China's Q2 GDP, CPI, Retail Sales Data, Power of Backtesting, 500 Pip USDJPY Setup.

Greetings, fellow traders! Join us as we dive into the exciting world of financial markets.

Here’s what we have covered today:

☕China's Q2 GDP, Inflation Reports, Retail Sales Data

☕The Power of Backtesting in Sharpening Your Strategy

☕+500 Pip Setup On USDJPY

🗞️Movers & Shakers🗞️

China's Data Dump:  China's highly anticipated Q2 GDP will be released on Monday (July 17, 2:00 am GMT), it's expected to surge from 4.5% to a remarkable 7.1% growth over the second quarter of 2023. The country has recently shown a trend of surpassing expectations, possibly leading to another upside surprise. However, other economic indicators might point to a slowdown. Industrial production figures could dip from 3.5% year-over-year to just a 2.5% gain in July, and the retail sales report might indicate a sharp drop in consumer spending from 12.7% year-over-year to just 3.4% last month.

The positive GDP numbers may lead to increased demand for the Chinese Yuan (CNY) as investors see the country's economic recovery as a positive sign. However, the slowdown in industrial production and retail sales might temper the overall bullish sentiment, causing some volatility in the currency markets.

Inflation Reports:  On Tuesday (July 18, 12:30 pm GMT), Canada's inflation reports will be released, potentially setting the tone for the Bank of Canada's (BOC) policy bias. Analysts are expecting a slight slowdown in inflationary pressures, with the headline reading forecasted to dip from 0.4% to 0.3% month-over-month and the trimmed-mean CPI possibly falling from 3.8% to 3.6% year-over-year.

If the inflation slowdown is less severe than expected, it may strengthen the Canadian Dollar (CAD) as it suggests the Bank of Canada (BOC) may continue its rate-hiking cycle to combat rising inflation. Conversely, a larger-than-expected slowdown in inflation could weaken the CAD as markets may perceive a more cautious approach from the BOC.

The same day, New Zealand will print its Q2 CPI (July 18, 10:45 pm GMT), with much slower price pressures anticipated. The reading might fall from 1.2% to 0.9% quarter-over-quarter, suggesting the Reserve Bank of New Zealand (RBNZ) might hold its current rates amid global growth and inflationary slowdown. This could lead to a decline in the New Zealand Dollar (NZD) as it loses its yield advantage compared to other currencies.

On July 19 (6:00 am GMT), the United Kingdom will release its CPI figures, with expectations of a dip in headline inflation from 8.7% to 8.2% year-over-year. A stronger-than-anticipated inflation reading might raise expectations of more aggressive monetary tightening from the Bank of England (BOE), potentially strengthening the British Pound (GBP) as investors expect higher interest rates in the future.

Retail Sales Data: US, UK, and Canada Showcase Consumer Spending. On July 18 (12:30 pm GMT), the U.S. will unveil its consumer spending report for June, with estimates projecting a 0.5% month-over-month gain in headline retail sales, up from the earlier 0.3% uptick. The core figure is also expected to accelerate from 0.1% to 0.4% monthly growth. Positive retail sales figures could bolster the U.S. Dollar (USD) as it reflects strong consumer spending and economic growth. On the other hand, disappointing retail sales data might lead to a weakening of the USD, signalling potential economic slowdown concerns.

Wrapping up the retail sales releases on July 21, the UK could show a slight dip in consumer spending from 0.3% monthly growth in May to a meager 0.2% uptick in July. A decline in consumer spending could weaken the British Pound (GBP) as it suggests a slowdown in economic activity and may affect the BOE's tightening plans.

Meanwhile, on the same day Canada might experience a more significant slowdown from 1.1% to 0.5% for the headline figure. Weaker retail sales could potentially dampen the Canadian Dollar (CAD) as it signals reduced consumer spending and could influence the BOC's monetary policy stance.

Economic Calendar

The Power of Backtesting in Sharpening Your Strategy

Today, we're diving into a critical aspect of trading that can significantly enhance your trading skills - backtesting. As an experienced trader with years of profitable experience, I understand the profound impact of historical testing. So, grab your cup of joe, and let's explore how backtesting can build your confidence in executing your strategy and sharpen your eyes for potential trading opportunities.

1. Understanding Backtesting: Backtesting involves analyzing historical market data to evaluate how a trading strategy would have performed in the past. Using historical price data and applying your trading rules, you can see how your strategy would have fared under different market conditions. This process provides valuable insights into the strategy's strengths and weaknesses, helping you refine and optimize it for future trades.
2. Building Confidence in Your Strategy: Trading with confidence is paramount for success. Backtesting allows you to witness the performance of your strategy over time, giving you the assurance that it has the potential to work in different market scenarios. Knowing that your strategy has shown positive results in the past can boost your confidence when executing trades in real time.
3. Sharpening Your Trading Vision: Backtesting provides a unique opportunity to analyze price action and identify recurring patterns or market behaviour that your strategy capitalizes on. By studying past market movements, you can sharpen your eyes for potential trading opportunities. This improved market awareness enhances your ability to spot setups and make well-informed decisions.

4. Mitigating Emotional Influences: By backtesting your strategy thoroughly, you develop a disciplined approach to trading. This discipline can help you mitigate emotional influences that may cloud your judgment during live trading. The confidence gained from historical testing empowers you to stick to your trading plan and stay patient, even in challenging market environments.

Action Steps:

1️⃣ Choose a trading strategy or approach you want to backtest.

2️⃣ Gather historical market data for the assets you wish to trade.

3️⃣ Utilize trading software or platforms that allow for accurate backtesting.

4️⃣ Thoroughly analyze the results, identify strengths, and address weaknesses in your strategy.

5️⃣ Embrace the confidence gained from backtesting as you execute trades with precision and maintain a sharp focus on potential opportunities.

By incorporating this essential practice into your trading routine, you build the confidence needed to execute your strategy and sharpen your eyes for market opportunities. Even after trading the same strategy week in and week out for many years, I still spend time backtesting my strategy on past setups or setups that I may have missed.

SIP, LAUGH, TRADE 😁

📈LATTE LINEUP📈

-USDJPY-

HTF(Daily): Observing the daily chart, it becomes evident that USDJPY is currently in an uptrend, having formed a crystal-clear new higher high. Despite the recent retracement, the uptrend remains intact as we await the formation of a new lower low to signal a potential trend reversal.

The price has recently dropped to revisit the previous low and has coincided with the 100% Fibonacci retracement level, creating a significant area of convergence. This suggests that this level may have potential buying opportunities and support. Amid this price action, we can't help but notice the emergence of a bullish engulfing candle. This bullish reversal pattern signals the resurgence of buying interest, potentially leading to further upward momentum.

While the higher time frame provides valuable insights, our focus now turns to the shorter time frame for a closer examination.

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LTF(1-HR): On the 1-hour chart, the inverse head and shoulders pattern begins to take shape. This pattern is a classic bullish reversal signal, indicating a potential shift in market sentiment. We'll closely monitor the market structure, waiting for the buyers to step in and validate this formation.

Our entry trigger hinges on the shift in market structure. To go long, we want to witness a clear formation of a new higher high and higher low, signifying the emergence of buying pressure. This confirmation will be further supported by rejection or engulfing candles at the 1-hour resistance, which we anticipate to act as newfound support.

We'll set our stop loss below the previous low to safeguard our position from potential adverse price movements. Our target aligns with the previous HTF high.

As the price action continues to unfold, the development of this setup will be closely monitored in the Nexus Hub. Updates and timely adjustments to our strategy will ensure we navigate the market with precision and agility.