March 14th Morning Brief – Choppy Trading Before FOMC Tomorrow
Dave Green • 2 min read
Yesterday, the market traded mostly sideways with no clear trends. Though our trading signals in forex and in gold did quite well, we were not lucky with the Nikkei signal. It remained active overnight and hit the stop loss today as the Asian session opened with a huge gap.
The U.S dollar also remained weaker and fell around 0.22% in the absence of major economic events on Monday. Usually, the volatility remains thin ahead of any major economic releases.
Investors are eyeing the FOMC and Fed Fund Rate decision releasing tomorrow. The U.S central bank is very likely to increase the rates but I think most of the rate hike is already "priced in". We may see a sharp movement in the U.S dollar but eventually, it will reverse back to settle at a fundamental value.
Economic Events To Watch Today
- German Final CPI m/m (8:00)
- German ZEW Economic Sentiment (11:00)
- Industrial Production m/m (11:00)
- ZEW Economic Sentiment (11:00)
- NFIB Small Business Index (13:30)
- PPI m/m (13:30)
- Core PPI m/m (13:30)
- CB Leading Index m/m (14:30)
- 10-y Bond Auction (Tentative)
EUR/USD – The Major Pair in Focus
Though the ECB has provided a very strong fundamental support to the Euro, we have seen some profit taking in the EUR/USD pair.
Undoubtedly, the common currency is in high demand due to the news suggesting that the ECB is considering some sort of tapering along with the possibility of raising rates before the end of the quantitative easing (QE).
In the 1 -hour chart for the EUR/USD, the trend indicator, EMA (50), is supporting the pair at $1.0644. We can also find the test bars right above the support level. By the way, it's also the same level where the pair has completed a 38.2% retracement. However, the RSI is below 50 which indicates that we should not enter a buy position now.
Trading Signal: I am looking to enter a buying position only above $1.0644 with a tight stop loss below $1.0620 and a take profit at $1.0690.
USD/JPY – The Safe Haven Pair
The Japanese economy is struggling with bad economic events. Yesterday, their core machinery orders and tertiary industry activity fell short of expectations. There are increased concerns that the economy may play with fiscal policy to stabilize and enhance economic activity.
The macroeconomic calendar will be light today and investors will trade the market on technical levels. Let's have a look at the technical side of the pair.
In the 4- hours chart, the pair has a strong support at $114.600. This is the same level which provided a double top resistance to the pair in the previous week. Further support is extended by the ascending trendline starting from the 7th of March to the 13th of March. Lastly, the RSI and EMA are also suggesting a bullish bias in the pair.
Trading Signal: Buying is recommended only above $114.600 with a stop loss below $114.250 and a take profit at $115.110.
Tomorrow in the morning brief, I will share a few tips to trade the FOMC and how it's likely to impact the market. Stay tuned for updates!