Open Account Trading Carries Risk

Treasury yields moved to highs not seen since April 2019 and stocks sold off after Fed’s Brainard said that she expected interest rate rises and a rapid balance sheet reduction to move US monetary policy to a “more neutral position” later this year. Market participants will focus today on the release of the FOMC minutes. The minutes are from a meeting in which the Open Market Committee probably discussed a 50-basis point rate hike that could take place in the next meeting in May. In today’s report, I cover DJ, USDCHF, AUDCAD, EURCHF, CADJPY and GBPNZD. By reading further, you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.

The way I have structured my analysis is that I will post trade ideas when I see them but when now apparent trade ideas stand out at the time of writing the analysis I will provide you with analysis and key price levels on markets that are worth putting on a watchlist. As soon as something catches my eye I will update you on our Telegram channel

I tend to include Target 1 (T1) and Target 2 (T2) levels (or ranges) so that you have an idea of how far the market would probably move if price action supports my trade ideas. The target one is a high probability target while the next target is further away and therefore there’s a greater risk that the market doesn’t reach the level.  While I don’t provide investment advice my analysis helps you in your own market analysis and then you can decide how to trade the markets. If you need help more help with your trading join me at the next live analysis webinar here: www.TIOmarkets.com/webinars I will show you live how to analyse the markets and identify trading opportunities.

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DJ 15 min chart 04 06

DJ hit my T1 level yesterday and sold off. For those interested the trade idea was published here. Now the index is trading relatively close to a range low. The lower end of the range is the 34533 support level while the upper end of the range is at yesterday’s high at 35106. In a rangebound market, our job is to buy near the range low and sell near the range high but now we also have a technical confluence zone in the middle of the range. Bull channel low, broken supports and the SMA(50) are all packed inside the 34771 – 34804 range. A break above 34688 would open a way to this confluence range. Alternatively, the resistance holds and DJ re-tests a minor support 34581.

USDCHF 4h chart 04 06

USDCHF hit my T1 and is about to hit the T2 also. I said yesterday that the pair could move higher and that above 0.9260 I’m interested in long trades with T1 at 0.9298 and T2 at  0.9336.

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CADJPY 8h chart 04 06

CADJPY is now trading above 99.00! The rally has been massive and even my T2 target range has been surpassed long ago. I said here: “CADJPY continues its run higher after the BOJ decision to keep its massive stimulus program untouched. The bank warned of risks to economic recovery from the Russia-Ukraine war and confirmed expectations the central bank will remain an outlier in the global central bank community. The BOJ keeps the stimulus tabs flowing while other central banks tighten their monetary policies. While this pressures the JPY, high inflation keeps the commodities markets bid (and, due to the Russia-Ukraine war, the price of oil has more upside than downside risk) which supports the CAD. No wonder the currency pair is flying higher. ” Now the market is trading almost about 5.3% higher than at the time of my long trade idea.  The nearest key S&R levels are 97.05, 97.62, 98.42 and 100.20.

AUDCAD 8h chart 04 06

AUDCAD retraced back to 0.9462 and penetrated it slightly. The pair is still bullish and my T1 at 0.9557 and T2 at 0.9615 are valid. Alternative scenario: The pair moves lower and breaks the 0.9407 support level and is likely to either consolidate further or take a deeper dive.

EURCHF 8h chart 04 06

EURCHF trade idea from yesterday is still valid. The pair has broken below the 1.0194 support and could eventually move lower. Judging from the price action the pair might rally towards the 1.0194 level and possibly test it. If the rally fails my T1 for the pair is at 1.0067 and my T2 is at 0.9980. Alternative scenario: EURCHF rallies above the resistance and moves to 1.0280.

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Macro Drivers for the USD As the most followed, invested and traded markets for risky assets are priced in the USD it is helpful to understand what macroeconomic factors impact the other side of the equation, the USD. Whether we are trading EURUSD, XAUUSD or US equity CFDs the factors impacting the dollar, the nominator in the equation, have a significant role in the formation of all medium to long-term price action. The following table summarises the most important fundamentals.

The Federal Reserve The Fed is expected to continue rate hikes after a 0.25% hike in its March meeting. The current Dot Plot suggests as many as seven rate hikes this year and puts the median rate for 2022 at 1.9%. Dot Plot is the FOMC participants’ assessment of appropriate monetary policy.
Stimulus The Fed is looking to scale down its bond-buying program (QE) but has signalled that it be careful with tightening due to the war in Europe.
Yields The US 10-year treasury yield has risen to 2.187% as investors sell the bonds and adjust to the expected rate hikes.
Employment The March non-farm payrolls increased by 431K while the analyst consensus had predicted 492K new jobs. The unemployment rate dropped to 3.6% and average hourly earnings were in line with expectations (0.4% vs. 0.4% expected).
Inflation The annual headline inflation reading for January came in at 7.5% (7% prior). This was the highest CPI print in 40 years. The core CPI (all items less food and energy) was confirmed at 6.0% (5.5% previous).

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 The Next Main Risk Events

  • USD – FOMC Meeting Minutes
  • USD – Unemployment Claims
  • USD – FOMC Member Bullard Speaks
  • USD – Treasury Sec Yellen Speaks

For more information and details see the TIOmarkets economic calendar here

Trade Safe!

Janne Muta
Chief Market Analyst
TIOmarkets.com

Open a VIP Black account now at TIOmarkets.com. We want you to be able to exploit trading opportunities in financial markets with 0 commission and tight spreads. Take advantage of the best trading account in the industry: TIOmarkets VIP Black. For more details on this truly exceptional offering see here. For more analysis and commentary, visit our YouTube channel where you can find market commentary videos to support your learning and growth as a trader. 

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DISCLAIMER TIOmarkets offers exclusively consultancy-free service. The views expressed in this blog are our opinions only and made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyzes and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with any legal requirements for financial analyzes and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval. FX and CFDs are leveraged products. They are not suitable for every investor, as they carry a high risk of losing your capital. Please ensure you fully understand the risks involved. All the prices in this report are CFD prices based on price charts provided by TIOmarkets unless otherwise stated. 

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