Unfortunately, I missed to catch that nice dip on EURAUD when it begun on Thursday last week. As a strong believer that the common currency is overstretched, I’m again bargaining for better entries and in the process earn positive swap by shoring the Euro this week. Anyway, at the moment, all focus is about the search of the next “next Yellen” despite the fact that she is still in contention.
We all know that Miss Janet Yellen has done more good than harm as the head of the Federal Reserve and even if Trump criticized her during his campaign trails, he has since changed his statements and outrageous claims that he kept rates low to in order to prop the Obama government. The choice now lies on Trump as he is set to interview her on Thursday even though many power brokers maintain that her contract renewal is next to nil.
Leading candidates include the 70 year old John Taylor, a professor who created the so called Taylor rule back in the 1990s. Taylor Rule is used by many policy makers to set interest rate and it is in fact being considered for adoption congress. According to the Taylor Rule, rates are supposed to be upwards of 3% if the Feds want to consistently maintain robust labor market and inflation around 2%. As such, he and former Governor Kevin Warsh are viewed as hawks. Should any of them be elected then the USD should rally and attract more investors looking for yield.
Additionally, Yellen and Rosengren views about the “strong economy” and the “soft inflation” which would not last long was supportive of the USD in light of the weak CPI and Retail Sales data last Friday.
Technically, I want to KISS today’s analysis. First off, as last week candlestick closed, an inverted hammer was formed. That is clear for everyone. Secondly, there is a minor bearish divergence with a stochastic sell signal after price rejected any price appreciation above 1.525. So, that’s it. We sell as follows:
Stop Loss: 1.51-which is above Friday’s highs
Take Profit: 1.46
Have a good trading day.