CTA Trading Signals

The major news that had a clear impact on the markets and opportunities for our CTA trading signals was the outcome of the first round for the French presidential election. Business-friendly and pro-European Emmanuel Macro became the clear frontrunner as he looks poised to become France’s next president. This outcome resulted in a measured reduction in the perceived risk in European assets. Investor focus aligned to the potential economic growth from the region as the political risk subsided. However, the markets did not completely discounted these risks. Support towards the far-right party of Marine Le Pen could dampen investor confidence with concerns over support for the anti-Euro block stance.

The political risks emerging in the existing investing environment would challenge the risk/reward profile of our CTA trading signals. Therefore, we took the stance on our advisory role to reduce the level of exposure to the markets traded. As for the non-discretionary signals the maximum drawdown thresholds were also reduced to pre-determined levels.

Shifting Patterns in FX Markets

Shifting trending currency patterns created a challenge for our CTA trading signals. As in the previous month, shifts in trading patterns meant that the support and resistance price bands narrowed. This occurred over time with break-outs following the release of market data, and a short-lived follow through. Evidentially, the markets retracted as a result of the short-term shifting trends. Consequently benefiting the short-term trading strategies seeking pre-determined take profit levels. Trend strategies seeking a clear directional market bias were provide sufficient information to execute strategies. the lack of market conviction to capture a new trend, resulted in a challenging period for generating positive returns.

Opportunities in Diversified Markets

Trading the diversified markets provides CTA trading signals greater depth and breadth due to the number of possible tradable markets. This increase market opportunity however did not translate effectively into profit seeking possibilities. Evidentially, the equity markets experienced gains from a lift in risk sentiment. However, these positive returns were offset by softer views in commodities. The shifting market sentiment from month-start to month-end experienced due to political factors challenged trend seeking strategies which had views reversed depending on the strength or momentum behind the market risk. Market volatility is present supporting the development of CTA trading signals but narrowing trading bands limits trending opportunities.