Short EURUSD down to 1.05 for a short term trade…

So, with the US we had overall slower but still relatively elevated CPI on Tuesday, retail sales beating expectations yesterday, and to top it off, the big NFP two weeks ago.

When we put all three together into context it gives us a sense that first there’s NO recession around, and second that the FED has still some work to do with rates, not a lot but just a bit more than what’s priced right now.

That gives us reasons to be in a short term bull camp for the Dollar, at least for the moment, as the market is both pricing out the longer term rate cut expectations that are sitting around year end and also pricing in an extra rate hike for the FOMC in May.

Not much else to add to this, if EURUSD jumps into resistance we will be shorting that for a continuation towards 1.05 in what looks like a potential measured move lower

Same setup once again forming for AUDNZD longs...

If this pullback extends a little further we will be taking profit on the position but looking at the chart structure we can see that it COULD be forming once again the same setup that we have seen multiple times already in this trend.

If that follows through, it will likely be the trigger to either add or get us into longs again for a resumption of the trend toward 1.12.

In the meantime, we are focusing on shorting EURUSD, or buying USD, as already briefed

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Update on EURUSD for a bit of context because the 1.05 target is approaching but we are getting a bit more careful.

As we speak US rates have priced full 25bps hikes at each of the next 3 FOMC meetings with some chances of a 50bps at the next rate decision so there’s not much more fuel to add to what’s priced in already and we can say that expectations have adjusted sufficiently, at least until we see the next batch of US numbers, with most attention obviously to the CPI.

So, right now we are still long the Dollar and we think EURUSD is still likely to fully hit the 1.05 target BUT we also think most of the Dollar move on the hawkish FED adjustment has unfolded already so we currently have our USD longs protected with stop loss in profit.

In other words, still potentially looking for a continuation in EURUSD to the full 1.05 target but much more carefully as the trend in question might be nearly done

Long NZDUSD for a short term trade up to 0.64…

Ok, as already anticipated yesterday it feels and looks like markets have repriced US rate expectations sufficiently higher at this point, it’s kinda hard to justify much more hawkishness from here at least until the next batch of important US numbers, NFP and CPI.

So for now, we think we should see another rebalance in expectations this time on the opposite side with US rates repricing lower and thus some short term USD weakness.

Admittedly this is NOT a super high conviction view as it’s against the medium term trend which is NOT something we like to do but if the technical setup and the fundamental logic are both there you just have to go for the counter trend ones too.

NZDUSD looks particularly good with the wedge breakout on the chart but overall any Dollar short is a viable option

Powell is scheduled to speak later today and obviously it will be key to see if he steps up the hawkish rhetoric or not.

Currently there’s still PLENTY of hawkishness already priced in, so if Powell doesn’t add anything new to the picture that will be perceived as relatively dovish, something that we keep in mind.

I mean, although logically it would make perfect sense to see a hawkish Powell given what we have seen with inflation recently it’s really NOT that straightforward, he might want to keep it balanced and the market would anyway interpret a balanced speech as dovish given that the hawkish scenario for rates is already WELL priced in.

With that said, we are still bullish and long NZDUSD as already briefed BUT, as always, open minded and ready for any scenario out of Powell later

Powell threw in some hawkish comments in his opening remarks, mostly about the possibility to reaccelerate rate hikes to 50bps if needed.

So that's NOT what we wanted to hear for the USD bearishness hence NZDUSD is getting a bit tight, we will stop out of the trade if it breaks and holds below the lows

The NFP today and CPI next week will set the tone for either a 25bps or 50bps hike for the next FOMC so two to watch very carefully to catch the next trend, will share some setups if we take any interesting trade out of it

Expectations are moving fast by the way, there might NOT be any rate hike at the upcoming FOMC with the recent developments in the US banking sector.

The debate now is NOT about 25bps or 50bps anymore but rather 25bps or NO hike, the CPI late will decide

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Short USDCHF down to 0.9070...

For now, we are NOT looking to bring this into the FOMC so we will protect it or close the trade right before the event

The stop is already at breakeven for us on this, still NOT looking to run it into the FOMC later, we will likely close the trade right before the rate decision

Flat heading into the FOMC, pay VERY close attention to the dot plot later and, as always, to Powell's words.

The size of the hike sure matters but it's most likely going to be a regular 25bps that doesn't shape the sentiment for what's next.

Instead, the subject that will drive the next trend across the board is how many more rate hikes they think are needed and thus whether a pause in hikes is approaching or not, Powell during the presser will shape that sentiment

Would have been a good hold, but you know, hindsight.

At the moment we are NOT short but with the FOMC now done I could say that fundamentally we can expect that low to be reached maybe next week or so as the FED on Wednesday confirmed that the rate hike cycle has essentially peaked which pushes US yields down and thus brings USDCHF and USDJPY along with it.

Anyway, keep an eye out for a possible entry on a pullback, will share more details when and if we take action on this

Getting interesting, now waiting for a technical trigger

Some support to go through but it can be done, it will get more interesting when we start breaking below 0.9150

Above 0.9155 and we take profit on this, US PCE coming up later today as well which we don't have much of a reading on, so trade well protected in case it moves back higher

Now most likely looking for something like this again for next week depending on what we see with the US PCE later today