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Donald Vs. Yellen – Round 1

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It’s the first FOMC meeting in 2017 and Investors will wait to see the Fed’s response to the first week of Trump’s presidency.
Although no one still knows what Trump’s plan is for the economy, we do know that he targeted the Dollar that has been suffering losses since his first speech three weeks ago.
In fact, the only break that the Dollar got recently was when Yellen spoke on January 18th and helped the Dollar Index to rally from 100$ to 102$.
Since no one expects a rate hike or a rate cut today, the focus will be on the future projections.
If the Fed will repeat its hawkish tone, that will probably boost the Dollar again.
If they will sound less confidence about the economy, that will probably be the trigger for the 100$ breakdown in $DXY

Dollar Bulls are fighting over the trend line

$DXY broke below 100$ yesterday.

The weak consumer confidence numbers helped the bearish pressure that started when DXY failed to close above the Fast MA line, to drive the Index below the psychological support zone:

Dollar Index analysis



Now, the only line that separates between DXY and the 200 days MA line (also Trend Line 2) is Trend Line 1.

We are seeing the Dollar Index climbing back towards 100$ this morning. This price zone will be put to the test again today, currently as resistance.

The three scenarios I mentioned in this week’s newsletter are still relevant:

  1. Short term bullish scenario – DXY rallies towards 102$ to create the right shoulder of a Head and Shoulders pattern
  2. Bullish scenario – DXY rallies above 102$ to complete a bearish Crab near 105-106$ (102$ should be set as first target zone in such scenario)
  3. Bearish scenario – Breakdown of the trend line and continuation towards the 200 days MA line

Notice that small bullish Bat that I added to today’s chart. X point wasn’t violated yet so the Bat pattern is still valid.

A close above 100.5$ can be used as an entry trigger for those who want to trade the bullish scenarios.

A close below yesterday low will be the trigger for the bearish continuation move.

SPX found sellers at the top of the channel

In this week’s newsletter I mentioned that $SPX has reached an important resistance zone – Top of a weekly trading channel:

SPY analysis

So far we’ve seen bearish pressure on stocks this week.

$SPX closed below the Fast MA line yesterday but buyers did push it higher towards the close.

If you were surprised by the bearish price action than you probably:

  1. Haven’t read this week’s Weekly Markets Analysis
  2. Didn’t pay attention to the VIX

VIX analysis

No matter how bullish you may be, whenever the VIX is at such historic lows you should be prepared for a spike in volatility.

This isn’t a bearish market yet. In fact, the bullish sentiment is still very strong.

The bearish reaction to the top of the channel confirms that 2300 is indeed a level in which we have Sellers at… But it doesn’t mean that $SPX can’t test it again.

To confirm that $SPX is heading south towards the bottom of the channel and the 200 days MA line, SPX must close below the Fast and 50 MA lines.

This week is far from over and even if the Fed will boost stocks again today, we still have NFP on Friday so remember that what matters is where the price will be by the end of Friday’s session.

Bullish scenario – A close above the Fast MA line can signal that $SPX will re-test 2300.

Bearish scenario – A close below the 50 MA line will confirm the bearish signal we got so far from $SPX and will send S&P 500 to its 200 days MA line

USDCAD holds 1.3 as support

The Dollar’s weakness and Canada’s GDP numbers sent USDCAD to test the 1.3 support zone yesterday.

usdcad analysis

The short term bounce from 1.3 was expected as it was not only a psychological support zone, it was also the bottom of a channel.

Elite Zone members got a special alert on $USDCAD when it reached 1.3 yesterday:

elite zone trading

The nearest resistance zone is 1.31.

It includes 2 MA lines and a daily structure.

Three economics events will impact USDCAD’s price action today:

  1. ADP numbers
  2. Oil inventories
  3. FOMC statement and Rate Decision
usdcad analysis

USDCAD weekly chart

The weekly chart above shows that if USDCAD will remain below 1.31 and break below the channel’s bottom, it can fall all the way towards the 1.25 zone.

At the current situation the trading scenarios that are possible are:

  1. Bullish (aggressive entry) – Buy USDCAD as long as it stays above 1.3
  2. Bullish (conservative entry) – Buy USDCAD if it will close above 1.31
  3. Bearish – Short USDCAD as long as it stays below 1.31

 

That’s it for today’s update.

Of course if you want more trading ideas and to learn how I do what I do, you are more than welcome to join us… Join the Elite Zone

 


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