Currencies Pairs to Watch Post Fed


THE KRONA - If you're looking for an interesting trade, go ahead and take a look at the USDSEK chart on the monthly. I cover it in today's technical overview and really like the idea of looking for a meaningful short position up into this area. The market has pushed back up to test some critical internal resistance on the longer term chart, while on the daily, technical studies are through the roof, with the RSI well above 80. So at a minimum, we should expect the market to slow down from here. The idea is not a short term one, so please keep in mind. But if you were compelled to take a shot, the strategy would be to sell around the 9.00 handle, targeting an eventual drop back down to 7.80, with an exit above 9.50. This risk-reward is compelling and when considering a market that is still looking to sell the Dollar across the board on a medium to longer term basis, this could be a wonderful opportunity.

cartoon may 3

STILL ON THE SAME PATH - As far as the Fed outlook goes, the outlook remains unchanged from my perspective and I think there is another rate hike in 2018 that has yet to be fully priced. Inflation hasn't been on fire by any stretch of the imagination, but it has been moving up. And what usually begins as a slow process, can very quickly turn into a hyper acceleration. Now that the Fed's 2% inflation target is basically being met, there really isn't a great option here. Whatever the case, at this stage in the game, the Fed will have more pressure on it to raise rates in an effort to offset the rising inflation. How all this impacts the Dollar's trajectory against most of its peers remains to be seen, with US administration soft Dollar policy demonstrating that it is at least can put up a good fight against any desired USD inflow from the monetary policy side. At the same time, I believe the impact on the US equity market becomes a lot clearer and the outlook is not pretty up at current levels, as higher rates mean far less attractive valuations. What this does do on the FX side, is it makes two major currency pairs more attractive as short plays given their traditional correlations with risk. Those two are USDJPY and USDCHF and I think both could invite opportunities to sell in the sessions ahead.

Some of the interesting currencies out there right now are the Yen, Swiss Franc and Swedish Krona.


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