Does Opportunity Lie with Playing USD from the Long Side?

August 22, 2016

The week kicks off with a distinct lack of market moving economic data from any of the major economic centres and attention therefore focuses solely on Fed Chair Janet Yellen to end the week.

Yes, we’re once again back in Jackson Hole, Wyoming and while I’m not really sure why, I just have it in my zaney Monday morning mind that we will be using the straight outta somewhere generator once again! We’re alloed to have some fun with markets, right?

Anyway! Carrying on from last week’s hawkish Fed speakers jawboning narrative, things are honestly starting to just feel… well, different. They’re starting to feel (heaven forbid) hawkish.

USDX Daily:
160822_usdx_daily
Click on chart to see a larger view.

But as this USDX chart highlights, forex markets maybe aren’t quite yet on board with this attempted change of Fed sentiment. This is where the opportunity could lie.

So with price sitting at a confluence of support and Janet Yellen capping off what could be seen as two weeks of hawkish Fed rhetoric trying to prime markets for a December rate hike, could we be in for a major bullish USD re-pricing?

EUR/USD Daily:
160822_eurusd_daily
Click on chart to see a larger view.

The disconnect between Fed rhetoric and market pricing can’t continue, and something has to give. Interest rate futures are now showing a 51% probability that the Fed hikes in December versus 42% a week ago. They’re starting to lean that way, so why isn’t the US Dollar?

After a heavy bearish trend, EUR/USD has formed a solid ranging pattern over the last 12 or so months. A pattern that to me just screams continuation.

Is anyone honestly excited about the fundamental prospects of the Eurozone? God no. This pair is being driven by the USD and the top half of this marked daily range looks a nice higher time frame sell zone.

With rhetoric changing, technicals hitting key zones and Janet Yellen hitting the microphone on Friday, I can’t help but feel the opportunity lies in playing USD from the long side.

Share your thoughts on where you see the greatest opportunity this week by mentioning @VantageFX on Twitter.

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On the Calendar Monday:

Empty Forex Calendar

As we have spoken about above, it’s not too often we start the week with an economic calendar completely void of tier one data! We’re expecting a fairly quiet start to the new trading week as a result, but we know that they are so often a trader/analyst’s famous last words. Stay on your toes.

If anything else, the slow start to the week should give you a chance to get your MT4 charts cleaned up, as well as giving you the opportunity to see what all the News Terminal fuss is about. Trust us, it’s worth having for the real time release of economic data alone!

Dane Williams – @VantageFX

Risk Disclosure: In addition to the website disclaimer below, the material on this page prepared by Forex broker Vantage FX Pty Ltd does not contain a record of our prices or solicitation to trade. All opinions, news, research, tools, prices or other information is provided as general market commentary and marketing communication – not as investment advice. Consequently, any person acting on it does so entirely at their own risk. The expert writers express their personal opinions and will not assume any responsibility whatsoever for the Forex account of the reader. We always aim for maximum accuracy and timeliness, and FX broker Vantage FX shall not be liable for any loss or damage, consequential or otherwise, which may arise from the use or reliance on this service and its content, inaccurate information or typos. No representation is being made that any results discussed within the report will be achieved, and past performance is not indicative of future performance.

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