TST NEWSLETTER – 20/06/2021

Hinting A Change?

Source: investopedia.com


  • Hinting A Change? Federal Reserve Hawkish Stand
  • Last Week In The Forex Markets
  • Top 3 Pairs For Next Week
  • The Social Traders Free Training Video

Hinting A Change? Federal Reserve Hawkish Stand


The Federal Reserve chairman Jerome Powell spoke about the hawkish approach they will be taking on interest rates and inflation, their outlook is to increase by 2023 to adjust for current economic conditions and adjustments that have been made during the pandemic.

This has caused a ripple effect across the stock and bond markets, leaving many investors of yields down and bondholders up.

The Issue

With Jerome Powell, chairman of The Federal Reserve giving us the stance on a wide range of topics, but most useful for all traders is the interest rates and inflation outlooks.

Jerome Powell states 'Monetary policy will continue to deliver powerful support to the economy until the recovery is complete'.

The feds will be pumping more money into the sectors and industries which need it, with GDP being projected to be between 6-8% in 2021.

Source: themortgagereports.com

However, the main issue lies in the outlook on inflation and interests rates, they originally hinted that we would not see this happen in the foreseeable future, yet we are now witnessing the opposite coming into effect, being pushed forward to 2023.

This comes as spending in the economy increases rapidly, people are returning to work, and there is more hope for the future, so this is where we see the feds crack down and reverse the decisions made during the pandemic last year.

Many stock and bond markets have been affected by this, leaving many exposed to large declines on markets close.

What Can We Expect Over The Next Year?

Things actually look promising for the US economy over the coming years, according to the feds.

Labouring forces are looking to be slowly recovering and out looked to be at 4.5% unemployment by the end of the year.
Many other aspects of the economy seem to be on the rise, but many experts are concerned about the effect this is having on the bonds markets.

Source: seekingalpha.com

Bond markets have been on a decline since 2019 but of course when yield fall, bonds rise.

So are we seeing a play here from the feds to raise bonds in an attempt to recover their side of the bargain at the expense of the economy?

As the likes of the DJIA, SPX, COMP and other markets dropped, we saw the US Bonds markets rise.

This left many investors exposed on market closure.

We can expect to see more volatility over the next year, this could offer some great opportunity but also could spiral into a bad taste for the US economy if it's not managed with care from the feds.

What Can We Do As Trader's?

As traders we can keep a open bias, we can expect to see lots of volatility over the stock markets.

Mainly caused by the decisions the feds make. When trading anything that is affected by this volatility, then we should look to take the needed precautions, such as larger stop losses, lower leverage, and taking realistic profits.

We can expect to see the feds try to do what they can to save the US economy but ultimately fixing one problem will only cause another to appear, the complexity of the situation leaves room for some great trading opportunities in the forex markets too.

Last Week In The Forex Markets

Continued dollar strength has been a main factor to some of the great setups we have had this week.

With Wednesday release of a promising FOMC press conference and added strength for the US after talks with Russia.

Here at The Social Traders we managed to capitalise on a fruitful week, so let delve in!

EURCAD: [+8.99%]

This setup was shared with our Pro Members.

EURCAD offered us an amazing opportunity to capitalise on, we can see that price action has been moving sideways for a small period of time.

We can see its descending nature and exhaustion, with this we where expecting a upside move.

Price action broke out of structure, this gave us reasonable cause to look for a order block.

Using the order block that was the cause of the break of structure, we looked to take the trade from 50% of the block of order.

Successful entry, we got a wick into the order block, tagging us in to the trade.

Profit targets where the previous structure points, bagging us a healthy 8.99%.

USDCHF: [+10.2%]

USDCHF has seen some great volume with the continue dollar strength.

Here we can see on the 4h, price action has been hard to read but breaking it down we can see a clear break of structure.

This gave us an indication that the cause of the structure break would be returned to, giving us a mitigation play.

Here we can see that played out to perfection!

We were tagged in at the top of the order block, we were originally looking for profit targets at the previous structural highs but we cut the trade early, being content and happy with 10.2% profit.

AUDCAD: [+10%]

AUDCAD offered us another great way to capitalise on the moves last week.

Price action has been moving side ways, but with a slight descending nature.

It then proceeds to break above previous highs, naturally, we looked for the order block that caused this.

Price action reacted sooner than expected and tapped us into the trade promptly.

With this being a descending channel type pattern, our profit target regions were 90% of the pattern.

This secured us a wholesome 10%.

Top 3 Pairs For Next Week

USDJPY: [Short]

Every Saturday we send a 'Market Breakdown' to our Pro Members, here are some of the setups we have already shared.

This week we have some super high-quality setups to share with you guys, following the current dollar strength.

USDJPY can be seen to be in an ascending nature, using pattern separation we can see that it would be highly probable for the price to return to the previous cause for a break of low (BOL).

We could look to trade it in to our area of interest but we feel the higher quality set-up is the sell from the highlighted area.

GBPCHF: [Long]

GBPCHF could present to us a class opportunity heading into next week.

As always we follow our strategy, we can see two clear breaks of highs.

Price action could be argued to be falling in a descending channel, this would give us confluence to take the long position from the block of orders sat below.

We could look to take this from the third tap of the descending channel, coincidingly lining up with the order block.

GBPCHF will be updated first thing next week for all of our Pro Members.

EURJPY: [Long or Short]

Finally for our outlook for next week, we are looking at EURJPY.

Highlighted in the market break down this week, here we have two scenarios for this pair.

In scenario 1, we are looking at a descending channel into a strong block of orders. We will want to see a clear pattern forming and slow down in price action before considering this a high probability setup.

Scenario 2, essentially the opposite of the first setup, we are simply looking for an ascending version of the pattern. Price action has the likely hood of reacting off the strong block of orders causing the break of low.

The Social Traders Free Training Video

This week we thought we would treat our free members to a free training video.

Here we will be covering 'discretion', now this is a subject all traders should take notes on as Dylan will explain in the free training video below.

We plan on doing more like this so be sure to let us know what you guys think and if you would like to see more of these!

Want to learn exactly how we trade the markets?

Why not check out our ‘pro package’? You will gain access to our in-depth course as well as many more features – www.thesocialtraders.com

Looking for a reliable broker with raw spread accounts and 1:500 leverage? Try our partnered broker – https://www.axitrader.com/uk/live-account?token=IDUZ-LFrugU5oKniM-HhFmNd7ZgqdRLk&affid=7138

We thank you for reading this week's addition to the TST Newsletter, have a great trading week, and stay consistent. – 'The Social Traders Team'

Written by – Karl Milward