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All Aboard the Roller Coaster

All Aboard the Roller Coaster

Traders and investors should make sure their ‘risk management’ tickets are in place for a volatile ride that could ensue within the global markets. While tight ranges have been rather constant for the EUR The EUR The EUR is the official currency of the European Union. Presently 19 out of the 28 collective  nati... More is the official currency of the European Union. Presently 19 out of the 28 collective  nati... More and GBP The GBP The GBP is the official currency of the United Kingdom. The GBP is a major currency and currently ra... More is the official currency of the United Kingdom. The GBP is a major currency and currently ra... More the past two trading sessions, wild bursts have punctured the air much like a roller coaster. Uncertainty within the investment landscape has created an amusement like ride for many traders who do not have a strong stomach and should likely stay away from so they do not feel ill.  Safe haven avenues such as the USD The USD The USD is the official currency of the United States of America. It is the largest reserve currency... More is the official currency of the United States of America. It is the largest reserve currency... More , JPY The official currency of Japan is the JPY The official currency of Japan is the JPY which is also knows as the Japanese Yen The official currency of Japan is the JPY which is also knows as the Japanese Yen The official currency of Japan is the JPY which is also knows as the Japanese Yen to investors and t... More to investors and t... More to investors and t... More which is also knows as the Japanese Yen to investors and t... More and Gold have gotten attention, but even these spheres have been punctuated by sudden twists and turns. And folks the ride is only going to get more exciting and opportunistic.

Trading will depend on the ability of participants to handle the turns, inclines and rapid jolts of the global marketplace. The question is if the risks can be quantified and if the potential for profits will be enough to entice traders into speculative positions. The Federal Reserve The Federal Reserve The Federal Reserve The Federal Reserve is the Central Bank of the United States of America and sets the monetary policy When used by traders and investors monetary policy When used by traders and investors monetary policy When used by traders and investors monetary policy usually refers to Central Bank policy concerning ... More usually refers to Central Bank policy concerning ... More usually refers to Central Bank policy concerning ... More ... More is the Central Bank of the United States of America and sets the monetary policy... More is the Central Bank of the United States of America and sets the monetary policy... More will get into the act tomorrow from the United States via its FOMC Statement, but is anyone really expecting any surprises? The answer is no, because economic data – led by a poor Non-Farm Employment Change result in early June cemented the inability for the Fed The Federal Reserve is the Central Bank of the United States of America and sets the monetary policy... More to increase interest rates now and likely dampened any possibility of a July increase.

The Federal Reserve no doubt will need to see a cycle of good economic activity before it can consider its much promised interest rate hikes which it has completely failed to deliver. Also coming from the U.S. will be the Empire State Manufacturing Index on Wednesday which produced a very bad reading last month.

A huge reason for the volatility in the global markets is because of the coming Brexit vote on the 23rd of June. The result cannot clearly be predicted. Two months ago many analysts including MaxOptions believed that the U.K. would vote to stay within the European Union with an easy outcome. However, the results via recent polling in the U.K. indicate that many potential voters intend on casting ballots in favour of leaving the European Union. To make it more interesting it is being reported that ‘betting houses’ in London believe that U.K. voters intend on staying within the E.U., which explains why investors feel perplexed.

Adding fuel to the fire being caused by the mayhem of the Brexit vote are the sparks from global government bonds which are producing record low yields. The German 10-year bond is now below zero. The reasons for this are not only safe haven seekers being created by fears of a Brexit, but also by Central Banks and their inability to hike rates – and their flirtations with negative interest rates.

The Bank of Japan and the Bank of England will both announce their official rates on Thursday.  The JPY has grown very strong in the past week and it is a near certainty that the Japan government is not happy with this outcome, but the question is how much ammunition does the BoJ have at this juncture to weaken the JPY.

Certainly the Bank of England is not going to make a move on Thursday facing the threat of an almost incalculable excel sheet of costs if the U.K. were to decide on leaving the European Union on June the 23rd.  Short-term trades and long-term propositions may present completely different tracks for traders at this juncture as they contemplate sentiment that is growing more anxious, while weighing this against valuations which seem to offer room for opportunities over periods of time. Traders will have to battle through their weariness and make sure they consider all risks. While the EUR and GBP may appear undervalued the currencies will face tests in the short-term as financial institutions contemplate hedges to safeguard vulnerable positions.

The Brexit looking glass is unclear and this is creating an air of extreme caution in the markets. The problem is that caution sometimes leads to sudden gyrations that can cause massive pressures in FX and Indices.