Global PMIs & CPI, Interest Rate Decisions, Using a Lot Size Calculator,+150 Pip USDJPY Setup

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Here’s what we have covered today:

☕Global PMIs and CPI, FOMC, ECB and BOJ Rate Decisions

☕Using a Lot Size Calculator

☕+150 Pips USDJPY Setup

🗞️Movers & Shakers🗞️

Global PMIs: The trading week will kick off with significant interest in the release of the manufacturing and services Purchasing Managers' Index (PMI) scores for July from major economies. Australia and Japan have already reported their mixed PMI results. Traders will closely monitor the upcoming PMIs, which are scheduled as follows:

• France (July 17, 7:15 am GMT): The High Council of Public Finance (HCOB) manufacturing PMI is projected to slip from 46.0 to 45.5, while services PMI might improve from 48.0 to 48.2.
• Germany (July 17, 7:30 am GMT): The High Council of Public Finance (HCOB) manufacturing PMI is expected to decrease from 40.6 to 40.0, and services PMI could decline from 54.1 to 52.9.
• Eurozone (July 17, 8:00 am GMT): The High Council of Public Finance (HCOB) manufacturing PMI could improve slightly from 43.4 to 43.5, but services PMI may dip from 52.0 to 51.5.
• U.K. (July 17, 8:30 am GMT): The manufacturing PMI, provided by S&P Global in collaboration with the Chartered Institute of Purchasing & Supply (CIPS), is expected to slip from 46.5 to 46.0, and services PMI might decline from 53.7 to 53.0.
• U.S. (July 17, 1:45 pm GMT): The manufacturing PMI, also provided by S&P Global/CIPS, is forecasted to slip from 46.3 to 46.0, and services PMI could decline from 54.4 to 54.0.

A notable deterioration in these reports' manufacturing and/or services sectors may raise concerns about global growth, leading to a bearish tone in risk sentiment. Consequently, currencies associated with riskier assets like the Australian Dollar (AUD), New Zealand Dollar (NZD) and the British Pound (GBP) could weaken, while safe-haven currencies like the Japanese Yen (JPY) and the Swiss Franc (CHF) might strengthen.

Global Inflation: Traders will be closely monitoring preliminary Consumer Price Index (CPI) reports from major economies, as they could significantly impact inflation sentiment. Here are the key dates and data to watch for:

• Australia (July 26, 1:30 am GMT): Price increases are expected to slow from 1.4% to 1.1% between Q1 and Q2, with the annual rate dipping from 7.0% to 6.3%. A lower-than-expected CPI reading could cast doubts on the pace of interest rate hikes, potentially weighing on the Australian Dollar (AUD).
• Japan (July 25, 5:00 am GMT) and (July 27, 11:30 pm GMT): The Bank of Japan's (BOJ) core CPI is projected to dip from 3.1% year-on-year to 3.0% year-on-year, and Tokyo's core CPI might slow down from 3.1% year-on-year to 2.9% year-on-year. Decelerating inflation in Japan could keep the Bank of Japan's (BOJ) policy stance accommodative, impacting the Japanese Yen (JPY).
• Eurozone (July 28, 6:45 am GMT): Germany's monthly CPI may remain at 0.3%, while France could see a slowdown from 0.2% to 0.0% in July. Mixed inflation reports could result in uncertainty for the Euro (EUR).

FOMC Statement: On July 26 at 6:00 pm GMT, the Federal Reserve is widely expected to raise its interest rates by 25 basis points to the range of 5.25% to 5.50%. All eyes will be on the central bank's forward guidance to assess their flexibility in sticking to another rate hike amid lower inflation and a tight labour market. Any surprises in the language or signals about future rate hikes could cause volatility in the U.S. Dollar (USD) and impact market sentiment. A hawkish stance might boost the USD, while a dovish tone could weaken it.

ECB's Policy Decision: Like the Fed, the European Central Bank (ECB) is also expected to raise its interest rates by 25 basis points, this time to 4.25%, on July 27, 12:15 pm GMT. Traders will scrutinize the ECB's forward guidance to understand the central bank's plans for the rest of the year. Any dovish signals could weaken the Euro (EUR), while hawkish signals could provide support.

U.S. Advance GDP: On July 27 at 12:30 pm GMT, the first reading of Uncle Sam's Q2 2023 GDP will be released. A weaker-than-expected GDP reading could inspire risk aversion and flight to (non-USD) safe-haven assets, potentially boosting safe-haven currencies like the Japanese Yen (JPY) and the Swiss Franc (CHF).

BOJ's Policy Decision: The Bank of Japan (BOJ) is not expected to make monetary policy changes. However, traders will closely watch the BOJ's guidance for any hints about potential adjustments to the Yield Curve Control (YCC) biases. Changes in the BOJ's stance could influence the Japanese Yen's (JPY) direction. A more dovish outlook may weaken the JPY, while a hawkish stance could strengthen it.

Economic Calendar

Utilizing a Lot Size Calculator

Today, we'll explore a powerful tool that can revolutionize your risk management strategy: the Lot Size Calculator. Over the years, I have always utilised this tool to ensure bulletproof risk management. I cannot stress enough the critical importance of position sizing. So, grab your cup of joe, and let's delve into how a lot size calculator can help you manage your trades accurately and confidently.

1. Understanding the Lot Size Calculator: The lot size calculator is a valuable tool designed to assist traders in determining the appropriate position size for each trade based on their risk tolerance and account balance. By inputting specific parameters like account size, risk percentage, and stop-loss level, the calculator provides the ideal lot size for your trade, ensuring that you're trading with an optimal risk-to-reward ratio.
2. The Role of Risk Management: Effective risk management is the cornerstone of successful trading. Determining the appropriate lot size based on your risk tolerance and trading capital allows you to control the amount of money you put at stake in each trade. This ensures that no single trade significantly impacts your overall trading account.
3. Benefits of a Lot Size Calculator: A lot size calculator is a powerful tool that simplifies calculating position sizes. By inputting your account balance, risk percentage per trade, and stop-loss level, the calculator instantly provides you with the precise lot size to maintain your desired risk-reward ratio.
4. Avoiding Guesswork and Emotions: Using a lot size calculator removes guesswork and emotional biases from the equation. It eliminates the need to make impulsive decisions based on gut feelings, helping you remain disciplined in your risk management approach. When you trade with precision, you can focus on executing your strategy with confidence and clarity.
5. Scaling Your Trades Effectively: As your trading capital grows or when faced with various market conditions, you may need to adjust your lot size accordingly. A lot size calculator simplifies this process, enabling you to scale your trades effectively while maintaining consistent risk management practices.

Action Steps:

1️⃣ Find a reputable lot size calculator tool or use one provided by your trading platform.

2️⃣ Input your account balance, preferred risk percentage per trade, and desired stop-loss in pips.

3️⃣ Utilize the calculator's output to determine the appropriate lot size for each trade.

4️⃣ Regularly reassess your trading capital and risk tolerance to adjust your lot size.

5️⃣ Stick to your calculated lot size diligently to optimize risk and achieve consistent results.

A recommended lot-size calculator to use is HERE.

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📈 LATTE LINEUP 📈

-USDJPY- (from last week +150 pips)

During the previous week, we shared this promising setup with the community, although the initial plan did not unfold as expected. Nonetheless, staying agile and alert, we seized a new entry opportunity when the market eventually broke out of the range. However, during the retest phase, we encountered a slight hiccup as the price failed to retrace to at least 50% of the Fibonacci on the 1-hour chart (1st green arrow).

In the ever-evolving landscape of trading, adaptability is paramount, and that's precisely what we did. The price action presented a new opportunity, forming a higher high and retracing to retest the previous high and resistance as support. This development, complemented by bullish candles on the retest, made for a compelling entry. (2nd green arrow)

We implemented stop-loss below the previous low to safeguard our position. Meanwhile, our profit targets were set at the previous daily high from the preceding week, aiming for a favourable risk-to-reward ratio.

As we start the new week, our main priority is to carefully monitor this setup's progress. We hold a bullish bias on the higher time frame, seeking confirmation through price forming new higher highs and higher lows. Staying aligned with our overarching strategy, we patiently monitor the unfolding price action.

The evolving game plan for this setup was shared in the Nexus Hub, where we prioritize transparency and provide in-depth explanations for trade adjustments, ensuring our community stays well-informed. Let's watch this position play out as the week unfolds.

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-GBPCAD-

HTF(Daily): HTF (Daily): GBPCAD presents a compelling opportunity on the higher time frame (HTF). The price has recently formed a clear higher high, followed by a retracement to test the previous resistance, now anticipated to act as a crucial support level. We need to watch for a bullish rejection candle or engulfing candle from this significant zone to signify the resurgence of buyer interest.

As price action traders, we know that HTF analysis serves as the cornerstone of our decision-making process. Once we have the confirmation of the bullish candle, we will shift our focus to the lower time frame (LTF) for further confirmation to initiate a well-timed entry.

LTF(1-HR): As we delve into the 1-hour time frame on GBPCAD, our eyes are set on the development of a potentially bullish setup. The first step is to patiently wait for a clear shift in market structure, confirming the buying pressure from the higher time frame (HTF). This shift will materialize when we witness the formation of a new higher high and higher low on the 1-hour chart.

Once the market structure aligns with our expectations, we anticipate the HTF buying pressure to gain validation, providing the foundation for a bullish move. Our focus remains on the retest of the broken level of resistance, now acting as support on the 1-hour time frame. We seek confirmation from candlestick formations, such as bullish rejections or engulfing patterns, to strengthen our entry position.

We will be cautious and protect our positions by setting a stop-loss order below the previous low. With the HTF buying pressure on our side, our profit targets will aim at reaching the previous daily high.

Since the setup needs to develop, stay up to date with all our commentary in the Nexus Hub.