US Dollar Trades on the Back Foot While Equities are Correcting Lower
Eric Furstenberg • 3 min read
Hello, guys. The markets are choppy at the moment, and the tension is running high as we head further into a week packed with all sorts of high-level event risks.
The BoJ (Bank of Japan) meeting didn’t rock the markets today, as nothing unexpected hit the wires from the BoJ Governor Kuroda’s side.
The Dollar lost some more ground against the Yen, and the USD/JPY punched to a fresh yearly low earlier today. Let’s look at a few charts, shall we?
USD/JPY – Threatening Support
USD/JPY Daily Chart
I have been eyeing the USD/JPY for quite a while now. I opened two short positions in this pair on 20 January which are running very smoothly. One of my targets is just below 110.00 and the other one just above 110.00. At first, it looked like a very long shot, but at the moment it doesn’t seem so far anymore.
As you can see in this chart, I almost got stopped out a few days ago. You will also notice that I didn’t move the stop loss to breakeven after the initial decline, which was a good tactic in this case, as this would have taken me out of the trade prematurely.
If you’re not in a trade on this pair yet and would like to trade it, you should maybe wait a bit before jumping into a trade. You see, the price is somewhat oversold at the moment, so you’re probably not going to get a serious bargain if you sell the pair at this level. There is a fair chance that we’ll encounter a retracement from here, so a bit of patience could possibly reward you handsomely if you choose to wait a bit for a better entry level.
Dax – Where Have the Bulls Gone?
Dax Daily Chart
The German Dax rose aggressively last week and printed new 2017 highs. The bulls have not been able to sustain these high prices, however, and the price came down rather aggressively in the last two trading days.
Today’s close below the 20-day exponential moving average should be a concern for bulls. The aggression with which this stock index sold off over the last few days makes me uncomfortable about the long side in the short term.
We can’t negate the topside, however. Remember that this index is technically in an uptrend, and far above its 200-day moving average. We’ve recently also seen some really aggressive buying on this instrument. Perhaps what we’re seeing at the moment is only a sharp correction which will offer cheaper prices for the bulls to take advantage of. I’ll come back to the Dax later in the week to make further comments and perhaps make a trade suggestion. Let’s look at some other instruments in the meanwhile…
S&P 500 – Showing Some Signs of Recovery
Since the time I started with this article, the S&P 500 has picked up remarkably. This index doesn’t look so bearish anymore, and it actually looks like we could get an awesome opportunity to ‘buy the dip’ here. Look at this daily chart:
S&P 500 Daily Chart
I like these downward wicks of the last two daily candles. What makes them so significant, is their rejection off of the 20-EMA and an important former resistance zone. Just look at the rest of this chart – the 20-EMA has often provided an excellent level to buy these dips.
I actually just opened some buy trades on the S&P, with my stop losses just below the low of today’s candle, and targets of three times my stop loss value. I use different brokers, so I placed several trades just now. If you only read this article in a couple of hours’ time, you might still get an opportunity to buy into this setup.
Just to remind you, we have some important economic data out tomorrow – Manufacturing numbers out of the USA, Germany, the UK, and China.
We also have the U.S. ADP Nonfarm Payrolls number at 13:15 GMT, and of course the FOMC Statement and FED interest rate decision at 19:00 GMT.
Good luck guys, and may you have a profitable day!