Dow Jones Boom Incoming
GM. Welcome to Currencies & Coffee, where our trading insights shine so bright even the sunflowers can't help but take notice.
Here’s what we have covered today:
☕Global PMIs and Jackson Hole - A Volatility Duo to Watch!
☕Quiet Times, Sharper Minds: Thriving Amidst Low Volatility
☕Selling AUDJPY & AUDUSD, Buying US30 - Let's Trade!
🗞️Movers & Shakers🗞️
Ready for a week of market action? Let's rewind last week's key moments and dive into the upcoming events.
The week that was:
➡️ China's Economic Ripples: China's economic indicators flashed caution with falling loan growth, missed retail sales, and industrial production data. The People's Bank of China (PBOC) made its second rate cut in three months, hinting at possible stimulus to support growth.
➡️ FOMC Hawkish Stance: The July FOMC minutes surprised with a hawkish tilt, suggesting potential for more rate hikes to curb inflation. This led to surging bond yields and a stronger US dollar.
➡️ Aussie Struggles: Rising unemployment and negative job growth weighed on the Australian dollar, fueling speculations that the RBA might have reached its peak rate.
➡️ BOE and BOC Rate Hike Pressure: Both the Bank of England (BOE) and the Bank of Canada (BOC) faced pressure for rate hikes as hotter-than-expected inflation data emerged.
The week ahead:
📅 Global PMIs' Clues: Keep an eye on global manufacturing and services PMI reports to gauge major economies' growth trends and potential impact on monetary policies. Watch for Australia's (Aug 22, 11:00 pm GMT) and Japan's (Aug 23, 12:30 am GMT) manufacturing PMIs and Eurozone's (Aug 23, 8:00 am GMT) PMIs.
📅 New Zealand's Consumer Pulse: New Zealand's retail sales data on August 22 at 10:45 pm GMT will reveal consumer activity, providing insights into potential inflation trends and the RBNZ's policy direction.
📅 Jackson Hole Symposium: Key central bankers' speeches, including Fed Governor Powell's (Aug 25, 2:05 pm GMT) and ECB President Lagarde's (Aug 25, 7:00 pm GMT), can hint at policy direction. Expect market reactions and potential insights into rate hike possibilities.
Quiet Times, Sharper Minds: Thriving Amidst Low Volatility
There come times when the market's volatility takes a breather, leaving us with fewer trade opportunities. In fact, just a few weeks ago, we discussed how August tends to be a month with subdued market activity (take a read if you missed it 👉🏽HERE ). This is not a lull in your journey but a chance to enhance your trading prowess and inner game. I've always emphasized that trading isn't just about the charts; it's about building a robust skillset and a resilient mindset. So, grab your cup of joe, and let's delve into how to make the most of these quiet moments and come out stronger than ever.
Refine Your Skillset: Low volatility periods are ideal for refining your trading skills. Take this time to revisit your strategies, analyze past trades, and identify patterns. Look for areas of improvement and consider tweaking your approach based on your observations. The goal is to emerge from this period with an even sharper edge.
Backtest and Validate: The absence of live trades doesn't mean you can't be productive. Use this downtime to backtest new strategies or tweaks to your existing ones. This is your chance to validate your hypotheses in a controlled environment. Backtesting builds confidence and prepares you for when the market springs back to life.
Review Past Performance: This is your opportunity to thoroughly review your trading performance over the past months. Analyze your trades, identify your strengths, and pinpoint areas that need improvement. By understanding your tendencies and patterns, you'll be better equipped to make informed decisions when market opportunities return.
Do the Inner Work: Trading success isn't just about reading charts—it's about mastering your mindset. Use this time to engage in self-reflection, journaling, and mental exercises that enhance your emotional resilience. Explore techniques to manage stress, build patience, and cultivate discipline. A strong mindset is your greatest asset in the trading world.
Shut the Charts: Quiet times are the most common times that traders give back most of their profit. They chase other markets, such as indices and cryptocurrency, to rack up losses because they are trading unfamiliar market conditions, undoing their hard work. While chasing the market during this period is tempting, remember that patience is a virtue. Stay informed about market conditions, but resist the urge to force trades. Trust that the market will regain its momentum, and you'll be ready when it does.
Action Steps:
1️⃣ Refine your trading skills and strategies during low volatility.
2️⃣ Utilize downtime to backtest and validate new trading approaches.
3️⃣ Review and analyze your past trading performance for insights.
4️⃣ Dedicate time to inner work, enhancing your mindset and resilience.
5️⃣ Stay informed about market conditions without rushing into trades.
SIP, LAUGH, TRADE 😁
📈LATTE LINEUP📈
-AUDUSD-
HTF (8-HR): When we look at the higher time frame (HTF), we can see a significant change in the price pattern. The recent drop indicates a lower low, which breaks away from the previous range. This shift suggests that a potential downtrend may be starting. Our main focus is on the price retracing to the previous support level, which now acts as resistance. This resistance level is even more important because it aligns with the essential Fibonacci levels, ranging from 50% to 61.8%.
To make our trade decision, we need to see bearish rejection or engulfing candles from the zone showing us the selling pressure is back. This will help us determine our trade bias before shifting to the lower time frame (LTF) to find a suitable entry point.
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LTF (1-HR): To confirm our HTF analysis, we need to see the selling pressure translate into a change in market structure from higher highs and higher lows to lower lows and lower highs. It's a good time to sell when the price breaks a previous support level on the lower time frame (LTF) and retraces to retest it as resistance, confirmed by bearish rejection or engulfing candles. I will set my stop loss above the previous high and target the previous HTF low.
-AUDJPY-
HTF (8-HR): On the HTF, we can see the price made a double top and broke to the downside, forming a new lower low. Presently, there is a retracement to test the earlier support level, which is now acting as resistance. This retracement aligns with the 50% Fibonacci level, creating a significant area of confluence for the price to reverse and start the next leg downwards. Before considering an entry on the LTF, we should wait for a more convincing candle closure, such as a bearish rejection or engulfing candle.
LTF (30-mins): Once we receive the necessary HTF confirmations, we need to watch for the selling pressure to result in a change in the market structure. Keep an eye out for a break and subsequent retest of an LTF support level that's been confirmed by a bearish rejection or engulfing candle. If this happens, consider taking a short position upon the closure of the candle, with a stop loss placed above the previous high and a target set for the HTF low.
-Dow Jones (US30)-
HTF (Daily): The price action on the higher time frame is bullish. The price recently formed a higher high and has now retraced to retest the previous resistance as support. Buying pressure is evident through the recent rejection candles from the zone, which lines up nicely with the 50% Fibonacci level adding greater significance. Let's go to the lower time frame to look at potential entries.
LTF (1-HR): Following our HTF confirmations, we can see a potential double bottom forming on the lower time frame. Before going long, I want to see a break and retest of the LTF resistance confirmed by a bullish rejection or engulfing candle. I will look to place a stop loss below the previous lows and target the previous HTF highs.
That brings us to the end of this Tuesday's edition of C&C. Remember, the markets are lacking volatility, so remain cautious and patient.
The C&C team.