Opportunity for USD


The week started with a suspicious lack of market movement from any of the major economic centers. Right now, the focus is solely on Fed Chair Janet Yellen to end the week.

Yes, we’re back in Jackson Hole, Wyoming and while I’m not sure why, I just have it in my Monday morning mind that we will be using the straight outta somewhere generator once again! We’re allowed to have some fun with markets after all, right?

Well! After last week’s hawkish Fed speakers jawboning narrative, things are just starting to feel… well, different. They’re starting to feel (heaven forbid) hawkish.

USDX daily

USDX daily

But as this USDX chart highlights, forex markets maybe aren’t quite yet on board with this attempted change of Fed sentiment. This is where the opportunity could lie.

So with price sitting at a confluence of support and Janet Yellen capping off what could be seen as two weeks of hawkish Fed rhetoric trying to prime markets for a December rate hike, could we be in for a major bullish USD re-pricing?

EUR/USD daily

EUR/USD daily

The disconnect between Fed rhetoric and market pricing can’t continue, and something has to give. Interest rate futures are now showing a 51% probability that the Fed hikes in December versus 42% a week ago. They’re starting to lean that way, so why isn’t the US Dollar?

After a heavy bearish trend, EUR/USD has formed a solid ranging pattern over the last 12 or so months. A pattern that to me just screams continuation.

Is anyone honestly excited about the fundamental prospects of the Eurozone? God no. This pair is being driven by the USD and the top half of this marked daily range looks a nice higher time frame sell zone.

With rhetoric changing, technicals hitting key zones and Janet Yellen hitting the microphone on Friday, I can’t help but feel the opportunity lies in playing USD from the long side.

Share your thoughts on where you see the greatest opportunity this week by mentioning @VantageFX on Twitter.

This Monday

As we have spoken about above, it’s not too often we start the week with an economic calendar completely void of tier one data! We’re expecting a fairly quiet start to the new trading week as a result, but we know that they are so often a trader/analyst’s famous last words. Stay on your toes.

If anything else, the slow start to the week should give you a chance to get your MT4 charts cleaned up, as well as giving you the opportunity to see what all the News Terminal fuss is about. Trust us, it’s worth having for the real time release of economic data alone!

This is a guest post originally appeared on Vantage FX. Reposted with permission.

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