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Kathy Lien

Kathy Lien

Kathy Lien is an Internationally Published Author and Managing Director of BK Asset Management. Her trading books include the following: 1) For beginners, “The Little Book of Currency Trading (2010, Wiley).” 2) THIRD edition of the highly acclaimed, internationally published “Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2015, Wiley).” 3) Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley) 4) High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia)

Articles by Kathy Lien

Why Investors are Nervous Ahead of FOMC

23 hours ago

Why Investors are Nervous Ahead of FOMC
Daily FX Market Roundup Sept 16, 2019
There are four central bank monetary policy announcements on the calendar this week but the Federal Reserve’s is hands down the most important. On Friday we talked at length about what to expect for FOMC and we’ll touch on that again tomorrow, the eve before the Fed meeting. However for now, we’d like to discuss the broad based rally in the US dollar. The greenback strengthened against all of the major currencies except for the Japanese Yen. The decline in USD/JPY is consistent with the sharp decline in treasury yields and sell-off in stocks. Investors are nervous ahead of the Fed meeting for a number of reasons. First the most recent piece of US data – the Empire State manufacturing index was

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USDJPY Up 7 out of 8 Trading Days

4 days ago

USDJPY Up 7 out of 8 Trading Days
Daily FX Market Roundup Sept 13, 2019
Next week is the Federal Reserve’s monetary policy announcement and despite widespread expectations for the Fed’s second rate cut this year USD/JPY is trading strongly ahead of the rate decision. The pair ended the week up for the 7th out of 8 trading days. The latest economic reports beat expectations with retail sales rising 0.4% in the month of August, which was double expectations. Consumer sentiment also improved with the University of Michigan Consumer Sentiment Index rising to 92 from 90.8.
According to Fed fund futures, the market completely discounted a quarter point rate cut and sees a 70% chance of a second move before the end of the year. Interestingly enough, these odds shifted lower over the past

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3 Reasons Behind EURO’s V-Shaped ECB Reversal

5 days ago

3 Reasons Behind EURO’s V-Shaped ECB Reversal
Daily FX Market Roundup Sept 11, 2019
The European Central Bank went above and beyond today in rolling out a massive stimulus package. Their actions not only reflect their desperation but also their resolve to boost the Eurozone economy and mitigate the risk of recession. These were the five steps taken today and when they were first announced, the combination of efforts drove EUR/USD to a low of 1.0927. The ECB also lowered their inflation and GDP forecasts for 2019 and 2020. According to ECB President Draghi, their actions were prompted by 3 elements – a more marked slowdown in the Eurozone economy, the persistence of downside risks and their baseline scenarios that included downward revisions to all of their inflation projections.

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EUR Outlook – How ECB Could Disappoint

6 days ago

EUR Outlook – How ECB Could Disappoint
Daily FX Market Roundup Sept 11, 2019
Tomorrow’s European Central Bank monetary policy announcement is the most important event risk of the week and we are not surprised that EUR/USD broke below 1.10 ahead of this rate decision. Investors have big expectations for this meeting because of widespread deterioration in the Eurozone economy and talk of recession in Germany. Euro hit a 2-year low last week against the US dollar as German bund yields tumble deeper into negative territory. Back in July Draghi brought up the benefits of a combination of measures and since then the need for stimulus intensified. While investors are preparing for a massive dose of stimulus, there’s also a reasonable chance the ECB will under deliver.
The Eurozone economy

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FX: Beginning of the Week Recovery in Risk

8 days ago

FX: Beginning of the Week Recovery in Risk
Daily FX Market Roundup Sept 9, 2019
All of the major currencies recovered today in what was a quintessential recovery in risk appetite. USD/JPY rose above 107 on the back of higher bond yields and US equities. Despite Friday’s lackluster jobs report and the lack of US data on Monday, 10 year Treasury yields rose above 1.6%. Investors were moved by the People’s Bank of China’s decision to lower its reserve requirement ratio by 50bp. This marked the third change of the year and fanned speculation for more aggressive fiscal stimulus from China. The latest trade numbers from China were dismal – not only did the surplus shrink more than expected but imports and exports declined. While overall exports fell only 1%, exports to the US were

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USD/CAD Crashes on Cool NFPs and Hot Canadian Labor

11 days ago

USD/CAD Crashes on Cool NFPs and Hot Canadian Labor
Daily FX Market Roundup Sept 6, 2019
Today’s non-farm payrolls report ended having very little impact on the US dollar. The greenback traded lower at the onset but recovered higher by the end of the NY session. According to the latest report, job growth slowed in August but average hourly earnings growth accelerated. Only 130K jobs were created, down from 159K but earnings grew at a 0.4% pace versus 0.3% in July. This was the strongest pace of wage growth in 6 months. Everything we heard from Federal Reserve officials suggests that they are reluctant to ease. This past week, FOMC voter Rosengren said “no immediate Fed action is needed if data stays on track.” FOMC voter Williams feels that the baseline for the economy is

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US Dollar Outlook – 5 Reasons why Payrolls Could Disappoint

12 days ago

US Dollar Outlook – 5 Reasons why Payrolls Could Disappoint
Daily FX Market Roundup Sept 5, 2019
Based on the rally in the US dollar today, investors are betting on a strong jobs report. The greenback ended the day sharply higher against the Japanese Yen and Swiss Franc while recovering its losses against other major currencies. Non-farm payrolls are scheduled for release tomorrow and economists are looking for job growth to ease slightly to 160K from 164K the previous month. Investors on the other hand are hoping that job growth will be closer to 200K. Their optimism comes after ADP reported the largest increase in private sector jobs in 4 months. Jobless claims also remained low while job cuts eased according to Challenger, which suggests that non-farm payrolls increased in

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FX: US Data Revives Recession Fears, Bank of Canada Preview

14 days ago

FX: US Data Revives Recession Fears, Bank of Canada Preview
Daily FX Market Roundup Sept 3, 2019
Recession fears are back! The US dollar traded sharply lower after the ISM manufacturing report fell to its weakest level in more than 3 years. Manufacturing is an important part of the economy and one of the first to feel the effects of slower global growth. Manufacturing activity contracted for the first time since August 2016 as exports declined and new orders fell to a 7-year low. August was also the fifth straight month of weaker activity. The service sector represents a larger part of the economy but services won’t be able to grow if manufacturing keeps contracting. In response to the disappointing report, Treasury yields dropped to fresh 2 year lows while the Dow Jones Industrial

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Dollar Snaps Back as Yields Recover

19 days ago

Dollar Snaps Back as Yields Recover
Daily FX Market Roundup August 29, 2019
The US dollar traded higher against all of the major currencies today with the exception of the loonie. The move was driven by conciliatory rhetoric from China, better than expected US data and the first uptick in Treasury yields in a week. Second quarter US GDP growth was unrevised but personal consumption was stronger than expected, rising 4.7% against an initial estimate of 4.3%. US and China’s trade relationship broke down completely 2 weeks ago but over the past week, soothing rhetoric is coming from both sides. President Trump talked about productive “calls” with China and China said they did not want to escalate trade tensions and are preparing for bilateral meetings this month. As our colleague

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FX: Trump Keeps Market Off Balance

22 days ago

FX: Trump Keeps Market Off Balance
Daily FX Market Roundup August 26, 2019
Thanks to US President Trump whose tweets keeps the market off balance, it was a wild ride for currencies overnight. Pairs like USD/JPY and AUD/USD gapped lower at the Asia open after President Trump said he regrets not raising tariffs on China higher. Then all of the gaps were filled by NY when Trump said, “China called twice” to get back to the table and restart trade talks in the early European session. Its incredibly difficult to trade in a market like this where news bombs can easily trip off big moves in currencies because if China officially denies those calls, the recoveries will disappear quickly. A spokesman for China’s foreign ministry said he didn’t know what Trump was talking about. When

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Full Blown FX Risk Aversion, Trade War Reaches New Heights

25 days ago

Full Blown FX Risk Aversion, Trade War Reaches New Heights
Daily FX Market Roundup August 23, 2019
The US-China trade war reached new heights on Friday. Currencies and equities ended the week with major losses after China hit the US with tariffs on $75B worth of US goods. Almost immediately, President Trump ordered US companies to start looking for an alternative to China and promised a more painful response. Many believe that he will raise Chinese tariffs to 25% but we can’t rule out a more distressing countermeasure. The US dollar was hit the hardest by the escalation of trade tensions with USD/JPY and USD/CHF falling nearly 1%. More losses are likely in the coming week as investors and central banks grow more concerned about recessions.
Federal Reserve Chairman Jerome Powell’s

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EURO Outlook & The Fed is Sending an Interesting Message

26 days ago

EURO Outlook & The Fed is Sending an Interesting Message
Daily FX Market Roundup August 22, 2019
No one is buying euros because they are worried about the political situation in Italy, the possibility of a recession in Germany, the prospect of aggressive easing from the European Central Bank and the ongoing risk of more tariffs from the US. This week, Italy’s Prime Minister Conte resigned, turning crisis into chaos for the Eurozone’s third largest economy. Of all the euro’s troubles, Italian politics has the most limited impact on the currency. Europe is no stranger to Italian political uncertainty (they just had elections in 2018 and who can forget Berlusconi’s countless scandals) and this crisis was a long time coming. Instead of rising, Italian bond yields fell because

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Next 48 Hours is Make or Break for EURO

27 days ago

Next 48 Hours is Make or Break for EURO
Daily FX Market Roundup August 21, 2019
The next 48 hours will be very important for EUR/USD because the currency pair has been confined in a narrow 60 pip trading range for most of the week. With Germany talking about potential recession in the third quarter and the Italian government in disarray, the single currency is struggling to find buyers. Yet the pair holds above 2 year lows because the market also expects an interest rate cut from the Federal Reserve next month.
Investors are worried that US policymakers will shift their guidance at Jackson Hole this week, which is why they largely ignored today’s less dovish FOMC minutes. The dollar rallied briefly and gave up its gains quickly. When the central bank last met, they lowered

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FX: Getting a Sugar High from Talk of Stimulus?

29 days ago

FX: Germany, US, China All Talk Stimulus
Daily FX Market Roundup August
Investors are dipping their toes back into US assets. Stocks traded higher for the third day in a row, Treasury yields rebounded off their lows and the greenback started the week stronger against all of the major currencies. These moves had nothing to do with data as there are no major US economic reports on the calendar this week. Instead currencies continue to be driven by headline risk and the prospect of fiscal and monetary easing. For the US in particular, there’s talk that the White House is considering a payroll tax cut to stimulate the economy. We know that President Trump is not satisfied with the extent of interest rates cuts so if the Federal Reserve continues to under deliver his only option will be

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Will EUR/USD Break 1.10?

August 16, 2019

Will EUR/USD Break 1.10?
Daily FX Market Roundup August
It has been a great week for the US dollar which recovered against all of the major currencies with the exception of sterling, which coasted on stronger UK data. The dollar’s rally was driven primarily by better than expected US data. Retail sales doubled expectations while year over year CPI growth edged closer to the central bank’s 2% target. These reports validate Fed Chairman Jerome Powell’s recent comments about the economy’s resilience and his positive assessment of the labor market. What it doesn’t do is reduce the chance of easing. Fed fund futures are still pricing in 100% chance of a quarter point rate cut next month so it will be very difficult for dollar bulls to remain in control. So far we haven’t heard many

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USDJPY Drops as US Data Beats but Fed Still Needs to Ease

August 15, 2019

USDJPY Drops as US Data Beats but Fed Still Needs to Ease
Daily FX Market Roundup August
The most important piece of US data scheduled for release this week was retail sales and even though consumer spending doubled expectations, investors shrugged off the news. For our readers, this should not be a surprise because yesterday we said nothing matters more than trade tensions, recession risks and global uncertainty. Even if consumer spending soars, the Federal Reserve will still need to lower interest rates in response to the deterioration in US-China trade relations, sell-off in stocks and turn in sentiment. The US and China made it very clear today that the tariff delays in no way reflects improved trade relations. US Commerce Secretary Ross said there was no quid pro quo with

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US Yield Curve Inversion – What it Means for You, Markets & FX

August 14, 2019

US Yield Curve Inversion – What it Means for You, Markets & FX
Daily FX Market Roundup August 14, 2019
Most people have a simple and basic understanding of what a yield curve inversion means. They know that it is unusual and every headline tells them that its bad news for the economy. Some are even aware that when a yield curve inverts, long-term interest rates fall below short-term interest rates as investors require greater return for locking up their funds for 2 vs. 10 years. Yield curve inversions in the US and UK triggered a wave of panic in the financial markets today. The Dow Jones Industrial Average dropped more than 700 points, money flocked into safe haven currencies, gold prices increased and oil prices fell sharply. All of these moves are consistent with risk aversion.

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Trump Delays China Tariffs, How Durable is the Bottom in FX?

August 13, 2019

Trump Delays China Tariffs, How Durable is the Bottom in FX?
Daily FX Market Roundup August 13, 2019
Currencies and equities raced higher after President Trump said he would delay tariffs on Chinese imports. He said “We’re doing this for the Christmas season. Just in case some of the tariffs would have an impact on U.S. customers.” Based on these comments, this overture is not a result of progress in US-China trade talks but instead pressure from US businesses. Regardless investors saw this as the perfect excuse to cover their shorts. The Dow Jones Industrial Average rose more than 400 points and USD/JPY soared above 106 in response.
AUD and NZD also turned higher, leading investors to wonder they’ve hit a bottom. Unfortunately while we expect a further recovery in risk currencies,

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Don’t Buy these 3 Currencies

August 12, 2019

Don’t Buy these 3 Currencies
Daily FX Market Roundup August 12, 2019
This week’s calendar is a jammed with market moving economic data but these releases will not alter the current trends in the market. For example, USD/JPY is very weak – it has been falling for seven out of the last eight trading days and is trading at its lowestt level in 7 months. This decline reflects the anxiety in the markets and the expectation for a response from the central bank. It is also reinforced by the persistent decline in Treasury yields and sell-aoff in stocks. Investors believe that with the deterioration in US-China trade relations and the turn in the markets, the Federal Reserve will have no choice but to lower interest rates next month. In fact, according to Fed Fund futures, traders are

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When Will USDJPY Break 105?

August 9, 2019

When Will USDJPY Break 105?
Daily FX Market Roundup August 9, 2019
It has been a very busy week for President Trump. On Sunday, he announced fresh tariffs on China, on Tuesday he ordered the Treasury to label China a currency manipulator, on Thursday he blasted the government’s strong dollar policy and on Friday, he said the US is not going to do business with Huawei and called on the Fed to lower interest rates by a full percentage point. Although it was later clarified that he meant he would be banning the federal government from doing business with Huawei and not US businesses, the damage was done. It is clear that President Trump has no plans to make a deal with China this far from the 2020 election. He’s on a rampage to show his constituents that he’s fulfilling the promises

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Why Trump Can’t Afford to Intervene in the Dollar

August 8, 2019

Why Trump Can’t Afford to Intervene in the Dollar
Daily FX Market Roundup August 8, 2019
Volatility wise, it was a relatively quiet day in the forex market. USD/JPY extended its losses but the greenback recovered against euro, sterling and other major currencies. The rallies in the Australian and New Zealand dollars were the strongest with both currencies experiencing their biggest one-day rally in 3 weeks versus the dollar. While there were no US economic reports released today, the rebound in stocks supported the steadier price action. Better than expected Chinese trade also helped fuel the recovery in AUD and NZD.
With that said, the big story in the markets today was President Trump’s comments on the dollar. In a series of tweets, he said, “As your President, one would think

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Will the RBNZ Cut Rates? Implications of China Currency Manipulator Label

August 6, 2019

Will the RBNZ Cut Rates? Implications of China Currency Manipulator Label
Daily FX Market Roundup August 6, 2019
The US government looked the other way for the past 25 years but under President Trump’s watch that is no longer be the case. For the first time since 1994, the US Treasury labeled China a currency manipulator. China responded by denying “any use of the exchange rate as a tool to deal with trade disputes” and blasted the US for taking action that would “severely damage international financial order and cause chaos in financial markets.” But instead of tanking, the Dow Jones Industrial Average stemmed its slide and the Chinese Yuan stabilized. In other words chaos did not rain down after the US announcement. Everyone will agree that the currency manipulator label has

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Does 750 Point Dow Drop Equal 50bp Fed Cut?

August 5, 2019

Does 750 Point Dow Drop Equal 50bp Fed Cut?
Daily FX Market Roundup August 5, 2019
There are 2 words to describe market sentiment right now – panic and fear. The Dow Jones Industrial Average dropped more than 700 points today, its biggest one-day slide in 2019. Last week President Trump announced new tariffs on China and overnight, China raised the stakes by allowing its currency to fall to a record low, breaching the 7.0 USD/CNY rate in the process. In addition to devaluing its currency, China also asked its state buyers to halt all US agricultural imports. President Trump responded by calling China a “currency manipulator,” raising fears that he’ll order the Treasury to slap this label on China officially. If the Treasury were to brand China a currency manipulator for the first

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Markets Crash, Consequences of Trump’s Newest Tariffs

August 1, 2019

Markets Crash, Consequences of Trump’s Newest Tariffs
Daily FX Market Roundup August 1, 2019
When we look back at this busy week nothing may matter more than news bombs and headline risk. Today, President Trump sent currencies and equities crashing lower by hitting China with an additional 10% tariff on $300B in Chinese imports starting next month. He said that while trade talks resumed and China promised to buy large amounts of agricultural products from the U.S., they “did not do so” nor did they “stop the sale of Fentanyl to the United States.” President Trump said trade talks are continuing but he’s playing hardball in the most dangerous way by slapping China with new tariffs. Beyond the sell-off in U.S. stocks, the U.S. and Australian dollars, there are a number of important

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Fed Cuts by 25bp & Here’s 3 Reasons Why Dollar Rallied

July 31, 2019

Fed Cuts by 25bp and Here’s 3 Reasons Why Dollar Rallied
Daily FX Market Roundup July 31, 2019
The Federal Reserve lowered interest rates by 25bp for the first time since 2008 and instead of sliding, the US dollar rallied. Normally, rate cuts are negative for a currency but in the case of the Fed, investors interpreted today’s actions as positive for the currency for the following reasons:
3 Reasons Why Dollar Rallied after Fed Cut Rates 25bp
1. 2 FOMC members voted against a rate cut
2. Fed Chair Powell says rate cut isn’t necessarily start of long series of rate cuts
3. Powell focused on strength of labor market, uptick in retail sales and resilience in economy
Going into today’s monetary policy announcement the market had fully discounted a quarter point cut with some traders were

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3 Scenarios for US Dollar on FOMC Day

July 30, 2019

3 Scenarios for USD on FOMC Day
Daily FX Market Roundup July 31, 2019
For the first time since the global financial crisis the Federal Reserve is expected to lower interest rates by 25bp. The rate cut itself won’t be a surprise as the market fully discounted the move weeks ago after the June monetary policy announcement. The Fed has given us zero reason to expect anything except a quarter point rate cut so the change in interest rates will be the least market moving part of the FOMC announcement. Instead, US dollar traders should be focused on the votes and forward guidance. We have a number of reasons to believe that the Fed will signal that this week’s preventive cut is all that is needed this year. When the central bank met in June they made it clear that their monetary policy

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Euro Hits 2 Month Lows, How to Trade ECB

July 23, 2019

Daily FX Market Roundup July 23, 2019
On the eve of one of this year’s most important European Central Bank monetary policy announcements, the euro is trading at a 2 month low versus the US dollar. The single currency broke below 1.12 overnight and extended its losses during the NY session. While everyone is talking about the prospect of an interest rate cut in the US, the ECB could also lower interest rates. Typically they like to prepare investors for major changes, which is why they are expected to take the major step of altering their forward guidance this week.
The ECB could easily add accommodation in July but according to the following table that highlights the changes in the economy since their last meeting, they have the flexibility of waiting until their economic

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UK to Get New PM, USD/CAD Bottoms

July 22, 2019

UK to Get New PM, USD/CAD Bottoms
Daily FX Market Roundup July 22, 2019
The next 2 weeks will be a busy one for the forex market but the lack of economic data on Monday has led to relatively quiet trade. The greenback moved higher against most of the major currencies after Fed President Rosengren suggested that he doesn’t support a rate cut. In an interview with CNBC on Friday, he described the economy as strong and said he doesn’t want to ease if the economy is doing perfectly well. As a voting member of the FOMC, his words carry heavy weight on the market. Yet even if he votes against a rate cut next week, there’s still enough support within the central bank for accommodation but his voice adds to the chorus of central bankers who are likely to opt 25bp over 50bp of easing this

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USD/CAD – Where’s the Bottom?

July 19, 2019

USD/CAD – Where’s the Bottom?
Daily FX Market Roundup July 19, 2019
The US dollar traded higher against all of the major currencies on Friday including the Canadian dollar but even with today’s rise, it is too early to declare a bottom in USD/CAD. Canada’s retail sales report the most market moving piece of data today and while it printed much worse than expected, the boost that it provided for the pair was short lived. The pair surged above 1.31 but the rally fizzled almost quickly as it happened. The selling pressure is strong for one reason alone, which is that the US dollar is weak. Economists had predicted a 0.3% rise in retail sales and the -0.1% decline caught everyone by surprise. It the first drop in 4 months and a big miss that was driven by weaker demand for food and

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5 Reasons Why Traders are Selling US Dollars

July 18, 2019

5 Reasons Why Traders are Selling US Dollars
Daily FX Market Roundup July 18, 2019
Investors are selling US dollars and we’d like to explain why. All of the major currencies traded higher against the greenback on Thursday with the exception of the Canadian dollars. There are no fewer than 5 reasons for the greenback’s weakness over the last 24 hours:
5 Reasons Why Traders are Selling US Dollars
1. Federal Reserve poised to cut rates this month
2. Iran seized a foreign tanker
3. US Treasury Secretary Mnuchin teases possible change in Dollar policy
4. Earnings disappointments drive stocks lower
5. USD/JPY closes in on 1 month lows
The backdrop should be one of US dollar weakness because the Federal Reserve is poised to lower interest rates this month. Although they may only grant us

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