Traders everywhere have gotten savvy to Trump’s tweets and how they are making the markets move.
On this week’s roundup of Donald Trump’s tweets, we look at two significant tweets: one resulted in a market reversal for the Euro, and the other strengthened the dollar. These presented great profit opportunities for those traders with a good understanding of how Trump’s tweets affect the market.
On 22 October 2018, the EURUSD was on a downtrend. However, after Trump’s tweet, which had a very negative anti-European sentiment, the EURUSD reversed. The EURUSD strengthened for the rest of the day amidst a bullish reversal. This is a potentially surprising trend. Generally, if Trump is “anti-” a certain country, it can have a bearish impact on that market’s currency.
Trump’s tweet on 22 October 2018, criticising the Mexican security forces for their alleged failure to stop the migrant caravan, resulted in the strengthening of USDMXN throughout the course of the day.
This follows the previous trend of Trump’s attacks on Mexico resulting in the peso falling against the USD. As the graph above shows, traders could ride on the momentum of such news for almost the entire duration of the day.
Last week we looked at the Ichimoku cloud strategy. Following this strategy, “a trader can go long when the price rises above the Ichimoku cloud and close his position the moment price goes below the Ichimoku cloud.”
In the graph below we can see how the trader can:
A trader can deploy this strategy to provide excellent profit-making opportunities. The trader needs to be able to predict how a certain tweet will affect the respective market. Then, they need to be able to deploy the right tools to take advantage of the market movements.
In the above example, traders who recognized how anti-Mexico tweets often result in a bullish fundamental bias towards the US dollar-Mexican peso pair, and utilised the Ichimoku cloud strategy, would have been able to trade profitably on the USDMXN.
All traders should be following Trump’s tweets. The next time he’s bashing a nation or institution, be at the ready to ride the political and financial waves that follow.