Hi everyone,
The dust has settled on a very busy and important week of fundamentals, so let’s have a look at what the big picture now looks like.
We saw the Fed raise interest rates by 75 basis points (in line with expectations) but more interestingly were their comments after the release. The two main points that I took away.
1) They seem to think that they can still avoid a recession
-When I was in business school we were taught that two negative quarters meant you were in a recession….but maybe the definition has changed? 
2) They are expecting to relax interest rate increases from next year as they believe that they will have inflation under control by then.
…I’m not sure the markets believed them.
We saw strength starting to return (finally, some might say) to the traditional safe havens of Gold and the battered Japanese Yen.
GOLD;
-I’m personally expecting a very big move from Gold. 1800 is a big area of previous support and resistance, but a break above this level could see a dramatic move up -in my opinion 🙂 Remember that bigger gold prices could also lead to a stronger CHF.
YEN INDEX: (Yen vs a basket of currencies)
A lot of buying pressure flowed into the Yen this week after the US FOMC and GDP news. Although it is still very bearish, I’m expecting some more Yen strength now.
DXY:
The dollar index looks like it might want to pullback and could have formed a lower high – It has two areas of previous support/resistance to break, but if it does I’m expecting those dollar pullbacks we have been speaking about.
A tip using the ‘spaghetti’ indicator:
I don’t use the indicator on a daily basis, but a good tip is to have a look at the indicator when doing your weekend analysis. I typically look for pairs ‘crossing’. The more ‘extreme’ the difference, the better (Very high vs very low). In the example below you can see the YEN crossing above the GBP, presumably showing YEN ‘strength’ vs GBP ‘weakness’. You still need the technical setup on the chart, but if you were looking for GBP shorts vs the Yen this can provide some additional confidence in your analysis. Also remember this doesn’t necessarily a quick change and could play out over a few days or even weeks.
FOREX NEWS:
It’s the start of a new month and that means a busy week ahead. We don’t recommend trading on Friday’s, but this week you really really shouldn’t as it’s non-farms. Along with FOMC rates this is the other BIG one. On Thursday we also have British interest rate news, so be very careful around that as well. Another reminder that the AUD news is usually ‘on tap’/ available for consumption before the event. (It, however, doesn’t mean that there can’t be any surprises).
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MAJORS
Most of the majors are showing signs of $ weakness or pullbacks. What I suggest is that you keep your eyes open over the next few weeks for Earth & Sky setups that allow you to ‘ride’ the dollar pullbacks into the A grade M2 setups.
EUR/USD: Short from around 1.0400 and 1.088
USD/CHF: Long from around 0.94800
GBP/USD: 1.2800 short is my A grade, but shorting from the current position does look interesting. I’d keep an eye out on the 4H candles on Monday.
AUD/USD: 0.700 is the key level with this pair. I would look to short from 0.71500
NZD/USD: Looking to short from 0.6600. Also at a key area at the moment.
USD/CAD: I’d look for longs from 1.2750 and 1.25600
USD/JPY: See video for my thoughts.
CROSSES
EUR/GBP: Short from 0.848000
EUR/JPY: 135.500 for a long, but I wouldn’t be too greedy with the take profit. A grade long at 129.000
EUR/CAD: A grade for me is 1.37500.
EUR/NZD: Long from 1.64500
AUD/CAD: Short from 0.91200
GBP/AUD: Short from 1.79200
AUD/NZD: BIG countertrend short from 1.12300
AUDCHF: Short from 0.67400 again
NZD/JPY: Short from 84.400 based on the 4H chart.
As always, remember correlation!!
We are NOT a “tipping service” our aim is to teach you how to trade for yourself.
Watch the video below for more detailed explanations of this week’s analysis and trade plan (click the 4 arrows bottom right to view full-screen):
Regards
Thinus
