Open Account Trading Carries Risk

Fed’s Bullard said yesterday he’d like to see the interest rate at 3.5% in order to fight the high inflation. In the last FOMC meeting Bullard was the only one disagreeing with the standard 0,25% rate hike while “many” agreed that a 50 bps hike would be needed but backed off due to the Russia-Ukraine war. The Fed is in a difficult situation. On one hand inflation is running hot and rate hikes would be needed but then on the other hand, too many rate hikes too soon would increase the risk of recession. Currently bond markets price in a low probability of recession for the next 12 months. Market reactions to the hawkish Fedtalk has been pretty muted. Gold and EURUSD that should be sensitive to changes in interest rates have hardly reacted. The 10-year yield keeps on ticking higher (now at 2.66%) but gold traders don’t seem to believe the move is going to last. 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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NAS 1h chart 04 08

Nasdaq is trying to reverse a recent downtrend and is now trading right below a key resistance level. This could turn into a breakout trade opportunity if the resistance is cleared by the bulls. I’m looking for buy signals above the 14656 resistance. On a decisive break of the level, my T1 is at 14720 and my T2 at 14790. Alternative scenario: Market fails to break the level and trades back to yesterday’s low.

EURCHF 8h chart 04 08 1

EURCHF trades sideways between 1.0130 and 1.0204 as bulls and bears are fighting over which way the market will go. This has allowed us two opportunities to sell short against the 1.0194 resistance level. Once again this reminds me that trading isn’t about knowing where the market will be going. Instead, traders need to follow the price action and see if the latest price movements indicate that the momentum is still in force or whether the market would be ready to reverse the current trend. If we do this and use the key price levels to initiate trades we have a good chance of being constantly successful. My earlier analysis for EURCHF is still valid. If the pair fails to break decidedly above the 1.0194 level it’s likely to move to my T1 at 1.0067. My lower probability target (T2) for EURCHF is at 0.9980. Alternative scenario: EURCHF rally above the 1.0194 level is sustained and the market moves to 1.0280.

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GBPNZD 4h chart 04 08 1

GBPNZD rally has stalled near to my T1 level but a minor support at 1.8943 has been holding this far and bulls try to push the pair higher. Therefore above 1.8943, my T2 is at 1.9058. Alternatively, if the 1.8943 is broken it’s likely to see this pair trading down to 1.8896 or so.

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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 Several FOMC members support 0.5% rate hike in May. The Fed is prepared to taper by $60B of treasuries and $35B of mortgage back securities per month.
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

  • CAD – Employment Change
  • CAD – Unemployment Rate
  • JPY – BOJ Gov Kuroda Speaks
  • EUR – ZEW Economic Sentiment
  • EUR – German ZEW Economic Sentiment
  • USD – CPI & Core CPI

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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