TECHNICAL REASON:
Price was within the zone of interest and the 4H candle has no lower wick which means everyone is priced one way; could see some profit taking ahead of FOMC
FUNDAMENTAL REASON:
It is worth noting that to the Fed, to gage inflation and how sticky it is or isn't, they are looking at jobs (more than CPI, PPI etc). Since the job market isn't cracking, it's a little premature to think that tomorrow they're going to come in as dovish as the market is expecting. Powell doesn't even have to necessarily come in Hawkish tomorrow for these moves to reverse. As long as he is less dovish than the average joe on Wall Street is expecting, USD is likely to have a strong reversal upward.
Short idea proved to be valid on the back of inflation print, which I believe is not that relevant. The Fed is focused on Jobs more than CPI, PPI etc. If price stabilizes today (likely will), expecting the market to offer 1825 again as a wick hunt and then for XAU to roll over.
HOW TO TRADE FOMC
I've taken partial profits in anticipation of getting "wicked out" and if this occurs, I will re-enter short around 1825
CROSS ASSET:
Everyone seems to be booking profits right now (see chart). The question is whether they will add once they're doing taking profits, open shorts or wait for tomorrow to make up their mind. The next 2.5 hrs are very important.
1. USD is stabilizing within lower boundary of wedge pattern
2. Bond yields haven't broken the low and are holding
3. NASDAQ (most forward looking index) is pulling back from the highs
Price was within the zone of interest and the 4H candle has no lower wick which means everyone is priced one way; could see some profit taking ahead of FOMC
FUNDAMENTAL REASON:
It is worth noting that to the Fed, to gage inflation and how sticky it is or isn't, they are looking at jobs (more than CPI, PPI etc). Since the job market isn't cracking, it's a little premature to think that tomorrow they're going to come in as dovish as the market is expecting. Powell doesn't even have to necessarily come in Hawkish tomorrow for these moves to reverse. As long as he is less dovish than the average joe on Wall Street is expecting, USD is likely to have a strong reversal upward.
Short idea proved to be valid on the back of inflation print, which I believe is not that relevant. The Fed is focused on Jobs more than CPI, PPI etc. If price stabilizes today (likely will), expecting the market to offer 1825 again as a wick hunt and then for XAU to roll over.
HOW TO TRADE FOMC
I've taken partial profits in anticipation of getting "wicked out" and if this occurs, I will re-enter short around 1825
CROSS ASSET:
Everyone seems to be booking profits right now (see chart). The question is whether they will add once they're doing taking profits, open shorts or wait for tomorrow to make up their mind. The next 2.5 hrs are very important.
1. USD is stabilizing within lower boundary of wedge pattern
2. Bond yields haven't broken the low and are holding
3. NASDAQ (most forward looking index) is pulling back from the highs
Comment:
The market is waiting for tomorrow’s Jobs data to make its move. Possible trade setups for tomorrow:
Comment:
The market is waiting for tomorrow’s Jobs data to make its move. Possible trade setups for tomorrow:
Comment:
ECB and the Fed are worried about services inflation - especially after initial claims were WAY lower than expected; forcing them to remain Hawkish
Which means lower XAU price to come
Which means lower XAU price to come
Comment:
This trade should ideally be a TUESDAY event based on fundamentals; if the data comes out a particular way the trade will be less valid.
Comment:
as long as price doesn't melt overnight, we should be good to go for tomorrow's short
NOTE: If tomorrow is a surprise 25bp hike or if Powell is excessively dovish this trade is invalid as XAU will likely shoot higher on the back of these developments.