Stay Ahead of the Game in Forex: Reading Market Cues Before Significant Economic Events

It's Nathan Bray here from ACY Securities, and I'm here to discuss the recent shockwave in the US dollar that left everyone astonished, particularly during the CPI release. The drop was unprecedented, and it's crucial for traders to align themselves with the higher tops and bottoms in currency pairs or gold, adhering to the daily trends.

Traders who followed this strategy are likely celebrating now, considering the significant upward movements in the euro-dollar, pound-dollar, Aussie dollar, and New Zealand dollar. The trigger for this surge was the CPI data, revealing that inflation remained stagnant; it neither grew nor receded. Although year-on-year figures may have eased slightly, the core CPI remains resilient.

Despite this, the market responded differently. The ten-year bond yield, a stability indicator I've emphasized in recent months, plummeted from 4.6 to 4.3 in a short span. Liquidity flowed into debt markets, possibly due to a sudden surge in bond purchases, then swiftly transitioned into the stock market.

Now, the US dollar, as I initially mentioned, witnessed a significant collapse. The question arises: what signs can we observe in the market to navigate such environments around major news events? In previous weeks, I highlighted the change in trend on the daily US dollar index, suggesting a potential correction.

This analysis wasn't solely based on economic factors but also on technical indicators signaling a shift in direction. Identifying lower tops and bottoms on the daily chart provided a crucial technical perspective, helping traders anticipate the US dollar's weakness. When faced with conflicting weekly and daily trends, traders have options: wait, trade in line with a specific trend, or carefully manage risks.

As the week progresses, keep an eye on the PPI data, as it can impact next month's CPI. The closing of this week will provide insights into whether the US dollar correction is sustained or if it mirrors past instances where it resumed its trend despite initial corrections.

Remember to align your trading strategy with market dynamics and stay vigilant amidst evolving scenarios. Best of luck with your trading endeavours throughout the week!

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