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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

Dollar Rallies on Consumer Comeback

4 days ago

Dollar Rallies on Consumer Comeback
Daily FX Market Roundup October 16, 2020
The US dollar traded higher against most of the major currencies on Friday thanks to better than expected economic data. Consumer spending rose 1.9% last month, more than two times the market’s estimate. Excluding autos, demand rose 1.5% compared to a 0.4% forecast. Despite high unemployment and less jobless benefits spending rose for the fifth month in a row. With clothing and accessories leading the gain, part of this increase can be attributed to delayed school re-openings. However the data also justifies the decisions by Governors to keep their economies open even as more than 20 states set records for new coronavirus infections.
The big question now is what the holiday shopping season will look

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Dollar Drops as Pre Election Jitters Set In

5 days ago

Dollar Drops as Pre Election Jitters Set In
Daily FX Market Roundup October 14, 2020
The US Presidential Election is three weeks away and investors are finally beginning to feel the jitters. Stocks sold off for the second day in a row, driving currencies lower in the process. This will be the most dramatic Presidential race in recent history and while most polls show Joe Biden in the lead, investors have grown leery of trusting the polls after being burned in 2016.
Over the past few weeks, equities and currencies rallied on the hope that some type of stimulus would be approved before or shortly after the election. However at this stage, it is looking increasingly unlikely. House Speaker Pelosi has repeatedly described Trump’s stimulus offer as grossly inadequate. The sell-off in

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5 Reasons Why EURO is Headed Below 1.16

6 days ago

EURO Finally Breaks Down, 1.16 Next?
Daily FX Market Roundup October 13, 2020
Euro finally broke down on Tuesday as it experienced its strongest one day slide in 3 weeks against the US dollar. We have been calling for a sell-off for days now as the rise in new coronavirus cases pose a major risk to the region’s outlook. France, Germany and Spain all reported significant spikes in cases which we believed would cause significant concern for investors and central bankers. We finally saw evidence of that today with the steep decline in the Eurozone and German ZEW surveys. The German index fell from 77.4 to 56.1 as the “recent sharp rise in COVID-19 cases increased uncertainty about the future economic outlook” according ZEW President Wambach. Today, ECB member Knot also said growth in

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FX: Stimulus Talks, Brexit and New Global Virus Restrictions

7 days ago

FX: Stimulus Talks, Brexit and New Global Virus Restrictions
Daily FX Market Roundup October 12, 2020
The most important drivers of forex flows this week will be stimulus talks, Brexit negotiations and new virus restrictions in Europe and Asia. Based on the continued gains in US stocks, equity traders are completely unfazed by the possibility of things going awry. Currency traders on the other hand are more skeptical with USD/JPY falling for the second consecutive trading day and high beta currencies like euro and the Australian dollar slipping lower. The losses are small which suggests that forex traders are still trying to decide if its wise to go against the move in stocks.
The primary reason why stocks are strong is because regardless of who wins the November 3rd election,

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FX: What to Expect Next Week

11 days ago

FX: What to Expect Next Week
Daily FX Market Roundup October 10, 2020
With less than four weeks before the November 3rd US Presidential Election, it has become very clear that investors believe that regardless of who wins, the economy will do better in 2021 than 2020. Barring another full US lockdown this is almost a certainty. Looking back, 2020 will be one of the darkest times in recent history but medical advances over the past year will make 2021 a year of recovery. More importantly Trump and Biden are prepared to pump the economy with major stimulus in the new year. Even so in the next few weeks volatility should increase with bigger trading ranges and wild swings in currencies and equities. US fiscal stimulus talks and Brexit negotiations are still in start stop mode and

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4 Reasons Why EURO Should Fall to 1.16

12 days ago

4 Reasons Why EURO Should Fall to 1.16
Euro is overdue for a correction. For the past 2 weeks, it quietly traded higher before consolidating within a narrow range versus the US dollar. Throughout this time, there’s been bad news for both Europe and the US but Europe’s troubles are deteriorating quickly. There are no shortages of reasons for why EUR/USD should be trading closer to 1.16 than 1.18 but here are the 4 most important:
1. Second Virus Wave Spreading Across Europe
New coronavirus cases are exploding in Europe raising concerns that the region could return to the tough times experienced at the start of the year. Daily infections hit a record high of 18,746 on Wednesday in France and are hovering near 10,000 a day in Spain. To put this into perspective, back in March cases in

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Stocks Soar, Risk FX Rally Holds

12 days ago

Stocks Soar, Risk FX Rally Holds
Daily FX Market Roundup October 7, 2020
The best way to describe how the equity and currency markets have been trading this month is erratic volatility. This may not be unusual for October which is historically the most volatile month for stocks but the market’s ability to ignore major game changing developments is impressive. The only rational explanation for the 500 point move in the Dow is that investors are looking past near term political jockeying to the stimulus package that will come eventually. Overnight President Trump went on a tweet tirade where he said he is ready to sign a stand alone stimulus check bill and in a show of strength he returned to work in the Oval office. Regardless of who wins the election, a major stimulus package is on

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Currencies Tumble as Trump Pulls Plug on Stimulus Talks

13 days ago

Currencies Tumble as Trump Pulls Plug on Stimulus Talks
Daily FX Market Roundup October 7, 2020
Late Tuesday, President Trump pulled the plug on stimulus talks sending currencies and equities sharply lower. He instructed his staff to stop negotiating until after the election which means unemployed Americans and struggling businesses wont receive any more help until December at the earliest. This unexpected announcement killed rallies in EURUSD and USD/JPY and could spark the beginning of a deeper contraction in risk appetite. Even when Trump was admitted to the hospital due to COVID-19, the prospect of a fiscal stimulus deal kept financial markets supported. By taking away this hope, Trump is giving investors a strong reason to square up ahead of the November election. Its always a

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Currencies Soar as Trump Escapes the Worst of COVID

14 days ago

Currencies Soar as Trump Escapes the Worst of COVID
Daily FX Market Roundup October 6, 2020
For US assets including the dollar, data shouldn’t be a big market mover this coming week. Aside from Monday’s service sector ISM report which ticked higher, the only scheduled US release worth watching will be Wednesday’s FOMC minutes. The Federal Reserve made their position very clear last month. With inflation running below target and unemployment at historically high levels, there are no plans to raise interest rates for the next 3 years. In fact 2 out of 9 policymakers wanted the Fed to use stronger language to describe their commitment to low interest rates. The FOMC minutes are widely expected to reinforce the central bank’s dovish bias which may be more negative than positive for the

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Stimulus Hope Reverses FX & Equity Trump Losses

17 days ago

Stimulus Hope Reverses FX & Equity Losses
Daily FX Market Roundup October 2, 2020
In our last note, we talked about all of the reasons why this October could be a spooky one for the markets and this morning’s curveball is an example of the surprises that could be in store this month. President Trump and the First Lady tested positive for coronavirus, sending stocks sharply lower. The Dow Jones Industrial Average plunged 400 points at the open, driving currencies down with it. However stocks recovered by the end of the day as investors shrugged off Trump’s positive coronavirus test. Now its just a waiting game to see if the Trumps’ symptoms are mild or severe. There have been a number of reports indicating that he is currently symptomatic with cold-like symptoms. Come Tuesday if

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Will it Be a Spooky October for FX?

18 days ago

Will it Be a Spooky October for FX?
Daily FX Market Roundup October 2, 2020
It is no secret that currencies take their cue from equities. Stocks extended their gains at the start of the NY session, taking high beta currency pairs like EUR/USD and AUD/USD higher. When they u-turned mid day, the rally in currencies fizzled. With that in mind, October is traditionally one of the most volatile months for stocks. It is estimated that the swings are 1% larger this month than any other month. For the Dow this means a wider 275 point range. With the 2020 Presidential election in November, the chance of wild swings in equities and currencies this year is even greater. Many unresolved issues may also be clarified over the next 30 days. This includes a second coronavirus stimulus package,

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How Month End Flows & Presidential Debate Moved FX

19 days 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

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Dollar Extends Slide ahead of First Presidential Debate

20 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

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Dollar Retreats as Dow Jumps 500 Points

21 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

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A Feeble Recovery in Currencies

25 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

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EURO Outlook – Is 1.15 Next?

27 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

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Dollar Rally Sends these Currencies to 1 Month Lows

27 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

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

28 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,

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

September 18, 2020

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.

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Stocks Sell Off, Dollar Follows

September 17, 2020

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

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Fed Says No Rate Hikes Until 2023 – Dollar Buyers Unfazed

September 16, 2020

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

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Will FOMC be Good or Bad for the Dollar?

September 15, 2020

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

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Busy Week Ahead – How are FX Traders Positioned?

September 14, 2020

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

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Euro Fails to Hold Gains Despite ECB Optimism

September 10, 2020

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

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ECB Preview: Could they Cut Rates? No Way.

September 9, 2020

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

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China, Brexit, COVID – Bank of Canada Next

September 8, 2020

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.

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FX: Drop in US Unemployment Rate Sparks Mild Optimism

September 4, 2020

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.

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800 Point Drop in Dows Sends Risk FX Lower

September 3, 2020

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

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EUR, AUD Tumble Sharply on US Dollar Gains

September 2, 2020

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

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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

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