Will the US Dollar Maintain Its Gains in the Market?

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Will the Fed Hike Rates in June?

Fed members have been making reference to a ‘live’ meeting in June since the last monetary policy of the Fed. Following the Federal Open Market Committee (FOMC) minutes it appears the word ‘live’ is referring to a live month (June) where a rate hike is possible. A larger consensus for a rate hike in June forced strong USD gains in the Foreign Exchange (Forex) market.

 The real question that must be asked is whether the Fed will hike rates before 2 risk events, the UK referendum and the Spanish elections, both due in June after the Fed’s monetary decision. The second part is if the Fed will surprise and hike rates in June, how much will the hike be and what references will be made to future rate hikes? These questions are likely to surface, which may force traders to realize profits over their long USD positions.

We are unconvinced the Fed will hike rates in June. We suspect the aim of the FOMC minutes and the ‘live’ references were intended for the market to price-in a rate hike in June (24% at the time of this writing) so if the Fed disappoints the US Dollar will be heavily sold. The USD exchange rate is one of the Fed’s objectives in its monetary policy.

We have 2 potential entries in the market. We are unlikely to opt for both as we would like to control our market exposure.

AUDUSD Weekly Chart

Please click on the chart to enlarge:

AUDUSD Weekly Chart 18/05/16

AUDUSD Weekly Chart 18/05/16

We have emailed earlier today on that the Australian Dollar (AUD) is due for moderate gains in the Forex market following the Reserve Bank of Australia (RBA) rate cut. The weekly chart shows AUDUSD has reached its weekly support, which if holds may play a key role in the formation of reversed Head-And-Shoulders (H&S). By the book a weekly close is required to affirm the support was able to contain the weakness. However, following the heavy selling in today’s session we find the current levels rather attractive and is inline with our projections for a weak US Dollar despite the FOMC minutes. What may be the trigger for the initial recovery is the Australian employment data but it is a mere speculation.

USDJPY Daily Chart

Please click on the chart to enlarge:

USDJPY Daily Chart 18/05/16

USDJPY Daily Chart 18/05/16

USDJPY recovery began following FX intervention threats from Japanese officials. Some disregarded the threats as Japan is bound to an agreement that forbids it from manipulating the currencies (JPY), however, Japan affirmed it may ask the US permission to intervene if required. We have no doubt the Bank of Japan (BOJ) will intervene in the market but only at lower price levels.

The recent gains in Dollar yen as a result of the FOMC minutes is seen as a dip before a resumption of the downtrend. The 55 Moving Average (MA, in blue) is seen as the nearest resistance level ahead of 110.90. Although it may appear the 55MA has yet to be tested it may trend lower based on the price action in USDJPY.

As we would like to be more transparent, AUDUSD weekly session is still open. Entering prior to the weekly close on a potential entry that is not based on dip-buying or dip-selling strategies must be exercised cautiously. If large number of stops will accumulate above 110.90 in USDJPY the risk for stop hunting may increase. We will decide which pair we are opting for in our trade alerts a after the daily close. We are not taking both trades despite the entries that are provided.

USDJPY Trade Alert

We have decided to opt for USDJPY. We will wait for AUDUSD weekly close or a better price to consider a long trade in the pair.

Please click on the chart to enlarge:

USDJPY Daily Chart II 18/05/16

USDJPY Daily Chart II 18/05/16

USDJPY short at market price (110.15)
Take profit: 106.10
Protective stop: 111.32
Risk Ratio (RR): 1 : 4 (approx.)
Estimated duration: 14 days

22/05/16 UPDATE: We have initiated a long trade in AUDUSD. We updated our subscribers that the United States issued a warning to Japan over the weekend to refrain from intervening in the Forex market.

AUDUSD Trade Alert Details

Please click on the chart to enlarge:

AUDUSD_Weekly_Chart_22_May_2016

AUDUSD long at market price (0.7220)
Take profit: 0.7640
Protective stop: 0.7059
Risk Ratio (RR): 1 : 2.6 (approx.)
Estimated duration: 21 days

23/05/16 UPDATE: USDJPY encountered a fairly moderate selling pressure after testing the 55MA resistance. Japanese trade data appears to have been the initial trigger for the selling.

Please click on the chart to enlarge:

USDJPY Daily Chart 23/05/16

USDJPY Daily Chart 23/05/16

USDJPY is trading at 109.37 at the time of this writing, we are closing 20% of the short trade at market price.

23/05/16 UPDATE: USDJPY is trading at 109.24 at the time of this writing.

Please click on the chart to enlarge:

USDJPY_Daily_Chart_II_23_May_2016

We are closing 10% of the short trade at market price. Protective stop loss order was shifted to the entry.

25/05/16 UPDATE: USDJPY triggered the protective stop loss order at the entry, ending the trade with some profit due to the partials’ realization.

31/05/16 UPDATE: AUDUSD is trading at 0.7229 at the time of this writing.

Please click on the chart to enlarge:

AUDUSD Weekly Chart 31/05/16

AUDUSD Weekly Chart 31/05/16

We have decided to close 10% of the long trade at market price prior to the Australian Gross Domestic Product (GDP).

01/06/16 UPDATE: We suspect the Non-Farm Payrolls may be the trigger. We are still anticipating USD weakness in the market but the progress of AUDUSD has been rather slow. We cannot shift the stop to the entry but we are closing 20% of the long trade at market price (0.7255).

03/06/16 UPDATE: As we have emailed several days ago, we suspected the NFP could be the trigger for AUDUSD gains. Although we are anticipating further gains in the pair we are closing 20% of the long trade at market price (0.7330) and shift the protective stop to the entry.

Please click on the chart to enlarge:

AUDUSD Weekly Chart 03/06/16

AUDUSD Weekly Chart 03/06/16

We are enjoying positive interest that is accumulating by holding onto the long trade since it has been initiated.

06/06/16 UPDATE:  AUDUSD is trading at 0.7372 at the time of this writing. Yellen is due to speak in just over an hour and may make several references to the Fed’s monetary policy. No Fed members are allowed to talk to the media regarding monetary policies until the Fed convenes next week. This period is often referred to as the ‘blackout period.’

Please click on the chart to enlarge:

AUDUSD Weekly Chart 06/06/16

AUDUSD Weekly Chart 06/06/16

Although we doubt Yellen will make any attempts to convince the market the Fed may hike rates soon we are shifting AUDUSD protective stop to 0.7290.

06/06/16 UPDATE II: Due to our exposure in other trades we have decided to exit AUDUSD at market price (0.7362) despite the fact the weekly chart remains intact for further gains.

Please click in the chart to enlarge:

AUDUSD Weekly Chart II 06/06/16

AUDUSD Weekly Chart II 06/06/16

This is a tough decision but it had to be made. We finished the trade with a decent profit.

07/06/16 UPDATE: AUD extended its gains in the market following the RBA monetary policy meeting.

Please click on the chart:

AUDUSD Weekly Chart 07/06/16

AUDUSD Weekly Chart 07/06/16

It was a tough decision but risk management is above all as there will always be new entries in the market.

Will the US Dollar Maintain Its Gains in the Market?

As USDJPY and AUDUSD trades are closed this page can now be accessed by all traders. Open trades and relevant intraday strategies are restricted to members only. We have been providing trade alerts in the Forex market since May 2014.
Will the US Dollar Maintain Its Gains in the Market?

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Will the US Dollar Maintain Its Gains in the Market?

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Will the US Dollar Maintain Its Gains in the Market?