Sep17 – Market Analysis

Overall

[Did a quick review of the markets yesterday morning (around 8am) – but did not have the time to update my blog, because I was started my French course yesterday.]

My two positions (long GBPCHF and long GBPJPY) are still open.  The first is basically still at the entry level, and the second is slightly in profit.  I am going to have to make a decision what to do with these positions ahead of the GBP news (the BOE vote) on Wed morning, as well as the Fed meeting on Wed night.

Oil and gold have been slipping back.  Equity markets continue to be trading near their historic highs.  The European markets made significant up-gaps on Monday morning, and their gaps have not been filled (well the CAC and DAX have not filled, but the FTSE has).

FX Market update

There were significant gaps on all the USD pairs on Sunday night – this occurred because Summers, who was the most likely replacement for Ben Bernanke in January 2014, and who has uncertain views on monetary policy, has dropped out of the candidacy.  The person who is now the big front-runner is in strong support of easing monetary policy and continuing QE.  Consequently this exerts downward pressure on the US dollar.

This new weakness has been maintained since Sunday night, and none of the gaps have been filled, although neither has price moved on from the gapping levels.  This is likely because the FX traders are waiting for the FOMC Statement on Wed 7pm UK time.

This new USD weakness has already made itself known on the strength matrix, with USD now having only 3 points and being the second weakest currency.  Sterling continues to be strong across the board.  CHF is weakening a little, AUD continues to strengthen.  EUR is holding steady, but is gaining against the USD.  JPY continues to be the weakest.

Thus in summary, I am looking to buy GBP and EUR (in terms of absolute strength) and AUD (on basis of recent strength), I am willing to sell JPY (absolute weakness as well as USD (recent weakness). Given this view, are there any pairs that potentially give me a setup?

This means I am considering GBPJPY, GPUSD, EURJPY, EURUSD as well as AUDJPY and AUDUSD.  CHF i am neutral on.

Forego all USD pairs until late Wed evening or Thursday morning because of the upcoming FOMC Statement.  This leaves me with EURJPY and AUDJPY.  I already have an open position on GBPJPY.

AUDJPY is also in a S1B environment.  There was a 200-pip retracement on the daily chart last week.  Currently price is trading in a supply zone.  I do not see clear bullish price action here.

EURJPY is also in S1B.  There has also been a reversal here, but not overly strong – this is basically because AUD has been stronger than EUR.  There are no corn-trade setups on either the 4H or D chart.

Thus neither one of these looks clear in terms of a setup, so pass over them for now.

No new orders to enter into the market.

Actions to take – Later tonight, review the open positions, and plan the stop loss management.

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