Why you can only by the US Dollar

Everywhere you look, it seems like the only option is to buy US dollars. These are the narratives why you can’t buy anything else:

Euro => Draghi just announced open-ended QE.
Pound Sterling => The hawks have backed away from pushing rate hikes. Inflation is tame.
Canadian Dollar => Oil continues to collapse and the Bank of Canada cut rates yesterday on that notion. The more oil drops, the more the market thinks we have another rate cut coming.
Australian  Dollar => While not oil country, the Bank of Canada cut rates based on terms of trade, low inflation, and lower oil. Switch “oil” with copper prices and other commodities (which matter to Australia). Now you can be worried about cuts coming from the RBA too.
New Zealand Dollar => Quarter-over-Quarter inflation just came in negative. With commodity prices going even lower, rate hikes start to be pushed out even more.
Swiss  Franc => Negative yields up to the ten-year mark. Why not buy US Treasuries instead? There’s a long way until it hits zero.
Japanese Yen => As I write, equities are still rallying post-ECB QE announcement. With equities up, hard to sell the USD/JPY.

The USD is a freight train right now. I only see meaningful resistance at the 94.5 level on the index. Currently 94.10.

Of course, prices swing in both directions, so do as you will.

AUD/USD In-depth analysis (January 19, 2015)

Main points:

* Long-term downtrend is intact; however, pair is at strong support levels
* Weekly and daily charts are showing signs of a short-term bottom at the .80 handle
* Possible reversal target is .8545
*Trade ideas at the end

Technical Overview:

Monthly chart:
The AUD/USD has been in a clear downtrend since it broke below parity. This was initiated by an interest rate cut from the Reserve Bank of Australia (“RBA”). As indicated by bubble 1 on the chart, it’s been lower highs and lower lows ever since that glorious time. The pair is now stalling above the key .8000 level (bubble 2) after breaking the 50% Fibonacci retracement of the .60-1.10 bull run (@ .8545). At the .8000 zone, we also have the 61% Fibonacci retracement of the same bull run (bubble 3) providing additional support.

Until now, the downtrend is intact. If the pair can manage a sustained break below .8000, the chart would indicate further downside to the .7300 level. However, the depressed stochastic oscillator indicator (bubble 4) may suggest that a bounce at these levels could be plausible. Upside appears capped at the .8545 level.

AUDUSD - Monthly

AUDUSD – Monthly

Weekly chart:
From this point of view, the downtrend is still clear (bubble 1), but we can also see additional factors supporting the “plausible” bounce scenario. The pair had a large bullish engulfing candle from the lows followed by another bullish hammer-like candle (with a long wick; bubble 2). The buyers keep stepping in. The double bottom in the stochastic indicator is also supportive of a bounce (bubble 3).

AUDUSD - Weekly

AUDUSD – Weekly

Daily chart:
The daily chart shows that the reversal was composed of a double bottom (bubble 1). We also left a higher low at the .8160s level. The first layer of resistance will be the trend line from the .9400 level. (bubble 2). If the pair can make the leap higher, it appears that the .8545 level (bubble 3) would be the next strong resistance zone. This is the 50% Fibonacci retracement of the .9400-.8000 wave (and as mentioned before, it’s also the 50% fib of the .60-1.10 bull run!). Amazing, is it not?

AUDUSD - Daily

AUDUSD – Daily

Four hour chart:
Here, bubble 1 shows the higher lows that have been forming on the chart. It’s a bit choppy, but as long as .8159 holds, the current up trend seems plausible. We could also see a range from .8000-.8250.

AUDUSD - 4 Hour

AUDUSD – 4 Hour

Technical summary:

From the monthly chart perspective, the pair is still in a downtrend; however, we’ve reached a major support zone. Long-term players are likely to stay put for now. On the other hand, the weekly and daily charts are showing signs of a reversal. The price action below .8100 has been bullish and the stochastic oscillator on the weekly support some upside. For further traction, the pair first needs to clear .8250. The .8545 seems like a cap for now.

 Fundamental factors:

Bullish:

*”Reach for yield” – as yields have been falling across the board

* Solid data from Australia

Bearish:

*Depressed commodity prices, especially copper.

* US rate hike expectations

Trade Ideas:

1) * Buy .8160; stop: .8110; target: .8350
2) * Sell .8355; stop: .8380; target: .8270
3) * Buy .8260; stop: .8210; target: .8350

 

USD/JPY – In-depth analysis (January 18, 2015)

— Technical Overview —

Monthly Chart:
The USD/JPY continues to be in a strong uptrend. Since October of 2014, the pair managed to break above the 50% Fibonacci retracement of the 147-75 bear run and opened the month of January above the 61.8% retracement level.
Nothing on the monthly chart currently indicates that the bullish trend is over. However, one must be cautious because the pair has traded above the upper Bollinger band for 4 straight months. While this may not stop the trend, it could put some pressure on the pair to consolidate at these levels. The stochastic indicator is also at elevated levels.

Jan 18 - USDJPY - Montly

Weekly Chart:
In this timeframe, a strong uptrend is still visible and the pair is currently in a range between 115.50s and 121.80s. Recently, buyers continue to step in at the 116 level.
Within the range, we’re starting to get slightly more bearish as the pair closed below the key 118 level during the week of January 12th. There was also a lower high at the 120.60s level combined with a double top on the stochastic indicator. To confirm this bias, we would need a lower low on the weekly chart, which would also mean a break of the key 115.55 level. This is in the current “line in the sand” and would be a significant event.

Jan 18th - USDJPY - Weekly

Daily Chart:
The daily chart further confirms the range between 115.55 and 121.83. Friday’s bullish engulfing candle off the bottom of the range and the lower Bollinger band suggests that we’re likely to stay at these levels for now. The stochastic indicator is also near lows at these levels, giving further support (note that this indicator is best for a range rather than a trend). As a side note, one could also claim a possible “double bottom” at the 116 level. The counter argument to this is that double bottoms work best after extended bearish trends (not the case here).
The negative bias on the daily is the multiple closes below the 118 level and the 55 daily moving average.

Jan 18th - USDJPY - Daily

4 Hour Chart:
Here we see the buyers coming in twice at the 116 level. A potential for a double bottom here is legitimate after the downward trend from 119.70. The pair is currently trading near the 117.70s neckline zone. The pair has also closed above a minor trend line from 119.70s.
Until now, the pair has been forming lower lows and lower highs from 119.70s. If it can break above 117.70s/118, it will start to diminish this short-term bearish trend and give some upward fuel for the pair.

Jan 18th - USDJPY - 4Hour

Hourly Chart:
The double bottom potential is also clearly seen in this timeframe. At the end of Friday, the pair was ranging between 117.30s and 117.70s. A breakout from here will be the clue in regard to the pair’s direction.

Jan 18th - USDJPY - 1 Hour

— Multi timeframe SUMMARY —

Given that the pair is in a range, we’re unlikely to see moves from long-term players. As long as the pair stays above 115.55, the uptrend remains intact and they’re likely buying on the dips to 116. If we were to see a break below this key level, it’s a different ballgame.

We’re then with the players off the daily and 4-hour charts. On the daily, these traders are playing the range as we can see from the bullish engulfing candle on Friday. Combined with the double bottom potential on the 4-hour chart, this suggests that we see some upside to 118, followed by 118.70s – where we encounter a minor trend line from 120.70. The 119.10s zone would be the target for the double bottom and also coincides with the 200 moving average on the 4-hour chart.

This 118.70-119.10s zone is the middle of the range and will serve as strong resistance (118.80s is also the 61.8% Fibonacci retracement of this last 120.73-115.81 bear wave). I see trades up to this zone as high probability (from current level). If the pair trades above the zone, we’re likely to see a re-test of 120.70. Given the current bearish-bias around equities, I see this upper level re-test as a lower probability event.

— Trade Ideas —

Unless the risk environment changes on Monday:
1) Buy at 117.30s-117.70s targeting 118.70s – the stretch would be 119.10 (latter requires short-term trend line break and is double bottom target range). Stops at 116.80-117.20 (depending on entry).

Additional:
2) Sell at 118.70s; target: 118.10; stop: 119.05
3) Sell at 119.70s; target 119.10s stop: 120.07
3) Buy at 117; target: 117.34 or 117.60s; stop: 116.70
4) Buy at 117.75; target: 118; stop: 117.60

— Key Fundamentals —

Bullish:
* Strong trend data from the US // Weak from Japan
* US rate hike expectations
* Potential: Quantitative easing from the European Central Bank
Bearish:
*Global deflation
*Softer Chinese data
* Lower US yields
* Tail-risk: Problems in the energy sector (due to drastically lower oil prices) and problems in Russia

The great fall of the USD/JPY

I’m not about doom and gloom predictions, but the USD/JPY dip buyers are about to get challenged big time. I think we’re going to challenge the recent low of 115.55. Can they hold it?

S&P Futures are down and the Nikkei Futures is trending down, hitting the big support zone I’ve been talking about. Yields are at lows. We get CPI from the US tomorrow, will it be a miss?

Earlier today on Twitter, with the lead of @FXMacro, I was talking about places where CTAs would have to find liquidity due to the CHF crash. These places: short AUD, short euro, short JPY.

We saw a surge in AUD/USD during Thursday trading (from lows after peg break). USD/JPY yen was also down (also due to risk aversion), but I think we may have more juice to give here. If it breaks, we’ll likely see a big spike down. People are panicky right now and looking for the exit if anything starts to get shaky.

Fear is in the air.

USDJPY

USDJPY

The world is not ending (SNB peg break)

The Swiss National Bank (“SNB”) caught a lot of people with their pants down today. By surprise, they decided to leave the Swiss Franc peg of 1.20 against the Euro.

Speculators were heavily short the CHF and got hit hard as the currency crashed from some 1.03 against the US dollar to the .80s at some point. There was a lot of price action in currency markets as liquidations were happening everywhere. It was a wild day with many ups and downs.

While people are upset by the surprise, the world is not going to end. As a result, I see lots of opportunities in the market. Long EUR/JPY @ 135.10s, long EUR/USD @ 1.1600s, long GBP/USD @ 1.5175, short USD/CAD @1.1970s. So essentially short USD in a lot of places that got hit. Some of the yen crosses also got hit hard and seem to have some good opportunities.

We have to be nimble and look for the right opportunities. At the end of the day, some market liquidations today was due to panic selling and margin call covering. As a result, some of these moves will be reverted accordingly.

The USD/JPY rebound

Wednesday was an exciting day with the USD/JPY dropping from 118 all the way to 116.05. The “punting team” (i.e. dip buyers) came in and did a great job though, bringing the pair back to 117.30s by the end of the day and then higher into the Asian session.

As mentioned on Twitter, I’m watching the Nikkei 225 futures. Until it breaks the big support zone on the chart below (that is, assuming it even does), this should give some support for the USD/JPY. Other factors on the Wednesday NY session that helped with support (and reasons why I was talking about buying USD/JPY):

* Yields got stretched after the retail sales data. The move seemed outsized for the event and yields were already lower on the day. Chanced were that see some a reversal (note: the move was completely retraced).
* Oil was trading substantially higher as the NY session went on.
* Beige book was scheduled to come out. We have to remember that this was written a bit ago already, so the Federal Reserve’s rosy assessment was the most plausible scenario.

Nikkei Futures

Nikkei Futures

Nikkei Futures

Bond Futures – Retraced all of the gains

Bond Futures - 2. 5. and 30s

Bond Futures – 2. 5. and 30s

AUD/USD – More upside favored

The Aussie continues to hold the .8130/40s zone. As long as this happens, I think we have room to challenge .8200/13 again, possibly .8240s. I would like to see this before the Aussie jobs report.

Copper is hitting new lows and so is oil. However, the market does not care about that right now (the actual prices). It’s about yields and equities (which are being affected by lower oil prices). The actual price  of commodities is not affecting the Aussie like you think it would (i.e. downside pressure).

In case the pair makes a visit to .8080/.8100, if it can hold the zone, I think upside still goes.

AUD/USD - 4 Hour Chart

AUD/USD – 4 Hour Chart