Post FOMC - Trade Analysis

Yesterday's FOMC meeting was nothing short of a celebrity news. Its surprising how some finance portals put their headlines as 'shocking' which is indeed surprising. Are their analysts too smart with their Phd Degrees that they are out of tune with what's actually happening or are they paid to give out false information? A case in point being Barclays which went on to justify why the fed would taper (Read: Trading the 4 Components of Sep. FOMC). Either there's something that i'm missing or perhaps that is the job of 'Sold-Out' economists/analysts who get fat bonuses based on how much of wrong info they give out.

Anyways, moving back to our analysis, yesterday I noticed the Dollar Index, 12 hour chart forming a Wolfe Wave pattern as well. It is bullish in the long term and currently dropping lower to make the wave 5. Needless to say, this basically puts the Dollar index inversely co-related to the EURUSD.

Later today we will see the initial unemployment claims being posted. Bear in mind that last week's better than expected headline reading was skewed on account of under-reporting from some states. So expect a downward revision. Markets should not be reacting adversely but given the insanity, who knows.

Below is the USDX chart, with price now in the 'sweet zone' A reversal could happen but at least not immediately.

Dollar index - Wolfe Wave Pattern, 12H Chart

EURUSD - It might seem like a missed opportunity but it pays to have patience. Euro has also crossed into the 'sweet zone' with upside targets in the region of 1.37 We will have to wait and see how price plays out here. This weekend, Germany, Europe's behemoth will be heading into elections. A Pro-Merkel victory would see the ECB heaving a sigh of relief. But it could be crisis time should the opposite happen. Given the above fundamental view, sitting on the sidelines is the best bet for now.

EURUSD - Wolfe Wave, Price in Sweet Zone

USDJPY - This pair has triggered a sell and our stops reside at 100.59. The first target is going to be 95.95 followed by the final target of 90.7.

USDJPY - Wolfe Wave, in Play

It would be best to book some profits around the first target, move the trade to break even and some pips (to at least cover the negative swaps and/or commissions) and sit back and watch.

Note: I will update the trades on Goldman Sachs and Staples later today. Both of which are shaping up nicely.

Update on charts

No time to write.. so just charts for now... but some food for thought.. the US Debt Ceiling is still due. A reversal is not too far away. More later.

EURUSD - Wolfe Wave Update

USDJPY - Wolfe Wave Update, In Play

Dollar Index - Now in the 'Sweet Zone'

Ahead of the FOMC.. this is what we're looking at!

I've been away, and markets have pretty much stalled ahead of today's FOMC meeting. Taper or not, is the big question. But if you dig deeper the answer is not straight forward, as much as we would like to. Analysts at large are hinting to a taper of 10bn - 15bn. If we read the original intent of Bernanke, we notice that he mentioned tapering would be dependent on data.

So while unemployment has edged to 7.4%, it is still short of the Fed's target of 6.5%. Inflation is also well below Fed's target with last month's inflation coming out at 0.1%. So where does this leave us?

Would the Fed taper, knowing that job participation has dropped and leave room open for more QE if the need arises or would the Fed revise its unemployment and inflation targets? And then there's also the question on Interest rates outlook as well. And last but not the least, the US Debt Ceiling is back in the picture again.

While speculation is all that we can do until the man speaks, here's a quick recap of the trades that we are watching.

The US Dollar Index

The 12 Hour chart gives us a possible Wolfe Wave pattern. It is bullish no doubt but currently the index is aiming lower. I expect a target of 80.50 to be reached (the index is currently at 81.14) before it can reverse and move higher to 83.95. The Estimated Time is 23rd October.

The Dollar Index, 12 Hour Chart - Wolfe Wave Pattern

It would be worth the efforts to keep an eye out on the Dollar Index as it can give us indications into our two trades.

USDJPY - Bearish Wolfe Wave

We continue monitoring the Dollar Yen. Recent price action hasn't been that clear for us to short this trade. The updated chart looks as follows.

There is still some move to the upside left, with the most immediate ceiling coming in at 100.584, 101.527, 103.728 and 104.351. On the downside, we're looking at 95.799, 93.773 and 90.669.

Using the Median line approach, we see price coming out of the pitchfork. Dovish comments today could set in motion the bearish move on the USDJPY.

USDJPY - Daily Charts - Wolfe Wave

Applying Fibs to the recent price move, we notice a confluence of the 50% level with the estimated price of 90.67 - 90.40. If price indeed does get bearish, an entry at 97.427 with stops at 100.583 could see us reaching the target level of 90.67 with other levels in between for scaling out of the position as price goes closer to the target.

USDJPY - Fibonacci Levels

On the contrary, a move higher is likely to see 103 being reached quite easily, provided the 100 psychological level can be taken out decisively.

EURUSD - Bearish Wolfe Wave

While the title might be misleading, in this bearish Wolfe Wave, we are looking at point 5 to be created. Thus, a bullish move before we expect price to reverse. The EURUSD has been in a continued downtrend from a larger perspective. Thus what we're actually looking at (the bullish move) is in fact a correction/pullback rather than an actual rally. Nothing much has changed in regards to the EURUSD and price action is comfortably inside the median line. So there is a probability that price could continue moving higher until it loses strength and starts to reverse.

EURUSD - Daily Charts, Bearish Wolfe Wave

All things said, more than the taper focus should be given to Bernanke's statement which could provide that much needed direction. Dovish Fed comments could keep our analysis on track, i.e: A bullish EURUSD and a bearish USDJPY, and of course a bearish Dollar index. On the contrary, any hint of hawkish comments could make us revisit the above analysis.

I'd be waiting until the statement is released before taking on any trades. Good luck!

Morning Market Brief - 10/09/13

Of the three pairs, EURUSD managed to make some decent moves, having broken the key price point of 1.32375, closing the day higher.

EURUSD - Daily Charts, 10/09/13

Today will be important to see if this level has indeed been breached. A close higher indicates a move to 1.342. 4-hour Stochs are in the overbought area, so there could be some moves to the downside. What matters is the daily close today. I expect a bounce off 1.32316 level and will be watching the 4-hour price action. A 4-hour close below this level along with a bearish stochs could be the first signs of a possible exhaustion in the upside move to 1.34.

EURUSD - H4 Chart

The Yen pairs literally seem to be stuck in a range. Today's early data from China came out modest but better than expected. Nikkei has been positive for most of the Tokyo session.

GBPJPY is looking to break the 156 region. Should that happen, we'll be dropping the GBPJPY pair off our watch list.

The US Dollar Index is down 0.1% at the time of publishing this article. It is looking bearish (since last Friday), currently at 81.73. If this continues, expect the USDX to drop to 81 - 80.50 levels.

US Dollar Index - 09/09/13, Close

In stocks, Staples and GS are looking good on the portfolio for now.

Not much of economic data today or tomorrow, so the Yen pairs could just continue ranging. Congress goes to vote tomorrow in regards to a military strike. Ironic that on the anniversary of 9/11 we have the US planning to vote whether to support the rebels who already have the backing of Al-Qaeda and the bigger irony is that of Obama, a Nobel peace laureate who wants a war, much against international opinion which recommends a UN resolution.

Sep-taper is going to turn out interesting. More and more editorials coming out trying to understand the recent jobs data. The general take away is that the unemployment rate dropped due to reduced work-force participation, furthermore a downward revision of June/July figures hints a slow recovery phase. Fed might be looking at a small taper of $10bn. There's also the talk of the famed US Debt Ceiling end of September. Contrarian views suggest Bernanke would hold off any taper at least until the debt ceiling issue (which the US Congress famously is known for burning the midnight oil) is resolved, which could mean we'll be looking at a possible Octaper?? Also concerns from emerging markets on capital flight needs to be taken into consideration, least it spirals into another crisis rubbing off from one economy to another.

Follow Up: GBPJPY, USDJPY, EURUSD

The USDJPY saw a mild rally during today's Asian session. Markets were boosted after Tokyo won the bid to host the 2020 Olympics. Economic data released earlier in the day saw the GDP figures pointing to a slow increase to 3.8% annualized rate.

However, as the European session opened, the Yen started gaining modest strength. In the absence of any major economic data for the rest the day, its quite likely for the USDJPY to be ranging rather than make any sudden big moves.

The pair is still at our key level. The Stochs currently at an overbought level sloping downwards indicating a possible move to the downside. We will continue watching this pair for now.

USDJPY - Wolfe Wave Updates

EURUSD: The EURUSD analysis was posted on Investing.com. You can read about the updated EURUSD analysis here. The key take-away is the 1.32375 level.

GBPJPY: This pair has been ranging for quite a while and has pretty much made up its losses post NFP last Friday. We also need to adjust the Wolfe Waves quite a bit. However, the bias remains the same, which is a long term upward bias with price action currently forming the point 4. So we expect a ride down to point 5 and then a rally higher.

GBPJPY - Updated Wolfe Waves

Update: GBPJPY, USDJPY, EURUSD

We continue to watch the above three pairs and so far, with the exception of USDJPY, we have had to make some minor adjustments for GBPJPY and EURUSD.

GBPJPY: After plotting the previous Wolfe Wave, a key price level was the 156.768, which was point 2 of the Wolfe wave. Price managed to breach point 4 but only by a few pips and short of the key price level.

A short position initiated at this reversal point is staying up with stops at 156.768. It is likely that price action will continue downwards to 150.453 and 147.574.

Below is the updated Wolfe Waves for GBPJPY.

GBPJPY - Updated Wolfe Wave

EURUSD: EURUSD showed a bit of confusion but so far price action is respected the trend line 2 - 4. However, given that today is the NFP release, it will be interesting to see how it will play out. There is still room for the downside, so long as price doesn't fall below 1.286 which infact is the estimated price target.

It is quite likely that we will have to re-adjust the EURUSD wolfe waves later this month, given the FOMC minutes due later in September.

EURUSD - Re-adjusted Wolfe Wave with further room to the downside

Possible Price Moves during today's NFP.

The downside targets are 1.30213, which forms the 61.8% retracement. A break below this level and a further drop would be a first indication of a possible invalid Wolfe Wave.

EURUSD - Downside Moves during today's NFP release

USDJPY: No change. Wolfe Wave still intact. Watching for a breakout.

USDJPY - Wolfe Wave, Intact

Watching USDJPY for a short

I was brought to the attention of USDJPY based off a friend's trade who is currently long and targeting 103. Curiosity got the better of me and I started scanning through the various time frames and the daily charts caught my eye.

In the chart below, we see a bearish Wolfe Wave being formed. So far, we have points 1, 2, 3 and 4 with price currently running up to make a peak at point 5 (which hopefully will be 103, for the sake of my friend).

USDJPY - Daily Charts, Bearish Wolfe Wave

The Wolfe Wave's ETA and EPA line shows a 30th September with a price target of 90.529, which is quite interesting. What would make this trade ideal is to short it around 103 with a target of 91/92 which should make a very healthy profit.

For now, we'll continue monitoring this chart.

By adding the median line to confirm the current run up to point 5, we see the ML being broken. Depending on how long it takes, the possible target region for price reversal could be anywhere between 101.513 and 103.728. Of course a break of this region would invalidate our analysis.

USDJPY - Bullish Price targets

 Applying the same median lines to figure out an early reversal at point 5, we currently see price action moving within the Median line. It would be ideal to revisit this trade probably early next week especially when the central bank speeches are more done with in order to get a sense of direction and to pursue this trade further.

USDJPY - Monitoring Price Action

USDJPY - Triangles, reached TP

Here's another trade that went off amazing. USDJPY reached TP as estimated by triangles. We now wait for the pivot 5 to be formed, which could be around 93.26 and we go long on the trade.

USDJPY - Triangles, TP Reached