Trading the Majors, post-Yellen


Trading the Majors with James Stanley 7.13.2017

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– In this webinar, we used price action to analyze macro markets after the Federal Reserve’s Humphrey-Hawkins testimony over the past two days.

The prime take away from that testimony appears to be a continuation of equity strength as the ‘risk on’ trade received another shot-in-the-arm. This appeared to come from the opening statement from Chair Yellen, in which she alluded to the ‘Fed Put’, or the idea that the Federal Reserve could re-activate dovish policy options should equity markets threaten to collapse. This has helped to drive U.S. stock prices higher as we’re now just (as of this writing) six handles away from another new all-time-high. This theme can be extrapolated into the FX space, as we look at in the various setups below.

– DXY remains extremely weak, but we’ve now seen two consecutive indecision candlesticks on the Daily chart. Tomorrow brings some USD risk with CPI, Advance Retail Sales and U of M, and the Dollar can certainly see some volatility going into the week-end, but traders would likely want to take notice of the fact that seller shave appeared to dry up as we’ve tested lows, giving the appearance that we may need another bearish driver to avail itself before downside continuation might be attractive again.

– On the side of USD-strength, we have USD/JPY. USD/JPY is currently digging in support around 112.85. We had looked at this level yesterday, and with the continued support around this zone, were able to set an Analyst pick for long USD/JPY earlier this morning.

– We then moved over to look at the Euro, which can be an attractive counterpart for short-USD strategies. EUR/USD is also working with a support zone that we had looked at yesterday, although this one is showing around 1.1380. This can open the door to bullish continuation plays, and in the webinar, we looked at a couple of different ways that bullish exposure could be sought. One target remains on the previous analyst pick for long EUR/USD.

– We then looked at GBP/USD, which has just posed a topside break of a bull flag formation; giving the appearance that topside continuation may be on the horizon. We had set an analyst pick for long GBP/USD in that earlier setup with USD/JPY.

– We then moved over to GBP/JPY, which could also be attractive on the long side, particularly from the perspective of a ‘risk on’ trade.

EUR/JPY put in a very attractive support inflection off a key level at 128.52. This is the 38.2% retracement of the ‘Abenomics’ move in the pair, and should prices hold above this level, the door could open for additional bullish exposure.

— Written by James Stanley, Strategist for DailyFX.com

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