Trading the Majors post-FOMC (7.27.2017)

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– In this webinar, we used price action to look at macro markets after yesterday’s FOMC rate decision. At that meeting, the Fed made no changes to rates, but did insert the language that balance sheet reduction could begin ‘relatively soon’. This is Quantitative Tightening, and markets appear to now be looking for the Fed to initiate this at their next meeting in September (20-21).

– We first looked at DXY, which has continued the troubling down-trend that’s defined 2017 for the U.S. Dollar. Yesterday’s FOMC rate decision helped to produce another quick run down to a fresh low, but buyers started to show up in the Asian session, and this morning’s US Durable Goods print helped to bring the Dollar back-up towards levels that were traded at before yesterday’s rate decision. As we shared previously, the U.S. Dollar is massively oversold, and sentiment has moved towards extreme lows. As expectations for U.S. data have moved lower after the disappointing 2017 thus far, the bar for USD-strength may be so low that even in-line data produces USD-strength. We looked at two setups for such a theme yesterday, just after the FOMC-fueled dip lower in the Dollar.

– We then moved over to EUR/USD, which is one of the more attractive USD-weakness plays that’s currently on my plate. I’d like to see a deeper retracement here to wash out some of the long exposure as bullish sentiment has grown quite stretched. We looked at a series of longer-term support levels at which such a scenario could present itself.

– GBP/USD: I’m bearish here under the presumption that the BoE isn’t yet ready to move away from their ultra-loose monetary policy. It had looked as though rising inflation in June was going to drive the MPC towards ‘less loose’ policy options, but as June inflation came-in below expectations, that theme doesn’t look so prominent any longer. Short GBP/USD was one of the setups in yesterday’s Analyst Pick, and if we do see a continuation of USD-strength, this could remain as one of the more attractive areas for long-USD exposure.

– USD/JPY: This is the other side of my long-USD play, but utilizing slightly different rationale. The BoJ has remained dovish, and much of the issue with USD/JPY throughout 2017 appears to emanate from the Dollar. If we do see that theme shift with USD-strength coming back, JPY-weakness could be one of the more attractive ways to stay long U.S. Dollars.

– AUD/USD: I’m bullish. .7925 support can open the door for stops at .7875 for a bullish continuation run.

– NZD/USD: Also bullish, but I’d like to see a deeper retracement here to set up a longer-term trade. That prior resistance zone around .7335 is extremely attractive for ‘higher-low’ support in a longer-term bullish continuation move.

– USD/CAD: Still bearish, but I’d like to see a deeper retracement before taking on short exposure.

– EUR/JPY: Range resistance around 130.50 has held well so far: I want to try to find support north of the prior swing low around 128.52 before taking on long exposure.

– GBP/JPY: Bearish moves may be on the horizon, and this is one of the few long-Yen plays that I have on the plate at the moment.

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