-2,128 USD Result Lessons: Risk-Off Response and Strategy Review Amid Ukraine Tensions
Trading Results from November 18 to November 22, 2024
Profit/Loss: -2,128 USD
Cause:
The rising geopolitical tensions between Ukraine and Russia increased the risk-off sentiment in the market, leading to significant selling pressure on the euro. I attempted to sell the euro several times, but my entry points were off, resulting in multiple stop-outs. However, I am still maintaining a bearish outlook on the euro.
Market Conditions: Geopolitical Risk Remains the Main Theme
Risk-Off Sentiment Continues:
Ukraine Situation: Tensions with Russia have heightened geopolitical risks, and the euro, due to its proximity and sensitivity, has been under selling pressure.
Gold (XAU/USD): Demand for safe-haven assets like gold has risen, and its price has remained robust.
Review of Major Currencies
USD/JPY: Fell from 155.36 to 153.29, then rebounded to 155.89.
Cause: Risk-off sentiment due to the Ukraine situation and higher U.S. interest rate expectations.
EUR/USD: Hit 1.0462, marking the lowest since October last year.
Cause: ECB rate cut expectations and geopolitical risks.
GBP/JPY: Dropped from the 196 range to the 193.50 range, before recovering to the 194 range.
Cause: Support from higher UK CPI, but geopolitical risks capped gains.
CAD/JPY: Rose from the 109 range to the 111 range, then adjusted to the 110 range.
Cause: Accelerating Canadian CPI and risk-off adjustments.
AUD/JPY: Rose from the 99 range to the 101 range, but then stalled.
Cause: The strong U.S. dollar and risk-off sentiment.
ZAR/JPY: Struggled at the 8.60 range but held steady around 8.40.
Cause: Post-SARB rate cut, lacking fresh catalysts.
Outlook and Strategy for the Week of November 25, 2024
Market Outlook
USD/JPY:
Direction: Continued upward trend.
Focus: Trump trade and higher U.S. rate expectations remain supportive. Watch for headline risks during thin liquidity around Thanksgiving.
EUR/USD:
Direction: Bearish.
Focus: ECB rate cut expectations and concerns over Trump administration tariffs remain downward pressure. A break below 1.0448 could add further selling pressure.
GBP/JPY:
Direction: Downward risk.
Focus: UK CPI is supportive, but geopolitical risks weigh on the pound.
CAD/JPY:
Direction: Mildly bullish.
Focus: Canadian CPI’s surprise and oil price movements could provide upward momentum.
AUD/JPY:
Direction: Sideways to bearish.
Focus: Watch Australian CPI and RBA Governor’s comments for influence.
ZAR/JPY:
Direction: Directionless.
Focus: Watch for sudden risks or the impact of reduced liquidity during Thanksgiving.
Key Economic Events
November 25 (Monday):
Australia: October CPI.
November 27 (Wednesday):
New Zealand: RBNZ policy rate decision.
U.S.: October Durable Goods Orders, GDP revised, new jobless claims, and PCE core deflator.
November 28 (Thursday):
U.S.: Thanksgiving (market closed).
This Week’s Strategy
Cautiously advance EUR selling:
Reassess entry points and look to sell upon a break below 1.0448.
Focus on gold’s safe-haven demand:
Continue with buying gold as geopolitical risks rise.
Monitor CHF movement:
Take defensive positions using the strong Swiss Franc in a risk-off environment.
Adapt to liquidity risks:
With headline risks rising during the Thanksgiving period, ensure flexible trades with small lot sizes.
P.S.
This week’s focus is on Ukraine’s use of the US-made ATACMS (Army Tactical Missile System), with a range of 300km, which prompted Russia to launch a medium-range ballistic missile, a weapon not previously used in combat.
After the missile landed, Ukraine announced that it was an intercontinental ballistic missile (ICBM). The market quickly shifted towards risk-off sentiment, but it was later revealed that the missile was a new medium-range missile “Olesynik,” based on the RS-26 Rubizh ICBM.
Many might wonder what the difference is between an ICBM and a medium-range ballistic missile. In simple terms, the difference lies in the range.
The range of an ICBM typically exceeds 5,500 km, with some reaching up to 15,000 km. In contrast, the range of medium-range ballistic missiles is typically between 500 and 6,000 km. Both can carry nuclear warheads.
Considering the distances, Russia cannot reach major US cities with this missile, but all major European cities are well within range.
Distance from Russia to the US:
Moscow to New York: ~8,000 km
Moscow to Los Angeles: ~9,700 km
Eastern Siberia to Alaska: ~4,800 km
Eastern Siberia to the West Coast (Seattle): ~6,700 km
Distance from Russia to major European cities:
Moscow to Berlin (Germany): ~1,600 km
Moscow to Paris (France): ~2,500 km
Moscow to Rome (Italy): ~2,400 km
Moscow to London (UK): ~2,500 km
Moscow to Madrid (Spain): ~3,400 km
Moscow to Athens (Greece): ~2,200 km
From the Urals (Western Russia):
Berlin: ~2,800 km
Paris: ~3,700 km
Rome: ~3,600 km
London: ~3,800 km
Madrid: ~4,600 km
Athens: ~3,000 km
From Kaliningrad (Russia’s westernmost point):
Berlin: ~500 km
Paris: ~1,300 km
London: ~1,300 km
Rome: ~1,600 km
Madrid: ~2,200 km
By the way, I’m currently in Paris, so I am well within the missile’s range.
As a result, the news from this missile launch makes it easier for the euro and the British pound to be sold, while the US dollar has had a relatively muted response to this event.
Currencies are greatly influenced by geopolitical news, and this incident serves as an example. Continuing to monitor geopolitical developments will be important.
Wishing you a great weekend!
