Importance Of Tracking Key Macro Drivers
Macro drivers are key themes which will help you anticipate price action and market bias'.
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We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
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We have a quick question here from a new subscriber asking why risk assets have been so choppy this week, saying we've had strong moves lower and strong moves higher and it's really difficult for them to keep track of the current market environment and they feel a little bit out of their depth.
The first thing I'll say is don't feel worried if you're a bit taken aback by some of the recent moves we've seen in markets. These aren't regular trading environments by any means that we're trading in and even the smartest and PhD analysts and traders and economists out there have recently been scratching their heads with some of the moves that we've been seeing.
So you know, it's normal to feel this way, especially if you haven't been exposed to these types of moves before and I just quickly want to run through an idea that's often overlooked and that is very important to really keep track of these types of moves and knowing when something will have a much bigger impact in the market, compared to not and that is by always keeping track of the key macro drivers that we have in the market.
So no matter where we are in the business cycle, no matter where we are in terms of monetary policy, those things are very very important, we always need to keep track of them but we always need to keep track of the main or key macro drivers that the markets are focusing on at any given time and you can basically classify them into two groups, you have your primary drivers and then you have your secondary drivers. Now the primary drivers are those macro themes that are the most pressing for the markets at any given time, so for example if you think back to 2016, what was the main primary drivers that the markets are focused on back in 2016? There was two things, it was first the Brexit referendum for June 2016 and then it was November 2016 US elections, where President Trump won the election.
Now in our current context here in July 2020, the underlying was secondary themes we have running right now is of course, the tension between China and the West, due to the recent Hong Kong legislation. We also have Brexit in the background with the negotiations going on because the transition period is at the end of this year and we also have the ongoing discussions with regards to the EU Recovery Fund, the proposal.
So the secondary drivers are things that are, they're still important to the markets but they might not be front of mind every day, due to the primary drivers basically taking all the shine and the price action in something like this it'd be 500 over the last two days, it just really gives us a great clear recent example of why focusing on the primary drivers are so important from an intra-day trading perspective.
So looking at the chart, we can see on Monday we had a very strong sell off in risk assets and a very strong risk off turn when we heard that the Governor of California had reinstated lockdown restrictions and ordered certain businesses to close down.
Now due to the virus being one of the primary drivers right now, we saw a very strong market reaction from it. Just a clean drop to the down side in that trading session.
We always need to make sure that we're using our energy and our time wisely when we trade and when we analyze the markets by placing more focus and more attention on those things that the markets are focused on right now and those primary and those secondary drivers in the market that we know there's gonna be market moving and this will help you to make better sense of these types of big moves in the market and will help you to guide your understanding when certain news happen, when it will have a bigger or smaller impact in the market, depending on what the markets are focusing on at that time, in terms of those primary and secondary drivers.
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If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://bit.ly/2HFykNd
-----
We have a quick question here from a new subscriber asking why risk assets have been so choppy this week, saying we've had strong moves lower and strong moves higher and it's really difficult for them to keep track of the current market environment and they feel a little bit out of their depth.
The first thing I'll say is don't feel worried if you're a bit taken aback by some of the recent moves we've seen in markets. These aren't regular trading environments by any means that we're trading in and even the smartest and PhD analysts and traders and economists out there have recently been scratching their heads with some of the moves that we've been seeing.
So you know, it's normal to feel this way, especially if you haven't been exposed to these types of moves before and I just quickly want to run through an idea that's often overlooked and that is very important to really keep track of these types of moves and knowing when something will have a much bigger impact in the market, compared to not and that is by always keeping track of the key macro drivers that we have in the market.
So no matter where we are in the business cycle, no matter where we are in terms of monetary policy, those things are very very important, we always need to keep track of them but we always need to keep track of the main or key macro drivers that the markets are focusing on at any given time and you can basically classify them into two groups, you have your primary drivers and then you have your secondary drivers. Now the primary drivers are those macro themes that are the most pressing for the markets at any given time, so for example if you think back to 2016, what was the main primary drivers that the markets are focused on back in 2016? There was two things, it was first the Brexit referendum for June 2016 and then it was November 2016 US elections, where President Trump won the election.
Now in our current context here in July 2020, the underlying was secondary themes we have running right now is of course, the tension between China and the West, due to the recent Hong Kong legislation. We also have Brexit in the background with the negotiations going on because the transition period is at the end of this year and we also have the ongoing discussions with regards to the EU Recovery Fund, the proposal.
So the secondary drivers are things that are, they're still important to the markets but they might not be front of mind every day, due to the primary drivers basically taking all the shine and the price action in something like this it'd be 500 over the last two days, it just really gives us a great clear recent example of why focusing on the primary drivers are so important from an intra-day trading perspective.
So looking at the chart, we can see on Monday we had a very strong sell off in risk assets and a very strong risk off turn when we heard that the Governor of California had reinstated lockdown restrictions and ordered certain businesses to close down.
Now due to the virus being one of the primary drivers right now, we saw a very strong market reaction from it. Just a clean drop to the down side in that trading session.
We always need to make sure that we're using our energy and our time wisely when we trade and when we analyze the markets by placing more focus and more attention on those things that the markets are focused on right now and those primary and those secondary drivers in the market that we know there's gonna be market moving and this will help you to make better sense of these types of big moves in the market and will help you to guide your understanding when certain news happen, when it will have a bigger or smaller impact in the market, depending on what the markets are focusing on at that time, in terms of those primary and secondary drivers.
-----
If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
