Pre-FOMC Price Action Setups (7.25.2017)
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- In this webinar, we used price action to look at macro markets ahead of tomorrow’s FOMC announcement. With a relatively heavy slate of news for the remainder of this week, it can be a great time to brush up or improve one’s approach, and last week we published and educational article on the topic of risk management for Forex traders.
- As we shared, expectations around FOMC are very low for tomorrow. The bank hiked rates last month, and this meeting does not have an accompanying press conference, and in the recent past the Fed has been reticent to act at non-press conference meetings. However, both Thursday and Friday bring high-impact USD data points to markets, and data has been the elephant in the room for the U.S. economy of recent. While the Fed has remained persistently hawkish, data has continued to disappoint, and this is likely the primary culprit of the bearish run in USD throughout 2017. For more on this topic, please check out our Market Talk article from earlier today entitled, FOMC on Deck, but What Can Resuscitate a Moribund U.S. Dollar?
- The first setup that we looked at was EUR/USD. EUR/USD came 1.8 pips away from taking out the pair’s 2.5 year high earlier today. But as we approached that level, buyers became bashful and prices turned over. Current support is showing around 1.1650, but traders looking to press the long side of the trade will likely want to wait for a deeper retracement first before looking to take on bullish exposure. Current IG Client Sentiment is -3.08, and this is bullish for EUR/USD.
- We then moved over to USD/JPY, which is giving the appearance of bullish price action on short-term charts. But on longer-term variations, we can see that prices have just moved up to the ‘big’ zone of support/resistance that runs from 111.61-112.40. For bullish approaches here, traders can look for price to move deeper within the zone, watching for resistance around 112.00; at which point looking for a ‘lower-high’ around 111.61, or current resistance, can open the door to long continuation setups.
- We then looked at GBP/USD. Cable put in a bearish move in the second half of last week, falling back-below the 1.3000 psychological level. The primary pain point here appears to be inflation: May inflation (released in June) came in at 2.9% and this, combined with some corresponding hawkishness from the BoE, is what drove Cable above 1.3000 towards the end of June. But June inflation (released last week) came in at 2.6%, and this has removed some pressure from the situation. With GBP/USD sub 1.3000, traders can look at bearish continuation strategies.
- USD/CAD is showing support just above the 2016 low: This feels like a trap to me, on both sides, and I’m going to avoid the pair until a cleaner setup presents itself.
- AUD/USD – respecting the spike high that came-in last week just shy of the .8000-handle. If USD strength begins to show, there could be a very interesting reversal setup here, but traders will likely want to await a break of .7900/.7850 before looking to press that theme.
- NZD/USD – bullish continuation after last week’s break of the symmetrical wedge formation. Support could be sought between .7360-.7395 for bullish continuation approaches.
- AUD/NZD – could be an attractive cross-pair for short-side exposure, combining the two above themes.
--- Written by James Stanley, Strategist for DailyFX.com
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