quiet today but US trading should offer more once again, with the moves in Wall Street a key factor driving trading sentiment.
Elsewhere, gold and silver are continuing to break higher as well and are showing little signs of slowing down amid the dollar rout. The silver move is particularly impressive but I’d be mindful of any “too far, too fast” moves in commodities.
The pullback can be brutal at times. So, remember to manage risk levels accordingly.

These eight steps are intended as a guide to the new trader and a reminder to the experienced.

Soul Number 8: Find the Balance Within Power - My Soul Urge Number1. Find Your Strength.  It is important that the trader determine what type of market, trending or consolidating, best suits their own personality and strength.  The best traders stay focused on one or the other and master it.

2. Know Your Market.  You should know your market when trading.  In other words, know the levels of support/resistance;  know how the instrument you trade moves with the general market; know who is likely to be on the other side and what they are thinking; and “the terrain of any market includes the “long-term charts” (140).

3.  Prepare Your Order.  Know when to get into a trade and why and know when to get out of a trade and why.  Just like a secret agent who will “never enter a room without knowing how to get out of it in a hurry” (142).

4.  Placing Your Order.  Once you have adequately prepared for a trade, it is then necessary to be ready to place the trade when the time is right.  Here “patience is the key…you must be able to wait for the market to tell you when the moment is right.  Wait for the market to generate the action; don’t force it” (143).

5.  Sticking With Your Plan.  This is probably the hardest part about trading.  Once you enter the battlefield (enter a trade), the emotions of fear, ecstasy, greed, and sheer excitement can then take over and cause you to forget your well prepared plans for entry and exit.  You must enter a “Zen-like mental state” where you remain in control of your emotions.  Not doing so could spell disaster.

6. Identify When You Are Wrong.  “It is crucial to your survival to identify in advance whether your view might be wrong and to determine what price level, when broken, would be in support of the consensus view; therefore, you are building up your ability to defend the occasional probes against you” (145).

7.  Holding On To Your Winning Positions.  Set a trailing stop when your trade is moving in your direction thereby locking in profits while allowing the trade to work toward its maximum potential.  “A trailing stop loss keeps you in the war, keeps you in tune with the war, and, most important, leaves you in full readiness to instantly strike again” (152).

8.  Focus On Your Next Trade.  This is the most important step and is saved for last.  This step simply says to start anew with each new trade.  No matter if you won, lost, or broke even on the last trade, the next trade is a new one.  “You do indeed need to be starting every single trade fresh and alert without any baggage from the previous encounter” (153).

Eight steps for success; eight goals for every trader.

UBS S&P 500 target is 3,300 (in about a year’s time)

UBS on the US equity index, say that Q2 of this year will mark the bottom for corporate profits, earnings to now head higher.

  • We expect profits to be down 40% in 2Q. However, as we expected, many management teams continued to emphasize that the outlook remains uncertain and is highly contingent on progress containing the coronavirus and additional government stimulus
  • Our S&P 500 EPS estimates of USD 122 (-26%) and USD 156 (+28%) for 2020 and 2021, respectively, remain unchanged. Overall, results should help sustain the rally we have seen over the last four months. 
  • Our June 2021 S&P 500 price target remains 3,300
Agree/disagree? Comments welcome!
UBS

Japan has approved a coronavirus drug – dexamethasone

NHK report overnight via Bloomberg

Japan’s health ministry has approved the use of the steroid drug dexamethasone
  • for the treatment of coronavirus patient
  • following the approval of remdesivir in May
Dexamethasone has been reported as reducing deaths among patients with severe cases of COVID-19
Dexamethasone is cheap, widely available.

USD facing more questions about its status as the primary reserve currency

Here is an item on the US dollar from Bloomberg that may be of interest.

It cites analysts from Credit Agricole and Mizuho
  • USD accounts for more than 60% of global reserves
  • the most widely used currency for international transactions
  • But it risks ceding ground to the euro after European Union leaders agreed on a 750 billion euro stimulus package that enhances the appeal of the shared currency and euro-denominated assets
CA say that the recovery fund will facilitate diversification out of the US dollar
offering liquid, high-rating, euro-denominated debt
Here is an item on the US dollar from Bloomberg that may be of interest.
I’d not be getting too gung-ho on this, and note that the analysts say ‘risks ceding ground’, they are not writing off the dollar.

US Indices end the session mixed.

NASDAQ closes lower for the 1st time in 3 days

US stocks are ending the session mixed.

  • The S&P index moved higher close at the highest level since February 21.
  • The S&P is up for the 3rd consecutive day
  • The NASDAQ index close lower after 2 days of gains
  • the Dow industrial average is on a today winning streak
A look at the closing levels shows:
  • S&P index up 5.46 points or 0.17% at 3257.30
  • NASDAQ index -86.72 points or -0.81% at 10,680.36
  • Dow industrial average rose 159.53 points or 0.60% at 2684.40