Making Sense

USDJPY / EURUSD / AUDUSD broadly performed in line with expectations as highlighted in the view earlier  with strong gains in JPY and w e hit our  SL on the GBPUSD  trade.  USDINR is seeing a rounded top technical formation and we may be breaking out lower. Today's close will be important and then the next immediate support is seen as 82.66.  Fed Chair Powell's testimony offered nothing new - Fed believes that they are peak of the tightening cycle.  T he statement reflected a cautious approach to monetary policy, with a recognition of the uncertainty surrounding the economic outlook and a focus on achieving the central bank's inflation target while supporting economic growth and employment and the delicate balance that policymakers must strike. The statement acknowledged that if the economy continues to develop as expected, there may be a need to start easing the current policy stance at some point during the year. The Central Bank would follow a data driv...

Look at the charts below, USD index chart has a H&S formation and also a wedge formation which appears to be breaking out to the downside. 104.78 is the 61.8% Fibo retracement of the larger 107.35 to 100.62 and resistance offered by the trendline joining the Sep 22 top seen at 114.78.  Also the second chart will show a descending triangle in formation on the larger time frame.  We saw AUDUSD earlier breaking out of the wedge formation and EURUSD broke out earlier. I suggested AUDUSD long at 0.6520 and we briefly dipped to 0.6519 lows.  We see a shark pattern in USDJPY and the stops are clear at 151.00 for move lower. GBP continues to be a puzzle on the backdrop of multiple Head and Shoulder pattern but H&S are best traded on breakouts.  I am biased to short USD ahead of the 104.80 resistance.  Tell me your take on the charts?

AUDUSD has broken out of the wedge in formation since 28 Dec 2023 and has broken the resistance seen at 0.6510. It is a text book wedge formation which is an important reversal pattern.  An important thing to bear in mind is that break out from downturn wedges may not immediately translate into breakaway moves and hence the action could be delayed.  The move out of the wedge, finds the first resistance at 0.6540 levels and support at 0.6520 and 0.6490 levels. Stop loss levels for me on this trade are below Thursday’s lows of 0.6477. Buying at 0.6520 and 0.6490 (average 0.6505) with stops below 0.6470 for a minimum target of 0.6610 offers good risk reward.

"Failure of Imagination" is the inability to understand in advance the full range of outcomes. Overnight, USD index weakened and USTs were unchanged. The implied Fed Fund pricing shows 20 bps of Fed Fund Rate cut priced into the March Policy and a cumulative 143 bps of Rate cuts priced until the Dec 2024 policy. Post the FOMC Rate decision, Markets had priced in 23 bps of rate cuts by March Policy and 148 bps of rate cuts by Dec Policy. We had comments from 2 Fed Speakers both of whom are FOMC Voters into 2024. Raphael Bostic reiterated his view of 2 rate cuts into 2024 starting sometime in Q3 and  stated that there is no urgency to back away from restrictive policy stance. Thomas Barkin stated that inflation continues to move in the right direction and if inflation trajectory evolves on expected lines, the Fed would act appropriately. U.S released housing data where Housing Starts rose 14.80% mom while Building permits at 1.46 mn were below consensus of 1.465 mn. On the dome...

 On Friday, US equities closed in the red with Dow Jones leading losses of 1.12% while today morning saw Asian equities trade mixed. US equity futures are seen trading in the green. Crude oil prices pulled back from Friday's high thus consolidating the push lower to $ 87.70 levels on Oct 24 for the 4th day between $ 87.70 - $ 91.  US Treasuries are off to a negative weekly start with yields on US2s rising 7 bps to 5.07% (swing high 5.26%) and US10s rising 7 bps to 4.91% (swing high 5.02%) on chatter around BoJ tweaking YCC in tomorrow's meeting. US2s10s steepened with the spread at a high of -12 bps on Monday of last week and traded a low of -30 to close the week at -17 bps. The implied Fed fund pricing shifted lower, I have written in the earlier blogpost the risk reward favors going long the contract as the market pricing for Dec 24 contract finds resistance at the 4.80% - 4.85% level.  Overnight Fed Funds Rate 5.33% Current Pricing Peak terminal rate is priced at 5.41...

Form a main idea and anticipate what may change to reverse the idea The main idea here is for the current trend in USD index to continue. As China is out for national  day Golden week, expect USDCNH to be range bound. Moves in AUDUSD are likely to be the result of the broad USD move or large surprises in Services and Composite PMI data and AUD trade data.  RBA Rate decision - Michelle Bullock's first policy statement was largely unchanged from the Sep meeting. RBA kept the interest rate unchanged at 4.10% as uncertainties regarding the lag effects of monetary policy and uncertain economic outlook continue to weigh on decision making. Inflation continues to be elevated with price pressures on goods inflation easing while prices of some services and oil continuing to rise. RBA expects inflation to decline to within the 2-3% range in late 2025 and U/R to gradually rise to 4.50% late next year.  AUDUSD broke the recent 46 day, 32 trading day 0.6360 - 0.6500 consolidation rang...

AUDUSD has been consolidating in a wide range of 0.6625 - 0.6800. Break below 0.6625 on 26 April to lows of 0.6574 saw strong buying interest come in. Full time 27100 jobs lost;U/R 3.70%,part time jobs added 22800, estimates were for a net addition of 25000; wage price index rose 0.80% qoq (Previous 0.90%qoq);  3.7% Est 3.6% Prior 3.40%. Markets are pricing in peak terminal rate of 4.10%, 25 bps hike from current level of 3.85%. AUDUSD faces crosswinds from CNH depreciation while sharp up move in Copper prices, Iron ore and natural gas prices make the outlook a bit cloudy. I would prefer to stay away from the pair till either a more conclusive technical picture present itself or there is a fundamental catalyst.  Important Resistance - 0.6708 / 0.6748 / 0.6793 Important Support - 0.6625 / 0.6575 / 0.6525