Get started

Usmidterm

US Midterms and trade war to drive AUDUSD to our buy limitTrade set up: We have seen a ‘shooting star’ candle printed on Friday’s daily chart, depicting a potential short-term bearish move in the pair. However, buying the AUDUSD after a retracement into 0.7165 is still our preferred strategy. Given the importance of a three standard deviation move on Friday, our bullish trade is still in play ahead of US Midterm elections. Why we like it: We can look at a simple regression model drawn from the January high, and if we take the view that this trend is set to continue, then it heightens the risk of a move into 0.7165, although we could also see 0.7140 (one-standard deviation from the line of best fit) come into play. We had been anticipating USD weakness ahead of the US Midterm elections driven primarily by profit-taking and covering long positions. However, this view may reverse somewhat with Asian equity markets getting sold off fairly aggressively today, thanks largely to comments from Larry Kudlow that a trade deal is seemingly still a big hurdle and this will only accelerate the move into the 0.7165/40 area. There is plenty of event risk this week to contend with, so it’s worth focusing on AUDUSD one-week volatility and applying this to get the weekly ATM (At The Money) straddle. Here, we see the market priced for an 85-pip move in either direction, so our view is to place stops after entry below Fridays low of 0.7072. Disclaimer. Trading leveraged products carries a high level of risk and may result in you losing substantially more than your initial investment. Pepperstone Group Limited is licensed and regulated by the Australian Securities and Investments Commission (AFSL 414530). Pepperstone Limited is authorised and regulated by the United Kingdom Financial Conduct Authority (FRN684312). This information not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation
Long
by Pepperstone
‘US Dollar index’, a buy ahead of Non-Farm Payroll numbersTrade Set up – Given the underlying trend, and at this very juncture, we feel it is hard to be short the USD. That said, with traders likely to defend the YTD high at 96.98, we feel waiting for a daily close through this resistance level makes sense as it would be sending a fairly powerful signal that the bullish trend is set to continue. On this development we would target 98.00, or the 61.80% retracement of the last major high, with stops below 96.30 looking to tighten stops as price moves higher. Why we like this trade – Price found strong support at the 200-exponential moving average, and used this as a platform to make a renewed assault above 96.00, and clearly the bulls are in control. We can take a look at the oscillators and see no immediate signs of a loss of momentum here, but one would expect momentum to wane into 96.98. Fundamentally, we see downside risks to the USD if we take our timeframe out a week into next week’s US midterms. However, with a $24B liquidity drain from the Fed’s SoMA portfolio tomorrow (which has historically been a USD positive), and the prospect of a 3%-handle in the wage data, as a feature in the US payrolls report we see the USD supported in the short-term. A close through the YTD high can only be seen as a bullish sign and we would trade this closing break accordingly. Disclaimer Trading leveraged products carries a high level of risk and may result in you losing substantially more than your initial investment. Pepperstone Group Limited is licensed and regulated by the Australian Securities and Investments Commission (AFSL 414530). Pepperstone Limited is authorised and regulated by the United Kingdom Financial Conduct Authority (FRN 684312). This information not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation
TVC:DXYLong
by Pepperstone