How can a trader trade the news using Trump's Twitter?

Hello, forex colleagues traders !

Social networks have changed our lives, transforming over the 14 years of their existence and development from a confidential communication tool into a general news platform. In 2019, no one doubts the enormous influence of messages on social networks, especially if the owner of the account is the head of state.

In today's material we will look at how currency speculators can use Donald Trump's Twitter in Forex trading. If you are not subscribed to him, but trade on the Forex market, this article can turn you into one of his most devoted followers!

Along with personal user accounts, corporate and political accounts began to emerge over time. Among the latter, Barack Obama, the first African-American president, managed to attract the largest number of subscribers.

He chose Twitter, a convenient platform for publishing news and short messages, allowing himself to deviate from the official @BarackObama channel and communicate “with the people” via personal account @POTUS - abbreviations from the first letters of the name of the official position of the President USA.

Having a liberal arts education, Obama knew how to joke and had the talent of a writer, which led to a record speed of gaining followers (the record was recorded by the Guinness Book of Records in 2015). The 45th President of USA who replaced him is the complete opposite due to his poor vocabulary, rating, and ambiguous reputation. However, this did not stop Donald Trump from collecting 64.6 million subscribers to his personal account @RealDonaldTrump.

In 2011, Matthias Lüfkens coined a new term - “Twitter diplomacy”, explaining in a detailed article that 97% of countries have accounts on this social network and publish posts with official communiques that can be found out before they get into news feeds and the business press.

Donald Trump in 2017 raised the political significance of social networks to unattainable heights. Exclusive news from the president’s Twitter was received not only by journalists from the business press, but also by the White House administration. Officials often shrugged when approached for comment. Later they began to admit that some messages were not discussed in advance and were the president’s personal point of view.

The head of state, unlike any other minister or deputy, cannot refer to the expression of personal opinion after written posts. Every word is a policy that affects international relations and the economy.

High-level political figures rarely or never allow messages to be written without moderation by a team that checks words for compliance with ethical, protocol and political standards.  Donald Trump is the only head of state who allows the publication of personal opinions, ambiguous phrases, open discussion and insults of other politicians.

Donald Trump ranks second in the number of tweets among political figures in the world (the king of Saudi Arabia is in first). The US President uses two accounts, having inherited the rights to @POTUS from Barack Obama and launching his own account @RealDonaldTrump.

According to linguistic analysis, Twitter for Trump is a tool for fairly straightforward and uncompromising criticism of opponents, constant praising the individual, demonstrating US superiority.

The President understands and is aware of the power and impact of his own words, trying to inflict maximum damage on the chosen enemy - an individual company or state. In this regard, the term “diplomacy” has little relevance to the pressure of verbal attacks, where there are no subtle moves or invitations to negotiate. The head of the first economy in the world contains threats and negativity in 140 signs or expresses complaints and grievances.

As mentioned above, the 45th President of the United States is “simple in words,” clearly conveying thoughts and ideas in 140 characters of tweets and hinting at future actions. Linguists are still debating what exactly the intentional or innate “poverty” of a language means, but it is quite black and white and understandable for traders, even for beginners with a minimum level of knowledge about the stock market, currencies or raw materials (in particular oil).

The main rule is to sell everything that is criticized, without paying attention to the praise, which usually refers to the statistics released that, in the President's opinion, prove the greatness of America achieved under his leadership.

This phenomenon is called MAGA - an acronym for the election slogan “Make America Great Again!”

The analysis of criticism of Donald Trump is convenient because it is serial and focused; the head of the United States cannot be denied the consistency of movement towards the goal. He tries to go to the end until he independently and publicly closes the topic, considering the goal achieved or the conflict settled.

Here it is very easy for traders to track the subject of discussion through publications in the business press and wait for a new batch of tweets until the topic has exhausted itself. Below are historical examples of messages and reactions to them from each market of interest to Donald Trump. From the examples it is clear that the only correct reaction to another post with criticism was pressing the “SELL” button.

Despite the influence of the person and the power of the American economy, the verbal influence of the president’s messages looks to traders like ordinary news, which is traded in within one to two hours, strengthening the trend or making an unexpected counter-trend movement.

The time of day also matters: tweets published during the night session will greatly influence Asian markets or currencies, while other trading instruments will show a moderate reaction. 

Messages on the social network of the US President traditionally affect the dollar, slightly affect the euro exchange rate, Mexican Peso, Canadian Dollar and Japanese yen. Random attacks against any currency are possible, the verbal onslaught included ruble, Turkish lira, Indian rupee.

The US dollar "suffers" from developments on two topics that have already become constant:

Investors “go to cash” by dumping shares and “parking” money in dollars or US Treasury bonds. Positive tweets cause the dollar to fall as the nest egg is used to buy shares of companies that could benefit from renewed trade relations and increased purchases of American goods by China.

For example, on June 18, 2019, EURUSD fell on the eve of the Fed meeting, but the tweet of the President who had just woken up (6-34 NY time), promising to meet with the leader of the PRC at the G-20 summit, marked the bottom and eased the pressure of the bulls.

As stated above, traders should consider the time of day and the short duration of tweets. In this example, the tweet came during the European session, and therefore caused a more lively reaction than an unexpected message on the night of May 6th.

The American president decided that China was dragging its feet on negotiations, and the time had come to introduce new tariffs. Everyone was surprised: investors, members of the official US delegation who were in Beijing at that time, and the head of the Chinese Foreign Ministry, who simply did not find words, but after this incident became the most devoted follower of @realDonaldTrump.

The Forex market reacted to this event with two weak candles down on the EURUSD pair, and the currency pair then continued its upward trend.

The main reason for criticism of the Fed is well known - the leader of the American nation was disappointed in Janet Yellen's successor. She was a supporter of hawkish policies, Trump expected low, almost zero rates from his own candidate who replaced her.

Jerome Powell disappointed the “patron” by raising rates; after this event, periodic attacks on the head of the Fed became a cause of weakening in the US dollar.

Any criticism was perceived by traders as evidence of two possible events: the removal of Jerome Powell from his post or a concession to the FOMC, which would lead to a decrease in rates. As a result, the second event happened, but Trump has been manipulating the dollar with this theme since 2018.

Criticism of the Fed's policy influences the weakening of the dollar more than the "kicks" of China. For example, in late March, Trump's late evening post allowed the bulls to almost completely buy out the dollar's strength in two candles at the end of the day.

In 2019, another topic appeared on Twitter @realDonaldTrump, which could become a constant source of weakening of the American currency. The US President decided that many national currencies were deliberately devalued (especially China's) and threatened to start a large-scale currency war.

The tweet came at the end of the day, but caused volatility, which resulted in a reversal trend and the weakening of the dollar.

The Canadian dollarnow rarely comes under Trump’s attention and criticism; the country was one of the first to fall victim to sanctions and surrender to the “mercy of the winner.” The American president “knocked” Canada out of a new trade agreement to replace NAFTA, sometimes threatening another round of sanctions via Twitter.

A clear pattern can be identified: the Canadian dollar falls whenever the president accuses the country of unfair trade conditions, i.e. in 99% of tweets. The USDCAD pair's reaction to negative messages is solid growth.

For example, during a weekend in June 2018, Trump was offended by Prime Minister Trudeau's speech, considering his remarks about the trade achievements of the Canadian economy boastful. A single message about “earning money at the expense of America” was enough for the Canadian dollar to fly 75 points in an hour at the market open on Monday, June 11.

Mexican neighbor experienced the double wrath of Donald Trump: if the topic of the NAFTA free trade zone is closed after the signing of the new format of the USMCA agreement, then political tensions due to migration problems are constantly torpedoing the country’s currency. Businesses have calculated that losses from verbal attacks by a strong neighbor exceeded $12 billion. It would be cheaper to buy out Twitter and permanently ban the account of the American president).

The latest verbal attack at the end of May affected the currency with a two-day fall and a loss of 4% of value, this was the result of an unexpected tweet about the introduction of a progressive scale of American duties from June 10, 2019. On the evening of May 30 (the night of May 31 Moscow time) Donald Trump decided to fight migration by raising monthly customs duties on Mexican imports.

The Mexican peso's fluctuations, as an example, ended well, with authorities reacting quickly by sending special forces to the borders to stop newly arriving migrants and give refuge to those already in Mexico.

As can be seen from the chart, Trump's satisfaction with his neighbor's actions was expressed in the return of the exchange rate to the “pre-crisis” level.

The topic of duties was raised in relation to India, Russia, Turkey, the European Union, and each time this led to approximately the same drop in the exchange rate of national currencies in the interval from several hours to a day.

The Japanese currency is not directly affected, despite misunderstandings between the countries over the trade agreement they are negotiating right now. Donald Trump is refraining from his usual style of Twitter insults towards Japanese authorities.

However, any statements regarding China indirectly affect the rate of the USDJPY pair, and affect the entire market Forex.

However, any statements regarding China indirectly affect the rate of the USDJPY pair and affect the entire marketForex.

Tweets weakening the dollar and calling on the Fed to cut rates help the market rise, as seen in the April 16, 2018 example. Unlike the Forex market, where the dollar rather weakly reacted to the American president's accusation against China and other countries of specially devaluing their national currencies, the S&P index received a strong growth impulse despite US exchanges being closed.

Donald Trump is not always able to contribute to the upward movement of stock markets due to the trade confrontation between the United States and China, but in this case the negative effect has a short-term effect. For example, on May 5 (6th Moscow time), an unexpected announcement about a return to duties led to a fall in the S&P500.

Any positive statement on China is won back by traders on the stock market, especially if the statement is unexpected. For example, during a lull in negotiations, on June 18, Trump only had to announce a constructive telephone conversation with Chinese leader Xi Jinping to ensure strong growth in global stock markets, including the S&P500.

The stock market and national currencies are linked by direct correlation, so any mention of a specific country in Donald Trump’s messages results in a drawdown on the local stock exchange. The Chinese indices are especially hard hit, with the Mexican stock exchange, “suffering” from constant migration attacks, in second place.

Actions on other markets are random. Donald Trump can unpredictably “take up arms” against any country, accusing it of trade imbalances or hidden state support for certain industries. The result is threats of duties, which leads to panic sales of shares at the opening of stock exchanges.

A separate line can be used to indicate the shares of various companies that at different times came under fire from the American president due to insufficient patriotism. In particular, Trump seeks to return some production to the United States, and therefore criticizes automakers and IT companies.

The backlash of investors to criticism of periodicals - it increases the circulation and the price of shares of the publishing house. Praise for retail products results in customer boycotts, but such tweets are rare.

The backlash of investors to criticism of periodicals increases circulation and the price of shares of the publishing house. Praise for retailer products results in customer boycotts, but such tweets are rare.

Renowned energy-market economist Philip Verleger studied the relationship between social-media posts and oil prices, which allowed him to conclude that Donald Trump's policy has a long-term impact on the cost of a barrel.

Regardless of OPEC's policy, the 45th President of the United States will not allow oil to reach $90 - this phenomenon is called the “Trump call option.” Traders confidently begin to gain short positions when quotes rise above $75, expecting the strengthening of all measures to curb the rise in black gold prices.

Tweets are just one of the tools; Donald Trump influences the position of Saudi Arabia and other OPEC countries from within, holding the sale of government oil reserves in the amount of 649 million barrels as his last trump card.

The name of the phenomenon arose by analogy with the confidence in the policy of the head of the Federal Reserve: the “Alan Greenspan call option” forced traders to buy stocks based on faith in stimulus measures. The head of the financial department has always met expectations with the reliability of an option that guarantees the completion of a transaction at a certain price at the time of expiration, regardless of the situation on market.

The name of the phenomenon arose by analogy with the confidence in the policy of the head of the Federal Reserve: the “Alan Greenspan call option” forced traders to buy stocks based on faith in stimulus measures. The head of the financial department always met expectations with the reliability of an option that guarantees the execution ofdealsat a certain price at the time of expiration, regardless of the market situation.

The EarlyBird program is one such innovative Twitter trawl, approved by the EU regulator for compliance with MiFiD II rules. The application is “tailored” to contextual search for significant information on a given Forex currency pair.

Despite the lack of a Russian-language version, the software works at a level understandable to a trader. After verifying their own account and installing the application, the trader can choose:

In this case, only messages containing keywords will be displayed on the desktop or in the application. In the example above, the message will be filtered if it contains the following: Mexico, migration, tariffs, etc. The list is constantly updated and monitored by artificial intelligence, the tweet will appear even if it is misspelled.

Releasing 11 short messages a day, Trump touches on all issues, from the dismissal and appointment of officials, as was the case with Secretary of State Mike Pompeo, to proposals for bilateral meetings at the level of heads of state (for example, North Korea).

P.S. On January 8, 2021, the social network Twitter still blocked the account of Donald Trump. You can see what the account looked like before it was blocked in the Internet archive here, you can read the tweets of the 45th President of the United States here.

Sincerely, Alexey Vergunov
Tlap.io

By analyzing Twitter using smart applications,tradergains an advantage over insiders of the largest companies. In the 21st century, social networks are replacing the media, delivering news before they appear in the feeds of news agencies.

P.S. On January 8, 2021, the social network Twitter still blocked the accountDonald Trump. You can see what your account looked like before it was blocked in the Internet archivehere, you can read the tweets of the 45th President of the United StatesHere.

Best regards, Alexey Vergunov
Tlap.io