There has been tons of volatility in the currency markets. As we can see, the Yen has been strengthening dramatically. In this video, I want to go over the week so that we can be a bit more prepared—or at least I can be a bit more prepared—on what to do with my trading software to make sure that, one, I am aware of what is coming out this week, and two, I can act accordingly.
Without further ado, let’s jump right to it.
Welcome! If you’re new to the channel, my name is Matt Jimenez. I’m an entrepreneur who has worked with the greatest minds in finance over the last several years, and I’m here to share with you everything that they’ve poured into me. In this video, this is going to be my Sunday market breakdown. Nonetheless, let’s go ahead and look at the forecast for the currency markets this week, and also let’s look at a couple of pairs and charts to see what type of volatility we could expect and where they’re probably headed.
But before I do, I want to make it clear that none of this is financial advice. This is merely for your entertainment and to let you know what I’m doing with my own personal interests.
Okay, so here we have Forex Factory, which is very important to stay up-to-date on upcoming news releases that will definitely impact the currencies. If you’re exposed to the currencies, you want to know what’s going on here because this will allow you to take action prior to these events happening, potentially hindering your performance, or who knows, maybe even benefiting your performance. But again, this is not any advice whatsoever; I just want to go over a few things.
Right here is something very important. The first thing that comes to mind is this AUD (Australian Dollar) on Tuesday, which is the cash rate, and they’re forecasting a 4.35% cash rate. Now, what will happen is, when this news comes out at 12:30 a.m. my time (and I am on East Coast time), the actual figure will come out, and then we will see some type of reaction within the markets.
What the cash rate measures is the interest rate charged on overnight loans between financial intermediaries. Now, it looks like it’s been 4.35% quite consistently, and again, this is pretty ironic considering the whole situation that’s unraveling with the Yen. As you guys know, the 50k account took a massive hit because of this exact setup right here.
So, if I were to borrow and get a large lump sum of Yen because it has such a low interest rate, I would go ahead and invest this in the Aussie Dollar, which has a 4.35% interest rate. This would allow me to get more yield for the money that I borrowed at 0% with the Yen. But now that the interest rate has gone up on the Yen, my hands are tied because I either need to make up for the difference—since the amount I borrowed from Japan is not the same due to the interest rate hike—or get margin called.
Now, with this AUD news coming out, combined with all the volatility already happening in the Aussie Yen, I would hope that this can bring some type of alleviation or bounce in this pair because it has just been bleeding dramatically. When I say “bleeding,” this is not like a typical stock where, if it goes down, it means it’s doing badly. This going down means that the Yen is doing extremely well because it’s strengthening dramatically in comparison to the Aussie Dollar.
So, if this news comes back positive, I think it could be the reason for a bounce in the Aussie Yen because we just had a massive bloodbath. What would be nice to see is a bounce up into this region—one, because anyone involved in this trade who is probably stuck in it is likely looking for some type of bounce.
Most likely, that’s number one. Number two, I actually have several positions open with the Aussie Dollar involved, so I am looking for some type of movement on the Aussie Dollar to help a couple of positions that I have open at the moment.
Now, one thing I also want to measure is how deep of a move this has been since the rate hike in Japan. As you can see, this move is quite dramatic. We have pulled back 50% of this entire move to the downside. The measuring tool that I just pulled out is called the Fibonacci retracement. I’m not going to get into it now because it’s extremely intricate, but to put it simply, this will help me find potential areas of interest that the chart will pull back to because of these universal measurements that are found throughout the universe. And no, I’m not joking – literally throughout the universe.
As you can see, we barely touched the 50% retracement and already had some type of move a little bit off of it, leaving this wick right here. But before we go, let’s see what pairs we should be looking at. I’ll go ahead and close this out. That’s the most important piece of news I think that’s coming out for the Aussie Dollar. Again, right after the cash rate, of course, you’ll have monetary policy statements because they’re all intertwined. When you have a cash rate release, obviously there are going to be banking figures speaking on monetary policies. This can go either way – if it’s hawkish or dovish, it will obviously impact the currency either negatively or positively. People speculate; if someone says something dovish, people will speculate on their statements and think, “Oh, maybe I should buy or sell this because they had this connotation to their speech or statement that they made.”
Now, let’s go ahead and come down a bit more. There are some more talks about the Aussie Dollar. With the talks, you can’t even measure it right because there is no way to forecast an actual measurement. So whenever you see “talks” on Forex Factory, you won’t actually see, to the far right, any type of forecasting numbers or actual numbers. You just have to click on the data, and then you can go into the history. You can click it and see a bit further, and then also you’ll have a description that tells you a bit more about what this lecture or talk will be about.
Scrolling down a bit more, because I don’t want to just go over the Aussie Dollar the entire time, it looks like we have Aussie Dollar the entire time! All right, so let’s go ahead and hit “More” to see the month of August. Again, nothing too crazy – just some more Aussie news – and that is for the month of August. So, for the month of August, I’m going to be on the lookout for any Aussie pairs. If I’m in any Aussie pairs and this news is coming back negative or positive, I may halt trading on it. I may close out certain positions that may not be in my favor. But again, none of this is ever financial advice. This is merely to let you guys know what I’m doing for your entertainment—either so you can call me smart if it works out, or you can call me dumb if it doesn’t work out. It doesn’t matter; I’m publicly displaying it for you guys.
Let’s go ahead and look at a couple more Aussie pairs. Let’s do AUD/USD, which is a quite commonly traded pair.
Okay, so here is AUD/USD, quite an important pair because it is so common and also because of all the Australian news coming out for the month of August.
Let me go ahead and remove this trend line. Let’s look at the monthly chart just to gauge where we’re at in terms of critical points on the chart. We are definitely at a very key point of interest, which is this crazy bounce that happened in ’08. Of course, this was during the recession. If I were to go ahead and plot that, it would allow us to know that this region was at an extreme low that we didn’t really experience – well, we did experience it back here in 2020, during the COVID crash. So, since we’ve been down here, it was back in the COVID crash, and prior to that, it was the ’08 recession. We are just consolidating and bouncing right off this key point of interest.
As you can see, when this was formed back in ’08, we came back down, touched this exact level, bounced straight up, came back down, bounced on it again, and now we’re just tinkering on it. Typically, when you have a support level tested that many times, they tend to actually get weaker and tumble over to the downside. That would make sense if it did tumble downward because that would indicate USD strength in comparison to the Aussie Dollar, which has a ton of news coming out this month. But it doesn’t look like they’re going to change their rates, so I’m actually hoping for some Aussie strength here, which I do think we might get. I don’t think the Aussie will plummet much, but again, it also depends on the other currency it’s paired with. If the other currency does extremely well and the Aussie stays neutral, that obviously means Aussie weakness by default.
Now that we know that level of support is at 0.63070, I’d like to always keep my eye on that level to see if we can keep it strong and bounce off it again, or if we’ll end up breaking through it. As you can see, the Aussie Dollar has been getting quite slaughtered lately across a multitude of pairs, so I wouldn’t be surprised if it broke down. I kind of want it to gain some strength because certain things are extremely overextended in one direction, and I think that needs to change. Now, there’s not a clear distinction or any type of sign of a reversal here; it is a bit of a chop. You do have a continuation of lower highs being formed, but fortunately, you also have a series of higher lows being formed. So, there is some type of strength in the Aussie Dollar on this pair, even though it seems to just be getting slaughtered. We are forming this kind of wedge pattern, which is typically a breakout pattern, so there could be some upcoming volatility here. But typically, the breakout happens near the end of the wedge, and you do have the pressure of the moving averages. This will be interesting to watch. I don’t have a clear, distinguished direction of where I think it’s headed on this pair, but let’s go ahead and check out one more Australian pair.
Let’s do AUD/CHF, which is actually something I have a ton of exposure to at the moment. So, I am looking for some type of CHF weakness, and again, that means some Aussie strength. I’m definitely hoping for some Aussie strength to come in here on these news releases, such as the cash rate—I’m pretty sure it’s at 4.35%. So, they’re probably going to hit their target, and that will help alleviate this dramatic bleed happening across a multitude of Aussie pairs. I would like to see some type of bounce upward here into this region where we have some support, as you can see. Let’s just drop this rectangle here, pull it across—you can see support, resistance, resistance, support, support. I think that we could pop back up into this area and form some type of support. If we did make it to this area, it would make sense that the moving average would also reach near this area at that time, which then again could see some type of rollover effect and a continuation of this downward trend happening on the Aussie Dollar. But I do anticipate some type of bounce on this pair, which is something I would love to see.
And again, let’s go ahead and swing up to the monthly chart just to make sure where we’re at in terms of significance on the exchange rate. This is quite significant. The lowest it’s ever been was down here, where it just wicked down and immediately bounced, but where actual price traded and closed at is a bit higher. So, we are at extreme lows for this currency pair, and ironically, where I dropped this support level is right in the middle of this resistance that I drew. Now, we are overly extended from the moving averages. I would hope that we could get a bounce to try and level things out a bit, but again, we are in extremely volatile times.
Now, that’s all I’ve got for you guys. If there was more on Forex Factory, I would have looked through more pairs for you guys, but there wasn’t much news, as you guys could see. I typically only look for things that have the red folder because that will indicate a certain level of volatility that definitely warrants my interest. Now, if you enjoyed this and found it informative, and you want me to continue doing this, please leave a like and/or comment. And if you aren’t already, please subscribe – it means the world to me.
And like always, my friends, peace.
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