Squeeze Story

November 20, 2015

Squeeze Story:
Yesterday’s FOMC Minutes, today’s Fed speeches from Fischer/Lockhart and the USD price action in relation to how much of the hike has been priced in, are all coming together to shout December.

Data out of the US including last night’s Philly Fed Manufacturing Index and Unemployment Claims both continued to highlight the strength of the US economic recovery and markets are now sure that the time has come.

We got this from the Fed’s Fischer early this morning:

“The Fed has done everything it can not to surprise markets.”

But as Lockhart continues to make clear, it now comes down to how fast and up to what level the Fed goes to:

“The pace of increases may be somewhat slow and possibly more halting than historic episodes of rising rates.”

This is why Forex markets are seeing the US Dollar squeeze that we have been. You look at what’s priced in already and any technical USD weakness is going to be sold in the short term as big longs start to take off some of their size.

USD/JPY 4 Hourly:
151120_usdjpy_4hourly
Click on chart to see a larger view.

This was highlighted no better than in yesterday’s USD/JPY price action, as price pushed into resistance.

I think it’s got a bit more juice to squeeze out of weak longs, but what are your thoughts? Leave a comment below or mention @VantageFX on Twitter.

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On the Calendar Friday:
EUR ECB President Draghi Speaks

CAD Core CPI m/m
CAD Core Retail Sales m/m

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Chart of the Day:
Today we take a look at the roller-coaster that is the CHINA50 Index.

CHINA50 Daily:
151120_china50_daily
Click on chart to see a larger view.

After rallying into vertical bubble territory, the CHINA50’s burst has been nothing short of spectacular.

The last few weeks has seen a steady, short term channel form against the overall trend that looks like a flag pattern back into previous support now acting as resistance.

Is that a short?

Do you see opportunity trading Forex?

Dane Williams – @VantageFX

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