Dollar Comes Back to The Bearish Trend. Gold and Silver Rise

  • Jerome Powell buried the USD, helped precious metals and as almost always…stocks
  • U.S. dollar index breaks the lower line of the channel up formation and goes down
  • Silver comes back inside of the symmetric triangle pattern, that’s bullish
  • Gold climbs higher
  • The NZDJPY is creating an inverse head and shoulders pattern on an important support
  • The CHFJPY goes higher after a very handsome technical setup, which we discussed in our previous video
  • The EURUSD with a false bearish breakout of a neckline, that’s super bullish
  • The USDCAD goes down as expected. Shooting star on a weekly chart is no joke
  • Indices push higher, same thing, different day

NZD Is Ready to Flex Muscles Again

There’s an excellent long-term setup on the CHFJPY, where we are finishing a bearish correction. The price is bouncing from the combination of a horizontal and dynamic support and everything seems ready for another bullish wave.

The AUDNZD is in a short-term sideways movement but with a long-term negative outlook.

The NZDCHF is in a perfect flag formation. For the buy signal, we need to see the breakout of the upper line of this pattern.

The NZDJPY is in a similar situation but here we additionally have a bounce from the horizontal support. The sentiment is positive.

Silver uses every chance to go lower. Currently, we are testing the long-term support of a symmetric triangle. The outlook is rather negative.

The dollar Index broke the neckline of the giant inverted Head and Shoulders pattern and yesterday it defended it as a support with a hammer candle. That is definitely a positive and optimistic sign for buyers.

For a look at all of today’s economic events, check out our economic calendar.

Exclusive: BOJ Seen Cutting This Year’s Growth Forecast as COVID-19 Curbs Hurt Outlook

But the central bank is likely to maintain its view the world’s third-largest economy is headed for a moderate recovery as robust exports and output offset some of the weakness in consumer demand, said four sources familiar with its thinking.

The expected downgrade highlights Japan’s struggle to contain the COVID-19 pandemic, as slow vaccine rollouts and a resurgence in infections force authorities to declare a state of emergency for Tokyo just 16 days before the Olympic Games begin.

“The foundations of a recovery are in place, but the timing may be delayed somewhat,” as the curbs weigh on the economy’s expected rebound in the current quarter, one of the sources said, a view echoed by three other sources.

In most recent forecasts made in April, the BOJ expected the economy to expand 4.0% in the current fiscal year ending in March 2022, higher than a 3.6% growth projected in a Reuters poll.

At its July 15-16 policy meeting, the BOJ will likely cut the current year’s growth forecast in fresh quarterly and inflation projections, the sources said. It is also widely expected to keep monetary settings unchanged.

In the new estimates, the BOJ will likely revise up this fiscal year’s consumer inflation forecast mainly reflecting the boost from recent rises in energy costs, the sources said.

The growth projections for next fiscal year ending in March 2023 will depend much on when households begin to feel safe enough to boost spending on leisure and travel, analysts say.

The central bank currently expects the economy to expand 2.4% next fiscal year and 1.3% the following year.

The BOJ estimates that households have 20 trillion yen ($182 billion) in “forced” savings accumulated last year due to stay-at-home policies, which could be tapped when vaccines are rolled out widely.

Japan’s economy shrank an annualised 3.9% in January-March and likely barely grew in the second quarter, as the pandemic took a toll on service spending.

Analysts and policymakers had expected the economy to enjoy a solid rebound in the latter half of this fiscal year, in part hoping that steady vaccinations and removal of curbs would spur pent-up demand for leisure and travel.

For a look at all of today’s economic events, check out our economic calendar.

($1 = 110.0400 yen)

(Reporting by Leika Kihara and Takahiko Wada; Editing by Shri Navaratnam)

 

Few FX Pairs Where We Are Still Waiting for a Breakout

First one is the GBPUSD pair, where the price is inside the flag formation, just below crucial long-term highs. Breakout to the upside, will give us a signal to buy.

The USDJPY pair is testing the lower line of the flag. Breakout should activate more sellers.

The EURGBP pair with a descending triangle pattern. Currently aiming its horizontal support.

The EURJPY pair testing the neckline of a big H&S pattern. That can result with a breakout.

The CHFJPY pair with a H&S pattern on a long-term resistance. Possibly an interesting trade for the sellers.

The AUDJPY pair is trying to break the upper line of the triangle but the first attempt looks bad. It is possible that a false breakout is happening right this moment.

The GBPJPY pair showing the beauty of price action. First two pennants and now very clean flag. Breakout to the upside can be a great buy signal.

For a look at all of today’s economic events, check out our economic calendar.

Dollar Gets Respite From Pick Up in U.s. Manufacturing Before Jobs Report

By Kevin Buckland

The dollar index, which measures the greenback against six rivals, hovered just below 90 after dipping to as low as 89.662 on Tuesday and approaching the lowest since Jan. 7 at 89.533.

Likewise, the euro traded at $1.2222 after pulling back from near a multi-month top overnight, when it climbed to $1.22545.

Investors were also watching out the trajectory of China’s recently bullish yuan. It was last at 6.3798 per dollar in offshore trading, after retreating from the three-year high of 6.3526 reached on Monday as policy makers took steps to cool its advance including raising banks’ FX reserve requirements.

Sterling also remained lower at $1.4160 after easing off a three-year high of $1.4250 reached Tuesday, while the Canadian dollar was at C$1.20590 per greenback after rallying to a fresh six-year peak of C$1.2007 overnight as oil rose.

“The direction of the dollar is definitely the focus,” said Shinichiro Kadota, senior currency strategist at Barclays in Tokyo.

“The market is split in its view” on whether current inflationary pressures will be transitory, like the Fed says it is, or persist long enough to force policy makers to taper stimulus and raise rates earlier than they have so far signalled, Kadota said.

“Even if inflation continues to overshoot, I think the Fed will continue to say it’s temporary, but the market won’t know for sure until fall, so we’re kind of stuck in this uncertainty.”

Over the near term, the euro and yuan will be key in determining if the dollar remains on the back foot or stages a rebound, he said.

On Tuesday, the Institute for Supply Management (ISM) said its index of U.S. manufacturing activity rose in May as pent-up demand amid a reopening economy boosted orders.

The dollar initially traded lower on the report, in which ISM said manufacturing’s growth potential continued to be hampered by worker absenteeism and temporary shutdowns because of shortages of parts and labor.

Those employment shortcomings will be front and centre of investors’ minds on Friday with the release of nonfarm payrolls numbers for May, after April’s much-weaker-than-expected reading sent the dollar index slumping 0.7% on May 7.

The index was mostly flat from Tuesday at 89.877, but still well off Friday’s high of 90.447, when a measure of U.S. inflation closely watched by the Fed posted its biggest annual rise since 1992.

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Currency bid prices at 100 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.2221 $1.2214 +0.06% +0.02% +1.2226 +1.2213

 

Dollar/Yen

109.6250 109.4800 +0.07% +6.07% +109.6350 +109.5250

 

Euro/Yen

133.97 133.73 +0.18% +5.55% +133.9900 +133.7000

 

Dollar/Swiss

0.8969 0.8972 -0.02% +1.39% +0.8974 +0.8968

 

Sterling/Dollar

1.4157 1.4150 +0.05% +3.62% +1.4162 +1.4147

 

Dollar/Canadian

1.2064 1.2072 -0.06% -5.25% +1.2076 +1.2058

 

Aussie/Dollar

0.7761 0.7754 +0.10% +0.89% +0.7769 +0.7750

 

NZ

Dollar/Dollar 0.7257 0.7253 +0.06% +1.07% +0.7259 +0.7249

 

 

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

 

(Reporting by Kevin Buckland; Editing by Shri Navaratnam)

USD/JPY Price Forecast – US Dollar Threatens 109 JPY

The US dollar rallied significantly during the course of the trading session on Thursday to test the top of the shooting star from the previous session, suggesting that we are going to try to break above it. If we do, that would be an extraordinarily bullish sign, and could send this market towards the ¥110 level again. This is probably not about the US dollar, but more or less about the Japanese yen as it is getting hammered by several different currencies right now.

USD/JPY Video 30.04.21

The 50 day EMA is currently offering support, and it does look like the market is respecting that. Furthermore, the 38.2% Fibonacci retracement level has offered support, and we did form a couple of hammers in that general area. That being the case, I think that the uptrend can continue, but if we were to break down below this hammers, that could open up a move down to the 200 day EMA.

Ultimately, I think that the Japanese yen is a currency that is going to be in trouble going forward, due to the lack of yield coming from the bond market. With this being the case, I do look to buy the dip in not only this pair but multiple other ones like the AUD/JPY, NZD/JPY, and even the lowly CHF/JPY pairs. With this being the case, I think that we have much further to go, and, in this pair, I suspect that ¥110 will be the next target if we can break above that shooting star.

For a look at all of today’s economic events, check out our economic calendar.

Gold Finds the Ultimate Support

 

Gold meets the ultimate horizontal support and bounces from it with a confidence.

Silver comes back above the uptrend line.

Nasdaq denies the head and shoulders pattern.

DAX trades confident around the all-time highs.

The EURUSD meets a very promising resistance but the bullish momentum looks strong.

The AUDUSD aims higher after the inverse head and shoulders pattern.

The USDCHF drops after the price creates a head and shoulders pattern on the 38,2% Fibonacci.

The CHFJPY enjoys the ride north after the false bearish breakout.

The USDMXN tests very promising support but so far, there is no sign of any bigger demand.

For a look at all of today’s economic events, check out our economic calendar.

FX Weekly March 7

Currency markets this week remain in pivotal positions however added to the week is NZD/USD at 0.7139, 

GBP/CAD 1.7484

AUD/USD 0.7652

USD/CAD 1.2771,

CHF/JPY 116.65

AUD/NZD 1.0765

AUD/CAD 0.9768 and 

NZD/CAD 0.9113

Ranges are wide this week and markets are easily capable to handle the big moves expected. Watch in particular EUR/NZD and EUR/AUD then GBP/USD. 

AUD/USD and NZD/USD topside pairs NZD/CAD and AUD/CAD both broke lower and signifies its a matter of time before AUD/USD and NZD/USD break and trade much lower. Bottom pairs AUD/CHF and NZD/CHF are both overbought and assists to further downside to AUD/USD and NZD/USD. 

GBP/AUD last week’s vital points were located from 1.8130 to 1.7885. This week 1.8130 to 1.7905. GBP/AUD broke 1.7885 and traded 80 pips lower. GBP/AUD correlates to GBP/USD at – 64% and caution is warranted to trade GBP/AUD.

GBP/NZD last week reported ranges from 1.9318 to 1.9176. This week 1.9318 to 1.9188. GBP/NZD last week first  broke 1.9176 to trade 82 pips to 1.9094. GBP/NZD then traded above 1.9176 to achieve 1.9415 highs and closed at 1.9290 vs last week’s close  at 1.9244. GBP/NZD correlation to GBP/USD run -43% and caution to this week’s trade. 

EUR/USD and all EUR pairs are deeply oversold and matches to richter scale overbought to USD/JPY and USD/CHF. Moves lower to USD/JPY and USD/CHF are corrective unless 105.70 and 0.9064 breaks lower. EUR/USD higher is corrective unless 1.2020 and 1.2034  trades higher. Weeks ago was reported EUR/USD targets at 1.1800’s and 1.1700’s. 

JPY cross pairs represent the best market moves for most pip gains beginning with GBP/JPY as all JPY cross pairs are overbought and current prices are miles to high. 

Last post was shown GBP/JPY true moving averages and the 20 day is located at 148.38 then the 50 day at 145.26. The 20 day average matches the 10 year average at 148.36 and off by 2 pips. A break at 148.00’s then GBP/JPY larger range becomes 148.38 to 142.30. 

Watch EUR/CAD higher this week, EUR/GBP oversold and GBP/USD overbought. 

Next 2 and 10 year yields, levels, ranges and targets. Inflation as a 3 month interest rate and its relationship to the 2 year yield. 

Bears Dominate the Indices and Metals

 

Gold is slowly but surely aiming for the 1680 USD/oz support level.

Silver is aiming to break the 26 USD/oz support level.

The NASDAQ is in a head and shoulders pattern.

The DAX is in a shooting star pattern on the daily chart, while flirting with all-time highs.

The AUDUSD is defending its major, long-term uptrend line.

The NZDCAD is in a negative sentiment after a false bullish breakout.

The CHFJPY is breaking a crucial, long-term horizontal support at 116.2.

For a look at all of today’s economic events, check out our economic calendar.

Sellers on Gold Have Appetite for More

Buyers on Gold struggle to hold above the crucial support on 1765 USD/oz. If broken, the target is on the 1680 USD/oz and in theory, this level looks extremely solid.

Nasdaq finishes the head and shoulders pattern and is ready to break the neckline.

DAX is still fighting on pre-Covid February highs.

EURUSD with a sharp reversal but still with a positive sentiment.

NZDCAD with a potential very dangerous false bullish breakout.

EURCHF corrects the recent surge.

Two safe haven currencies, CHFJPY test the 117.7 again. As long, as we stay below, the sentiment is negative.

For a look at all of today’s economic events, check out our economic calendar.

Dollar With a Bullish Correction

Nasdaq is locked inside of the symmetric triangle and is waiting for a breakout.

DAX pretty much the same but inside of the ascending triangle.

FTSE with a dangerous head and shoulders pattern.

Gold is aiming for 1850 USD/oz.

Dollar Index bounces from a crucial horizontal support.

EURUSD goes lower after two daily shooting stars on 1.19.

GBPUSD with a double top formation.

CHFJPY breaks the lower line of the symmetric triangle pattern.

For a look at all of today’s economic events, check out our economic calendar.

Thursday On Indices Brings Us a Correction

Seems that Thursday will be a correction day on global stock exchanges, which is pretty normal and sellers should not get overly excited about seeing a red color on the screens.

FTSE is getting ready for a bearish correction, probably aiming 38,2% Fibonacci.

CAC is doing pretty much the same.

Gold is defending crucial support on 1850 USD/oz.

Oil is testing the most important support in the past few weeks – 41.3 USD/bbl.

AUDUSD aims lower after creating the Head and Shoulders pattern.

EURUSD goes lower after the false breakout of a dynamic resistance.

EURAUD tests and bounces from the lower line of the long-term range.

USDCAD bounces from the long-term horizontal support.

CHFJPY – two safe haven currencies locked inside of the symmetric triangle pattern.

GBPCAD with exactly the same situation.

For a look at all of today’s economic events, check out our economic calendar.

New Week Starts With Bearish Stocks and Bullish Yen

DAX and CAC start the new week on the back foot

Nasdaq drops below 23,6% Fibonacci and uses it as a resistance

SP500 is in a slightly better position and buyers are still above crucial supports

EURUSD consolidates below dynamic resistance

GBPUSD bounces from the important horizontal resistance

USDJPY continues heavy drop after the bearish breakout from the triangle

EURJPY bounces from the neckline of a very handsome H&S pattern

CHFJPY also has a H&S pattern but the price is currently above crucial support so a further drop is not so certain

GBPJPY breaks long-term dynamic support which changes the sentiment into a negative one

For a look at all of today’s economic events, check out our economic calendar.

“WARS” Zones Of Another Kind, The Wuhan Acute Respiratory Syndrome

So, traders will pivot from the other Wars, Trade and Iran, and into the “WARS” zones of another kind, the Wuhan Acute Respiratory Syndrome zone, where the latest travel restrictions now confine nearly 60 million Chinese.

Traders who would be typically discussing the weekend football results are now sadly focusing on mortality scores this morning. And trust me, absolutely no market professional likes making money off misery, but we all have a job to do to protect client’s savings. So, risk profiles need to be adjusted as the Wuhan frenzy factor kicks in, and risk markets enter the fear zone, a highly pandemic place in its own right. Even more so after President Xi calls the rapid spread of the virus a grave situation.

So defensive strategies will be priced at a premium out of the gate as investors shed China and global risk proportionally to the mounting reports of confirmed Wu- flu cases worldwide. Suggesting the market risk lights could start flickering between amber and red.

While much of the focus has been on the usual suspects’ luxury, travel, and tourism, just calculating the number of canceled tourist trips, declines in retail trade and similar factors are not sufficient to get a full picture of the impact of “WARS.” The structural changes to the global economy complicate the economic analysis of this because there are linkages within economies, across sectors, and across international trade and capital flows that need to be factored.

The biggest threat to the global economy is not just because the disease spreads quickly across countries through networks related to global travel. But also, because any economic shock to China’s colossal industrial and consumption engines will spread rapidly to other countries through the increased trade and financial linkages associated with globalization.

Unlike 2003 where SARS was less impactful on the developed world market, the rest of the world could feel the pinch this time around. And if the virus stunts China’s domestic economic growth in an echo of the SARS epidemic nearly 20 years ago, the falls could be even more precipitous than projected. And there are two reasons why: 1) consumption is now a more substantial part of China’s GDP, and 2) China’s overall growth trajectory. In 2002, retail sales accounted for 34% of nominal GDP; this share is now over 40%. And since China has been at the forefront of the global economic recovery this year, mostly driven by consumption, there could be a massive knock-on effect globally as China’s pivot from a brick and mortar economy to a services powerhouse means they import much more from abroad than they ever did

There has already been a significant markdown in China exposure and leisure stocks – as positioning had been extremely consensus in both. But not only could we see a multi-sector ASEAN equity market fire sale unfold, but a massive chunk of the nascent great global growth trade of 2020 could unwind. After all, a possible one percent haircut to China’s GDP is not a trivial matter, and indeed, when China sneezes, the world catches a cold.

According to the IMM commitment of traders, equity futures long positioning has continued to rise to new records, call volumes have surged to the highest since October 2018, and sentiment indicators are at the top of their historical band. Over the last three months, equity funds have also seen inflows of $75bn, the strongest since early 2018, with cyclical sectors being big beneficiaries, especially Tech, Financials, and Industrials. Indeed, the market’s fear factor has given way to greed, which could leave current positions precariously perched. Pullbacks of 3-5% in the S&P 500 have been typical every 2 to 3 months historically, but now we’re stretched to about 3.5 months, and if a significant Wu-Flu risk wobble occurs, we could see more profound positioning unwinds as a pandemic panic ensues.

There is nowhere that China’s economic influence is more on display than in Asia. The key driver of ASEAN’s steady growth over the past decade has been the rapid growth in bilateral trade with China. China has been ASEAN’s largest trading partner in the past ten years, with two-way trade reaching $292 billion in the first half of 2019. And thus, makes the rest of Asia extremely vulnerable to a China economic slowdown.

And although I have the usual assortment of crazy trade ideas going through my head, unusual for me, I’m starting to think cash is the right place to be for the next few weeks instead of trying to stand in front of the Wuhan freight train. It’s too early in the year to go into a trading hole.

Oil market

Oil sold off aggressively last week on concerns about the impact on China’s economy of the outbreak of a SARS-like virus. Brent was down close to 6% on the week as trader moved to price in a worst-case scenario around Chinas travel and transportation demise. But now traders are left with the impossible task of factoring in the global demand impact as the outbreaks are getting reported worldwide, not to mention a potential 1 % hit to China GDP. Given the extremely tight linkage between China’s economic growth and its appetite for oil, there’s no place to hide for oil bulls and as we saw last week, taking a bullish leap of faith proved to be a fruitless exercise in frustration.

Since the Wu-Flu incubation period is estimated at between 5 days and two weeks, we’ll need to assess the true extent of the damage after the Lunar New Year holiday, so I suspect the balance of oil markets demand devastation risk remains on the wobble until then.

Gold Markets

Gold is performing well in large part because of the slump in US yields since the new year. This fact seems to be offsetting the impact of a strong US dollar to a more considerable degree. And with the Fed on hold, so a risk-off induced break lower in yields could be relatively unobstructed, which would be very bullish for gold.

Also, the details of Friday’s US PMI report were a little downcast. New business did rise, but at a slower pace. Both manufacturers and service providers recorded a more gradual expansion of new orders than expected. And new export orders placed with US private sector firms dipped into the contractionary territory at the start of 2020. Which supported also provided a fillip to gold priced on Friday

But a Wuhan flu triggered sell-off in equity markets will likely drive gold demand out of the gates today, and long-term strategic buyers could compound the move higher as they start to position for the Wu-flu to spread at a faster pace in the coming weeks. The more rapid pace of contagion will represent another significant headwind to global growth. Given how early we are in the newfound growth cycle, more policy easing will be needed to support growth, which could be viewed as bullish for gold. A policy response from the PBoC is a given. But the big question is if the Feds need to react at some point down the road. All of which would be bullish for gold

Still, the effects on the US economy are a long way’s off as trade flows between China and the US have been reduced to a trickle due to tariff wars. And with only two, at this juncture, reported flu cases stateside, it’s not going to have a significant impact on US consumers, but its the fear factor that’s impossible to gauge. None the less at this stage of contagion the Wu-Flu is unlikely to have a material effect on the FOMC policy.

But in case you needed more reasons to buy gold this week, all eyes and ears will be honed on Chair Powell’s FOMC presser. Still, more specifically, Powell will be grilled about the financial stability risks created via the Fed’s liquidity injection due to balance sheet expansion.

There’s no blueprint for unwinding the balance sheet without some element of risk. But the fear heading into this FOMC meeting is a communication misstep. At some point, the Fed will need to communicate a temporary pause in the Fed’s repo activities as it can’t go on forever. Still, a misstatement could easily trigger a huge adverse market reaction. This in itself demands some protection either via long gold or downside USDJPY structures.

ASEAN currency markets

Depending on how widespread the outbreak gets, we could see more shifts in the market long ASEAN axes with tourist-heavy THB and the global growth-sensitive TWD as most vulnerable in this case.

The preferred way to trade this through FX is THB – with the economy dependent on tourism, the loss over China New Year will weaken GDP and weigh on the Baht, precipitously.

The THB remains the most exposed to the new coronavirus outbreak as Thailand is a top destination for Wuhan tourists. Analysis of seat capacity on flights by OAG shows that the two largest international markets are Thailand, with nearly 107,000 seats and Japan with 67,000 seats available.
Coronavirus – Tracking Down the Bug (OAG)

Other analysts estimates suggest a 3% haircut to tourists during the Lunar New Year holiday week.

But if the virus stunts economic growth in an echo of the SARS epidemic narrative and triggers a deeper slowdown in China and weakens the RMB. Then the Yuan correlated basket of KRW and MYR have the most to lose so we could see a further unwinding of capital market risk in South Korea and Malaysia this week.

G-10 Currency Markets

G10 FX vols are holding in for now in though spot markets will be quiet in Asia due to the Lunar New Year holidays across the region. Implied levels are already low, and concerns regarding the new coronavirus outbreak continue, so market makers do not want to be short vol just in case fear escalation. If the virus outbreak continues to expand, it could significantly impact the currency market where the safe-haven JPY and CHF should shine while the USD will attract its lion share of safe-haven flows. I don’t like either of those trades mind you 1) due to Japan’s economic proximity to ground zero, and 2) the SNB doesn’t care about the US Treasury currency manipulators tag.

The Euro continues to struggle even in the face of a moon shot on this week’s ZEW data, and while hints of a move towards a symmetric inflation target are a small positive within the context of the ECB policy review. Still, without a more supportive fiscal policy input and a bounce in rates, the Euro could languish.

But the Euro has been a critical funding currency of the “carry trade” this year, especially into the ASEAN basket. Hence, as local currency bullish bets unwind, it could add some support to the underlying EUR risk as those shorts get covered.

As for the market short dollar narrative, the US dollar will undoubtedly be a big talking point during the US presidential election, and the Fed is likely to end up cutting rates following the strategy review. But these events are later in the year, and for now, it’s hard to fight safe-haven US bond driven currency inflows.

AxiCorp’s Innes discusses Wu-Flu on morning podcast 6:23 min

False Breakout on the NZDUSD!

In my opinion, the big contributor here is the technical situation with the Head and Shoulders pattern as a main player.

The reversal from the beginning of the week is a false breakout above the neckline of the big inverse head and shoulders pattern. NZDUSD loves this structure! The head of this is build from a smaller iH&S. What is more, the right shoulder had two H&S patterns inside. The last one is the false breakout mentioned above. As a technical analyst, I call this amazing. The sentiment here is negative.

Second one is the pair of two safe heavens, CHFJPY. Currently we are inside of a pennant, which is formed after the breakout of two major down trendlines. Bullish momentum seen recently is driven by the double bottom formation on the long-term chart. Currently, most traders wait. Price breaking the upper line of the pennant, will give us a signal to go long and price breaking the lower line, will give us a signal to go short.

Last one is Gold, where we are also inside of the sideways trend. The price did not manage to break the 1518 USD/oz resistance, which caused a proper drop. Now, we are testing the lower line of the rectangle. As long as we stay above, buyers can be optimistic but breakout to the downside will change the outlook to a negative one.

This article is written by Tomasz Wisniewski, Director of Research and Education at Axiory

Liquidity Trade ??

With global economic engines still clattering and in desperate need of some high-grade Central Bank stimulus, investors are still pinning their hopes on central bank policy.

Frankly, with the calamitous state of affairs in global capital markets, the Feds will likely consider a significant policy pivot to make up for the last FOMC policy debacle while other central banks which are out of policy wiggle room consider more non-conventional policies around QE, equity buying or even the possibility of helicopter money by the ECB and other central banks who are currently running deep in negative territory.

After a number of surprise rate cuts by various central banks over the past couple of weeks, and given the latest trade war infused market carnage, investors will certainly be hanging on Powell’s every word for any indication of how the committee is leaning concerning its rate decision on September 18th.

Jackson Hole

Last weeks frenetic gyration in risk assets will be put through the rinse cycle again this week as the Fed’s Jackson Hole event comes front and centre. We’ll also get the latest FOMC meeting minutes to absorb while another round of Eurozone PMI’s will be used to measure the pulse of global growth.

But indeed, all eyes will be on Jackson Hole this week which will hopefully go a long way to pacifying these turbulent markets. Fed Chair Powell is offering opening remarks on Friday which could be pivotal heading into the next Fed meeting on September 18. And considering the global economy is dealing with a considerable downdraft and a US yield curve inversion shocker, the Fed may very well have to abandon the insurance metaphor as hefty doses of monetary (and potentially even fiscal) will go a long way to stabilising market sentiment. The question now in the context of the latest market meltdown is the absolute scope Jay Powell is willing to move away from the insurance cut mantra. The market wants to hear one thing and one thing alone, and that is the FOMC committee are unambiguously transitioning towards an easing cycle.

Now and again something significant does come out of the central bank soiree, and with Germany debating fiscal policy there might be some coordinated economic +monetary policy academic paper or proposal in focus as most of the G-10 Central Banks conventional policy arsenals are at or nearing exhaustion.

Indeed nothing like a good dose of policy easing to correct the market ills and grease the wheels of global capital markets

Oil markets

Oil managed to mostly recover from Thursday’s lows after US President Trump’s mention of a planned call with his Chinese counterpart Xi Jinping.

At today’s open prices remain supported by a softening of US trade war bombast ahead of a planned US-China trade call which could open the door to another face to face. Also, Oil markets are getting a boost from expectations of an explicit dovish policy pivot from Jay Powell.

However, risk asset will remain prone to negative trade headlines and a more profound yield curve inversion if this week’s Eurozone PMI’s produce another shockingly weak survey.

Oi Prices finished the week on the ups but given the whippy intraday day moves which are expected to continue as trade-related headlines come in fast and furious, even picking outlier trading ranges is getting tougher by the headline which is making for treacherous trading conditions. And likely contributing to the oil markets lower liquidity profile.

But with so much doom and gloom built into oil markets via US crude inventory build and weaker macro indicators, the US-China trade overhang desperately needs to be resolved for markets to recover.

Gold Markets

Given the policy uncertainties that may or may not unfold later in the week from Jackson Hole, Gold could consolidate further before eventually resuming its upward momentum, a sturdy build in positioning notwithstanding, for no other reason that every central bank remains in contention for the Yellow Jersey in the race to zero

After some aggressive price action last Wednesday and Thursday, the yellow metal failed to make new highs, which could say a bit about the speculative length in the markets.

With that in mind, given the position builds, it likely triggered some relatively hefty weekend inspired profit-taking as the dollar remained on solid ground and equity markets bounced off weekly lows as risk sentiment has been steadily improving after US President Trump’s mention of a planned call with his Chinese counterpart Xi Jinping.

The main Headline risk for gold remains the easing of US-China trade tensions, while support will come from dovish signals from the Fed, and talk of central banks QE or anything that sounds like helicopter money by the ECB or the BoJ which should continue to underpin market sentiment.

On Friday, Gold prices held up in Asian and European trading before weakening in US action. Gold’s initial strength came for the usual assorted worries about the global economic slowdown and deteriorating trade conditions, but prices edged lower amid dwindling bid side liquidity as the day wore on.

End of week book-squaring and profit-taking looks to have contributed to the decline as did a short-covering rally in US equities after a turbulent week helped to encourage Gold profit-taking as well.

Bond Markets

The U.S. economic data does not suggest a coming recession, but this does not mean the U.S. economy is immune from the knock-on effects of a slowing global economy, but contagion will probably take the long road from China. So, the U.S. inversion makes more of a statement about growth in the rest of the world. And the UST 2/10’s inversion is likely getting amplified by the overload of negative-yielding debt in Europe, suggesting Bunds are causing the moves in U.S. treasuries, rather than the other way around. This view is supported by the Granger causality test as global inflation expectations shift lower, Bunds tend to drive U.S. treasuries likewise.

Currency Markets

G-10 safe havens should remain in demand or at least hold steady as traders are reluctant to hold risk positions which remain vulnerable to headlines, Tweets, comments and flows if there is any risk appetite left in the markets it’s supported by little more than the “who blinks first” narrative as U.S. and China are set to restart trade talks.

Yen and CHF demand will be triggered by trade headlines; however, traders could get discouraged from buying more CHF and JPY for fear of a strong SNB or BoJ reaction.

I’ve been trading USDJPY from the long positions, but it is starting to get complicated again as short term money is staying short buying into all the US recessionary cheerleading.

The Euro

Weak Eurozone data and a dovish ECB suggests an imminent test of the mid 1.10’s, but the prospects of Germany increasing deficit spending triggered EURUSD short-covering which dampened the markets downward momentum considerably heading into the weekend. Deficit spending suggests a more pragmatic mechanism free from the drama of helicopter money and less harmful for the Euro.

USDASIA

The markets feel way too heavy long USD for my tastes, so I joined the markets which went into risk reduction mode ahead of the weekend. Given the markets remain long USD positioned across the Asia basket, I suspect the market will remain capped unless USDCHH moves higher and or if the US-China trade talks deteriorate. So, the markets will need some persuading to add more USDCNH top side risk. So we could expect a relatively muted Asia FX market response today.

The Ringgit

The Ringgit closed the week on a positive tone after the surprisingly sturdy Q2 GDP print which saw the USDMYR fall below what was a healthy 4.18 support level. The BNM has also liberalised their FX rules to allow more hedging by foreigners.

So, with that positive domestic economic backdrop, pressure coming off the Yuan and risk tentatively stabilising and supporting oil prices, it should temper the negative views toward the Ringgit but will fall well short of a bullish shift in attitude.

Mad World

The world does appear to have gone utterly mad, but if you think the oval office couldn’t outdo themselves, think again. I finally got a chance to read over all of last weeks reports and the Washington Post sums this up perfectly, “President Trump has pushed top aides to investigate whether the U.S. government can purchase the sizeable ice-smothered island of Greenland.

This article was written by Stephen Innes, Managing Partner at VM markets LLC

FED moved the Market but technical analysis still Works

Movements that we see on the chart right now are in the same time very technical, which is a great thing also for those traders that tend to ignore the news and put more attention to the dots and lines on the chart.

First instrument today is the EURUSD, which on Wednesday, broke the local horizontal support on the 1.111 (yellow). That breakout was a legitimate signal to go short. For the past several hours we do have an upswing though but this is a normal price action movement, which is the broken support being tested as a newest resistance. First contact with the yellow area is positive for the sellers as we can see the bounce. As long, as the price will stay below the yellow line, the sell signal will be present.

FED cutting rates was also a fuel for bigger movements on the SP500. Here, the price eventually chose to go down. The movement is also technical, as we do have a triple top formation and the breakout of the 23,6% Fibonacci. The movement towards the 38,2% is very probable.

Last one is the CHFJPY so a battle of safe heavens. Currently, JPY is winning. The price respected the down trendline and broke the lower line of the flag pattern. That is a beautiful bearish price action movement and should be continued in the nearest future.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis

Australian Dollar tango down

Some traders prefer to avoid such market conditions and trade elsewhere. For those, we made this video. Today,3 occasions on the pairs without the USD.

First one is the AUDCAD, where the price is falling down sharply after two bearish price patterns. First, major one, is the flag, which is present in the proper downtrend and was giving us a hint, that this trend was about to be continued. The breakout happened after the price drew a second pattern – double top formation. Currently, we are close to mid-term lows, which can be a good occasion for taking some profits and, in consequence, reversal.

Second instrument is the EURAUD, where we can also witness the weakness of the Australian currency. Setup presented here is the Head and Shoulders pattern, with a false breakout to the downside. Movement south stopped on the long-term up trendline and since that, we do have a strong upswing. In my opinion, the positive sentiment should be continued.

CHFJPY is the last instrument in this analysis. Here, the price is creating the third bearish correction pattern in a row. We already had one flag and a pennant and now, we are having flag again. The sell signal will be created, when the price will break the lower line of the flag and horizontal support on the 109.1. Chances for that are quite high.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis

Weaker Global Sentiment & Mrs Lagarde at the ECB – CHFJPY Moves Lower

Under Lagarde the IMF repeatedly backed and called for ongoing or further ECB support, so markets are clearly hoping for additional and wide ranging easing measures, although part of the rally in bonds and weakness in the EUR may reflect relief that market-focused Draghi won’t be followed by Bundesbank President Weidmann, who has a much more traditional view on monetary policy.

Indeed, like Fed’s Powell, Lagarde is a lawyer and not a trained economist. However, while many in Germany may lament that Weidmann lost out and that the ECB missed the chance to distance the central bank somewhat from financial market pressures, Lagarde’s skill as negotiator and her wide ranging contacts may help to fill the cracks in the monetary union that are becoming more apparent and to not only improve public support for the central bank, but also to get politicians to finally push ahead with the banking union and further integration.

The euphoria following the prospect of the restarting of US-China talks and cooling of trade tensions (for now at least) has subsided as we move into July, adding a renewed bid for the Japanese Yen.

The CHFJPY pair may not be on every trader’s radar but with a trading system, trading plan and good risk management no asset should be ignored. Indeed the sign of a good trading system/strategy is that it should be applicable to as many markets as possible, be that forex, commodities or equities.

“A chart is a chart” is the call of many chartists. But whatever time frame, asset or approach an individual trader takes they have to be able to follow the rules, accept their losing trades as well as their winning trades and above all manage their risk.

Below are three Trend Following and one Mean Reversion approach to the pair from the close on July 2.

  1. Is the Daily Moving Average approach – the baseline for this approach is a breach and break of the 20-SMA, (109.37) with a Target 1 set by the ATR x 1.25 (108.55) and Stop Loss at the turn in the market (110.55). The higher time frames (Week & Month) are both biased to the downside so the move on the Daily chart is with the trend.
  2. Shows the EMA Crossing Strategy which is also based on moving averages and utilizes the ATR for target setting too, this time ATR x 1 and ATR x 2.5. Stop Loss, as ever, above the turn.
  3. Shows the clarity and simplicity of the Heikin Ashi candle approach – lack of upper wicks and a red candle enough to suggest a short position, Stop Loss again above the turn but this time no target, simply a wait for the candle to change colour.
  4. If Mean Reversion is your approach then again the simplicity of the Awesome Oscillator could be for you. This approach suggested a turn in sentiment July 1 but has yet to suggest a short position as the histogram remains north of zero.

For details on all these approaches and how to manage the most important aspect, YOU then join us during July for our exclusive series of educational webinars.

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Yen Bulls gain Confidence

That is the case right now as tensions around the trade wars between China and US are increasing. All three setups are pretty similar to each other and the correlation between them is high.

First one is the CHFJPY, which on Monday, broke the crucial long-term support using the bearish gap. The breakout, from the technical point of view, was promoted by the descending triangle pattern. After the breakout, the price rushed to close the gap and created the pennant formation. Pennant was promoting a further slide and this is precisely what happened. The sentiment right now is definitely negative.

AUDJPY is the second one and here we also had a gap, which allowed to break a major support. In this case, the support is dynamic and connects higher lows since January. Traders managed to close the gap and after that, immediately started to sell. As long as we stay below the black line, bears have bigger chance for a success.

Last one is the GBPJPY loved for its volatility. Most recently, the price managed to break crucial horizontal support on the 143.8, which gave us a proper sell signal. Whole slide was initiated at the beginning of May with a very nice false breakout pattern. When you see this, tell me, how can you not love this kind of setups?

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis