Yellen
Gold Miners Run Up to Key ResistanceGold mining stocks have been trending higher, along with the overall U.S. equity market, of late. The recent support in gold prices allowed the Market Vectors Gold Miners ETF (GDX) a strong close last week, pushing 15 percent off the November 18 low.
Gold mining stocks really get a pass from traders, and it is still early to determine whether the move will last or not. And, this could depend largely on whether or not the Federal Reserve tightens monetary policy for the first time since 2006. If the Fed does hike rates, gold prices could suffer.
Currently, GDX has been able to close around the 50 percent Fib. retracement on the October 15 high. The daily candle closed near the top of its range on strong volume. The ADX is ticking upwards with a concurrent upward movement in + DMI, and this can garner stronger upside potential.
Conversely, the GDX could see resistance at the 50 percent Fib. level, which also coincides with trend resistance (broken support). A reversal at current levels could send the mining ETF $14.20/00, while deeper price support lies at $13.38.
Further upside momentum would cause the GDX to test the larger, downside trend line between $15.50 and $15.75. If the Fed fails to hike rates in a mere week, the GDX will retest the 200-daily EMA.
Stock pickers could find undervalued gems in the mining space. Meera Shawn, Market Realist, points out that some miners have down quite well this year: Agnico-Eagle Mines (AEM), up 11.2 percent; Centerra Gold (CG), up 31.2 percent and Alacer Gold (ASR), up 8.4 percent versus a 23 percent decline in GDX as a whole. It is important when choosing commodity producers to look for strong balance sheets and low operation costs. This helps producers whether pricing declines
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Potential Inflection in SLV: Price Action and OptionsThe iShares Silver Trust (SLV) has been beaten bad, falling over 13 percent prior to Friday’s rally. On a combination of low inflation and low growth, silver has fallen long out of favor with Wall Street (but remains a small investor’s favorite).
But, there are a couple factors that could signal, at least in the short-term, SLV may see some upside.
First, price action was able to trend along support at $13.35/30 that was created back on August 26, following the Black Monday event in equities; and it also represents a solid line of support on the weekly chart. Secondarily, the three percent move off of support was coupled will back-to-back sessions of heavy positive volume.
There is a daily bullish convergence in the +/- DMI, which suggests that positive price action is taken favor. The non-directional biased ADX is slopping downward, too, which may mean the downward trend could be taking a pause.
Even with some positive technicals, Friday’s move was fairly big and can tend to muddy near-term projections. Bulls still have several key resistance levels ahead of them, including dynamic resistance of both the 50- and 72-day EMA. However, if SLV can close above $14.10, traders could see a near-term boost to $14.42 and, potentially, $14.75.
There is some interesting options action, too. According to Nasdaq, there was particular options of interest in the January 2016 chain. The put contract at the $13.00 strike has a current bid of $.32, so if a trader was looking to sell-to-open, there would commit to purchasing SLV at $13.00/share but also receive the $.32 premium. This would then reduce their cost basis to $12.68. Not bad considering that it closed Friday at $13.87.
Precious metals received a boost Friday, after ECB President Mario Draghi promised there were “no limits” to the implementation of QE tools in the wayward attempt to spur growth via long-term monetary intervention.
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Markets Shake with Impending Rate HikeThe bullish run for the markets appears to be slowing especially as the impending interest rate hike gets becomes more of a reality. Some bearish signs are especially prevalent for QQQ, as we see a relative vacuum area from below and lots of room before we hit any resistance from the Ichimoku cloud. Moreover, the RSI, MACD and OBV all indicate an unfortunate turn of momentum for this asset.
For profit targets, consider the first fibonacci level at around 111.59, or the high of 10/22 at 109.82. Be especially wary of 115.52 as it corresponds to a recent high and a fibonacci level concurrently.
HYG Leading SPY Lower?Junk bonds are typically just that - junk. But, the iShares High Yield Corporate has been one of those crowded trades that just do not die.
After witnessing the immaculate short squeeze from 1,864, the SPX staged an impressive rebound. But as I mentioned earlier today (on my InvestFeed - link below), the SPY is looking weak, and the ADX, which measures trend strength, is beginning to fall.
This is interesting because HYG tends to flow with the SPX (and SPY). As equities had a sharp correction so does high-yield The opposite is also true, and junk bonds rallied along side equities. SPY also acts more "violently" when prices diverge greatly.
According to ETF Daily News, roughly $10.7 billion was injected into U.S. equity ETFs last month, while $8.3 billion of inflows were seen in U.S. corporate bond ETFs - the largest monthly inflow recorded. HYG took in just over $5.5 billion.
This is important because today's trader shows the epitome of herd behavior: all cramming into a few trade ideas. So, when that idea doesn't material, traders flee and the response is not exactly orderly.
Price action is on a few minor support levels, but there is bearish EMA, RSI and DMI momentum. ADX looks to be moving upwards supporting negative price action.
If the SPY breaks down lower (I'm expecting mid-160k NFP tomorrow), this could spell trouble for HYG.
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EURGBP to Push Lower After Wedge RetestIf price closes underneath the combination of support, traders will search out The U.S. dollar’s upward momentum quickly faded, following Wednesday’s FOMC minutes which suggested a December rate hike was “back on the table.”
Traders were likely booking profits after the spike higher in the dollar index, which has caused dollar pair counterparts to advance into the weekend. The greenback advance tested, and failed at, price resistance at 97.80.
The euro was able to rebound modestly after the downright shellacking it took following comments from European Central Bank (ECB) President Mario Draghi that more quantitative easing and interest rate adjusts can be made when needed.
However, the pound greatly surpassed gains made by other currencies against the general dollar weakness.
I have said previously, even mentioned it to Pedro da Costa (Editorial Fellow at the Peterson Institute for International Economics), that the Bank of England’s comments about a rate hike by the end of 2015 were as facile as the Fed’s.
After the highly anticipated September FOMC minutes, where the vast majority expected the Fed would indeed hike rates (not I), came and went without a rate hike, Sterling sold-off. Why? I mentioned that the Bank of England does not want to move first in monetary tightening and was merely piggybacking off of the Fed’s rhetoric.
Now that the Fed fund futures have priced in a higher probability of a rate hike in December and January (2016), cable has made solid gains in recent days.
Technically speaking, EURGBP really began its decent lower after Draghi’s QE-related comments, and the selling pressure piled on after this week’s FOMC.
Price action has closed the week at an important support-crossroads. The broken descending resistance trend created by a previously completed daily wedge (purple dotted) is not acting like subjective support, while price support comes into play at .7115.
If price closes underneath the combination of support, traders will search out price targets of .7030 and .6965. If current support can muster buying, a rebound to .7200 is probable with secondary pullback target of .7270.
In the medium-term, we are likely to see trader sentiment strengthen in favor for the Sterling as long as data remains mediocre in both the U.S. and the U.K., which would allow the pretense of potential monetary tightening by the end of the year.
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The Missing Key for Silver is InflationShould silver price in retail demand or economic sentiment?
Silver prices have rallied hard since the beginning of October, up almost 10.5 percent since the October 2 low. However, traders are now budded up against key technical resistance. Will traders’ sentiment reject silver’s upward momentum, as it has done seven times since 2013, or will demand spark higher gains?
Silver has had a rough go since crashing from its 2011-highs. Currently, silver is trading around the 200-day EMA, which has proven fickle for silver prices. Every time prices have been able to rally to the key pivot-point, prices have been immediately rejected or the trend’s momentum quickly faded.
Despite mints beginning to ration silver bullion coins (again), prices are continuing to show the divide between sentiment and demand. As I have mentioned in several articles previous, silver’s demand is largely based upon economical factors, such as manufacturing and industrial output whereas gold prices are almost entirely derived from investment demand in relation of central bank policy.
Some analysts expect silver prices to rally because demand for minted coins has risen, and mints are having a tough time filling orders. But, if history is any indicator, this does not happen.
For instance, in July, the U.S. Mint reported that demand for American silver eagles were so high that it depleted their stores and began to ration the bullion coins. Needless to say, silver went on to drop an additional $2 per ounce while breaking $14 per ounce back in August.
It may not be all it is cracked up to be. The shortage of minted coins only represents one, small facet of silver demand. According to Smaulgld.com, when the first shortage was reported, the shortage was found in the retail market but not the wholesale market.
Silver has long been a trusted go-to for retail investors. It is a tangible asset that tends to be priced reasonably for the everyday investor. The multi-year lows carved out this year has only been seen as a buying opportunity.
Although, it is important to understand that silver is not an investment for tough economic times because that is, generally, how market participants price silver. Silver is only a form of protection against inflation, which undoubtedly will show up. Investors will just have to be incredibly patient.
(Silver outperformed during recessions that were coupled with higher inflation as seen during the 1940s and 1970s recessions).
Unlike gold, silver has no historic evidence of protecting against deflation (gold nearly tripled during the early-1930s). During significant bouts of deflation in the early-1920s, and again in 1929 to 1933, silver’s performance was horrible. It was also horrible as inflation subsided after the stagflation of the 1970s and early-1980s.
Again, following the lack of inflation – on paper – during the Federal Reserve’s seemingly endless quantitative easing programs after the financial crisis.
Current rates of inflation, as measured by consumer price index (CPI) and producer price index (PPI), could suggest prices have more to fall. The U.S. is seeing the lowest bouts of inflation in decades.
The U.S. is experiencing the lowest levels of CPI outside of a recession since 1954 and the lowest PPI since 2001, following the dotcom bubble.
However, silver has experienced great gains following a recession as inflation re-enters markets. Silver could get cheaper, but patience is a virtue and could reward big when inflation rears its ugly head.
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Mixed situation after ECB's verbal interventionas you can see in my comments, I think we are now in a situation where we could potentially experience 3 outcomes to this macroeconomic puzzle.
Well now we have 3 possibilities
1) we start another rally up confirming the triangle and breaking to the up.. in that caseI can see ECB desperate in ecember increasing QE (25% chances)
2) we start plummeting, different figures will confirm the tech. side and yellen will come outwith FED rate hike and push the Euro to its lows of the year... we need big Rate hike for this... (25% chances)
3) we keep seen choppy mixed news from both sides, EU and USA suffering further from low inflation and unemployment slowing down with China playing a key paper (50% chances)
I am afraid that we will continue to see a mixed load of news from both sides of the atlantic, we will see good news from the USA strenghening the FED rate hike possibilities and also good news from EU that will push the euro up... unfortunatelly this will only maintain the fair price line as a pivot point that the euro will keep revisiting.
on another note, we are shifting north to this line so if this is not pushed further down, then i think this upper channel could end up confirmed and we will see an unstopable Euro.
ANOTHER THING... I nearly forgotten... just be vigilant of the SNB, the CHF is moving out of the "confort zone" and they could intervine like they have done in the past. Just protect yourself from extrain movements.
in summary,
- keep your eyes and ears on the ECB and FED future statements /Hints
- Maintain your risk low while there is no clear trend
- look for confirmation of levels, sacrifice 20 pips to gain confidence!
- use your common sense... dont buy the highs and sell the dips
- trade what you see.
- protect yourself from sudden moves but get used to volatility.
hope this helps all!!!
Gold Surprises as Dollar Gets Monkey-Hammered LowerIn " Gold Leaps Higher as Worries Mount ," I briefly pointed out how those very same institutions that championed quantitative easing policies implemented by the Federal Reserve are now coming out to proclaim quantitative easing added no substantial benefit to the real economy .
Gold was pushed lower on the assumption that central banking policy would all pan out and that the U.S. would finally achieve escape velocity; but the exact opposite is occurring. Despite the near 12 to 16 months of absolutely horrendous, even recessionary data, market participants believed that if the Fed began to tighten monetary policy then the economy must be alright.
Central bankers,misguided by classroom academics and abhorrent to real world economic dynamics, believe that if you tinker with interest rates that somehow inflation will magically begin to rise. Not so because it is real, meaningful growth that produces inflation; and it is more evident now that the these policies do not produce meaningful growth.
I mapped out the dollar's downward trajectory, which was largely based on the floundering economy and the inability for the Fed to take action that will pop asset inflation. I still believe this is based on the above factors and that the dollar will likely gather strength as the US slips into deflation.
Traders and CNBC pundits think that if deflation takes hold then gold will surely decline into the abyss. And just like their "lower gas prices equal booming consumer spending" myth, gold falling off a cliff during deflation is just as preposterous.
Gold is unique in that if can act like an insurance policy against both sides of tail risk (inflation and deflation). It is well-known that gold had a massive bull run when stagflation took hold of the US during the 1970s. Inflation ran amok.
However, nobody mentions that gold tripled, in inflation-adjusted dollar terms, during the early 1930s (the Great Depression) prior to President Roosevelt outlawing the private ownership of gold.
As I wrote last April:
" There is an assumption that the dollar and gold’s performance is strictly inverse of one another, but that is not so. The WGC (World Gold Council) indicates that between early 2014 and March 20, 2015, the dollar has gained over 20 percent while gold only fell 1.2 percent.
Historically, gold prices more than double on a weak dollar than it falls on a stronger dollar. Thus, a stronger dollar is not indicative of massive gold depreciation.
When the dollar declines, gold has appreciated 14.9 percent. Yet, when the dollar strengthens, gold has only fallen by 6.5 percent, according to the WGC. "
If you look at this chart, you will notice one thing: gold sure looks to trend with the SPX. There is an argument that this due to simple asset inflation.
Notice the massive divergence began when gold began to top in 2011. The divergence is what I call the "perception" gap.
I expect that divergence to close. It's no secret that I was right about the volatility of 2015, along with other key macro trends. I believe by the end of 2016 and 2017 is when the real fireworks begin.
Gold's recent move has been huge, and, of course, there will be profit taking. But those who follow me know that the underlying fundamentals for gold has been strengthening for some time.
(Note: the gold chart is the same I used in the above mentioned gold idea, but the minor uptrend (along with new resistance) were added).
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DOW Transports To Retest Recent Lows(Note: DOWT is no longer in a bear market after rallying the last two weeks)
2015 was suppose to be just another year of the epic bull market created by reckless central banking policies. Some Wall Street estimates for the S&P 500 were as high as 2,300. Me? I projected a contraction to 1,810 in mid-January.
Whether or not the SPX will reach my target within the next 10 weeks, or so, is uncertain; but what has been quite clear is the scaffolding holding with risk assets around the global has been crumbling for sometime.
In " Is A Storm Brewing? How History is Repeating Itself ," I was clear and concise in what 2015 had in store (posted Jan. 13, 2015):
I support the idea that we are on the precipitous of something disastrous.
Those who constantly look at underlying factors and notice the shifts in the FX, commodity and economic data are witnessing that the latest boom cycle is on its last leg.
In essence, the post was a summery of the marco trends few wrote about because everybody indulged in the feel-good of rising stock prices.
The post ended quite ominously: "2015 is going to be mercurial…"
On March 26, I indicated that the DOW transports looked technically weak. Price action had been consolidating early in the year, much like the SPX. The index made several lower highs, higher lows and finally broke support at 8600.
Nobody was even looking at the transports as a potential catalyst to drag the broader markets lower, even though that is historically the case.
For instance, Cowen Group's Head of Sales, David Seaburg, said, as late as June 25 (after the the transports already began weakening underneath consolidation), "Everyone is up in arms about the transports, but the underperformance has very little to do with a weak economy and has more to do with the structural issues within the sector."
Seaburg also said that "I DEFINITELY don't see any downside (broader markets) necessarily." Almost a month-to-the-day, not only did the DOW and SPX hit their first 10 percent correction in four years, the DOW transports fell into bear market territory. Awkward.
Those that live by subjectivity, die by subjectivity.
The broader markets did receive a massive bounce following the largest NYSE short-interest since the Lehman Brothers collapse, but the transports has been rejected twice from 8,250, or the 23.6% Fib. retracement from the 2012-lows.
It's important to note that central bank credibility is fading fast, and traders will become more wary as the year winds down. Structurally, the index looks weak as earnings have been lackluster to not good at all.
EMAs are showing bullishness on the daily, as they are sloping upward. However, a close above 8,250 will be needed to garner any significant technical buying in my opinion.
Price action is within a large symmetrical triangle with price support of 7,970 cutting through the middle. This key, near-term support level could determine whether the index will test triangle support, which is supported by price support of 7,790.
A confirmed close below the triangle support will cause transports to retest the 2012 ascending trend line. I expect fundamentals to continue to deteriorate into 4Q, and the transports to challege 2011's trend (between 7,200 and 7,300).
Conversely, a close above triangle resistance could cause a rally to 8,500.
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FED POSSIBLE SCENARIOS FOR EURUSD (Dec Meeting)Hi All!
As I did back in August with the september meeting, I have decided to create a possibility of different Scenarios for the EURUSD pair for the month of December.
I have outlined 3 scenarios based on the price range seen and recheable so far this year, this would give you a good idea of where to buy, sell or hold positions if you are thinking about trading in Dec.
As ALWAYS! please be careful what you do, this is not for beginners but Im sure it would be a great time to try a few things with demo money as well.
In a nutshell...
IF THE FED RAISE THE RATES - the question here is not will you?, or, will your not? The question is, how much? and for how long? - investors will have to digest the FOMC minutes to make sure they understand how much the FED is prepared to raise and what is it going to be the path of increases. in every outcome there is an idea of what would happen if the rate hike is symbolic, when I say Symbolic I mean so small that is just to show they are taking some action but not enough to make Institutional investors change their mind about the Euro.
IF THE FED HOLDS ON THE RATE HIKE - this would just take us to the same place we are at the moment, important to watch that pivot line (green) because we will continue to pass over and below this line for a long time and only the ECB decisions on the EURO QE purchasing program will decide what moves the pair (and puntualities like Greece, migrant crisis and also fundamental news)
IF THE FED DECIDES TO LOWER THE RATES - this is the less of all outcomes, chances of this is nearly zero and this is why I havent mentioned it on the chart but there still a possibility, if this happens, forget about parity, the Euro and other majors would instantly take over the dollar and we could see levels we havent seen for 2-4 years. Crazy eh? well... we know central banks can be crazy (remember SNB flash crash begining this year)
So... here we go, no only the action of increasing will move the market, but also how much is increased and for how long, watch out for inflation and unemployment as these will be the triggers.
any questions? - ask me here or on my twitter account @SolidSnakeUk89
Inverse Head & ShouldersSterling has been on a monster tear after mixed employment data out of the United Kingdom. Averages earnings beat expectations of 2.6 percent, printing a 2.9 percent.
However, the U.K. did see a rise in unemployment even as the unemployment rate fell a tenth-percent.
Traders are looking to front from any potential talk out of the Bank of England (BoE) that could hint at a potential rate hike. BoE Governor Mark Carney still pressed that a decision to address interest rates would not be made until the end of the year, likely to figure out how financial markets react to an anticipated hike from the Federal Reserve.
The yen saw pressure, along with the dollar, as risk assets continued their second day of rallying into tomorrow's FOMC minutes meeting and pressure conference (which tends to be the case).
Without a doubt, their will be a good deal of volatility, and it will largely coincide with what Fed Chair Janet Yellen foresees in the near future in regards to the U.S. economy and the potential trajectory of interest rates.
As seen in the early '90s, the Fed could raise rates (although, I doubt they would) and the dollar could actually decline. Depending on how the yen reacts, GBPJPY could potentially break out of an inverse head and shoulders pattern.
Price action have jumped up to the neckline on the 4H chart, but there are a few key things to consider:
1. It is always prudent to wait for a close above the neckline, as a false breakout will suck in traders.
2. The neckline also lines up with a well-established supply zone on the intraday charts.
If price action meanders too long in the supply zone (blue rectangle), momentum could wane causing the pair to retreat.
Conversely, if GBPJPY can close above 187.65 then the pair could attempt 188.55 and 189. If not, a retrace to 186 could be warranted.
Side note: considering that the VIX is currently trading within a descending wedge (bullish reversal), it possible that heightened volatility will strengthen the yen.
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Gold Leaps Higher As Worries MountFollowing the FOMC minutes on Wednesday, gold has seen a massive two day move that brought the precious metal to five-week highs. Worries mount as market participants are beginning to realize that the Federal Reserve is stuck within a liquidity trap.
The minutes statement indicated that the Fed saw risks to near-term inflation (as the five-year breakeven rate hit five-year lows) and growth. The once “sure bet” on a September rate hike quickly dwindled, and the possibility of another round of quantitative easing is growing.
There has been a lack of attention to two key revelations within mainstream media:
The Bank of International Settlements (the central bank of central banks) and the St. Louis Fed have come out publicly to express that quantitative easing has been the epitome of failure. Both institutions have stated that the massive balance sheet expansion and zero interest rate policy (ZIRP) has not added any growth to the real economy.
The BIS has even gone as far as to say that the world is defenseless against the next crisis, which many “Main Street” analysts believe is around the corner. In regards to a efficacy of ZIRP, the white paper publish by the St. Louis Fed said:
“A Taylor-rule central banker may be convinced that lowering the central bank’s nominal interest rate target will increase inflation. This can lead to a situation in which the central banker becomes permanently trapped in ZIRP.
With the nominal interest rate at zero for a long period of time, inflation is low, and the central banker reasons that maintaining ZIRP will eventually increase the inflation rate. But this never happens and, as long as the central banker adheres to a sufficiently aggressive Taylor rule, ZIRP will continue forever, and the central bank will fall short of its inflation target indefinitely. This idea seems to fit nicely with the recent observed behavior of the world ís central banks.”
But, this is not just the Fed’s problem. Quantitative easing has been a failure in Japan and Europe. In a “defenseless” world and crisis looming, gold stands to greatly benefit.
Price action for gold is fueled by short-covering (near-term) because the dollar just base-jumped of the hopes and expectations of a Wall Street recovery. However, as Pandora’s box is opened, gold’s upside potential becomes great.
Resistance can be found at $1,162, which is slightly below the descending trend created in late January. If price action can close above these key levels, gold will attempt to challenge the 200-day EMA near $1,182. The 50 percent Fib. retracement of January’s downtrend is at $1,189.
As long as the dollar remains soft, gold will be relatively supported at these levels. Although, price taking can take place and healthy. The daily RSI is approaching 69, but the weekly and monthly RSI is below 45.
Moreover, the weekly chart is showing a bullish +/- DMI crossover, suggesting a potential inflection point in the most hated asset on Wall Street.
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Double Top Madness.The market is repeating itself with lower values and has formed a classic double top. I think the increase we are seeing now is Yellen hype. A push up will close out shorts then the market should fall to the neckline support.
USDJPY: Longer term perspective is still bullishI've been watching this chart closely, and I think we might see a great buy setup in the near short term.
Eyeing the area between 121.43 and 122.34, with invalidation for this signal below 118.968, potential upside is 137.94 in 6 months or less.
We don't get significant trends in FX very often, and this is one of them. I'll be monitoring the Yen to enter a longer term position in it, since I consider the risk/reward and probabilities to be on the bullish side here.
The fundamental odds favor this position as well, I included The Working Trader's idea in the related ideas field since I consider his input valuable. It's good when both technicals and fundamentals agree, just have to be patient for the right setup to pop.
Good luck,
Ivan.
Looking At Ashraf Laidi's 40-Month CycleYesterday, Ashraf Laidi put out an interesting post on the USDJPY and a 40-month cycle.
From April 1995 to August 1998, the pair rose just over 85 percent. In brief, in the mid-90s, the US were raising interest rates (who does that anymore? Psh), which made the dollar stronger following the recession of 1990.
The Japanese yen was devalued, too, as their asset bubble grew bigger. The Japanese saw this as the cause of the "lost decade," while it could also have been blow back from the Plaza Accord in 1985.
Nevertheless, the pair ultimately crashed 31 percent from it's 40-month cycle high. Following the Asian Financial Crisis in 1997, the Federal Reserve began lowering rates in 1998, briefly increased the Fed funds rate before rapidly lowering rates into the 2000 bubble bust and recession. (Which I believe will happen next).
Fast forward to the current 40-month cycle, spanning February 2012 and June 2015. The pair has been able to gain a respectable 65 percent, and there is no reason why one would not BFTD; but, is the pair's fate remain the same as it were in the mid-1990s?
Analysts take of a policy devergence, but really it's come to a rhetoric divergence. The Fed has yet to tighten monetary policy, and even if it does, Fed officials have opined that it would still be "accommodating" and largely based on market reaction.
We very well could see a 25-50 bps increase in the Fed funds rate over the course of several months or a year, but that is when the true economic rot will fester to the surface; and the Fed will undoubtedly reverse course.
The BoJ has admitted, no matter how many times Kuroda tries to revert course, that there are diminishing returns in regards to a weak yen.
Quasi-monetary policy can only take economic growth to a certain point before fiscal policy takes the reigns, and we have not seen that from either country.
Both central banks have embarked on massive QE programs; yet nobody wonders why in the same period the US is undergoing its slowest recovery from a recession, while Japan has had three recessions since the financial crisis. During the 40-month expansion, Japan has had three quarters of GDP growth matched with three of economic contraction.
Central banks don't see to want to believe they are responsible for asset bubble, yet they are always the root cause.
Dollar On Shaky GroundDollar bulls may be few and far between, as a potential rate hike has now become a "buy the anticipation, sell the rumor" play. Even the most hardcore bulls like Marc Chandler has taken a step back to rethink the dollar.
After making a series of lower highs and lower lows, the dollar could very well test the lows near 93; while a series of resistance levels could snag any upside potential.
Last night, a few BoJ officials wanted to move the markets with their words. For some unknown reason, BoJ Governor Kuroda blurted out that the yen was "very weak" as to lead the market to believing it was too weak.
This is interesting on a few fronts:
One, a weaker yen was modus operandi numero uno. It was not "very weak" when it was down 25, 30 or 35 percent, but that 40 percent mark is the sweet spot.
Two, this comes at a very interesting point, following the G7 meetings. The market expects the Fed to increase rates solely based on non-farm payrolls and nothing else because, frankly, the data out of the US is borderline, if not outright, recessionary.
The Fed will never hike rates into a stronger dollar. As I said many of times, the Fed will work its way into the currency war by taking down the dollar. But much like their gold charade, the Fed has someone else do their dirty work.
The dollar is typically inverse of the yen, and by increasing the yen the dollar is almost guaranteed to fall by default. A falling dollar - in theory - supports the Fed's inflation projections.
It also gives the Fed more breathing room to throw around the idea of a rate hike.
Please visit my linked idea on the dollar. It is trading very much between S/R, while maintaining the downward trajectory.
Still projecting the DXY with an 80-handle by mid-summer.
Dollar Data Dependant The USD sell off as traders set a chain of profit taking after 2 weeks rally due to various factors:
- Greece uncertainty of exiting the EZ make holding USD worthwhile
- US Economic data has been promising with CPI much higher
- Hawkish comment from Yellen
- That view is changing with 5th of June looming for a potential deal and no Grexit
A lower USD potentially because:
- Euro rally with Bund unable to find support and Grexit averted
- Unwinding of USD/JPY longs
- Commodities currencies caught bids
- A worse than expected US economic data
A higher USD potentially because:
- Grexit so USD safe haven currency
- Better than expected US economic data that imply a September rate hike
- Hawkish comment from Fed members
Technically:
- Heavy band of resistance between 96.63 and 97.73
- Heavily biased for more downside with a possible AB - CD playing out
US Dollar Index Bull FlagEntry: Long Dollar on the break out from the flag and taking out previous high of 97.73 for confirmation.
Stop: Use 97.00 psychological level or 96.98 which is 76.8% retracement of the flag high to low.
Target: Using the Flag pole as an estimate to a target - we have 100.37 (which was previous target)
Trade Invalidate if:
- Fed members talk down the dollar
- A Dovish remark made by Yellen
- Suggestions that September rate hike is questionable
- Worse than expected employment data
EURUSD- Medium/Long Term ShortIf policies continue to diverge, there will be strong fundamentals in place to justify a stronger dollar relative to the euro.
From a technical standpoint, the long term support line appears to be broken.
The 20v 50 day cross-over suggest momentum will be downward sloping.
Bearish MACD cross-over is not a good sign.
RSI may be over-sold but the down-trend looks pretty clear.
It is certainly possible that EUR/USD will rally in the near-term, but I think the break of the long-term support and the firmly entrenched down channel will prevail. If we go below Below 1.00 & 1.05, the all time lows will be exposed.
EURUSD 1HR: Two Structure Levels for ShortsI've explained this trade in detail during my latest Weekend Review video (link below), so i'll try to be brief. Like everyone else, I want to buy Dollars & Sell Euros based off of the fundamentals. With that being said it's important that we don't try and jump on the bandwagon because that's how a lot of rookie traders get burnt. Rather, we should stick to what got us here, the technicals and use our skill of technical analysis to predict where the next relief rally will end and find a low risk opportunity to get involved. (By low risk I mean, putting myself in the position where my potential profit is larger than my potential drawdown).
As mentioned in the below video, I like the higher level of structure a lot more than the lower one, but both are worth keeping an eye on for the next leg down. It's crystal clear that the U.S. wants to raise interest rates. The best guess is September, but they have left it open by saying it depends on the economic data. I still believe that this market is prime to ignore any negative USD data (unless it's drastic) and waiting to rally on any "at expected" or positive USD news. These opinions won't affect my trading as far as looking for long or short opportunities, but they're good to know especially if the opportunity comes to shoot for extended targets.
Have a great week traders and make sure you check out the other videos in my Weekend Review Playlist.
"Maybe I Got Too Fired Up" www.youtube.com
$EURUSD Short Setup$EURUSD Appears to have failed below the #FOMC high, carving a lower high around 1.0950. Shorts valid with stops above swing high, targeting the bottom (1:2.5 Risk:Reward), continuation. Stop should be trailed if aiming for continuation.
