-Price inside Daily Supply
-Price Broke 1hr/4hr upward trend lines
-Price removed opposing 4hr/1hr demand zones
-1hr RBD supply zones reacted
-Took a short form the top of the RBD supply
and looking for TP around 2:1 or 3:1 with trade management around 2:1.
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The Japanese Yen exploded higher in the closing hours of last week’s trade. The benchmark USD/JPY exchange rate came within a hair of the 152 figure for the first time since May 1990, then plunged. It is on course to finish the day down nearly 2 percent, marking the biggest one-day rise since early March 2020. Those gains were scored amid the risk aversion triggered in the early days of the Covid-19 outbreak.
The high to low intraday swing registered this time came to a telltale 3.78 percent, matching with almost perfect precision the move marked by Japan officials’ intervention in FX markets on September 22. In that episode, the Ministry of Finance (MOF) directed the Bank of Japan (BOJ) to buy Yen as USD/JPY probed above 145 for the first time in decades. Prices swung 3.8 percent top-to-bottom.
Japanese officialdom offered familiar threats on Thursday. Vice Finance Minister for International Affairs Masato Kanda – the MOF’s point-person on currency affairs – told reporters that authorities are “always ready to take necessary action as excessive volatility has become increasingly unacceptable.” After Friday’s price jump, he declined to comment on interventions even if they happen. A later article from Nikkei citing unnamed sources appeared to confirm policymakers’ involvement.
USD/JPY Spot (daily)
Chart created with TradingView
This makes for a murky outlook in the week ahead. A regularly scheduled monetary policy announcement from the Bank of Japan is firmly in the spotlight. Governor Haruhiko Kuroda has assertively maintained an ultra-dovish stance even as most other global central banks rush to tighten amid blistering inflation, building up punishing yield differentials and sinking the Yen against increasingly higher-returning counterparts.
The MOF seems content to let the currency depreciate, but not too quickly. It’s probably quite telling that that officials’ second intervention in a month occurred after the Yen fully erased the impact of the first outing and proceeded to shed nearly 5 percent more of its value. Clearly, there is scant appetite to defend a particular level on the exchange rate or to invest in lasting JPY appreciation.
For its part, the BOJ seems thus set up for another repeat of the dovish mantra. Traders may be loathe to pounce on such guidance however, at least in the near term, lest they be caught on the wrong end of another MOF-directed spike. Scaring away speculators is precisely what Mr. Kanda and company have in mind, of course. They may be aided in the effort as Fed officials go mum ahead of the November 2 FOMC outing.
On balance, this might make for staid activity in the near term. The corporate earnings season may offer a bit of downward JPY pressure if corporates’ downbeat guidance continues to allow for nominal upside surprises on third-quarter results, throwing a bone to battered risk appetite. Shell-shocked markets may struggle to build on this, however. USD/JPY slowed to near-standstill for two weeks after September’s intervention.
— Written by Ilya Spivak, Head Strategist, APAC for DailyFX
Follow or contact @IlyaSpivak on Twitter
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When it comes to the Dollar-based majors, the Greenback continues to exert undo influence over its peers. That means a market that can stall out or charge as much as it places the onus of bullish or bearish bearing on the single currency. At the moment, the US currency is under pressure; but it is struggling to project new lows. The masses seem to be waiting for a clear driver. US recession risks have been teased of late – including from the NFIB’s US business optimism indicator this past session – but the threat can seem somewhat abstract and ‘far off’ for the short-term opportunists. If we are going to gain traction on a bearish or bullish course on the Greenback, it would seem that the US CPI for rate speculation on Thursday or bank earnings on Friday for growth potential are top catalysts. In turn, anticipation could work against any productive movement we could see before we reach these updates.
When I am analyzing anything in the market, I prioritize fundamental influence. For a pair like AUDUSD, the US currency is vastly more liquid and thereby can overpower the impact of the Australian fundamental matters. That said, if the US docket and currency are in a holding pattern; the Australian counterpart can push the market higher or lower with the proper motivation. In the interim period until we hit the US CPI, the Australian docket will offer up November CPI and retail sales figures Wednesday morning and the same month’s trade balance early Thursday. Economic potential is a factor, but interest rate differentials seem to be the guiding light for now. As such, with AUDUSD on the threshold of the midpoint to the April 5th to October 13th range at 0.6915 and having just recently breached the 200-day moving average; it would seem the markets are looking for motivation. The inflation report may offer that short-term resolution, but the US CPI update could readily bully (or amplify) a move.
of clients are net long. of clients are net short.
| Change in | Longs | Shorts | OI |
| Daily | -12% | 54% | 1% |
| Weekly | -8% | -6% | -8% |
Chart of AUDUSD with 50 and 200-Day SMAs, Overlaid with NZ-US 2-Year Yield Spread (Daily)
Chart Created on Tradingview Platform
As far as the hierarchy of ‘major’ currencies go, the New Zealand Dollar is even lower on the totem pole than its Aussie counterpart. It is even more distinctly represented by its high and AAA-rated sovereign debt yield, which is perhaps why the New Zealand – US 2-year yield differential represents a higher correlation to the underlying NZDUSD exchange rate. Fundamentally, the same criteria as the backdrop for AUDUSD exist; but the New Zealand docket is all but vacant for major market moving event risk. That will make it an unblemished view ahead for the US docket. What’s more, the technical picture doesn’t the immediacy of a technical resolution. We are treading in the middle of the past two months’ range with the midpoint of the March 2020 to February 2021 advance at 0.6460 and the December 13th high of 0.6515 offering the range of resistance. For the meaningful floor, the confluence of the 50-day SMA, 61.8 percent Fib of the aforementioned range and lows land around 0.6200-25.
of clients are net long. of clients are net short.
| Change in | Longs | Shorts | OI |
| Daily | -13% | 25% | 1% |
| Weekly | -25% | 0% | -15% |
Chart of NZDUSD with 50-Day SMA Overlaid with NZ-US 2-Year Yield Spread (Daily)
Chart Created on Tradingview Platform
What would an Australian and/or New Zealand picture look like without the overriding influence of the US Dollar? The combination of the two currencies presents a more refined picture of these ‘lower end’ majors with cleaner technical levels, more historical trend and a distinct fundamental backdrop. From the charts, the nascent bull trend following the December low (potentially qualifying as a ‘V bottom’ depending on the definition you prescribe to) has experienced some tight consolidation around the 38.2 percent Fibonacci retracement of the September 28th to December 16th leg lower. A break below this approximate 75 pip range would be a ‘path of least resistance’ as it moves back into established range and builds up consolidation. A bullish break would build upon a trend that would keep up productive market movement for a fourth consecutive month. Here, the Australian data can have more influence, so watch the releases.
Chart of AUDNZD with 20 and 100-Day SMAs, Overlaid with AU-NZ 2-Year Yield Spread (Daily)
Chart Created on Tradingview Platform
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ATOM was struggling to break the trendline resistance (black line).
While the breakout is still a question and depending much on the strengh of BTC , some sign of weakness in ATOM structure have already appeared.
Firstly, on 4H TF, ATOM is forming a double top patterns with bearish divergence on MFI indicator. Also, it is breaking the 4H trendline.
On higher TF, 1D and 2D, a bearish divergence can also be seen (see the below screenshot)
If market sentiment are no longer positive, one can consider this crypto for a Short.
The US Dollar (via the DXY Index) fared well over the course of most of last week until intervention efforts by one or both of the Bank of Japan and Japanese Ministry of Finance sent USD/JPY rates tumbling on Friday, sinking the US Dollar across the board. Overall, the DXY Index fell by -1.26%, with USD/JPY rates falling by -0.72%. EUR/USD rates added +1.42%, while GBP/USD rates gained +1.06% around the resignation of UK Prime Minster Liz Truss. Gold prices in USD-terms (XAU/USD) nearly set a new yearly low, but were able to settle higher by +0.80%.
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After last week, when there were no high rated US data releases, the economic calendar has several meaningful reports due in the coming days. It’s also worth noting that we’re now in the communications blackout period ahead of the November Fed meeting, placing additional emphasis on data releases as a source of volatility in USD-pairs.
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Based on the data received thus far about 3Q’22, the Atlanta Fed GDPNow growth forecast is now at +2.9% annualized. The upgrade resulted from “the nowcast of third-quarter real gross private domestic investment growth [increasing] from -3.6% to -3.3%.”
For full US economic data forecasts, view the DailyFX economic calendar.
We can measure whether a Fed rate hike is being priced-in using Eurodollar contracts by examining the difference in borrowing costs for commercial banks over a specific time horizon in the future. Chart 1 below showcases the difference in borrowing costs – the spread – for the front month and January 2023 contracts, in order to gauge where interest rates are headed through the end of this year.
Since the beginning of August, there has been a tight relationship among the DXY Index, the shape of the US Treasury yield curve, and Fed rate hike odds. Despite easing back at the end of last week, Eurodollar spreads are still pricing a full 75-bps rate hike for the next Fed meeting in November. Additionally, a 75-bps rate hike in December is discounted by Eurodollar spreads and Fed funds futures.
The shape of the US Treasury yield curve – inverted near -26-bps, but steeper than in recent weeks – alongside a drop in Fed rate hike odds has impaired the US Dollar in in the near-term. US real rates (nominal less inflation expectations) continue to hold near yearly and multi-decade highs, helping cushion the US Dollar from a steeper fall.
Finally, looking at positioning, according to the CFTC’s COT for the week ended October 18, speculators slightly decreased their net-long US Dollar positions to 32,708 contracts from 32,814 contracts. A lack of change in positioning is not necessarily a surprise, given the sideways trading experienced by the US Dollar after the reporting period ended. Overall, US Dollar positioning remains near its most net-long levels in over five years; the long US Dollar trade is still overcrowded.
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— Written by Christopher Vecchio, CFA, Senior Strategist
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At this juncture, the markets are registering healthy volume with open interest in derivative assets back up to levels approaching normal. It seems we have left the holiday conditions behind, but we are still lacking for a clear trend in the undercurrent of speculative appetite. That shouldn’t come as a surprise given that during the downtime for trend development, the skepticism around central banks’ commitment to inflation has risen while concern over an inevitable recession has slackened. That complacency isn’t the same foundation for an unconstrained bullish drive like it was just three years ago, but it is effectively taking the wind out of the bears’ sails. Now, the curb on traction is a more immediate factor. There is key event risk on the immediate horizon which has proven history of moving the market over the past few quarters. It would not be a stretch for market participants to set aside interim turbulence (otherwise referred to as ‘noise’) and await a stronger signal.
Meanwhile, the markets are following the expected cadence of a shift from motivation to anticipation. Friday’s unexpected rally from the US indices following the modestly better than expected employment figures and sharp drop in service sector activity turned into clear reticence with Monday’s intraday reversal and now this past sessions bounce. The modest 0.7 percent climb from the S&P 500 measures up to uncertainty while both holding the combination of the 20-day and 100-day simple moving averages though it in turn pushed to technical acuity of the former head-and-shoulders support (November 11th to December 14th). In the wash before major event risk, we can see thinner liquidity, higher volatility and an erosion in the solidity of technical barriers. This is a good time for introspection.
of clients are net long. of clients are net short.
| Change in | Longs | Shorts | OI |
| Daily | -4% | 13% | 3% |
| Weekly | 12% | -18% | -4% |
Chart of the S&P 500 with Volume and 100-Day SMA (Daily)
Chart Created on Tradingview Platform
With anticipation picking up, I would expect the major volatility indicators to start to swell; but that is not really holding true. The VIX volatility index – the standard – actually dropped 1.4 handles (6.3 percent) this past session to a December 21st low. This is still well within the past year’s larger wedge, but it doesn’t really line up to expectations. There are few contributions to this unexpected push including the fact that there is much more trading in options as directional trades (rather than hedges to the underlying S&P 500) as well as the 30-day duration behind the index. Most of the index-based, shorter duration volatility measures have been shut down and speculative replacements are not well made. The VXX short-term volatility ETN hit a new record low this past session as it continues to bleed value more owing to the way it was calculated than its actual reflection of market conditions. A little more interesting is the ‘volatility of volatility’ VVIX Index was briefly above 77 but went right back to the floor of what I consider ‘sitting duck territory’. The market remains ill-prepared for difficult conditions regardless of the event risk ahead.
Chart of the VVIX Volatility of Volatility Index Overlaid with the VIX (Weekly)
Chart Created on Tradingview Platform
Fundamentally, the markets had a chance to grasp on to a key fundamental theme this past session. There was of course the Fed Chairman’s remarks in which he would reiterate the central bank’s commitment to fighting inflation while holding to the forecasts they issued just last month. And yet, the market is actively rejecting those views with skepticism. It seems the Fed once again has a credibility problem. The more interesting theme on my radar was the perspective of the US economy. Adding another notch to the run of problems from inversion of the US 2-10 curve, last week’s IMF warning and the ISM service sector tumble; the NFIB’s business optimism survey dropped in its December update. It is holding just above the low set in June – which is itself the lowest reading of confidence in 10 years. I believe we will return to this theme, but perhaps not until the bank earnings can unnerve more of the market.
Chart of US 10-Year to 2-Year Yield Spread, NFIB Business Optimism and S&P 500 (Monthly)
Chart Created on Tradingview Platform
Looking out over the next 48 hours of trade, there is a dearth of high profile event risk. Wednesday’s trading session will be particularly tepid relative to the expectations of the final 36 hours of light left in the trading week. That is likely to translate into the difficult conditions mentioned above. If there is a significant move between now and the US CPI release Thursday morning Washington time, we should really eye it with skepticism.
Top Macro Economic Event Risk Through Rest of the Week
Calendar Created by John Kicklighter
With the market loosing its traction, a measure like the S&P 500 which is bouncing between levels in its broader range, there is seemingly less at stake. The same is not necessarily true of the Dollar in the FX market. The DXY Dollar Index has stalled out right on the verge of fresh multi-month lows. Just below the measure is the former high from the post-pandemic highs at 103.00, which will likely receive a boost of influence due to the lack of conviction to be found. This will disrupt other ‘majors’ like EURUSD where many are eyeing the 1.0750 level as if it will either break or reverse hard at any moment. I would eye it with skepticism.
Chart of DXY Dollar Index Overlaid with US 2-Year Yield (Daily)
Chart Created on Tradingview Platform
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Not trading today, but figured I’d post an update
MFI now overbought, and RSI is just touching. I think it goes a little further beofre we get a dip.
With PCE numbers later this week and no Fed/ECB speeches, so maybe a melt up. I think tomorrow will be a whipsaw day regardless
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The US Dollar marked time in what was a fairly quiet trading session on Tuesday. Traders were eagerly anticipating a speech delivered by Federal Reserve Chair Jerome Powell during the Wall Street trading session. But, when the time came, he did not directly comment on the monetary policy or economic outlook. This left markets focusing on more pressing matters ahead, namely the CPI report.
Since the turn of the new year, a couple of disappointing economic figures left markets repricing the broader Fed rate outlook. Looking at the chart below, two more rate cuts were added by the end of next year. That has resulted in broad weakness in the US Dollar and some optimism in equity markets, albeit very cautiously.
Moreover, markets are increasingly looking to a softer-than-expected US inflation report on Thursday. The headline rate is seen clocking in at 6.5% y/y in December, which would be down from 7.1% in November. Consequently, this does mean that a stronger outcome, or even an in-line reading perhaps, may result in disappointment due to rising expectations of a weakening.
Chart Created in TradingView
Cautious optimism on Wall Street may see Asia-Pacific indices push higher. Although, meaningful progress may have to wait until after the US CPI data. In the interim, the Australian Dollar will be eyeing local inflation data. Australian CPI is seen clocking in at 7.2% y/y in November versus October’s 6.9%. This may keep the Reserve Bank of Australia on its toes, offering AUD/USD some upside.
On the daily chart, the DXY US Dollar Index left a Doji candlestick pattern after prices broke under the key 103.39 – 103.93 support zone. This is a sign of indecision. Meanwhile, positive RSI divergence shows that downside momentum is fading. That is a hint that prices could turn higher. As such, it seems premature to confirm USD’s downtrend resumption at this time. Further downside progress places the focus on the May 2022 low at 101.29.
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Chart Created in TradingView
— Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com
To contact Daniel, follow him on Twitter:@ddubrovskyFX
NVDA with a cup and handle setup playing out as it leads with the semis strong into the open of the week. Breach of 191.50 revisits volume shelf from may 2022 where next Kls are 196.53, 203.62, 211.63, 221.80, 235.63. Below 188.13 revisits 179 level and auction at these levels. // Beta: 1.73, ATR: 7.70, RVOL: 1.97// Bias: Risk On
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The Canadian dollar reacted favorably to Chinese economic optimism giving the commodity currency a significant boost. This came despite falling crude oil prices however, being a large global exporter of various commodities, the loonie gained traction. Since then as we have seen for much of December and now in 2023, COVID cases within China have continued to limit upside for commodity demand and markets hold firm in their cautious approach.
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This morning, the USD is slightly stronger against the CAD that may be following on from an expectedly hawkish FOMC minutes. At the time of release, markets reacted in a muted fashion with the prior ISM manufacturing release weighing down on the greenback. Later today U.S. labor data (see economic calendar below) will be in focus beginning with the ADP report (traditionally a poor gauge for Non-Farm Payrolls (NFP)) and jobless claims. Overall the U.S. labor market remains tight with the demand for labor exceeding supply. I do not expect a major market reaction from this data ahead of NFP’s tomorrow.
From a Canadian perspective, the balance of trade figures for November may also be greeted with minimal reaction due to the lag in data (November) but remains an important variable for the Canadian economy which has been in a trade surplus since January of 2022.
USD/CAD ECONOMIC CALENDAR
Source: DailyFX Economic Calendar
Introduction to Technical Analysis
Candlestick Patterns
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USD/CAD DAILY CHART
Chart prepared by Warren Venketas, IG
Price action on the daily USD/CAD chart shows yesterday’s daily candle fully enclose the body of the prior candle resulting in a bearish engulf. The bearish engulfing candle traditionally leads to subsequent downside however, this particular formation does not appear at the top of an uptrend as is customary but may still result in the conventional downward move. Another daily close below the psychological 1.3500 support handle could spark a leg lower towards the 1.3385 swing low. This being said, tomorrow’s NFP data is crucial for short-term guidance and will likely provide the catalyst needed for directional bias.
Key resistance levels:
Key support levels:
IGCS shows retail traders are currently LONG on USD/CAD , with 59% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment resulting in a short-term downside bias.
Contact and followWarrenon Twitter:@WVenketas