A1 Trading Company

How to Trade JPY This Week

Today and tomorrow are primed to be significant for those trading the Japanese Yen, as well as Japanese bonds. The Bank of Japan (BoJ) is tentatively scheduled to release a Monetary Policy Statement at some point today along with any interest rate adjustments, with a press conference to follow tomorrow. Buying pressure for JPY has been gaining steam over the past few months as traders bet on the BoJ finally pivoting away from extreme dovishness as annual inflation in Japan hits a historic 3.7%. However, while the BoJ seems likely to change course at some point, there have been few explicit signals to suggest that a newfound hawkishness could be just around the corner; for context, Japan’s economy has wrestled with a chronic deflation problem for decades. While the BoJ’s Governor, Haruhiko Kuroda, has a planned retirement in April of 2023, what sort of tone his successor will set still remains a little way off. As retail traders contemplate how to trade JPY this week, it may be wise to focus more on fundamentals over speculation.

Three Pairs to Watch

The EdgeFinder is currently quite bearish on JPY ahead of the upcoming monetary policy news. For those interested in looking for potential trade setups for selling the Yen, the following pairs are rated favorably for JPY bears. They are listed below with their respective ratings, signals/biases, and corresponding charts.

1) CHF/JPY - Receives a ‘7’ Rating, or a ‘Strong Buy’ Signal

How to Trade JPY This Week
How to Trade JPY This Week

2) EUR/JPY - Receives a ‘6’ Rating, or a ‘Strong Buy’ Signal

How to Trade JPY This Week
How to Trade JPY This Week

3) NZD/JPY - Receives a ‘5’ Rating, or a ‘Buy’ Signal

How to Trade JPY This Week
How to Trade JPY This Week
5 Strongest Pairs to Trade

As another dense news week draws to a close and financial markets continue to react to the latest flurry of interest rate hikes around the world, it can be helpful for traders to recenter on key biases. Before the weekend fully arrives, let’s check in with the EdgeFinder, A1 Trading’s market scanning software, to take note of the various ‘strong’ signals that have been generated in preparation for next week. The following list is composed of the 5 strongest pairs to trade according to EdgeFinder analysis: they are listed with their respective ratings, signals/biases, and corresponding charts. Additional fundamental and technical commentary will be provided accordingly.

1) USD/CAD - Earns an ‘8’ Rating, or a ‘Strong Buy’ Signal

5 Strongest Pairs to Trade
USD beats CAD in every listed category besides inflation (although annual inflation in the US remains slightly higher than in Canada).
5 Strongest Pairs to Trade
This yearlong uptrend has been impressive, with a sustained breakout above key resistance.

2) NZD/CAD - Earns a ‘6’ Rating, or a ‘Strong Buy’ Signal

5 Strongest Pairs to Trade
NZD beats CAD in every listed category besides inflation and interest rate divergence (although annual inflation in New Zealand remains higher than in Canada, and their benchmark interest rates are identical).
5 Strongest Pairs to Trade
The past few months have given way to incredible bullish momentum following October's reversal.

3) EUR/JPY - Earns a ‘6’ Rating, or a ‘Strong Buy’ Signal

5 Strongest Pairs to Trade
EUR beats JPY in every listed category besides inflation and unemployment; interest rate divergence is especially significant in light of the EU's departure from ultraloose monetary policy, which contrasts sharply with Japan.
5 Strongest Pairs to Trade
This yearslong uptrend has reached highs not encountered since 2015.

4) AUD/NZD - Earns a ‘-9’ Rating, or a ‘Strong Sell’ Signal

5 Strongest Pairs to Trade
NZD continues to beat AUD in every listed category.
5 Strongest Pairs to Trade
The aggressive selloff continues following October's stunning breakout below trendline support.

5) GBP/NZD - Earns a ‘-9’ Rating, or a ‘Strong Sell’ Signal

5 Strongest Pairs to Trade
NZD continues to beat GBP in every listed category.
5 Strongest Pairs to Trade
Trendline resistance spanning over a decade continues to hold as key support is yet again retested.
Warning: US CPI Tomorrow

Tomorrow morning at 8:30 am ET, the United States Bureau of Labor Statistics is scheduled to release the latest Consumer Price Index (CPI) data for the month of November. Widely considered a proxy for inflation, the rate at which CPI increases will help the American public and the Federal Reserve discern how much of a threat high inflation continues to pose. Month-over-month CPI is forecast to slow to a 0.3% increase, while month-over-month Core CPI (which excludes volatile food and energy prices) is anticipated to clock in at 0.3% as well. If the real numbers exceed these expectations, this would be bullish news for USD and bearish news for stock market indices, whereas the inverse would be true if the numbers come in smaller. This is because hotter inflation data gives the Fed further incentive to raise interest rates to cool the economy, which strengthens the Greenback while diminishing demand for stocks. With the Fed’s next rate hike and press conference coming just two days from now, we must issue a warning: US CPI tomorrow is just the beginning for major pairs and equities.

Three Pairs to Watch

Considering that the latest Producer Price Index data released last week was quite bullish for USD, it seems plausible that tomorrow's CPI updates could yield similar results. With this in mind, for those interested in going long on USD, here are three potential pairs to watch for trade setups. While the EdgeFinder, A1 Trading’s handy market scanner, is reasonably cautious about some of them, new momentum from a fundamental catalyst could correlate with new biases being generated which are more optimistic for US Dollar bulls. They are listed below with their respective ratings, signals/biases, and corresponding charts.

1) USD/CAD - Earns a ‘6’ Rating, or a ‘Strong Buy’ Signal

Warning: US CPI Tomorrow
Warning: US CPI Tomorrow

2) USD/JPY - Earns a ‘1’ Rating, or a ‘Neutral’ Signal

Warning: US CPI Tomorrow
Warning: US CPI Tomorrow

3) AUD/USD - Earns a ‘-1’ Rating, or a ‘Neutral’ Signal

Warning: US CPI Tomorrow
Warning: US CPI Tomorrow
Time to Buy CHF

As the Swiss National Bank (SNB) gears up for a likely new interest rate hike on Thursday, December 15th, financial markets will be watching. Chairman Thomas Jordan of the SNB has made these hawkish intentions clear repeatedly; this contractionary agenda would be the continuation of Switzerland’s recent departure from ultraloose monetary policy. Negative interest rates had been a years-long precedent for the central bank prior to the SNB’s shocking pivot towards tightening over the course of 2022, as high inflation grips the global economy. These rate hikes contribute to a greater valuation for the Swiss Franc, which already displays impressive fundamentals thanks to the stability of Switzerland’s economy. This reflects in the EdgeFinder’s positive analysis of the currency, which has aided in generating several new signals for CHF pairs; they are listed below with their respective ratings, signals/biases, and corresponding charts. As potential trade setups emerge over the coming week, it is worth asking: is it time to buy CHF?

1) CHF/JPY - Earns a ‘5’ Rating, or a ‘Buy’ Signal

Time to Buy CHF
Time to Buy CHF

2) AUD/CHF - Earns a ‘-4’ Rating, or a ‘Sell’ Signal

Time to Buy CHF
Time to Buy CHF

3) CAD/CHF - Earns a ‘-4’ Rating, or a ‘Sell’ Signal

Time to Buy CHF
Time to Buy CHF
Caution: Bizarre US Labor Data

This morning’s economic news pertaining to the United States has been rather complicated. Because of this, we would like to issue a word of caution: bizarre US labor data like this can have odd effects on price action for major pairs. On one hand, Non-Farm Employment Change (NFP, for Non-Farm Payrolls; a key gauge of private sector labor market activity) estimates for November came in far from strong. Released at 8:15 am ET by Automatic Data Processing, Inc., a meager 127,000 jobs were projected to have been added to the US economy over the latest month, a far cry from the 196,000 that had been forecast. This implies a cooling labor market, which is bearish for USD.

On the other hand, however, the latest findings in the Bureau of Labor Statistics JOLTS jobs report, published this morning at 10 am ET, has seemingly contradictory implications: an impressive 10.33 million job openings remain in the US, still almost double the number of unemployed individuals looking for work. Coupled with better-than-expected quarter-over-quarter real GDP growth, with the latest numbers clocking in at a 2.9% expansion this morning, and a smaller decline in homes sales than anticipated, this news paints a different picture of the US labor market and economy, one that is still red hot. This is quite bullish news for USD.

What to Make of This?

While it does appear that more reports are signaling USD bullishness than bearishness, we can also wait for further confirmation about US economic strength over the next few days. For example, tomorrow morning the latest changes in the US Core PCE Price Index month-over-month will be made public; this is a key fundamental indicator for those trading USD, as it is the Fed’s preferred measure of inflation. Likewise, Friday morning will be a pivotal day in the financial markets, since the official new NFP numbers, wage growth data month-over-month, and new US unemployment rate will be published too, all at 8:30 am ET. Between all these crucial updates on fundamentals, traders will have much to chew on, far more than just today’s confusing data.

3 Potential Pairs to Buy

According to the EdgeFinder, A1 Trading’s market scanner, EUR/USD and USD/CAD remain the optimal pairs to monitor right now for opportunities to go long on USD. Because we just explored their respective charts in Monday’s article, let’s take this time to examine the EdgeFinder’s highest rated pairs to buy, which all happen to be NZD pairs. A strong currency in its own right, the New Zealand Dollar is well worth focusing on as we await further USD developments. Without further ado, here are the three pairs that rank highest on the EdgeFinder’s score summary chart, along with their respective ratings, biases, and corresponding charts.

1) NZD/CAD – Receives a ‘6’ Rating, or a ‘Strong Buy’ Signal

Caution: Bizarre US Labor Data
Caution: Bizarre US Labor Data

2) NZD/USD – Receives a ‘5’ Rating, or a ‘Buy’ Signal

Caution: Bizarre US Labor Data
Caution: Bizarre US Labor Data

3) NZD/JPY – Receives a ‘5’ Rating, or a ‘Buy’ Signal

Caution: Bizarre US Labor Data
Caution: Bizarre US Labor Data
Shocking New USD Fundamentals

Near official as of last week, the financial world has had some stunning news to grapple with. The Federal Open Market Committee (FOMC), the policy-making body within America's Federal Reserve, revealed in their latest set of meeting minutes that they are leaning towards slowing the pace of interest rate hikes. A huge step away from recent hawkishness, one key motivating factor for this blossoming consensus is the FOMC's desire for caution, and their intent to monitor the US economy's response to this year's sequence of rate hikes. This desire for hesitancy is warranted since the effects of rate hikes typically lag, with higher interest rates for businesses and consumers often taking a while to slow demand, reducing inflation and economic activity over time. The US Dollar Index (DXY) has continued sinking lower on these shocking new USD fundamentals, testing support at the 106 level as depicted on TradingView's chart above.

However, these new developments are complicated by other crucial variables. First, the FOMC has also made it clear that they now expect the federal funds rate to peak at a level higher than their earlier expectations had reflected. In other words, in spite of near-future rate hikes likely shrinking in size, they will also likely be more frequent than previously intended, with US interest rates currently anticipated to climb higher than the FOMC had planned several months ago. This factor is quite bullish for USD at face value, though how financial markets will digest it over the coming months is difficult to say.

Second, the DXY faces peril in the form of a fresh slate of US economic data this week, including: the Conference Board’s Consumer Confidence report at 10 am ET on Tuesday tomorrow; Non-Farm Payroll (NFP) estimates, JOLTS Job Openings, and a speech from Chair Powell on Wednesday; month-over-month Core PCE Price Index numbers on Thursday at 8:30 am ET; and wage growth, NFP changes, and the new US unemployment rate on Friday at 8:30 am ET. As this flurry of new data becomes available to traders around the world, many major pair trade setups will likely emerge for both USD bulls and bears.

Three Pairs to Watch

For those who remain bullish on USD, two of the following currency pairs are viewed favorably by the EdgeFinder, and the other, USD/JPY, earns a spot on this list nonetheless due to its past potential. They are itemized below with their respective ratings, signals/biases, and corresponding charts. They could potentially yield some great opportunities for going long on USD this week, depending on how the markets react to the contents of these new batches of economic data.

1) USD/CAD - Receives a ‘4’ Rating, or a ‘Buy’ Signal

Shocking New USD Fundamentals
Shocking New USD Fundamentals

2) EUR/USD - Receives a ‘-4’ Rating, or a ‘Sell’ Signal

Shocking New USD Fundamentals
Shocking New USD Fundamentals

3) USD/JPY - Receives a ‘1’ Rating, or a ‘Neutral’ Signal (Personal Long Bias)

Shocking New USD Fundamentals
Shocking New USD Fundamentals
Kiwi Dollar Spike Tomorrow

While today is relatively uneventful in terms of major economic news around the world, this will not be the case for long. There is a chance that the forex market could witness a Kiwi Dollar spike tomorrow due to the Reserve Bank of New Zealand (RBNZ) announcing their latest interest rate hike at 8 pm ET. With market forecasts currently expecting the Official Cash Rate to increase by 75 basis points, hitting 4.25% (surpassing the United States’ Federal Funds Rate), all eyes will be on NZD to see if it retains its bullish momentum. With the RBNZ set to issue a Monetary Policy Statement in conjunction with their rate hike, and a press conference to follow an hour later at 9 pm ET, how the markets interpret the RBNZ’s commentary will help decide the fate of the New Zealand Dollar.

Three Pairs to Watch

The EdgeFinder, A1 Trading’s market scanner, currently holds NZD in high esteem: all the pairs with the strongest buy and sell signals are NZD pairs, with biases that corroborate Kiwi Dollar bullishness. Three of these pairs are listed below with their respective ratings, biases, and corresponding charts.

1) GBP/NZD - Receives a ‘-9’ Rating, or a ‘Strong Sell’ Signal

Kiwi Dollar Spike Tomorrow
Every line item in the Score Summary list favors NZD over GBP, factoring in fundamental, technical, and sentiment analysis.
Kiwi Dollar Spike Tomorrow
This monumental downtrend is years in the making.

2) AUD/NZD - Receives a ‘-9’ Rating, or a ‘Strong Sell’ Signal

Kiwi Dollar Spike Tomorrow
Every line item in the Score Summary list favors NZD over AUD, factoring in fundamental, technical, and sentiment analysis.
Kiwi Dollar Spike Tomorrow
October's huge breakout to the downside of trendline support has given way to an aggressive new downtrend.

3) NZD/JPY - Receives a ‘5’ Rating, or a ‘Buy’ Signal

Kiwi Dollar Spike Tomorrow
Although NZD beats JPY in a number of key categories, perhaps the most crucial is interest rate divergence, as the RBNZ and the Bank of Japan engage in starkly different projects in terms of monetary policy.
Kiwi Dollar Spike Tomorrow
This uptrend has held strong for over two years now.
3 Strongest Pairs to Buy

As we wait for major economic news releases this week (such as monetary policy meeting minutes from the Reserve Bank of Australia tonight at 7:30 pm ET, United States Producer Price Index numbers tomorrow at 8:30 am ET, and Consumer Price Index updates from the UK on Wednesday at 2 am ET), it can be helpful to consider what pairs the Edgefinder already signals to be particularly worth watching. With this in mind, here are the EdgeFinder’s current 3 strongest pairs to buy this week, listed below with their respective ratings, signals/biases, and corresponding charts. Additional comments on fundamentals and technical analysis will also be provided.

1) CHF/JPY (Receives a 5, or ‘Buy’ Signal)

3 Strongest Pairs to Buy
Despite the similarities between these two countries' economies in terms of stability and hot labor markets, the Swiss National Bank's willingness to raise interest rates is decidedly bullish for CHF, while the Bank of Japan instead continues to keep its monetary policy 'ultraloose'.
3 Strongest Pairs to Buy
While the uptrend has paused, strong support has been found around the 146 level.

2) USD/CAD (Receives a 5, or ‘Buy’ Signal)

3 Strongest Pairs to Buy
The US economy notably outpaces Canada's in terms of labor market activity, economic growth, inflation, and central bank aggression.
3 Strongest Pairs to Buy
Despite the steep fall over the past month, price action is encountering a key support zone; Keltner Channel walls suggest oversold conditions.

3) NZD/CAD (Receives a 4, or ‘Buy’ Signal)

3 Strongest Pairs to Buy
Despite the Reserve Bank of New Zealand lagging behind the Bank of Canada regarding interest rate divergence, this may not last long, considering New Zealand is currently leading in terms of holistic overheating.
3 Strongest Pairs
It appears a significant breakout to the upside may have just occurred within the past week, disrupting a year-long downtrend.
Caution: US Midterm Elections Tonight

For those trading stocks or the US Dollar this week, we would like to encourage caution: US midterm elections tonight may become fundamental catalysts, creating volatility across markets. With hundreds of millions of potential voters going to the polls across the United States today to decide who they want to represent them in government, these decisions will ostensibly have significant impacts on financial market activity, especially with federal elections. With Democrats projected to lose their current majority in the House of Representatives and a slew of close races to determine a new Senate majority locked in a dead heat, the policy-making landscape in the US could be quite different in January 2023, when those newly elected take office.

What Impacts Might This Have?

If Democrats manage to beat expectations and keep both chambers of Congress, even adding to their current majorities, this will likely pave the way for more federal spending packages over the next two years, potentially adding to both GDP growth and inflation. On the other hand, if Republicans take one or both chambers, this could effectively nullify President Biden’s future agenda by preventing new spending packages from passing over the next two years, reducing potential GDP growth and inflation.

Thus, my personal guess is that a) a sweeping Democrat victory would create shorter-term stock rallies and longer-term USD bullishness (due to increased stimulus), and b) one or more chambers being won by Republicans would cause longer-term stock support and slight bearishness/neutrality for USD (due to increased austerity). However, this is only speculation; we will have to wait and see how the markets respond. This reaction may take some time to culminate, as some states take longer than others to tally votes and report election victories, meaning some results may not be known for days.

Two Potential Pairs to Watch

If you are bullish on USD and looking for potential trade setups as midterm results emerge, the following two pairs are currently rated favorably by the A1 EdgeFinder for those interested in going long on the Greenback. They are listed below with their respective ratings, signals/biases, and corresponding charts.

1) USD/JPY (Earns a 5, or ‘Buy’ Signal)

Caution: US Midterm Elections Tonight
Caution: US Midterm Elections Tonight

2) USD/CHF (Earns a 3, or ‘Buy’ Signal)

Caution: US Midterm Elections Tonight
Caution: US Midterm Elections Tonight
Fed Doubling Down on Hawkishness

Yesterday afternoon, the Federal Open Market Committee (FOMC; the Federal Reserve’s policy making body) met market expectations by implementing another 75 basis point interest rate hike. With this now being the fourth time in a row such a large hike has occurred, this was not the central story of the day; rather, it was Fed Chair Powell’s shocking press conference afterwards. While answering reporters’ questions, he repeatedly explained that, while the size of the rate hikes could grow slimmer soon, the Federal Funds Rate must now increase to a level previously thought unnecessary. He also mentioned preferring to err on the side of over-tightening monetary policy, since it would be easier for the Fed to lift the US economy out of contraction than to stamp out overheating. With the Federal Funds Rate now at 4% and the Fed doubling down on hawkishness, USD seems primed to continue its historic climb once again as US equities suffer.

Three Potential Pairs to Buy

According to the EdgeFinder, A1 Trading’s market scanner which offers traders an array of supplemental analysis, the following three pairs are viewed quite favorably for USD bulls. They are listed below with their respective ratings, signals biases, and corresponding charts. Tomorrow morning’s big US labor news, which will be discussed in a subsequent article today, will likely provide yet another fundamental catalyst that will influence price action for these pairs.

1) USD/CAD (Earns a 7, or ‘Strong Buy’ Rating)

Fed Doubling Down on Hawkishness
Fed Doubling Down on Hawkishness

2) USD/CHF (Earns a 6, or ‘Strong Buy’ Rating)

Fed Doubling Down on Hawkishness
Fed Doubling Down on Hawkishness

3) USD/JPY (Earns a 5, or ‘Buy’ Rating)

Fed Doubling Down on Hawkishness
Fed Doubling Down on Hawkishness
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There is a significant degree of risk involved in trading securities. With respect to foreign exchange trading, there is considerable risk exposure, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
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