While FX Markets Are Dead - AUD/USD May Offer Some Action
NOTE: some charts I note in the text below cannot be displayed because they are non-TradingView images.
Good Evening.
Normally I do not post on Friday evening, but there is not a time sensitivity here and frankly, I am hunkered down fending off COVID running rampant in our area.
As you have seen in the morning posts this week, the focus has been squarely on the S&P futures. If you followed along and lined yourself up accordingly, there is little doubt you had some solid trades this week. I am expecting more volatility next week.
But what about the beleaguered FX market? Well, we cannot impose our will on any market and we certainly cannot impose our will on the largest market in the world. The FX vol chart (Deutsche Bank FX Volatility) tells you just how quiet it has got in FX land over the last month....yikes!
However, given the volatility and weakness, we have seen in the S&P's this week, we might start looking for possible moves. I am looking at AUD/USD and to a lesser extent NZD/USD.
Naturally, the Aspen S/R Levels will be key for helping us gauge entries and exits. But, equally important will be the direction the S&P's chose to go next week. The general linkage is that weak S&P's = weak AUD/USD and NZD/USD. As you will see in the chart below, that played out early in the week but NOT on Friday. So, score one for FX in terms of relative performance. In the second chart, you will see that AUD/USD is testing key resistance at .7186, thus we now have a scenario where longs or shorts could be in play. For now with the S&P's weak, one would say that fading this .7186 level is the proper way to play it.
Let's add one more piece of data into the mix: positioning. Bearish bets continue to rise in AUD/USD and NZD/USD. These are the scenarios that can often end up catching those most leaning to one side off balance. Maybe that happens this time and we see AUD/USD move higher. As a side note, note that just as JPY shorts were increased....again....is when the Aspen S/R's called the recent top and where I advised clients to raise stops to 115.90....we closed today at 115.47, 100 pips off the highs.
Generally speaking, a sustained bull move for AUD/USD will require higher S&P's and as of Friday's close, that is not looking likely.....for now. But markets can and do change....quickly. So, you may be asking yourself right now,
"Dave, should I go long or short AUS/USD?"
My answer is simple: it will depend....like in all trading scenarios. Follow me closely next week and maybe we will get some data points to help us hone in on what side we will play.
Enjoy the weekend.
Dave
Good Evening.
Normally I do not post on Friday evening, but there is not a time sensitivity here and frankly, I am hunkered down fending off COVID running rampant in our area.
As you have seen in the morning posts this week, the focus has been squarely on the S&P futures. If you followed along and lined yourself up accordingly, there is little doubt you had some solid trades this week. I am expecting more volatility next week.
But what about the beleaguered FX market? Well, we cannot impose our will on any market and we certainly cannot impose our will on the largest market in the world. The FX vol chart (Deutsche Bank FX Volatility) tells you just how quiet it has got in FX land over the last month....yikes!
However, given the volatility and weakness, we have seen in the S&P's this week, we might start looking for possible moves. I am looking at AUD/USD and to a lesser extent NZD/USD.
Naturally, the Aspen S/R Levels will be key for helping us gauge entries and exits. But, equally important will be the direction the S&P's chose to go next week. The general linkage is that weak S&P's = weak AUD/USD and NZD/USD. As you will see in the chart below, that played out early in the week but NOT on Friday. So, score one for FX in terms of relative performance. In the second chart, you will see that AUD/USD is testing key resistance at .7186, thus we now have a scenario where longs or shorts could be in play. For now with the S&P's weak, one would say that fading this .7186 level is the proper way to play it.
Let's add one more piece of data into the mix: positioning. Bearish bets continue to rise in AUD/USD and NZD/USD. These are the scenarios that can often end up catching those most leaning to one side off balance. Maybe that happens this time and we see AUD/USD move higher. As a side note, note that just as JPY shorts were increased....again....is when the Aspen S/R's called the recent top and where I advised clients to raise stops to 115.90....we closed today at 115.47, 100 pips off the highs.
Generally speaking, a sustained bull move for AUD/USD will require higher S&P's and as of Friday's close, that is not looking likely.....for now. But markets can and do change....quickly. So, you may be asking yourself right now,
"Dave, should I go long or short AUS/USD?"
My answer is simple: it will depend....like in all trading scenarios. Follow me closely next week and maybe we will get some data points to help us hone in on what side we will play.
Enjoy the weekend.
Dave