S&P, USD, JPY Price Action to Face Critical Questions Next Week

Talking Points:

– We go into this weekend with complicated opening risk around a arriving medical vote. The formula of a opinion will expected not be famous until after marketplace tighten today; and when markets re-open on Sunday, we competence have a new motorist to work with.

– This week saw some engaging support breaks in a SP 500, a U.S. Dollar and USD/JPY. Below, we puncture a bit deeper behind any pierce with an eye on what competence be ‘around-the-next-corner’.

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The past month has seen utterly a bit take place in financial markets. As we came in to March, expectations were comparatively low for a travel during a Federal Reserve’s assembly in a center of a month, hovering during around 30-40%. But on a final day of February, usually forward of Donald Trump’s Joint Address to a Union, a array of Fed speakers talked adult a awaiting of a pierce during a Mar assembly and a Dollar began to organisation forward of President Trump’s speech. And when that debate was delivered, SP futures peaked aloft along with a Dollar, really identical to what was seen during a ‘Trump Bump’ when both a Greenback and a SP were shooting-higher in tandem.

But during a initial week of Mar that pierce in a SP did not extend: The dollar remained upheld as contingency for a travel during a Fed’s Mar assembly continued to run-higher. But when it came time for this well-telegraphed rate travel to take place, a Federal Reserve left markets wanting when they didn’t ascent their superintendence for destiny rate moves; a proof being – if a Fed felt that a economy was so clever to support a near-term hike, this would be an well-suited time for a bank to advise of additional destiny hikes given strength in a stream backdrop. The fact that a Fed did not take that event to beam rates aloft showed one of dual things. Either a) a Fed binds small certainty in a awaiting of mercantile impulse indeed entrance to delight from a Trump administration or b) a stream backdrop isn’t as clever as advertised (on a subject of inflation) and a Fed merely wanted to use this new marketplace unrestrained to corner rates-higher by 25 basement points. This is taken from a rather heated sell-off that was seen in a Greenback around that rate decision, which, frankly, hasn’t nonetheless stopped as price movement remains nearby seven-week lows.

Samp;P, USD, JPY Price Action to Face Critical Questions Next Week

Chart prepared by James Stanley

The SP 500

But given that rate hike, another array of questions has come-up; and that’s mostly revolving around a intensity for continued gains in impassioned equity market. The SP gapped-higher after Trump’s Joint Address to a Union; environment a uninformed all-time-high during 2,401. But given then, cost movement has had a opposite feel and we’ve seen a array of lower-lows and lower-highs develop; and this includes a initial dump by some-more than 1% given Donald Trump was inaugurated President; that set another lower-low.

Samp;P, USD, JPY Price Action to Face Critical Questions Next Week

Chart prepared by James Stanley

The severe aspect around a SP during a impulse is one of domestic implications. It would seem that this many new inclusion of bearish cost movement is coming-in around complications of a medical check creation a approach by a House of Representatives. This is a disorderly situation, though apparently a opinion is going to be hold today. We expected won’t have formula of that opinion until after marketplace close; and we’re expected going to be saying this subject heavily debated over a weekend; so this can lift some flattering poignant opening risk here. If a check does pass, we’re expected going to see a detonate of strength return. But if it doesn’t pass, we can see a delay of this near-term bearish cost action.

On a daily draft below, we demeanour during a SP with a aim of putting some range around this new move. We’ve seen usually a 38.2% retracement of a 2017 pierce in a SP 500, and for a past dual days cost movement has been hold in a hollow between a 23.6% retracement and a 38.2% retracement of that 2017 move. These can be used as ‘barrier levels’ to weigh directional position after markets re-open after a weekend. Price movement violation back-above a 23.6% retracement opens a doors to new highs; though if we mangle subsequent this 38.2% retracement, afterwards a 50% and 61.8% retracements turn appealing as subsequent areas to demeanour for support.

Samp;P, USD, JPY Price Action to Face Critical Questions Next Week

Chart prepared by James Stanley

The Yen

Another marketplace with bigger design connotations entrance to light during a impulse appears to be a Japanese Yen. The Yen had remained relatively-weak ever given a night of a Presidential Election; and with a U.S. Dollar was retracing those gains in January, a retracement was utterly a bit lighter in USD/JPY highlighting a additional Yen-weakness that was being seen during a time. While DXY retraced roughly 60% of a post-Election run during a month of January, USD/JPY went for a more-shallow ~38.2% retracement.

And that 38.2% retracement is surrounded by support levels of interest. At 112.40 we have a 61.8% retracement of a 2002-2001 vital move; and during 111.61 we have a 50% retracement of a 1998-2011 vital move. The net of all of these levels produces a support ‘zone’ that had hold a lows in USD/JPY around Feb and many of March; until this week.

So this support mangle puts USD/JPY in a comparatively discreet position. The longer-term trend is still ‘up’ as we’re trade about a ¥110.00 psychological turn that happens to be feeder with a 50% retracement of a ‘Trump Bump’. If we tumble subsequent that section subsequent week, this could open a doorway to bearish strategies in USD/JPY. But until then, this could be an engaging section to demeanour for buyers to step-in after a mangle of a pivotal support section (which expected had utterly a few stops from longer-term bullish positions get triggered). But if we poise a postulated mangle subsequent a ¥110.00 zone, a prospects for bullish delay aren’t so appealing any longer; and this can be an ideal area to examine for stop chain on bullish positions or to use as a ‘trigger’ for bearish strategies on a postulated break-below.

Samp;P, USD, JPY Price Action to Face Critical Questions Next Week

Chart prepared by James Stanley

— Written by James Stanley, Analyst for DailyFX.com

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