Cautious week ahead as FOMC meeting could mean a rate hike

In my last post, I included several links suggesting markets have 100% priced in a rate hike for this Wednesday. I did raise the concern of a lower participation rate along with a lower unemployment rate so I remain not as optimistic. 

Last week’s COT report indicated a record non-commercial short position change meaning investors have continued to stockpile the U.S. Dollar in anticipation of this rate hike by at least 25 bps.

screenshot-at-dec-11-21-17-33

The non-commercial position on the Yen two weeks ago was a record low at 269 short positions. Last week we saw a huge increase by over 33,000 contract another indication investors are trying to ride the rate hike Dollar appreciation.

screenshot-at-dec-11-22-23-12screenshot-at-dec-11-22-27-12

The daily and monthly views of the Dollar Index shows a sharp reversal on December 8, which is the Thursday. According to the economic calendar, no significant releases came out other than the U.S. unemployment claims met its anticipated 258K. This turnaround further indicates weak economic release driven impact on the U.S. Dollar buy-up.

For the week ahead, trade setups remain nearly all technical.

screenshot-at-dec-11-22-47-12
EURJPY 1-Hour

I shorted the initial breakout on this pair and it has since recovered upon Sunday’s open 5 pm New York time. I highly doubt this recovery marks any fresh long entries, but rather covering of initial short positions. Any downwards pressure near the 122.036~ price level can be safe to say marks fresh short positions. If this pair successfully breaks out above this price level, my sentiment would be an instant 180 flip to the bullish side with Friday’s shorts covered and new long entries coming in.

Aside from the EURJPY pair, the other pair I am actively watching a the moment is NZDUSD.

screenshot-at-dec-11-23-09-58
NZDUSD 1-Hour

Currently, I have several levels plotted for monitoring with no sentiment or bias. All these zones are relatively weak given that they were essentially fundamentally driven with less than probable chance of holding up. There are no trading plans for this pair as of yet.

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