Hi guys,
I feel sometimes that I see the market always from the other side as many. But if I even see it a bit other than rookie then it tells me to share my thoughts because I might be dead wrong. Here comes our COT watchlist and also a Fundamental thought.
[B]COT watchlist:[/B]
The FOMC results gave us another good entry for commodities. I mean here [B]silver[/B] which made a huge fall since yesterday. I will definitely enter the market today for a long term setup. I do not know if it goes more down but it is in the middle of the range of our entry wish (16.50 to 17.00). My position will not be big but I find it is a cheap level to buy and I can sit it through if it goes more down.
[B]Copper[/B] also turned down yesterday, but we have to wait more for good entry levels.
[B]Gold[/B] is falling like a stone. Here is more tought to say if an entry is in place. I will not enter it today.
[B]Fundamentals:[/B]
I do not like to trade indexes anymore this week. Just to start with. Besides that I see the situation other than you guys do. I was bullish the whole time with USD, made nice pips and every hour I am going to more to the direction of closing my trades before the GDP reading in 2.5 hours. Everyone is optimistic everyone expects something good so it is dangerous. A good reading might be already priced in so I think it can more surprise to the downside. If it is a strong reading and it goes up, then it will be the game deciding reaction for me. But do not get me wrong. I do not decide on the reading. What I look for is what the reaction of traders will be after an initial USD gain after a strong report. If USD holds on to the gains then everything is ok, if it is faded, that will ring all red alarm bells.
I am making my game plan ready for the afternoon. Why I am so worried when I was bullish the whole time? Well, I checked now all net positions for currencies. NZD is almost on a complete extreme level, just like MXN and the USD Index is on a complete extreme level. More than that: what is this hype on FOMC statement? All they did is finishing taper. But that was their very last bullet I think. The rate hike would be of course something strong but we know that they are dovish lately. So this tapering news gave the USD a boost but I do not see any other reason why USD should rally further on. It was the last shot IMO. The rally was there because of good reports. Well we saw USD weakness lately which could be a correction of course but if we look at the reports lately, they are not as good anymore. This does not mean of course that we might not see a good GDP today, but it is more of a short term act I would say.
Looking away from the currencies, we should observe USD from the commodity markets. Silver, gold, copper, oil etc. are at very cheap levels. It will be tough to push them a lot more down and as we know the COT extreme is coming there too. This is another main reason (because of the inverse relationship with USD) why I think the USD rally might be over. Of course I still think that the US economy is a lot stronger than the EU economy. That is not a question. It might continue to win against the EUR or JPY but only very slowly. Ok guys, if you reached this point of the post, you get a very small exercise. [I]Click through the daily charts for the 7 USD pairs and check what happened yesterday and today.[/I] Does it ring a bell? I do not think commodity currencies are beating the USD today because of risk off sentiment or last day of the month. Commodity prices go down but commodity currencies are still rising. Wow what is out there? Well, I just think the USD is shooting with an empty pistol at them. This empty pistol is scary enough for the other 4 currencies at this moment but not again the comdolls anymore.
As always guys, I do not know what happens and if any of this is right. This was my perspective on the market and what we see. Either way the GDP report turns out, if the fading of a good report does occur, it is more me a clear signal of a reversal. My USD longs end their journey in 3 hours.
FE
PS: Mike, I hope your NZD coming back occurs today! Those are the only trades where I do not do too good. I see what rookie wrote, I am still bullish. All central banks are bearish now, so leaving the rates at 3.5% is still better for me than all others having 0%. We will see what happens.
Edit: closed all US trades half an hour ago already. It did not look too good to hold them.