Open Account Trading Carries Risk

The RBA rate decision took the markets by surprise. The consensus expectation was that the central bank will increase the interest rate from 0.35% to 0.60% but the hike was as big as 0.50% to 0.80%. This rallied the pair initially but pretty quickly the move was faded by traders and the AUDUSD pair moved all the way back to pre-announcement levels. In RBA’s view, the Australian economy is strong enough to take aggressive rate increases. The central bank says that it will do what is necessary to ensure that inflation in Australia returns to target over time although RBA expects inflation to increase further. Elsewhere, GBPUSD is trading below a key support level after 148 MPs voted against Prime minister Boris Johnson yesterday speculations of his resignation have increased. This weakens the pound. The next key risk event is Canadian Ivey PMI. By reading further, you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.

In today’s report, I provide you with trade ideas, analysis and key technical levels on

  • AUDUSD
  • EURUSD 
  • GBPUSD
  • DAX
  • USOIL

Get live updates on my analyses and trade ideas here: https://t.me/TIOmarkets_Announcements

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AUDUSD 8h chart 06 07

AUDUSD – The RBA rate decision took the markets by surprise. The consensus expectation was that the central bank will increase the interest rate from 0.35% to 0.60% but the hike was as big as 0.50% to 0.80%. This rallied the pair initially but pretty quickly the move was faded by traders and the AUDUSD pair moved all the way back to pre-announcement levels. Now that the dollar has been strong and there have been some signs of risk aversion creeping into the markets it will be interesting to see how all this balances out. On one hand, we have a strengthening USD and on the other RBA has shown it’s ready to hike the rates substantially in order to counter the rising prices. I think today’s price action will be in an important role. If the market doesn’t trade decisively below 0.7141 it’s still in an uptrend. If however, there’s a sell-off and the 0.7141 is violated we might see the market slipping down to 0.7060 or so.

EURUSD 8h chart 06 07

EURUSD – My trade idea for this market was to look for sell signals if there’s a decisive break below the support at 1.0704. This far EURUSD has failed to rally above the level and provided us with some good trading opportunities. My target level for EURUSD is at 1.0642 and is valid as long as the pair stays below the 1.0704 support. Alternative scenario: The market fails to stay below the support level and rallies to 1.0804.

GBPUSD 8h chart 06 07

GBPUSD is trading below a key support level (1.2458). The market has created a lower high which increases the probability of this support giving in. After 148 MPs voted against Prime minister Boris Johnson yesterday speculations of his resignation have increased. This weakens the pound. Also, if the dollar strength continues and the level breaks we could see a move to 1.2336. If the market trades decisively below the 1.2458 support I look for short entry signals with my T1 at 1.2400 and the T2 at 1.2336. Alternative scenario: The support does hold and the market rallies to 1.2589.

DAX 8h chart 06 07

DAX – I expected this market to rally to Friday’s high yesterday as the market was quite bullish. This happened and the high was penetrated but the index couldn’t hold the levels above it. Now DAX has retraced back to an intraday support at 14521 but yesterday’s weakness in DJIA and Nasdaq caused by the dollar strength (rising yields) is concerning. There’s a bearish wedge in DAX 8h chart but the market is still in an uptrend above the 14440 support. The nearest key S&R levels are at 14398, 14440 and 14711.

USOIL 8h chart 06 07

USOIL – I said yesterday that this market was a candidate for long trades on pullbacks and gave you the nearest key S&R levels. USOIL retraced the 115.95 (one of the levels I pointed out yesterday) and rallied nicely. This was a great opportunity to go long oil. Hope you made some points! Oil still has both fundamentals and technicals favouring the bulls. Therefore it makes sense to look for long trades as long as there’s no change in these market drivers. Alternative scenario: USOIL sells off and breaks the rising trendline (currently) at 111.25 decisively, then we could see a move to 108. Therefore the market stays bullish above 111.25.

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 ReserveFed hiked by 0.5% in May but according to Powell 0.75% hikes are off the table. 
StimulusThe 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. 
YieldsThe US 10-year treasury yield has been drifting lower since early May as equity investors have moved over to T-Bonds in search of safety. 
EmploymentThe May non-farm payrolls increased by 390K (436K previous) while the participation rate was confirmed at 62.3% (62.2% previous). The unemployment rate remained unchanged at 3.6%.
InflationThe US annual inflation growth for April slowed down and came in at  8.3%. This represented a 0.2% drop from the 41-year high of 8.5% in March. It was, however, above the analysts-predicted number of 8.1%.

Open a VIP Black account now at www.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.

 The Next Main Risk Events

  • CAD –  Ivey PMI
  • EUR – Main Refinancing Rate
  • EUR – Monetary Policy Statement
  • EUR – ECB Press Conference
  • USD – Unemployment Claims
  • CAD – BOC Gov Macklem 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 www.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 analysis 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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