U.S. Dollar Giving Back More Gains, Immense Tension Ahead of the FED’s Rate Decision
Eric Furstenberg • 3 min read
Monday was a choppy day in the markets – not the best I’ve seen in terms of trending opportunities and market participation. Of course, this is quite normal for the Monday preceding a FED interest rate decision. Many investors and institutions are watching from the side at the moment, and neutralizing much of their risk as we head into this very important economic event.
AUD/USD – Correcting Higher
Although we’ve seen much sideways movement on Monday, a few pairs have moved closer to zones in which we can look for trading opportunities. The AUD/USD is one such pair and has moved closer to its 20-day exponential moving average as the Aussie gained against the Buck, especially in the Asian session. Let’s look at some charts:
AUD/USD Daily Chart
In the chart above, you can see that the price traded higher on Monday, and almost touched the 20-day exponential moving average. It seems like the sellers like this area, and I have to say, I think the guys who sold this pair at Monday’s high got in at a good level for a short play. That is to say, if the 20-EMA holds as resistance in the next couple of days.
The price is currently above its 200-day moving average, but this level could be breached pretty soon if the bears launched another attack. I’m still holding on to my short trades on this pair, and as long as the price closes below the 20-EMA, I will remain bearish. Monday’s candle doesn’t display strong rejection of higher prices, so if you’re keen on entering short soon, you might want to wait for a really solid rejection candle to form close to the 20-EMA. Of course, you can use triggers on smaller timeframes as well. Hopefully, we’ll get some tradable setups on the daily chart, as well as on the smaller timeframes for those of you who are more interested in short-term trading.
USD/CHF – Really Sluggish
The USD/CHF seems to be really exhausted at the moment. On the following daily chart, it looks like the pair has formed an important swing in the last couple of trading days. Let’s look at a daily chart:
USD/CHF Daily Chart
Of course, we can’t exclude a move to the topside in this particular instance. But, the close below the 20-EMA on Monday suggests that we could get some bearish follow-through in the next few days.
GBP/USD – The Bears Are Snoring
As I mentioned in the weekly forecast, Don’t Fall for the FED Rate Hike This Week…, the bears are expected to ease off their selling this week. The clue was Thursday and Friday’s doji candles which suggested a bounce. This is exactly how things are playing out at the moment. Look at this daily chart:
GBP/USD Daily Chart
The more you look at forex charts, the more you’ll notice how the price likes to revert to the mean after moving away from it. The 20-day exponential moving average is often a good measure of the mean value on a chart. At the moment it looks like the 20-EMA is drawing the exchange rate to it once again, so perhaps we’ll get some splendid selling opportunities in this area in the next couple of days. Remember to wait for candlestick confirmation(s). This pair is trading in a wide range, so in this case, we would ideally want to get a strong sell signal to trigger us into a short trade.
We don’t have much market moving data on Tuesday, and even if we did, it would probably not provoke any notable market volatility because everyone is holding their breath in anticipation of the FED’s rate decision, FOMC statement, and Janet Yellen’s speech on Wednesday.
The most important events, however, are Chinese industrial production numbers at 02:00 GMT, German ZEW economic sentiment number at 10:00 GMT, and the U.S. PPI (Producer Price Index) number at 12:30 GMT.
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All the best guys!