ANALYSIS PRIOR TO FOMC MEETING MINUTES
On 9th October (Monday), we held our free weekly Alpha Play Weekly Traders Meetup, during which we shared our analysis and insights on upcoming news events to watch out for the week ahead.
One of the few key events that we focus on last week was the US FOMC Meeting Minutes on Thursday morning; and the US Core Retail Sales and Consumer Price Index (CPI).
The CPI measures the change in the price of goods and services purchased by consumers, excluding food and energy. This data is significant to the US FED because consumer prices account for a majority of overall inflation; and inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate.
Generally, if the Core CPI data is significantly better than the expected numbers, it will indicate an improvement in the economy, which usually cause the strengthening of the US Dollar. On the other hand, if the data released is significantly worse than the expected numbers, it will indicate that the economy is slowing down, which usually translate to the US Dollar to weaken.
Early last week, we saw the Dollar Index’s price moving higher in a corrective nature, and formed an ending diagonal structure with a divergence in the oscillator indicator.
This gave us the conviction in expecting a potential fall in the price on the US Dollar.
*To protect our traders’ interest, not all pairs and details will be discussed in this post.
The video recording below is a snippet of what we shared with the traders in our Weekly Traders Meetup.
US DOLLAR MOVEMENT POST CORE CPI
As our traders know how we leverage on the risk events in the financial market as catalyst to move prices. The FOMC Meeting Minutes, Core Retail Sales and CPI data ‘fuelled’ the fall in the price of the US Dollar.
For traders who took action and traded the Dollar pairs last week, the market presented more than +320 pips of profits.
Below are just some of the setups capitalising on the price drop in the US Dollar.
KEY FOCUS THIS WEEK
There are a few key risk events to take note of this current week. In this post, however we shall focus on the AUDUSD.
We are keeping a close watch on this currency pair as it has the potential to yield a +400 pips profit this week and next.
Price has been falling in a 5-wave structure from the high at 0.8126 to the recent low at 0.7732. According to Elliott Wave Principle, after a completion of a 5-wave structure, we can expect a 3-wave correction.
Last week’s weakness in the US Dollar has given us the first wave up. Going into next week, with few key risk events coming from the Australia side, we might see the completion of the 3-wave correction, WXY.
A decent correction from the close last week might give us a short term opportunity to look for a buy trade targeting 0.7929 to 0.7975 area, before flipping our position to look for a longer term short trade targeting 0.7632 region.