Fed Speak Today – Yellen To Make It Or Break It

Well you can never boil this down to a single days trading ( especially these days ) but as per our outline last week, this “relief rally” has played out to the letter.

As seen via Japan’s Nikkei Index ( $Nikk – the symbol I follow in case you want to add it to your watch lists etc.. ) we’ve seen our “correctional move higher” with this mornings over night action now down -175 points forming a potential “swing high” – suggesting we are ready for reversal.

The chart from last Sundays report:



All corresponding and related JPY pairs ( AUD/JPY, NZD/JPY, CAD/JPY, GBP/JPY as well EUR/JPY, CHF/JPY and USD/JPY ) have now put in bearish reversal type candles with their daily RSI’s all rolling – now pointing lower.

The movement of The Nikkei (lower) and JPY (higher) correlates near 100% these days so there is no rocket science here. It’s very easy to see and follow along. I’ve also suggested the correlation with Gold – being that both Gold and JPY should move higher when risk comes off.

European Indices are also trading down / in the red here as of this morning, leaving us with of course…U.S stocks, Bonds and the U.S Dollar firmly held in the hands of Janet Yellen and the statements  / information expected today at the Jackson Hole Meeting.

If not for this risk event ( pure gambling if you think you’ve already got the markets reaction figured out ) the “long JPY trade’s we’ve been setting up for” are now in fantastic shape across the board.

Please get these on your screens and note these levels.

The Australian Dollar has obviously ( and expectedly ) rallied along side risk the entire week – now fading and looking weak.

Will markets take Yellens comments as full blown dovish ( suggesting all is well in “Fed land” ) and just continue to climb? Or will there be suggestion of “possible tightening” and a more hawkish view ( possible rate hike coming earlier than expected ) be the case?

You’ve only got a couple more hours to wait ( which I certainly suggest you do ) and find out.

Everything I track suggests we move lower next week, but one can’t discount the idea of an immediate “upward reaction” to Fed comments here this afternoon as “this is what the people want” right?

Still holding a couple of small “short USD trades” ( underwater at present ) and suggesting everyone just “stay out of the way” until this very large “risk event” passes.

Have Faith In Foreign Exchange

Considering the overall weakness in U.S equities today, and the blistering panic spread ‘cross the financial blogosphere – my currency trades / accounts have barely budged an inch. As cranky pensioners and smart alec newbies race for the exits, screaming,  “pleading for answers” as to why their “all-in” equity trades are in the red, falling like dominos to the wall street fatcats gobbling up their shares…all is calm with Kong.

The EUR even picked up a full 100 pips against the dollar, as U.S equities get taken to the cleaners (and I mean that quite literally), as the last of the weak hands are rinsed of their shares. This may continue ( but I doubt it).

The U.S equities market is the “number one largest measure of risk” I currently track in my pocket full of charts and graphs. At every crossroad, at every turn – no matter how sure you are of a particular trade – you will be tested. It is so painfully obvious, through observation of currency movement – that this is the final stage of “shake out in weak hands” as the big boys are buying shares hand over fist.

How do I know?

  • How about  complete reversals in several currency pairs suggesting “risk on” taking hold.
  • Only modest pullbacks in pairs that have already reversed (I will be adding to these..not selling).
  • The EUR gaining 100 pips against USD, as well JPY and even  moving on CAD!

The currency markets are not at all in step with the sell off in U.S equites, and most certainly paint a clearer picture of the  road ahead. You can trade it, or you can watch from the sidelines – but you can’t win if you don’t buy a ticket.