The smart money sucks 'em in again. The Scottish "No" vote Wins

The "No" vote won the Scottish independence vote battle but it was the amateur traders that lost on currency markets on Friday. Many got sucked in trying to speculate and buy the Pound on a likely "No" vote. They got one thing right but the most important thing wrong. We talked about it all week that the Pound would likely benefit from a "No" vote win and I still hold that view. Over the medium to long term I expect the Pound to rally again but the price movement on Friday was a typical example and great lesson for us all on how to avoid being sucked into the grasp of the smart money. Here is what essentially happened to too many of the buyers.

The "No" vote was the likely victor in all polls leading up until ballot booths closed. The amateur traders couldn't help themselves and started buying the Pound on mass on the news of a "No" vote victory. And yes it did initially rally. But on virtually every Pound currency cross you will see this morning a quick and sharp pull back in price occurred. The smart money simply waited until the market was saturated with buyers and they sold the Pound off right back at them. Leaving the buyers confused, stopped out or wondering what to do next.
So where is the Pound likely to go long term? Back higher in my opinion but it may take a few days or a week or so before that overall trend gathers pace again. The UK economy is going to gain confidence again, now that the Scots are staying put. The interest rate speculation will gain momentum again once we receive some strong economic UK data that reminds the market that the Bank of England is likely to raise the official cash rate in 6 to 9 months.

Be patient and consider a long trade on the Pound via the LTG GoldRock Daily Order sheets. If you have any questions about how the markets reacted simply join us for our weekly live coaching sessions Monday & Tuesday at 5pm AEST. Go to www.ltggoldrock.com to register.

Watch for more volatility on the AUD at 11.30am today.

LTG Goldrock Reviews: We discussed the AUD drop yesterday in this report and I want to give you a warning right now that the unemployment report today has the potential to shoot the AUD back up higher. If you are short on the AUD and are in front more than 50 pips give some consideration to bringing your stop to break even before 11.30am today because my gut feeling is the unemployment report might be better than expected and a quick flush of buyers might come for the AUD.

I have been doing some reading and last month’s unemployment report pushed the official unemployment rate to 6.4%. Many leading economists believe it may drop back a tick or two at 11.30am today. In the event you bring your stop to break even and the report is negative you get to continue to ride price lower for more profit but if its positive then you may be able to lock in some profit or limit any negative loss if price drives quickly higher. You also have High Impacting News from China to contend with at the same time. See below for more on that.

The Consumer Confidence report yesterday was a major catalyst for the AUD fall as it showed the weakest consumer confidence in years.  Now the AUDUSD is below that 200 Day Moving Average I have been mentioning for weeks we need to be patient and wait for a 50/200 set up or Order Sheet entry.

Please also be aware there is High Impacting news for China today at 11.30am which coincides with the Aussie Unemployment report so there is potential there for what I call a Double Banger News Event.

The Pound is so oversold it’s due for a bounce back higher.

LTG GoldRock Reviews: The fact remains right now Scotland is still part of the UK and the UK is highly likely going to have an interest rate rise in the next 6 – 9 months. Yes, the independence vote could de rail that if Scotland votes on September 18th for independence and we need to watch what happens but did you see the bounce the Pound received in the past 24 hours? 

Why did the buyers come for it again? Nothing substantial fundamentally, the UK Government seem to be offering to smoke the peace pips with the Scots and trying to convince them to stay but from what my charts show me, we are about to enter a potentially very large rally higher on the Weekly Chart. We are about to enter Wave #5 which technically matches up perfectly with the potential for an interest rate increase. Add to this a vote by the Scots to stay part of the UK and a fast and furious rise is not out of the question before the end of September.

LTG Goldrock Reviews: It is time for Draghi to go!

The European Economy is in serious strife and the ECB will this week need to announce a "shock and awe" style Quantitative Easing, US style money printing program.  But sadly they won't.

Mario Draghi and the ECB has always been too slow, too reactive, it's lacked the real ticker and guts to get on the front foot like the US did and tackle what is now a diabolical challenge. Draghi and the ECB has essentially stuck its head in the sand and ass in the air and "hoped". Hoped its baby steps will lead to an improvement, it hasn't.
Virtually every measure the ECB has put in place has not been enough. Draghi only days before the 2012 Olympics in London said in a press conference. "We will do whatever it takes". I would say to him you have not done what it takes Mr Draghi, you have failed and it’s been 2 years since the Olympics and Europe is worse off now than it was 2 years ago. Thanks for your efforts but it's time to go. Resign or be sacked!

Draghi and the current committee have had long enough, they have been the ones at the helm and Europe is arguably in worse shape now than it was 3 years ago. It's time for a new coach. Draghi and his committee have shown they don't have what it takes, their measures have been far too reactive and slow and whilst many criticise the US Fed for its QE programs over the past few years, it’s worked. The US has gone from over 10% unemployment to 6.1%, its growth rate has gone from 0% to an annualised rate of currently around 4% and the economy has improved to the point where financial markets are speculating on an interest rate rise. And all through the same time period the ECB has stuffed around and promised plenty and delivered very little. In fact they have contributed to the disaster Europe currently faces, years of living in a society where standards of living are dropping, kids have little opportunity for work, the chances of a university education are less and poverty is an ever growing reality for many.

Extract: LTG GoldRock Insider Report Monday the 1st of September 2014

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Where will the bears likely attack the Aussie Dollar? #LTGGoldrock

The Aussie Dollar is one of my least likely currencies to trade simply because there are currencies such as the US Dollar and Kiwi Dollar that have offered more volatility in the past few months. BUT the volatility is likely going to return to the AUD and the sellers could attack when the price gets below the 200 Day Moving Average on the Daily Chart. You can see from the snap shot below there are some support levels around the 0.92 level but under 0.9177 there is far less support and this also coincides with the 200 Day Moving Average on the Daily Chart which is the red line.

LTG GoldRock Reviews the latest on the Aussie Dollar #LTGGoldrock 

I did warn traders last week about the Yen.

The Yen has risen in value the most in a month on the back of geopolitical tensions and stock market volatility. Even though the Bank of Japan continues to print staggering amounts of money to prop up its economy. I warned in this report last week about trying to get long on the Yen when negativity is in the air on stocks and geopolitical tensions are rising.
Currently there is a war in Iraq, Syria, Ukraine and the deadly battles between Israel and Hammas don't seem to be going away either. I doubt an overnight cease fire between Hammas and Israel will hold as both sides seem hell bent on their demands and no ceasefire has held true so far, so why should we expect this one to hold.
The Yen and Swiss Franc have the potential to gain strength in the short term so just be careful in the coming week or so trying to play the Yen and Swiss Franc short. As I mentioned last week I personally do not trade the Yen at all because of its unpredictable volatility.