Free Profitable Forex Newsletter
Hey! This is Philip with this week's Fx update of the Free Profitable Forex Newsletter!
Given the wider consolidative/sideways action across Fx pairs, we’ll take a more detailed look at the EURUSD pair and discuss some potential opportunities on breakouts in either direction.
The rollercoaster price action yesterday around Fed Chairman Powell’s speech was not that much of a surprise. However, the big picture did not change as most currencies stayed within their wider ranges. EURUSD, for example, remained between 1.17 and 1.19 (although it is challenging levels above 1.19 now).
Powell announces Fed will change policy to Average Inflation Targeting (AIT)
Yesterday’s market action seems like the classic buy the rumor sell the fact behavior. Powell delivered what the markets expected. But, because positioning was so heavily USD short, the dollar rebounded on profit-taking. Nonetheless, Powell’s proclamation that the Fed will change its inflation policy to targeting average inflation (AIT) can’t be bullish for the USD. And, we are already seeing the effects today as the
dollar reversed all of the gains and has already moved below yesterday’s low.
Still, no central bank wants to see its currency too strong. And some of the other currencies are reaching pain thresholds for their central banks. While the moves in EURUSD and other pairs may continue in the short-term, it’s unlikely that the ECB will sit and watch the euro go above 1.20. They are more likely to react and push back with their own dovish measures or policy changes. Such a move by the ECB could trigger the overdue correction in
EURUSD.
This bearish dollar narrative is maybe better to be traded via long Gold (e.g., for a potential move toward or even above $2000 again next week), than against other currencies.
Technicals remain bullish, but resistance is holding too.
1.17 remains the key here, which wasn’t even tested yesterday. EURUSD rebounded ahead of 1.1750, in what is now clear was a fake bearish breakout which probably served to suck in more sellers on the wrong side of the market.
Overall, we stay cautions in this range on EURUSD and awaiting a cleaner breakout to get some directional traction. Cautious because positioning exposure is extended long, meaning a downside correction can kick start violently once some technical levels are broken.
On the other hand, the trend here is strongly up, so any correction may be short-lived. Yesterday’s rejection below 1.18 is another clear test and confirmation of the support. With the stellar bull trend providing a tailwind, it will be no wonder if EURUSD marches higher to 1.20, and maybe even higher.
Potential trade opportunities from the long or short side
- A breakout below 1.17 in EURUSD should still trigger a deeper correction to 1.15. This would be the selling opportunity if it occurs. Such a correction will probably be some time away, especially if EURUSD moves above the 1.1965 high.
- On the other hand, a move above 1.20 may open the door to further extension to 1.22. However, buying up there will squash the risk-reward. A better risk-reward for expressing bullish on EURUSD would be to look for buying opportunities on renewed tests at 1.18 and below.
Trade signals from the past weeks
- July 10 - Long EURAUD from 1.6295, stopped out August 26 for +100 pips profit
- August 1 - Long EURCHF setup (not triggered and canceled)
- August 7 - Short EURGBP from 0.90, stop triggered at 0.8980 = -20 pips
TOTAL: +80 pips in the past 3 weeks
TOTAL: +2680 pips profit since October 1, 2018
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Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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