wa wa wa. Stopped out. I had some signals to close based on hrly candles, but left it open on the idea that the trade was valid risk. Thinking about that one now.
Deutsche Bank Securities Inc. FX Daily
Trading patterns surrounding the
FOMC minutes
________________________________________________________________________________________________________________
The FOMC minutes have proved important in bridging the gap between
what the dovish Fed leadership are thinking, and the evolving view among
other FOMC members.
10y yields have gone up on ten consecutive FOMC minutes release days.
This strong pattern for higher bond yields on FOMC minutes release days,
occurs after FOMC’s Economic projections and press conferences, or
absent these events
The USD Trade-weighted index versus major currencies, has been up on
11 of the last 13 FOMC minutes release days, suggesting the bearish bias
in US longer-dated yields has largely translated to a stronger USD.
A clear evolution to the hawkish side among FOMC ‘rank and file’ is more
likely to be evident in the July FOMC meeting minutes, assuming another
strong payrolls report next month. As important as these minutes are they
are about to get a good deal more interesting in the wake of the next one
or two meetings.
Market movers today
US initial unemployment claims are expected to indicate a continued improvement in
the labour market. The current level of the initial unemployment claims has
historically been consistent with monthly gains in non-farm payrolls exceeding
250,000 as reflected in the most recent non-farm payrolls for June.
The interest rate meeting in Bank of England is unlikely to offer significant news in
terms of changes to its current monetary policy. Instead focus will be on the minutes
from the meeting (released on 23 July), where we will see if there is some dissident
vote among board members, advocating an earlier rate hike.
We estimate a monthly decline in France and Italian industrial production of 0.2% and
0.5% respectively. Given the series of negative surprises in industrial production data
for June, notably in Germany and the UK, risks are probably tilted to the downside
relative to our forecasts.
Selected market news
According to the FOMC minutes from the 17-18 June meeting released last night, the
Fed will end its QE3 programme with a USD15bn taper in October barring any
economic surprises. For the first time the Fed now signals a clear end-date for QE3
and while timing and pace of interest rate increases remain under debate, it seems
highly likely that this will become a market theme later in H2.
The Fed also debated its ‘exit strategy’ and how it should communicate its future
policy to financial markets. According to the minutes, ‘many’ Fed officials want to
keep reinvesting income in their asset purchases until at or after the time that interest
rates rise, which would be a change to the current strategy of stopping reinvestment
before raising rates. Moreover, ‘many’ officials indicated a preference for continuing
to express the target Federal Funds rate as a range when the Fed eventually starts to
raise rates instead of giving a single number as it did in the past.
What Is Price Action In this article I'm going to talk about Price Charts. Let's face it: all traders love charts. Even if the best traders in the world could work off a quote board (as Linda Raschke says), they'll glance at a chart or two now & again. What exactly do charts display? What is the usefulness of charts? And why are we talking about charts in a psychology article? Read along to find out.
The COT report is a very useful but overlooked sentiment indicator. The way we use it at OrderFlowTrading helps us attain a longer term perspective on major capital flows, as well as a read on how overextended certain markets may be. It is part of a larger arsenal of sentiment indicators that we use. Recent developments:
DXY: Specs still long and 80.00 holding, although we had an inside week.
Amongst the comm-dolls, CAD has seen inflows vs. AUD which saw modest outflows.
Amongst European FX, we saw outflows of capital last week. Euro remains weak.
Amongst Safe-Haven FX, there has been JPY selling noted. CHF stable.
Speculative interest is highest in GBP overall and lowest in EUR overall.
Most crowded trades: AUD(FX), Crude (Commodities).
Comments & Most Interesting Charts
- The AUD is still registering an extreme long sentiment situation and the %Long has increased 8% last week, hence supporting the case for some profit taking. Whilst we are still in a range, it may pay off to look also to some crosses for potential opportunities. AUDJPY is looking interesting for example. http://www.orderflowtrading.com/Port...e002_thumb.png
AUDJPY Weekly Chart
CAD bulls continued to show their strength last week, until Friday's reversal. The price action is equally interesting on USDCAD and CADJPY, suggesting a potential profit taking scenario and some continuation for USDCAD longs and CADJPY shorts. http://www.orderflowtrading.com/Port...e004_thumb.png
CADJPY Weekly chart
Gold has continued to rise last week but the extended long sentiment, together with the the crowdedness of the trade, supports the case for some profit taking. Price action is still not present to confirm this hypothesis however. We must wait and watch.http://www.orderflowtrading.com/Port...e006_thumb.png
Gold Weekly chart
In other news:
ZB has flipped to a short stance last week; however the price action into the close has been strong and has probably nullified this change. We shall monitor ZB anyways because it's the first flip short since December 2013. To sum up: watch AUDUSD/AUDJPY, USDCAD/CADJPY and Gold this week for potential opportunities.
Orderflow Game Plan for the Week of July 14th, 2014
In this weekly report, we will try to direct our attention to the currency pairs and assets that are most likely to offer trading opportunities during the coming week, based on a combination of sentiment, orderflow and price action analysis. On the docket for this week
Taking a glance at our calendar, we can notice the more important news events for the week. For the coming week the main events are: Monday: (Sunday = NZD PSI – bullish expectations) EU Ind.Prod. (bearish expectations) Tuesday: AUD RBA Minutes, JPN BOJ Decision, UK CPI (bearish expectations), GER & EU ZEW, US Retail Sales + Empire State (bullish expectations), NZD CPI (bearish expectations) Wednesday: CNY Retail Sales + Ind. Prod. + GDP, UK Unemployment (bullish expectations), EU Trade Balance, US PPI + TIC Flows + Ind. Prod. + Manuf. Prod. + Beige Book, CAD BOC Decision Thursday: EU CPI, US Housing Starts + Jobless Claims + Building Permits + Philly Fed Friday: EU Current Account (bearish expectations), CAD CPI (bearish expectations), US UoM + Leading Index (bearish expectations) Strong vs. Weak
Looking at the CME FX futures market, we can see that:
DXY has closed last week with a neutral yet positive stance, finding bids around 80.
There have been very few clues last week, with most pairs chopping around. Many pairs are at the top end of their trends and without some decisive bullish action it's not safe to step into these mature trends. So for the first time this year, the Game Plan is to wait and watch for further clues.
Only fresh bias is bearish CAD, so we can look for opportunities on USDCAD and/or CADJPY.
To understand more about strong vs. weak, be sure to check out the heatmaps here in the news feed
Sentiment Analysis on relevant assets
Summer doldrums are here and if things continue in the same fashion as last week, it could be a boring summer. But what can we rationally expect for the future? In the short term, investors will take a close look at growth expectations, earnings and monetary policy (in the US most importantly), and changes on the geopolitical front. In the longer term, they will try to understand what a low-growth environment would mean for markets. Lower growth would also be more stable; a related fall in economic uncertainty would contribute to a low-volatility regime in global financial markets; ever abundant savings relative to investments would justify lower for longer rates. USD: sentiment is neutral with a bullish accent. Save the date: on November 1st, the Fed will stop expanding its balance sheet. And the focus is now on the first rate hike. But stop traffic: the minutes clearly stated that Fed members did not discuss the possibility of upside risks on the inflation outlook. Their main concern remains the high level of slack on the labor market. Fed Chair Yellen’s semi-annual Monetary Policy Report, scheduled to be delivered to Congress, is not expected to cover new ground on the policy outlook. So this week's drivers will be in other data prints. CAD: sentiment is negative. Friday's surprise employment contraction sent the Looney lower across the board. Unemployment ticked up 0.1% to 7.1%. The BOC will be meeting this week and Poloz will probably be more dovish/cautious, which could drive the Looney even lower. Euro: sentiment is negative. Regardless of the latest easing in risk appetite, the EUR has remained remarkably stable in the past week. Expect more of the same. Ewald Nowotny reiterated last week that there is no need for additional policy action in the near future. Draghi’s speech at the quarterly hearing before the committee on economic and monetary affairs of the European Parliament will attract attention this week, but he is unlikely to provide new insights. All of the above suggests that the EUR will be driven by external factors, such as the Fed’s monetary policy expectations and global risk sentiment. AUD: sentiment is positive. RBA minutes (Tuesday), Chinese activity, Iron Ore prices will be the main events to watch. The trend in the Aussie is strong but the extended range tells us that unless we get some surprising new drivers, this trend could give way to profit taking.
For updates on sentiment as it progresses throughout the week, stay active in our
It’s a tough challenge to combine sentiment, price action, technical analysis, and fundamental analysis all together to turn these thoughts in to actionable order flow trade ideas. If you still find yourself struggling in that regard, it may be time for As always, good luck out there!
