The US Dollar may finally make a trend setting move this week and break out of the recent consolidation we have seen in April. Whether the USD rises or falls will depend on how the market reacts to the FED decision Wednesday and US data releases. Expectations will be running high for the USD with NFP expected to come in at 210K jobs added vs 192K previous, anything under this could harm the USD dramatically.
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This week will be extremely busy with event risk. Most importantly with the Federal Reserve, they are expected to continue their pace of tapering which should help the USD find some strength. Any deviation from tapering could send the USD moving dramatically.
If the situation does not improve in Ukraine we will likely see the Russian economy suffer further (USD/RUB is currently trading around 36 which is all time low vs USD). We are continuing to get closer to direct armed conflict between Ukraine and Russia. If this occurs Gold will likely continue to rally above $1300 and possibly oil which is on support right around $100. More on ukraine from Bloomberg
AUD/USD looks like it may have topped 3 weeks ago and should continue to trend lower. The Australian economy is lagging, with CPI coming in weaker than expected last week which will put pressure on the RBA to act if things to not improve.
For now we are holding short.
GBP/USD has been in a uptrend for about 8 months now but the trend momentum is slowing. We could soon see a break down in GBP/USD but that will have to come from a more Hawkish Fed and a continued unchanged tone from the BOE. The trend has been up since August 2013 on the back of rate hike expectation by 2015 by the BOE. It may start to stall since it is coming into major resistance at 1.70.
For now we continue to hold a small short (this is a speculative counter-trend trade).
NZD/USD is has fallen even after the RBNZ hiked rates 25bps from 2.75% to 3.00%. There is always the possibility for further downside until we break out of this downward RSI trend. Major support is market by the long term 0.236 fib at around 0.85. Look for a bullish RSI break for possible NZD/USD continuation higher.
For now we are holding a small long.
USD/JPY has really not done a lot this year besides consolidate in this triangle pattern which should bring continuation. However, USD/JPY is facing some near term trend line resistance dating back to the beginning of 2014. RSI is sitting right around neutral 50 on the weekly chart. Look for 102.2 and 101.9 for possible support. The fact that the BOJ may not add any more QE to their already large stimulus program is putting some speculation that we could see a move lower soon.
If we break down below the trend line this week we could see 100 soon which would see a lot of support. Right now it makes more sense to be short since we are closer to the top down trend line of the triangle pattern. If we see a maintain in tapering USD/JPY could get a temporary boost but if NFP under performs market expectations then we could still see a trend line break.
We are currently holding a small size short after taking profit on our long trade that was placed 2 weeks ago.
USD is facing some resistance near term, reaction low resistance and down trend resistance may prevent further USD strength for the time being. USD could possibly rise this week on a continued taper and very good data. Expectations are very high for the USD and this is leaving us with a cautious outlook for the time being.
Gold has found some recent buying and could possibly continue higher. Gold is currently trading around $1302.
SPX500 has been up 7 days in a row, a pullback has occurred but follow through will depend on the Fed and US data this week as well as market sentiment. While we are unable to press above all time highs there is a risk of steeper declines.
I have added an overlay of Gold to the SPX500 to prove a point that the two are not always inversely correlated. Last month Gold has been pretty correlated vs the SPX500, maybe on possible bubble or market top fears but has dropped off recently…