Quick question from Asanka asking us how can you go about, basically, predicting what kind of news will move the market? So, Asanka, thanks for the question.
There’s two ways that we use that we can use to predict what type of news will be market-moving. The first one involves research and analysis that you can find inside the terminal.
There’s a couple of reports in the terminal like the tradable sentiment shifts report is one example. That’ll give you lots of information on exactly what to look for. In terms of a possible tradable sentiment shifts coming up in the market, there’s also the must read section where we have the daily risk event outlook report that’ll highlight the upcoming data points as well as upcoming speeches, political events that might move the market.
RECOMMENDED READING: HOW TO PREDICT MARKET MOVING NEWS
And we also have the video commentary that basically goes through a couple of examples of potential market movers in the daily basis as well. Now those will usually provide you with a wealth of information on current important themes that can cause volatility to look out for. Now of course apart from that, the second thing we encourage you to do is to do additional research, right? Making sure that you are staying on top of the current drivers across macro.
Now, there are also plenty of unexpected announcements that will hit the wires that might not be mentioned in any of our reports. Things that as it happens, you will know okay this will have an impact on the market or it should have an impact in the market, based on the additional research that you’ve done.
Just a quick example, was from earlier this week, we had an announcement in the newsfeed coming out from the South African Reserve Bank that actually came out, I think it was on Tuesday, with a surprise rate cut of a hundred basis points due to an extension of the current nationwide lockdown for the virus. Now, obviously, we don’t include any emerging market currencies as part of our specialization and research in the terminal, but living in South Africa, I always stay on top of the news and the current events and market expectations as far as I can.
So when the news dropped that they had a surprise rate cut, of a hundred basis points, I knew it would be it would mean downside for the ZAR. Especially against the US dollar that, at that time, actually saw some safe haven, some safe haven inflow. So as an emerging market economy, the only thing they really have going for them in times of like this is that basically attracting vestors is offering a much higher rate of return or a higher yield.
So by cutting rates by a hundred basis points just after cutting it by a hundred basis points just two weeks prior as well, I knew that it would be a short term negative catalyst for the ZAR. So I’m here to basically this candle was the announcement so I basically just jumped in on that deuce after the initial candle to the upside because I knew it would be a sustainable move throughout the day. And basically just rode that out until it reached that next level of resistance.
Now, obviously in hindsight, I should have probably held onto this trade for a little bit longer. The buyers was definitely told that to the upside for the US dollar versus the ZAR but my point with this isn’t to say that you should now start suddenly trading emerging market market currencies.
It’s just an example. The point was that by doing initial research I knew that it would be market-moving. But there was not any expectations, you know, in the market for them to cut. It was just a surprise move that I happened to be prepared for at that time.
So apart from going through all the info we have available in the terminal that can move the markets, make sure to do some additional macro research. Just giving you a broader sense of what is moving economies.
What is moving the market trade now, to give you that upper hand that when something hits the wires you immediately know, okay, this is going to be market moving. It’s something that you can jump in or not, so.
That’s just a quick tip from my side. Asanka, if there’s any other questions, don’t hesitate to let us know.MOV