The Easter break is over, signs of spring have appeared outside the window and nature is waking up after its winter slumber. The markets have also revived, liquidity and volatility have returned and the markets are in full swing. It promises to be a week rich in macroeconomic events – just take a look at the calendar and there are already two important events tomorrow. At 14:30, we will learn about inflation in the USA (CPI) and at 20:00 we will learn about the minutes of the last FED meeting held 2 weeks ago.
Both events may increase volatility and raise our adrenaline levels 😉 The first event will be particularly important – the level of inflation is one of the most important indicators for the Fed’s monetary decisions. While market expectations for a rate hike in the US have decreased significantly recently but still more than 61% expect a 25bp hike and 39% think there will be no hike at the next Fed meeting. Tomorrow’s CPI data could set the direction for the USD for the next few weeks, especially if the results differ significantly from expectations.
The next events – BoE Governor Bailey’s speech or the Bank of Canada interest rate decision are also opportunities for high volatility for the Canadian dollar and the British pound so it is worth being prepared for any eventuality.
USDJPY – is it time for a trend reversal?
In April, there was a change in the BoJ chairman’s position. The outgoing Kuroda has been less dovish in his recent statements and has systematically laid the groundwork for his successor, Kazuo Ueda, to move easily to exit ultra-loose monetary policy – if the government supports such a change, of course. Perhaps the first step could be to lift interest rates, which have remained at an unchanged negative -0.1% for seven years. An interesting piece of news that could have an impact on the appreciation of the weak yen is the Warren Buffet decision. Japanese media reports that Warren Buffett is considering increasing his holdings in Japanese equities. Fundamentally, this would favour the strengthening of the yen. But what does this look like on the technical side?
The fundamentals say yes, but what about the technical analysis?
The USDJPY pair established a 20 October 2022 maximum not seen for more than 30 years. Since then it has been falling steadily. During the downward correction, the first week of March closed with a large downward candle forming a bullish engulfing. Today, the market is testing the minimum of this formation from below. If the price remains below this, it could be a signal for a return to declines. It is possible that tomorrow’s US inflation data will give us direction. If such declines are confirmed, reaching the dotted line (neckline) would form a H&S formation‘.
More on this pair , Gold and other currency pairs in live sessions :
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The above analysis is based on the PA+MACD strategy, a detailed description of which you can read HERE . I will talk more about the PA+MACD strategy applied to these currency pairs during the live trading sessions which you can attend from Monday to Friday.
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