Traders Insight Magazine [June 2020]

BRINGING YOU MARKET ANALYSIS FROM OUR TRADERS

US/CHINA TENSIONS Read more, p. 5/6

EXCLUSIVE: BLACK GOLD, BLACK SWAN: IS NEGATIVE THE NEW NORMAL?

NEGATIVE RATES; A NEW NORMAL OR A RISKY ROAD?

NOITIDE 0202 ENUJ

TRADER'S INSIGHT

FEATURED ARTICLES PAGES 5-6: Market Overview PAGES 8-9: Negative rates; a new normal or a risky road?

PAGES 14-16: Black Gold, Black Swan: Is negative the new normal?

CONTRIBUTORS GAVIN PANNU: HEAD OF TRADING ACADEMY

Gavin is an experienced trader of a multi strategy fund. He is a certified market technician with both the STA and IFTA organisation and has worked with trading companies and brokers as a Senior Market Analyst and Mentor. He has been a regular contributor to financial publications.

RON WILLIAM: MARKET STRATEGIST

Ron is a Market Strategist, with +20-years of experience, working for leading economic Research & Institutional firms; producing macro research and trading strategies. He specializes in blended, top-down, semi-discretionary analysis, driven by cycles and proprietary timing models.

THIS MONTHS CONTRIBUTORS DESMOND ADEOSUN: JUNIOR TRADER

Junior FX Trader at Alphachain Capital with a Mathematics and Economics (BSc) degree. Possesses a strong focus in technical analysis and prefers to trade in line with the fundamental theme.

3

SCARED TO TRADE YOUR OWN CAPITAL? DON'T BE.

GET FUNDED NOW THERE'S NO OTHER PERFECT TIME. VISIT HTTPS://WWW.ALPHACHAIN.ACADEMY/

4

MARKET OVERVIEW - US/CHINA TENSIONS IMPACT FIAT WHILE BTC REMAIN STABLE AFTER HALVING GAVIN PANNU The monetary and fiscal stimulus has been able to contain the virus’s impact and has gradually allowed lockdown measures to begin to ease in many developed economies.

May’s data suggested the worst of the contraction may have taken place, but we see a rough restart in coming months and uncertainty to whether the Covid-19 impact will recede as the virus impacts South America with growing numbers in Brazil.

The big question remains how successful policy execution will be in bridging cash flow constraints and preventing permanent damages to the economy and what the risk is of policies in the coming months if there is an outbreak of cases.

In May the biggest concern was not actually the virus but rising U.S.-China tensions. A potential flashpoint is China’s proposed security law for Hong Kong, which caused the biggest drop in the Hang Seng Index in five years. Investors watched the latest developments in U.S.-China relations after reports that China was pausing some purchases of American agricultural goods, amid rising tensions over the status of Hong Kong as an independent region.

President Trump and his administration would potentially implement new sanctions against China and revoke special privileges enjoyed by Hong Kong after China moved to impose a new national security law on the special administrative region.

China's move was rebuked by the U.S. and its allies as an incursion on Hong Kong's autonomy and rule of law.Investors were also monitoring clashes between protesters and law enforcement as Americans took to the streets to condemn police violence.

Market participants worry that the protests may complicate state reopening efforts in the midst of the COVID-19 pandemic if demonstrations last for a longer period.

Bitcoin’s third halving on May 11, a 50% reduction in the BTC block subsidy that rewards miners for validating transactions and securing the network, represents a clear distinction between fiat monetary systems governed by whim and crypto monetary systems executed through software.

A global crisis such as the one we’re facing now is a crucible for any monetary system, often showing what the priorities of the powers that be are.

5

The unlimited ability to print money in the fiat world operates in stark contrast to Bitcoin periodically reducing the issuance through an immutable monetary policy.

The Bitcoin halving in the context of the pandemic provided stability in comparison to the wild swings seen in the greenback while fiat monetary systems feature monetary policies highly subject to what the lawmakers believe is necessary.

Bitcoin and other cryptocurrencies are decentralised, autonomous monetary systems with rules coded from their launch.

Bitcoin’s monetary policy is unique in that it is executable through open-source software rather than a central mint overseen by treasurers and politicians.

Its core features include a capped supply of 21 million BTC, around 10-minute block times, an incentivized issuance mechanism for minting BTC and an adaptive mining difficulty to maintain this economic clock.

We think it is still too early to be risk on long term as it remains unclear how vigorous the economic recovery will be after this bounce.

There has been increasing bankruptcies, production chain disruption, a sharp rise in unemployment and changing consumer trends is likely to have an influence.

6

ALPHACHAIN CAPITAL GTN A GLOBAL NETWORK OF TRADERS

GLOBAL TRADERS NETWORK JOIN FOR FREE TODAY AND GET A £100 STARTING CAPITAL BONUS, AS CASH!

LEARN MORE 7

NEGATIVE RATES; A NEW NORMAL OR A RISKY ROAD? DESMOND ADEOSUN As we draw towards the midpoint in the year, global economies and industries have been left spellbound by the wave of panic, uncertainty and devastation witnessed across financial markets worldwide. A flood of fiscal and monetary stimulus measures have been deployed as tactics and strategies to curb the inevitable slowdown that nations will face as a result of the Coronavirus pandemic. As business confidence plummets and households are left doubtful over their future, Central Banks and governments are now mulling over an unconventional monetary policy measure known as negative rates. Much of the rhetoric surrounding this idea in recent time has been refuted, though as we face an unprecedented time within the world of finance, economies may be forced to take ‘extraordinary action’ to maintain stability and increase GDP growth. Within his first few months, BoE Gov Bailey has clearly outlined that though the risks are to the downside we must not completely rule out the idea of rates going southward in the UK and to do so would be ‘foolish’. The road back to recovery is one to be pursued with caution as the risks remain rife though it is left to be seen whether negative rates will be one of the measures utilised to restore solidarity within a nation that is already hurting on many frontiers.

The concept behind negative rates follows that by discouraging banks to deposit money at the central bank, they are more likely to lend and offer their services to households and businesses. The push for rates sub-zero will not only disincentivise savers from saving but will also be an attempt to increase spending and as a result increase GDP growth.

8

The viability of this method very much depends on the effect of negative rates on banks filtering down to their clients in the right manner and with businesses and households already under an undue amount of pressure there may be a challenge transferring the costs to depositors. The risk to this is that it may not bring about the actual desired outcome and result in worsening the current situation. Dampening the spirits of savers may lead to the channelling of investments into riskier assets which could unnaturally increase prices and lead to bubbles being formed which is a counterproductive outcome to the initial proposed idea.

In a negative interest rate environment where the value of money depreciates each year it has been witnessed that such policies eroded business and consumer confidence for nations and regions who have attempted to implement it previously, historical accounts from the likes of Japan and the Eurozone support this fact. It can be said that an unequivocally dramatic step may increase the atmosphere of worry and lead to conditions deteriorating rather than picking up.

The introduction of such a policy would, of course, have a rippling effect on the national currency, sterling which has already experienced heavy selling pressure in recent time having dropped to multi-decade lows against the USD earlier on in the year may be set for limited upside potential and further downside pressure from its current level should negative rates be introduced. The reasoning for this is linked with currency demand as foreign depositors find it more beneficial to take out their funds and seek higher yields elsewhere. Although this can make exports more competitive and may help boost GDP, with supply chains that are currently hurting, the upside potential may be limited. On the other hand, a weakened currency will undoubtedly result in imports becoming more expensive and could have effects on the nation’s trade balance. Businesses and households will likely pay the price for this in terms of higher costs in the short term as imports cannot all be easily substituted by domestically produced goods.

Furthermore, given that the UK has already cut rates twice this year, the consideration of negative rates may threaten the financial stability of the nation as the banking sector is likely to experience stress and pressure . If the costs are unable to be transferred to their customers and clients, the banks' profitability will come under fire in a time where they are likely to be casualties of defaults and a plethora of other pandemic related losses.

Despite the deliberation on the introduction of negative rates, the argument may unavoidably turn from a matter of ‘if’ to ‘when’. It will be important to ensure that banks are provided with enough support to sustain and weather the negative consequences that such an event would bring. Sterling remains a currency that is likely to experience an increase in volatility as traders, financiers and investors continue to evaluate and analyse the macro and microeconomic risks surrounding the future of the UK. The forward guidance for the economy currently remains uncertain and the supportive measure at present lies in the hands of fiscal policy and QE though could we see the BoE and their counterparts’ experiment with negative rates potentially leading to a new normal? Or will the road riddled with inevitable and detrimental risks be completely avoided?...

9

Technical Indicators: 200SMA, 50EMA, RSI Â GBPUSD Â Price remains subdued beneath the 200SMA demonstrating the overall bearish sentiment in the market long term. Price action has most recently put in a 3-candle reversal signal though a short-term level of resistance remains above around 1.2600.

Taking a closer look, price is currently holding at the bearish trendline and rejected the 50EMA. Should price hold at the level then we could see bears take control and push prices lower towards 127.2% extension. A break above the 61.8% level could see prices push into the key level of resistance at 1.2645.

10

GBPJPY Â Sterling could continue to demonstrate short term strength against the Yen before rejecting at key level of 135.45

A similar story to cable as price remains below both moving averages though the 200SMA does appear to be illustrating a slight change in gradient. Price is currently holding around 133.00.

11

EURGBP Â Euro regaining strength against Sterling with a strong Marubozu candle breaking through the 200SMA and a 4-week long consolidation pattern.

Bulls have stepped back into EURGBP as sellers failed to take price lower than 0.8680; since then price has resumed its push higher and with the spread between the two moving averages widening it could be a sign of further bullish momentum to come. We could see a slight retracement on this pair after the strong gravestone Doji followed by a continuation in bullish pressure.

12

DEVELOP YOUR TRADING SKILLS WHILE WORKING FROM YOUR DESIRED LOCATION.

GLOBAL FOREX TRADER PROGRAMME LEARN MORE 13

BLACK GOLD, BLACK SWAN: IS NEGATIVE THE NEW NORMAL?

BY RON WILLIAM, CFTE / TWITTER: RONWILLIAMRWA / IGTV INTERVIEW LINK Black gold’s black swan price spike into negative territory, in late April, has potentially triggered a new normal regime over the next 3-6 months, with a significantly lower equilibrium level around the $10 handle.

It marks yet another shockwave from the global pandemic VUCA (volatility, uncertainty, complexity & ambiguity) environment, coupled with legacy oil supply imbalances that continue to weigh.

Trend regression bands spanning over a decade from the 2008 super cycle peak level of $147.27, previously exhibited a historical mean of $50, tracking volatile price swings of +/- 1STD. These statistical bands now project a new range between $10 and the subzero depths of -$30.

While negative pressure remains, the latest spike low at -$40.32 is likely to hold strong for the foreseeable future, with small, but probable risk of a w-shape bottom retest.

Meantime, the upside strategic level of $10 will continue to be important, serving as the historic 1998 low, part of a wave IV structure of a prior impulsive cycle pattern. Further long-term resistance can also be found at $20 and $30, based on statistical probability distribution measures.

14

Over the short-term horizon, Oil’s v-shape recovery is still pressured under an overhead price gap between $36-41 and by a silent contagion contango, with futures contract deliveries across the next 4 months (June-September), favouring sub $10, with a risk back under the zero mark, into negative territory. Immediate technical price support holds at $29.50 and $25.00 (Dow theory structural level & 61.8% golden ratio). Only a sustained confirmation below the latter point would renew Oil’s downside vulnerability.

One of the popular methods to participate in the Wild West of the Crude oil market is via futures based synthetic products. ETFs and ETNs make the speculative access to the derivatives markets convenient for retail investors. However, the latest demand spike in Oil’s exchange traded products warrants extreme caution, following the unprecedented wave of speculative “hot money” attempting to catch the proverbial falling knife. Figure 3 highlights a composite basket of 24 crude oil funds and United States Oil (USO) fund breaking multi-year ceilings, with the latter ETP giving rise to 137% of new Robinhood trading accounts, between February to the end of April, fuelled by a staggering $1.6 billon in inflows in just one week!

Latest data shows that retail traders have dumped -30% of their pain trade in just a few days. This happened just as the price of USO rose from just under $17 post-split to its peak of over $19 and proves again how dangerous both the markets and investor behaviour can be. Not unlike the XIV debacle of early 2018, could this portend the implosion of derivatives based oil ETFs? Perhaps much worse, a perfect storm is likely brewing ahead, once oil producers take the other side of futures bought by USO and other ETPs. What happens when a historically unprecedented % of shorts stand for physical delivery? Even with a financial bailout, risks will likely remain for both the industry and technical likelihood of a new normal regime, which currently signals a return back under zero, into negative territory and a potential W-shape bottom.

15

ABOUT ALPHACHAIN Alphachain Capital is a proprietary trading firm founded with a vision of combining strategy, innovation and technology to succeed in today’s global markets. Alphachain Academy focuses on the development of our new traders for our prop firm. For aspiring and novice traders, the Alphachain Academy's programmes have been designed to develop, select and grow a new generation of talented prop traders from a variety of backgrounds who wish to trade cryptocurrency or FX markets. For established traders we offer state of the art infrastructure, investment capital and a collaborative trading environment nurturing success.

16

LEARN HOW TO DEVELOP AUTOMATED TRADING SYSTEMS.

AUTOMATED TRADER PROGRAMME PROGRAMME HIGHLIGHT:

LEARN MORE

DEVELOP PROGRAMMING SKILLS DEVELOP QUANTITATIVE APPROACH ACCESS ALPHACHAIN STRATEGIES IMPLEMENTATION OF AUTOMATED SYSTEM

17

Web: https://www.alphachain.academy/ Phone: +44 20 7097 1715 Email: info@alphachain.co.uk Office: 25 Clarendon Road, Redhill, Surrey, RH1 1QZ Disclaimer: Trading in any financial products whether with or without margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. Trading involves risk. Losses can exceed deposits. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. All information in this publication is for education only and should not be seen as advice or a trading signal.

18