Best Instruments to Trade This Week
This week, there are a few high-probability trade ideas I'd like to recommend to you. Trading these setups, be sure to implement a proper risk management approach.
Bulls Are Coming Back
Information is not investment advice
The US dollar index rose to 105.40 after the Fed’s 75-basis-point key rate hike, while the stock and the crypto markets fell. However, during the past few days, investors and traders returned to risk assets as they expect inflation growth to slow. Moreover, Jerome Powell, the head of the Federal Reserve, announced the Fed might start cutting the key rate by 2024, which is the most evident hint of an upcoming market reversal.
What is happening?
The last US inflation rate data sent the markets down as investors prepared for the sharp key rate increase from the Federal Reserve on June 15. And they were right. The Fed increased the rate by 75 basis points to 1.75%, pushing the US dollar index to year highs. However, the famous saying “buy the rumors – sell the news” always works in the markets, as already on June 16, the US dollar index lost 1%, boosting the other currencies against the USD.
The following week traders will learn about the German Flash Manufacturing PMI, which is important as Germany is the leading economy of the European Union. Moreover, they will listen to the speeches of the Reserve’s Bank of Australia and Bank of England governors on Friday, June 24, and Wednesday, June 29. If the speeches are more hawkish than expected, AUD and GBP might surge against the greenback. At the same time, better-than-expected German Flash Manufacturing PMI will boost EURUSD.
Why is it important?
EUR and GBP occupy 57.6% and 11.9% of the US dollar index, respectively. The strengthening of these currencies might significantly affect USD and push other currencies, such as JPY, CHF, and CAD, up against it. Moreover, the US stock and crypto market usually correlate negatively with the greenback. Therefore, stocks and crypto might also surge trying to break the recent bearish trend.
What to trade?
EURUSD, weekly
EURUSD is consolidating above the historic support level of 1.0350, which is a positive sign for the bulls. Traders should consider buying the pair in the 1.0400 – 1.0500 range. However, if the price loses this support, it will slide to 1.0000.
US500, daily timeframe
US500 is retesting the breakout of the support trendline. Usually, a breakout of a support trendline signals an upcoming bearish impulse. We believe the US500 will reach 3515 within this week, where the final reversal will happen.
USDCAD, weekly
USDCAD reached the upper border of the ascending channel. The price has already reacted to this resistance, confirming an upcoming bearish impulse. Consider selling USDCAD with targets at 1.2800 and 1.2530.
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European Currencies Ahead of the Banks' Statements
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
Will the FOMC Surprise the Markets?
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates? Recall that the Federal Open Market Committee had previously ended the year 2022 with a 50bps hike, and an indication from Powell, the committee chairman, that the Fed could consider raising interest rates by 75bps in the course of the year 2023.
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Best Instruments to Trade This Week
This week, there are a few high-probability trade ideas I'd like to recommend to you. Trading these setups, be sure to implement a proper risk management approach.
European Currencies Ahead of the Banks' Statements
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
Will the FOMC Surprise the Markets?
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates? Recall that the Federal Open Market Committee had previously ended the year 2022 with a 50bps hike, and an indication from Powell, the committee chairman, that the Fed could consider raising interest rates by 75bps in the course of the year 2023.
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