07 January 2018
Nothing happens in January. Nothing changes anyway, the stock markets will inflate, the pound will gyrate, bitcoin mania will maniate. It is a little reported fact that the most likely outcome of any scenario is that ‘it will probably stay the same’. It is the job of talking heads to feed us daily scenarios of unprecedented gains and catastrophic collapses, but those scenarios are rare – which is why they surprise us when they do happen. One of the tricks to trading successfully is to look for the most likely outcomes, not the most profitable. The most profitable outcomes are almost always built on hope and best cases, the most likely outcomes are where you make your, usually modest, daily gains.
If that’s too ethereal for you then ignore it, just get back to basics. If you have been profitable in Q4 of 2017 then keep doing whatever you did into Q1 of 2018, until the market outlook changes. In the other case, if you haven’t been successful, now do the opposite of what you’ve been doing.
QE policy questions are in the air; when will the Fed start selling bonds?, when will the ECB stop buying them? Both answers tell us when the EURUSD pair will rise again. The rise will be tempered by US interest policy, but it will rise. Other currencies have less of a counterbalance and will find it hard going against the big two this year.
If USD does win out and the OECD economic forecasts are right, expect commodity prices to gain. The consolidation of corn prices must be a portent of something. Unless everyone has finally agreed on one price for corn. Gold and Oil have come to this party early, wait and see if they’re staying or if they go out and come back in.
The “dot plot” can be found here for the latest summary of Dollar direction CME Fedwatch Tool.