ridethepig
Short

Positioning for FED hikes September [detailed macro post]

FOREXCOM:EURUSD   Euro / U.S. Dollar
We closed our latest EURUSD buy idea after failing to clear final targets before the end of today, well done to all those on the buy side who made a few...

=> Here we are now starting to position for the FED hikes tomorrow;

As per today's odds (94.4%) markets are trading a done deal tomorrow.

The US is structurally very strong with factors like lower tax rates in US is still attracting capital, reserve currency, upside of 2020 administration being more frugal.. etc.. providing an ever lasting pull factor, whilst on the other side of the coin we've got a twin deficit currency which is broadly viewed in the backstreets of Westminster as overvalued because of US protectionism and the fact fund managers in Europe will start adding exposure to the EZ and EUR once yields tick above zero.

On the monetary side US rates are far higher than global rates. A divergence in FED members opinion on yield inversion, coupled with odds of a faster paced normalisation from the ECB in 2019 started to tick higher last week and a BOJ widening the yield band are weighting against the dollar on this one. EM crisis is in a bad shape via rate differentials, so what we are tracking here is any change in language from "accommodative" towards concerns over trade tensions or EM struggle (markets are not expecting this) as this will catch markets on the wrong side and short circuit all those pricing in a December hike as it gets pulled off the menu.

Inflation is on track and unemployment is still falling so we have nothing to see on this front. Here expecting a slightly hawkish Powell and selling rallys towards 1.176xx. We will be covering this event live in the telegram with some key updates coming on the close today.

Technical levels here we are still within the June ECB range so we are placing stops out of reach here to protect against any spikes tomorrow with targets at the bottom of the range (1.18xx - 1.15xx). A simple flow trading the inside of the range.

GL all....

Comment: 'we are tracking here is any change in language from "accommodative'


=> removal as expected
Comment: Flawless entry ...
Trade closed: target reached: Well done guys 220 pips in a few days, We have an update to our EURUSD chart this morning
Great analysis. Good to see people take a look at long term trading with fundamentals in check.
+1 Reply
@aleisley, Thanks for your kind words mate.
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