Let’s get started…
- Scan Of The Markets
- Hot Trade Of The Day
- Insights Into Market Studies (Video)
- Recent Economic Indicators
- Educational Material
Scan Of The Markets
To see an expanded version, right-click and select ‘open link in new tab‘. The indices show the performance of a currency vs a G8 FX basket.
The main takeaway from the FOMC is that interest rates in the US will be depressed at the lowest bound for longer. After all said and done, it appears as though the Fed is making it clear that it has no intentions to fiddle with the rates setting policy until at least the end of 2023 judging by the median forecast of members in the dot plot charts.
Volatility-wise, the FOMC turned out to be rather disappointing. The net effect was a solid bid in the USD and the JPY in line with the turnaround in US equities as the market was left unconvinced of the dovish message. The Pound, battered as of late, was again the currency topping the leader board Cable in a mix of further short-covering and a repricing as PM Johnson appears to ease the threat against EU trade negotiations amid the internal bill controversy, while the Euro ended up under-performing the rest of its peers.
Going back to the FOMC statement, it noted: “The Fed will maintain the Fed Funds rate within the 0-0.25% target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2 percent for some time.”
As per new inputs on its QE intentions, the Fed re-phrased ever so slightly the message in what appears to be an attempt to communicate a stance a tad more aggressive by now saying that the bond purchases are meant to not only be supporting the market function but also to “help foster accommodative financial conditions”. Other than that, the forward guidance, which was described by Powell as a ‘powerful one’ going forward, didn’t contain any explicit references to further QE.
As part of Fed’s Chairman presser, we were left with more questions than answers, which means Powell did his best to sound as vague as he could in order to tame down market volatility. Gotta give it to him as he did accomplish low market movements indeed. Ironically, the one aspect we now have more transparency on is that the Fed’s forward guidance will now be more outcome than time-based, which honestly, is not telling us much about the future intentions as they now more than ever become heavily linked to ongoing fundamental dynamics.
Going forward, it’s another day packed with economic data releases with high chances to have a significant impact on currencies. We started the day with a -12.2% print in the NZ Q2 GDP, which was not as bad as feared (-12.5% were the expectations). Later on the August Labour Force report in Australia is due, followed by the BoJ monetary policy meeting. As we move into European hours, the EU final CPI readings are scheduled ahead of the BoE meeting. In the latter, with the employment and inflation outlook weakening, alongside a fragile recovery amid COVID-19 restrictions and the EU-UK trade deal uncertainty, the BoE may soon hint at further easing.
Shifting gears to FX charts, the FOMC has left us with a EUR/USD still trapped in no man’s land within its 2 cents range, while GBP/USD returns to retest the 1.30 round number. Meanwhile, the struggles in the Aussie to break through 7340 are evident even if the bullish trend in the daily is unquestionable. The Kiwi’s outlook looks even brighter. USD/CAD, price action wise, looks very choppy and with no discernible directional bias. Gold is also unable to break through its range top in the daily either. Last but not least, and for a change, watch USD/JPY momentum as it’s finally broken out of its daily range.
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Hot Trade Of The Day
To see an expanded version, right-click and select ‘open link in new tab‘. In this section I pick a market or several ones that presented an opportunity to buy on weakness or sell on strength based on the higher timeframes outlook. My video analysis below will further elaborate on the logic behind the trade.
EUR/JPY presented a great short opportunity that I sadly missed by 1 pip yet makes me glad to know others got in. The 15m timeframe (left chart) shows an initial bullish price delivery only to see stops raided before a sudden bearish reversal trapping longs. From there, after a retest of what used to be support-turned-resistance, the market went straight into the profit target, even exceeding it by an addition 3 RR.
Insights Into Market Studies
In this video analysis I dissect the information above. Ultimately, it is the traders’ call, via a set of entries thoroughly backtested, to enter and manage a position, hence the video is intended as educational in nature and not financial advice.
Recent Economic Indicators & Events Ahead
If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!
Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to this video. Fractal breakouts is at the epicenter to assist us in the analysis of chart structures.
In order to assess the market momentum of a particular asset, I’ve promoted for years the idea of using what I call the smart money tracker. The settings and the indicator can be obtained via our Discord room, where traders from all walks of life interact frequently. In this video I lay out the elements I look into to call trend directions.
The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection