I’ve been a little quiet to end last week with the Yellen chatter spiking up my charts and not really giving me the easy intra-day ranges that I like to trade off.
All the chatter over the weekend has been that a lot of the market USD longs have been squared up going into FOMC. The market then interpreted Yellen’s statement as saying that the Fed’s rate rises will be less and further away than expected so we got more of a USD sell off on that decision.
With the market still VERY long USD, I wouldn’t be surprised if this spike was just the start of a real USD profit taking correction.
EUR -194K vs -181K prior
JPY -48K vs -59K prior
GBP -38K vs -33K prior
AUD -29K vs -77K prior
CAD -33K vs -39K prior
CHF -2.2K vs -8.4K prior
It’s just worth noting that the fundamentals still haven’t really changed. The US is still moving into a rate raising cycle while almost all of the other major central banks are still slashing and slashing hard.
From Barclays this weekend:
“Given an overhang of market positioning in USD longs (as indicated by IMM CFTC data), any disappointment in activity or inflation data could drive more liquidation and consolidation in the USD in the short term.”
“Nevertheless, we think that the USD should remain on a medium-term uptrend, given divergence in monetary policy between the US and the major economies.”
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With the above in mind, moving onto the daily charts for this week.
EUR/USD Daily
– Strong daily down trend.
– Bounced off lows but still capped by a very steep, second trend line resistance.
– Chart doesn’t do any justice to the narrative of short covering coming.
GBP/USD Daily
– Either re-testing previous trend line resistance as support or just chopping through a line that shouldn’t be there?
– The narrative was that the BoE was also looking to begin raising rates but the GBP has just been demolished with all it’s /USD brothers.
– If any of the /USD pairs are a buy this week, then I probably like this one the best.
AUD/USD Daily
– Breaking out of the down sloping channel.
– Still consolidating at support where there has been obvious buying interest.
– This is the pair that I have wanted to be a buyer of for weeks now, but safer continuing to go with the flow.
USD/JPY Daily
– Out of consolidation after the strong up trend.
– Dollar flying and the BOJ murdering the Yen.
– Now we’re above 120.00, I want to buy any dips to this level. Got a nice break and retest of previous support as resistance which looks almost too good to be true.
Dane Williams – @danewilliamsau
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