Thursday , October 1 2020
Home / Kathy Lien
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

How Month End Flows & Presidential Debate Moved FX

17 hours ago

How Month End Flows & Presidential Debate Moved FX
Daily FX Market Roundup September 30, 2020
Currency trading was just as messy on Wednesday as the first US Presidential debates. Euro, which rallied against the US dollar in Asia, came under selling pressure in Europe, snapped higher shortly after the NY equity market open only to see its gains fizzle by the end of the day. Similar price action was seen in USDJPY which rallied in the early hours but fell sharply after the NY open. It is not unusual to see wild swings this time of the year as month and quarter end flows played a large role in currency volatility. EUR/USD and USD/JPY moves aside, today was not a good day for the greenback. The dollar sold off against most of the major currencies despite stronger US data.
Non-farm

Read More »

Dollar Extends Slide ahead of First Presidential Debate

2 days ago

Dollar Extends Slide ahead of First Presidential Debate
Daily FX Market Roundup September 29, 2020
Investors drove the US dollar lower ahead of the first Presidential debate between President Trump and former Vice President Joe Biden. The contemporaneous sell-off in equities, Treasury yields and the currency tells us that investors are worried that the debates will polarize voters further and cause more uncertainty. While debates rarely win elections they can be important turning points in adding or subtracting momentum. President Obama’s famous comeback in the last debate sealed his win against Mitt Romney, while Hillary Clinton failed to put away Donald Trump by not being aggressive enough in 2016. As our colleague Boris Schlossberg noted, “Given both men’s penchant for

Read More »

Dollar Retreats as Dow Jumps 500 Points

3 days ago

Dollar Retreats as Dow Jumps 500 Points
Daily FX Market Roundup September 28, 2020
Equities kicked off the week with gains on Monday as the Dow Jones Industrial Average rose more than 500 points. At the end of last week, Treasury Secretary Mnuchin and House Speaker Pelosi revived hope for another coronavirus stimulus package. We didn’t see any new developments Monday but stocks leaped higher on the possibility of a new deal and reports that President Trump will announce the shipment of millions of coronavirus tests to states urging them to use them to reopen. The first televised debate between Trump and Biden is also tomorrow night and investors are eager to hear updated plans from the two candidates on stimulating the economy. No US economic reports were released but non-farm

Read More »

A Feeble Recovery in Currencies

7 days ago

A Feeble Recovery in Currencies
Daily FX Market Roundup September 24, 2020
Currencies and equities attempted a comeback on Thursday after selling off sharply this week. While currencies rebounded, the Dow Jones Industrial Average which rose nearly 300 points intraday failed to hold onto its gains. Investors had been desperate for some good news which they found in the latest new home sales report. Economists predicted weaker housing market activity but more than a million new homes were sold in the month of August, the most since 2006. Record low interest rates and the exodus out of metropolitan cities fueled robust demand for new property. While many question the durability of this demand, the housing market will be supported by the prospect of no rate hikes for the next few

Read More »

EURO Outlook – Is 1.15 Next?

8 days ago

EURO Outlook – Is 1.15 Next?
Daily FX Market Roundup September 23, 2020
Investors continued to sell euros on Wednesday, driving the currency to its weakest level since July. Europe’s greatest fear is materializing with the number of coronavirus cases exceeding 5 million. As we indicated at the start of the week, stricter restrictions are on their way. France in particular introduced a color coded map of hot spots and restrictions on gathering along with reducing opening hours for bars and cafes in an attempt to slow the virus spread. No one is willing to return to the hard lockdowns that were in place in the spring but even smaller measures like these will curtail growth. We’re already beginning to see a slowdown in the recovery with service sector activity slowing across the

Read More »

Dollar Rally Sends these Currencies to 1 Month Lows

9 days ago

Dollar Rally Sends These Currencies to 1 Month Lows
Daily FX Market Roundup September 22, 2020
The US dollar traded higher against all of the major currencies on Tuesday on the back of relatively neutral comments from Federal Reserve Chairman Jerome Powell. Although Powell described the outlook as highly uncertain and said “the path forward will depend on keeping the virus under control and on policy actions taken at all levels of the government,” none of these remarks were surprising. Powell is speaking a few times this week on the coronavirus and the economy but with monetary policy set, comments from his peers could be more market moving. In fact we were surprised when Fed President Evans said the economy returned to 90% of pre-pandemic levels (because it certainly doesn’t feel

Read More »

Europe’s Second Virus Wave Triggers Sharp FX Sell-Off

10 days ago

Europe’s Second Virus Wave Triggers Sharp FX & Equities Sell-Off
Daily FX Market Roundup September 21, 2020
Currencies and equities sold off sharply on Monday as virus cases in Europe hit new record highs. Everyone’s greatest fear this summer was a second wave and unfortunately that fear has materialized. Spain reported 14,389 new cases on Friday while France reported nearly 13,498 new cases Saturday. These numbers which are far beyond the peaks set back in March triggered a series of tighter social restrictions in Europe’s second and third largest economies. Even Germany which has not seen a significant uptick in virus cases tightened mask and contact regulations in a bid to prevent a broader spread in Munich. In the UK, cases are below their spring peak but doubling every day,

Read More »

NZD Soars to 5 Month Highs as NZ Beats Out COVID Twice!

13 days ago

NZD Soars to 5 Month Highs as NZ Beats Out COVID Twice!
Daily FX Market Roundup September 18, 2020
The US dollar fell to fresh lows against euro, the Japanese Yen and New Zealand dollar on Friday. This morning’s US economic reports were mixed. Consumer sentiment improved in the month September but the current account deficit ballooned in the second quarter. The uptick in sentiment is a a surprise considering that stocks declined and extra unemployment benefits expired for many Americans. However this suggests there is still a lot of hope that a vaccine is right around the corner and economic activity will return to normal. Even though stocks are flat, the rally in the dollar is still a reflection of risk aversion because USD/JPY fell for the fifth day in a row to a one year low.

Read More »

Stocks Sell Off, Dollar Follows

14 days ago

Stocks Sell Off, Dollar Follows
Daily FX Market Roundup September 17, 2020
Twenty four hours after the Federal Reserve pledged to keep interest rates at zero until 2023, the US dollar extended its losses against all of the major currencies. The greenback fell the most against euro and the New Zealand dollar and was the most resilient versus Aussie and Sterling. The day started with very little consistency for the greenback but by the end of the NY session, despite losses in stocks, it was clear that the Fed’s dovish outlook made the dollar less attractive. The latest US economic reports were mostly weaker than expected. Housing starts and building permits declined in the month of August while the Philadelphia Fed index failed to show improvements like the Empire State survey. Yet

Read More »

Fed Says No Rate Hikes Until 2023 – Dollar Buyers Unfazed

15 days ago

Fed Says No Rate Hikes Until 2023 – Dollar Buyers Unfazed
Daily FX Market Roundup September 16, 2020
The US dollar traded higher on the back of the Federal Reserve’s monetary policy announcement. Although the main takeaway from today’s FOMC meeting is no rate hikes for the next 3 years, the greenback strengthened, just like it did after Jackson Hoke because none of this was a surprise. As expected, the Federal Reserve left monetary policy unchanged and pledged to keep interest rates on hold until they achieve maximum employment. However the vote was not unanimous with 2 out of 9 policymakers dissenting. Kaplan wanted “greater policy flexibility” once employment and inflation goals are reached while Kashkari wanted stronger forward guidance to signal no hikes until inflation is

Read More »

Will FOMC be Good or Bad for the Dollar?

16 days ago

Will FOMC be Good or Bad for the Dollar?
Daily FX Market Roundup September 15, 2020
Wednesday’s Federal Reserve monetary policy announcement is the most important event risk on this week’s calendar but many investors are wondering how much impact it will have on the US dollar. On Monday, the greenback traded lower against all of the major currencies on the expectation for dovishness but today, the price action is mixed. The dollar extended its slide against the Japanese Yen but strengthened versus the euro. Other currencies like sterling, the Canadian, Australian and New Zealand dollars ended the day up versus the greenback but also descended from earlier highs which means that during the New York session with the exception of USD/JPY, the dollar caught a bid.
Why are investors

Read More »

Busy Week Ahead – How are FX Traders Positioned?

17 days ago

Busy Week Ahead – How are FX Traders Positioned?
Daily FX Market Roundup September 14, 2020
With three monetary policy announcements, labor market numbers, New Zealand Q2 GDP, retail sales and a number of inflation reports scheduled for release this week, it should be a busy one for currencies. Volatility is on the rise with USD/JPY breaking an 8 day long consolidation to end the day at its weakest level in more than 2 weeks. The greenback traded lower across the board as investors position for dovishness from the Federal Reserve. Last month at the virtual Jackson Hole Summit, Chairman Powell introduced a new strategy for inflation that could guide the wording of this week’s FOMC statement, dot plot and the central bank’s economic projections. Other currencies are also moving on

Read More »

Euro Fails to Hold Gains Despite ECB Optimism

21 days ago

Euro Fails to Hold Onto Gains Despite ECB Optimism
Daily FX Market Roundup September 10, 2020
Euro soared above 1.19 on the back of the European Central Bank’s monetary policy announcement. The ECB was less dovish than anticipated but the single currency failed to hold onto its gains as Brexit risks mounted and US stocks staged an early reversal. Central Bank President Lagarde was far more nonchalant than investors feared as she urged the market not to overreact to euro gains. She admitted that the euro was discussed but they do not target the exchange rate and instead watches its effect on inflation.
The central bank also raised its GDP forecasts for 2020, 2021 and 2022 and boosted its 2021 inflation forecast. After this month’s record low CPI report, investors worried the ECB

Read More »

ECB Preview: Could they Cut Rates? No Way.

22 days ago

ECB Preview: Could they Cut Rates? No Way.
Daily FX Market Roundup September 9, 2020
The European Central Bank’s monetary policy announcement is the most important event risk this week. Based on the persistent weakness of the euro, investors are bracing for ECB dovishness. According to the rates markets, ECB dated Eonias are pricing in a 10bp rate cut in 2021. Could the central bank lower interest rates next year? Possibly but a rate cut this week is certainly not on the table. The only scenario where the central bank could lower interest rates over the next 3 to 6 months would be if there is a full blown second virus wave and everyone returns to hard lockdowns and the markets crash 20 to 30 percent. These scenarios are possible and some market watchers would assign it greater

Read More »

China, Brexit, COVID – Bank of Canada Next

23 days ago

China, Brexit, COVID – Big Headaches for FX
Daily FX Market Roundup September 8, 2020
With no major US economic reports scheduled for release this week, the dollar is set to take its cue from political and pharmaceutical headlines. President Trump was busy this Labor Day weekend throwing out threats to decouple from China. China toughened its pressure on Australia by accusing an Australian journalist of carrying out illegal activities. Currencies and equities sold off in response as this increase in trade tensions foreshadow more negative headlines in the weeks leading up to the US election. Trump also suggested that a vaccine could be ready in October but general skepticism and overall concerns about the safety of a fast tracked vaccine has investors shrugging off this comment.

Read More »

FX: Drop in US Unemployment Rate Sparks Mild Optimism

27 days ago

FX: Drop in US Unemployment Rate Sparks Mild Optimism
Daily FX Market Roundup September 4, 2020
Job growth in the US slowed in the month of August but instead of falling, the dollar traded higher against the euro and yen. US companies added approximately 1.37 million people to payrolls, down from 1.73 million in July. However, the unemployment rate improved dramatically, falling to 8.4% from 10.2% and most importantly average hourly earnings rose 0.4%. With the increase in the participation rate, the jobs report was pretty good considering that economists had been looking for no improvement in wage growth. Although part of the uptick was due to hiring of temporary census workers, numbers like these allow investors to shrug off the standoff in Washington and the ongoing pandemic.

Read More »

800 Point Drop in Dows Sends Risk FX Lower

28 days ago

800 Point Drop in Dows Sends Risk FX Lower
Daily FX Market Roundup September 3, 2020
With less than 24 hours to go before the next US jobs report, it was finally time for investors to take profits on overstretched equity positions. The fragile US recovery fails to justify heady stock market valuations and investors now fear that with slower service sector growth, non-farm payrolls could fall short of expectations. If the labor market is weak, the economy is weak and therefore stocks should be trading lower and not higher. Today’s the correction in equities led to broad based risk aversion in currencies. The US dollar sold off against the Japanese Yen and Swiss Franc but traded higher against all high beta currencies with the exception of euro.
Non-farm payrolls is traditionally

Read More »

EUR, AUD Tumble Sharply on US Dollar Gains

29 days ago

EUR, AUD Tumble Sharply on US Dollar Gains
Daily FX Market Roundup September 2, 2020
The record breaking moves in the S&P 500 has drawn investors into US assets and in turn the US dollar. The greenback extended its gains against all of the major currencies on Wednesday with euro and the Australian dollar experiencing the steepest declines. Non-farm payrolls will be released on Friday and ADP is an important barometer of labor market health. According to the private payroll provider, US companies added 428K workers last month, about half the forecasted amount. When the number was initially released investors reacted by selling dollars but the rally resumed quickly as buyers returned.
Even if tomorrow’s non-manufacturing ISM report shows service sector activity slowing and

Read More »

EURO Rejects 1.20, More Losses Ahead?

September 1, 2020

EURO Rejects 1.20, More Losses Ahead?
Daily FX Market Roundup September 1, 2020
At the start of the New York trading session, EUR/USD raced above 1.20 but this psychologically significant level was rejected quickly and aggressively. The reversal is no surprise given this morning’s mixed Eurozone data. German manufacturing PMI was revised lower while Eurozone inflation figures fell more than expected. Rising coronavirus cases in Spain show the country in a second wave and with the school year approaching, there’s widespread concerns that the pandemic will worsen. On Friday the country reported 9,779 new cases, surpassing the peak in March. If this pace continues, the government will have no choice but to institute new restrictions. Spanish Health Minister Illa ruled out an all

Read More »

End of Month Dollar Selling, RBA Meeting Next

August 31, 2020

End of Month Dollar Selling, RBA Meeting Next
Daily FX Market Roundup August 31, 2020
With August drawing to a close, the Federal Reserve’s decision to shift its inflation focus last week is catching up to the US dollar. The greenback traded lower against all of the major currencies except for the Japanese Yen. USD/JPY marched to its own tune despite end of month profit taking in US stocks and the sell-off in Treasury yields. This could be tied to political and economic uncertainty in Japan. One of the big stories last week was Prime Minister Abe’s decision to step down over health issues. Japanese retail sales also fell more than expected while vehicle production, construction orders and housing starts continued to tumble. Inflation in Tokyo declined, a sign that deflation continues

Read More »

3 Reasons Why Dollar Soared on Fed’s New Inflation Strategy

August 27, 2020

3 Reasons Why Dollar Soared on Fed’s New Inflation Strategy
Daily FX Market Roundup August 27, 2020
The Federal Reserve has a new inflation strategy. Instead of focusing on curbing price pressures, they will now allow inflation and employment to overshoot their targets in order to attain long term price stability. This new approach follows nearly a decade of inflation falling short of their 2% target. Even before COVID-19, the Fed had been thinking about changing its focus. This decision was made after more than a year of analysis and ushers in a new phase for the central bank.
The coronavirus pandemic gave the Fed a stronger reason to shift gears as the slowdown in the economy scraps any potential inflation recovery. With today’s announcement, the Fed is telling us zero interest

Read More »

Dollar Dips Ahead of Jackson Hole – What to Expect from Powell

August 26, 2020

Dollar Dips Ahead of Jackson Hole – What to Expect from Powell
Daily FX Market Roundup August 26, 2020
For forex traders, Thursday’s Jackson Hole speech by Federal Reserve Chairman Jay Powell is the most important event risk this week. Despite a continued rise in US yields, investors sold US dollars ahead of this big event. The greenback experienced its biggest decline against sterling, the New Zealand and Australian dollars. USD/JPY shrugged off better than expected durable goods numbers to trade back down towards 106.00. Economists are calling this speech “profoundly consequential” and probably “historic” according to CNBC.
Here’s what we know:
1. Powell will confirm that the US needs ongoing policy accommodation – Regardless of the improvements in home sales or durable goods,

Read More »

Why Stocks Fell but Currencies Rallied

August 25, 2020

Why Stocks Fell but Currencies Rallied
Daily FX Market Roundup August 25, 2020
At the start of the NY trading session, investors were buying currencies and equities. The S&P 500 and Dow Jones Industrial Average climbed to record highs, leading high beta currencies such as euro, sterling and the comm dollars higher. Even USD/JPY saw healthy demand with the pair ending the day above 106.00. Although the S&P 500 recovered earlier losses, the Dow still ended the day in negative territory. The early morning reversal was sparked by a significantly weaker than expected consumer confidence report. The Conference Board’s index dropped to 84.8 from 91.7, a six year low. This means that even with low death rates and stabilization of new virus cases in certain parts of the country,

Read More »

EURO – Pullback or Correction?

August 24, 2020

EURO – Pullback or Correction?
Daily FX Market Roundup August 24, 2020
It is the last week of August and during this time of the year the markets are normally very quiet. Most people are off enjoying the final bits of summer and spending time with their families before school starts. 2020 is a year like no other but there should still be less participation which means either tight trading ranges or low liquidity breakouts. The US dollar is grossly oversold against high beta currencies like the euro, sterling, Australian, New Zealand and Canadian dollars. With extra unemployment benefits expiring, the US recovery is losing momentum as manufacturing activity in the NY and Philadelphia regions ease. There are a few events on this week’s calendar that could inspire some moves in

Read More »

Dollar Tug of War Ahead of Retail Sales

August 13, 2020

Dollar Tug of War Ahead of Retail Sales
Daily FX Market Roundup August 13, 2020
For the greenback, Friday’s US retail sales and University of Michigan consumer sentiment index are the most important economic reports on this week’s calendar. Investors have been looking forward to two things since Monday – progress on stimulus talks and an update on the recovery. Inflation data, while interesting has very little impact on the markets in a zero interest rate world with no changes by central banks in the foreseeable future. Talks in Congress stalled with no signs of progress after a pivotal call between House Speaker Pelosi and Treasury Secretary Mnuchin. According to Pelosi, Democrats and the White House are “miles apart,” suggesting that a deal is still far away. The pressure on

Read More »

Will NZD See Deeper Correction as European FX Outperform?

August 11, 2020

Will NZD See Deeper Correction as European FX Outperform?
Daily FX Market Roundup August 11, 2020
Currencies and equities traded higher on the back of better than expected economic data and reports from Russia that they’ve won the global vaccine race. While Russia announced the world’s first approved vaccine it has not finished phase 3 trials which the World Health Organization deems essential for statistical accuracy. There are currently 8 other vaccines in phase 3 trials from the US, US/UK, Germany and China. Nonetheless, pharmaceutical companies are getting close and the single most important game changer for the global economy could be right around the corner. The persistent gains in stocks reflects the market’s optimism and their hope that medical advances made over the past

Read More »

What EURJPY Sell-Off Says About Broader Markets

August 10, 2020

What EURJPY Sell-Off Says About Broader Markets
Daily FX Market Roundup August 10, 2020
This new trading week kicked off with fresh gains for equities but a rally in stocks failed to translate into strength for currencies. The Dow Jones Industrial Average moved higher for the seventh day in a row but most Japanese Yen crosses including USD/JPY failed to push higher. In fact, USD/JPY which traded to 106.20 at the start of the NY session rejected 106.00 by the end of the day.
The sell-off in EURJPY in particular sends some interesting signals about the broader market. First it tells us currency traders are not as optimistic as equity investors. USD/JPY’s inability to rise despite Friday’s better jobs report and President Trump’s weekend executive orders is a sign that FX traders

Read More »

Dollar – 2 Reasons why Friday is the Big Day

August 6, 2020

Dollar – 2 Reasons why Friday is the Big Day
Daily FX Market Roundup August 6, 2020
This Friday is a big day for currencies, equities and Treasuries. Its Congress’ self-imposed deadline for a stimulus package and the scheduled release of non-farm payrolls. Based on the decline in the dollar, investors are worried that job growth will slow and the deadline will pass with no agreement. According to House Speaker Nancy Pelosi, there’s light at the end of the tunnel but Democrats and Republicans still can’t agree on topline numbers so there’s probably an 85% chance that Friday will pass with no deal. According to White House Chief of Staff Mr. Meadows, if nothing happens by tomorrow, his optimism will “fall off the cliff exponentially.”
To complicate the scenario, President Trump,

Read More »

Dollar Tanks on NFP Worries, What to Expect from BoE

August 5, 2020

Dollar Tanks on NFP Worries, What to Expect from BoE
Daily FX Market Roundup August 5, 2020
The US dollar traded lower against all of the major currencies on Wednesday, a sign that FX traders are worried about Friday’s non-farm payrolls report. With ADP reporting significantly weaker than expected private payroll growth in July (167K vs. 2.3 million forecast) and the employment component of non-manufacturing ISM dropping to 42.1 from 43.1, all signs point to a slowdown in labor market recovery last month. However based on the strong rally in stocks and more than 7% increase in ten year yields not everyone is convinced that the data will be terrible or that the outlook is grim. Investors should be worried about the possibility of NFP miss, but the argument can be made that new virus

Read More »

Dollar Resumes Slide Taking Cue from Yields

August 4, 2020

Dollar Resumes Slide in Short-Lived Yield Recovery
Daily FX Market Roundup August 4, 2020
The US dollar resumed its slide on Tuesday in what may turn out to be a very short-lived recovery. There were no US economic reports on the calendar but ten year Treasury yields resumed their slide, falling more than 6% and driving the dollar sharply lower in the process. According to the Democrats, stimulus talks are finally moving in the right direction but with extra unemployment benefits gone and the moratorium on evictions and foreclosures over, the US economy could fall off a cliff if something isn’t done soon. As noted by my colleague Boris Schlossberg, over 40% of US renters are now at risk of eviction and if they can’t pay their rent, they certainly won’t be spending. Investors are

Read More »