Trade Logic vs. Reality... Guess Who Won?

Macro Gossip
The Market Still Moves To Trump’s Beat.

Now the 'Tariff Man' (strange superhero / villain name) is no stranger to dropping political statements either on X formerly known as Twitter or his Truth Social platform. 

But the upcoming president of the United States Donald Trump seems to have started his tariff campaign early by announcing plans to place 25% tariffs on Canada and Mexico. 

The market got spooked, especially USD/CAD which popped its head back above the 1.4100 resistance level (Jord will be happy). 

Those that traded in 2016 to 2020 will be very familiar with this narrative. I assume the Trump social media alert tracker will be re-instated now, and traders will be on edge for the next four years.

Why it Matters:

Trump’s tariff talk is back, here’s what to watch:

1. Trump’s announcements will move markets – Unfortunately, as retail traders we can prepare for this by following and hitting the notification bell on Trumps socials.

2. Volatility – I always use an ATR (Average True Range) for my stops, but when trading assets to do with the US or nations impacted by significant tariffs, it may pay to add a little extra on stops.

3. Trading decisions – The difference this time around, Trump has the house and the senate, so passing bills will be easier. Is it smart to make snap decisions on these social media posts? No. Be thoughtful in your process still.

The Boss’s Take: “Woo another 4 years of the market being reactive! Can’t wait!”

Quick & Dirty Trade
Swipe Right on GBP?

Got a minute? Perfect, here’s the view of GBP this week:

• Pros: With ongoing uncertainty surrounding UK GDP growth and dovish tones from the BoE, GBP/USD could face downward pressure. Pair this with consistent USD strength, setting up a solid short opportunity.

• Cons: Any surprise hawkish commentary from the BoE could reverse the trend. Upcoming US data (like NFP) might introduce volatility and USD uncertainty. And Jon likes the idea…

Verdict? Swipe right if you’re into risk; swipe left if you want to sit on the side lines.

Macro Insight, Micro Impact
Episode 17 – The BOJ’s Balancing Act

Plot Twist of the Week:
Japan’s inflation is heating up, but the Bank of Japan is sticking to its ultra-loose monetary policy. With inflation consistently above 3%, the BOJ’s decision to hold rates steady raises a burning question: Are they playing with fire?

Why This Matters:

• Low Rates = Carry Trade Boom.
  Investors may keep borrowing yen cheaply to buy higher-yielding assets, sustaining global risk appetite.

• Yen Weakness Ahead.
  The JPY could remain under pressure, pushing pairs like USD/JPY and EUR/JPY higher.

• Exports Get a Boost, but At What Cost?
  Japan’s exporters may celebrate, but domestic consumers are feeling the pinch from rising import costs.

• Will the BOJ Be Forced to Pivot?
  If inflation remains stubborn, market speculation could grow around a policy shift, introducing volatility in yen crosses.

Stay tuned as the BOJ’s next moves could shake global FX markets!

Macro Hack of the Week
Correlations Can Be Insightful

This week we look at the Treasury Notes vs USD. T-notes are similar to bonds, but have a shorter maturity than other debt securities.

Typically U.S Treasury notes have an inverse relationship with U.S dollar (similar to bonds). Think of it as a seesaw effect, as Treasury Notes rise the USD can fall and vice versa. 

Look at this chart of the 5-year T-Note Futures (candlestick chart) and the DXY (pink line).

Why it matters for traders:

• The 5-year T-Note futures and the DXY have an inverse correlation, this can be useful in determining what could come next for the USD.

• The Commitment of Trader Reports highlight a strong bullish signal on the 5-year T-Note. Hedge funds are short at levels we haven't seen in history.

• If the correlation holds up and the 5-year T-Note futures rally, it could help identify a turn in the USD.

Seasonal Play Of The Week
EURUSD BULLISH?

Next week’s seasonal spotlight shines on EUR/USD. Over the past 20 years, the pair has shown a strong 75% win rate during the period November 29th to December 29th, with an average gain of 2.09% in those 15 winning years.

Will you be trading this seasonal trend? 👀

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