Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
Commodity currencies are wobbling this week against the dollar as a further ramp-up in Fed hawkish rhetoric, and subsequently, higher US Treasury yields are starting to put a strain on growth expectations and commodity prices. Consequently, AUD, CAD, and NZD are all pulling lower on this versus the USD after each respective pair first hit important technical zones.
The 0.70 technical area is in key focus for NZDUSD, where the bullish attempt was strongly rejected. Below we look at the current NZDUSD situation on the charts with a potential trade on a break below key support at0.6850.
NZDUSD rejected at resistance; Will it break support next?
NZDUSD was knocked lower during Tuesday afternoon after briefly trading above the 0.70 level. There are multiple resistance factors in this area, such as the long-term resistance trendline that connects back to February of last year. The 55-weekly moving average is nearby (0.6965), above which NZDUSD has not been able to close. Of course, 0.70 is also an important
psychological area for the pair.
Given all this, the weekly close tomorrow will be important. There is potential for a bearish hammer (also called shooting star) or engulfing candle to form if the close is near the current lows (0.6890) or lower. But even without a clear bearish candle, the rejection of more than 100 pips off the highs is an important technical signal here.
The focus now is on daily support, which could clear the way for more downside action. The key support zone is at the cluster of highs and lows around the 0.6850 zone (daily chart shown below). The support trendline of the February-March bullish leg is also concurring with the horizontal zone here. Finally, 0.6850 is a confluence Fibonacci zone as the 38.2% retracement (of
the entire leg), and 61.8% retracement (of the March 15 - April 5 leg) meet at this zone.
A technical break below this support would signal that the bears have gained the upper hand in NZDUSD, which should lead to a further decline towards the next support area, some 100 pips lower.
Entry:
- Short on a break below 0.6850
Stop loss:
- Above the most recent swing high (currently that is 0.70.5 but look for a lower one, perhaps on lower timeframes such as 4H).
Targets:
- 1st - 0.6750
- 2nd - 0.6550 (January lows)
Can the markets ignore the hawkish Fed for much longer?
The NZD followed the AUD and CAD in the trend higher during March, driven by surging commodity prices following the Russian attack on Ukraine and the outbreak of the war there. While high commodity prices are positive for these currencies, a lot of this has now been priced in, and with the Fed turning increasingly more hawkish every day, the risk is that the Fed’s rate hikes and QT can
pull risky assets and commodities lower while pushing the dollar higher.
Yesterday’s FOMC meeting minutes were perhaps a demonstration of this dynamic in action. Stocks and commodities fell on the hawkish discussions revealed in the minutes (i.e., most Fed officials support 50bp hikes and aggressive QT), while risk-sensitive currencies like NZD and AUD pulled lower. The hawkish Fed has so far not caused any big sell-offs in stock markets, and
so risk-sensitive currencies held up very well during March. But if this were to change, and if stocks dump, AUD, NZD, and CAD could suffer badly. The markets probably won’t be able to ignore the hawkish Fed for too long, especially when FOMC officials continue to call for even more forceful action to curb inflation that they now view as “too high.”
Long CADJPY update: Given the above and that stocks are moderately falling this week, we are adjusting the stop on the long CADJPY trade to breakeven. This will also protect from any volatility around tomorrow’s jobs report release from Canada, which can often have a volatile impact on CAD
pairs.
Trade signals from the past weeks
- March 10, 2022 (entry after ECB) - Short EURUSD from 1.1040, ½ position already closed near first target at 1.09; stop on remaining ½ position above 1.1150, targeting 1.08 and below (trade open in progress)
- March 28, 2022 - Short GBPUSD, entry at 1.3130, stop loss adjusted to above 1.32 (trade idea sent Mar 16)
- April 1, 2022 - Long CADJPY from 98.30; stop moved to breakeven (in progress)
TOTAL: 0 pips in the past week
TOTAL: +5310 pips profit since October 1, 2018
If you have any questions or feedback, don't hesitate to reply to this email.
Thank you!
P.S. Email providers such as Gmail and Yahoo! Mail sometimes place messages in different folders or tabs (often in the promotions tab). You can whitelist my email address to ensure that all trade signals I send will end up in your (primary) inbox folder.
High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
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.
|
|
|
|
