NzdUsd acting as expected this morning, rotating lower off the reported offer area. Usd bulls back in the driver seat. We are now playing with the current week lows/weekly open, which will be the most important hurdle on the way towards the bids at last week's lows. The Euro diddn't even reach the offer zone this morning. We noted that sentiment was still decisively bearish, so nothing really surprizing there.
So even during these summer doldrums we have the opportunity to view the relative importance of "pure technicals" vs. "sentiment". Yesterday we noted how AudNzd was bumping up against a swing level and depending on the reaction, it might be worth a shot for a short. So what happened? Offers came in as expected but once the 1.0770s stops got hit, bids held their ground and we consolidated for the rest of the day. Then, overnight the Aussie climbed back to 9375 ahead of Stevens' speech. The complete lack of comments on the impact of the exchange rate saw a squeeze to 9395 before easing back to close at 9383. Sure, the CPI print will be more interesting but sentiment on the Aussie has had a positive infusion overnight, giving strength to the trend players that look strong enough to pop the topside stops today. It's always better to play in favour of the prevailing sentiment - which is often reflected/confirmed by an evident trend in motion.
And the Euro is continuing in line with hte negative sentiment that surrounds it. Here is the 4H chart along with the order levels reported by the guys at orderflowtrading.com As we can see, the market has worked through the bids down here and has also probed the stops below last week's low. More stops are seen sub-3475. Another lesson on why you don't fight sentiment. There has been EurJpy selling by leveraged accounts this morning which has also weighed on the Euro. So where are we headed? Firstly, the 3400/50 zone holds a bit of history, and then the 3300/20 zone.
Onto the main data for today: US CPI + Existing Home Sales. It's always good to take a look at the macro calendar and find out what the market is expecting/pricing in. Then, if you have reason to believe the consensus is imprecise - or more recent data points to some other scenario, then you can start to work out a plan. News trading is not something I do. On rare occasions, when there is a big surprize, a trade idea might be generated. But I do not news trade. I use the market's expectations and the analysis shown above to help myself in administering existing trades and/or preparing in advance for a potentially useful move. For example, if the current downtrend in the euro was brought to a halt by US data, giving an intraday pullback, I may use that opportunity to hop back on the negative-euro sentiment/trend trade. In short, headline news events can create counter-sentiment moves that can be "faded" in line with the dominant bias.
Hey Username, good question! I am going to take the opportunity to expose one of the issues I had a lot of trouble overcomming. Basically the majority of those who set out to trade get focused on "the entry". It's a mentality like "show me how to enter and I'll replicate it and make tons of money". Unfortunately the entry is only the tip of the iceberg. The entry is the "timing" part of trading. It is important but more important than the actual method used to enter is the level/zone (where as opposed to how). It's all about location and risk:reward. I had a heck of a time overcomming this issue. I was so concentrated on the techniques available to "time" the market that I completely ignored the main reason why some entries worked and some diddn't. Jesse Livermore would call it "underlying conditions"...the guys from orderflowtrading call it "sentiment". The way I see it, you have to stack up a few things before you can actually look for an entry: 1) you need evident sentiment + evident trend showing you that there is participation/interest. It's useless to try and tackle the market each and every day. Simply because there isn't always decent participation from the big players. And as an orderflow trader I am very aware that I need to piggyback on other participant's orders and i need to be good at identifying the reasons that might make them participate and the zones/levels they might be interested in taking on. This is the background preparation. 2) then there's the timing part. I like to see the market start to work for me, as opposed to against me. Many traders like touch trades or pure fading..i like to have some sort of confirmation. Price action is a direct reflection of the current market psychology so it's like asking the market "what do you think about this?" at key levels. As a concrete example, let's look at the EurUsd. 1) We know that the recent stance of the ECB (basically saying that rate hikes are off the agenda, as inflation remains subdued and there may be need for some additional QE) is negative for the Euro. Then we have had some downbeat eco data. Then we have the more recent Russian/Ukraine debate with the passenger jet taken down. If the EU sanctions Russia, pressure will be on Europe as well. So underlying conditions are euro-negative. And this is reflected in the clear downwards trending motion. 2) Does this mean we can enter anywhere? Nope...timing is important because it allows you to stack some odds in your favour. Tight stops vs. large potential rewards; not entering at the (potental) end of a move; not entering when participation is light. This week opened with some slight upwards momentum. The areas I spoke about here were 1.3560/70 and 1.3590 for potential offers to cap. Price diddn't even get there. It rose just above thursday/friday highs and then fell back down. There was rationale for an entry yesterday after seeing the highs get eaten up again. If you diddn't want to take that entry and wanted to wait for some more confirmation, this morning gave an easier opportunity after the break/hold of the overnight lows: As you can see Username, I try to get onboard before price starts to do business with these big levels (like last week's low) giving myself potential leeway in case the level reacts strongly and pushed price back up the ladder. I try to sell rallies in a downtrend and buy dips in an uptrend, around key levels where it makes sense to ask the market "what are you thinking?".
Hey I am looking to sell USd post CPI, no matter what the result is I hope we get a range extreme especially in gbpusd or eurusd for longs there and nzdusd longs also what do you think about that? and also about possible nzd longs into rbnz post US CPI but if we get to levels from last friday and fail to break below.
Hey Svejed1, first of all thank you for posting your question...i think there are many silent lurkers watching the thread but few actually jump into the ring So my first question is this: why would you want to sell USD in the first place? In my experience, one piece of data (with the exception of central bank meetings or NFP) cannot change the direction of the flow. It can throw a wrench in proceedings, but usually it's temporary. So given that the DXY is showing strength, why would you want to sell it? Sure, we're approaching a level of resistance/swing high in the 80.90/81.00 area but the flow, for the moment, is upwards. And the CPI print came out in line with expectations... the Euro initially rallied on the data but we've since turned lower, breaking to fresh 2014 lows. Heavy stops below the 1.3470/75 area have been triggered and we've fallen to 1.3460 thus far. This is the point of the sentiment/trend filter: it's much easier to take out the stops of those players that are fighting the sentiment/trend. So the market did exactly that. If you want to sell USD, then you need to look elsewhere and find something that's acting strong against the USD (if you can find it)...then you need to wait for a decisive sentiment switch to favour you. Until that happens, make life easy for yourself and insert yourself into the prevailing trends Regarding NzdUsd the situation is slightly different. Why? Because the Euro is not in this picture. So the downwards sentiment is not as strong and as noted a couple of days ago, the recent data was sort of disappointing but we do have a rate hike expected (which is positive). So what 's happened? The bird has flown down to last week's lows (our initial target on the short idea from earlier in the thread) and has found bids. Is that enough to buy NzdUsd? For some, maybe. Not for me though. To me, at the moment, it's just a loss of downwards momentum in a move down. To start buying this thing, I'd like to see the current week's high pressured/taken and then look for some kind of trigger. In between last week's lows and this week's highs is only chop for me.
I did a quick scalp in nzdusd for 25pts and USD index , but things seem very USD bullish at the moment although I believe its based on a wrong premise, tomorrow with UK data will be quite interesting and the EUR reaction.
And if you've developed a method that allows you to work off these edges and you're happy scalping away, then by all means keep on doing so! There are many ways to skin this cat and it doesn't matter one bit that I don't support scalping: if it works for you, then keep on doing it! And if you're working off consistently reactive levels like prior week's low prior day's low big round numbers evident flip levels then at least you're working off something robust and not scalping in the middle of nowhere!