Understanding Impact of Bond Yield Differential on EquitiesOver the past decade the interest rate differential between US and India has been constantly going down. This has largely been due to stronger fiscal position of India and also gradual weakening of US Public Finances.
This has led to the Rupee becoming more stable against the Greenback, thereby reducing the rate of inflation in India.
Further, this has resulted in rising of equity markets over the last decade, and more importantly, the same setup is likely to stay or become better over the next two decades.
Hence long term retail investors in India can benefit from this by placing algo based orders to buy Index ETFs on dips and reduce their cost of buying and stay invested over the long term thereby getting benefit of power of compounding.
---------------------
Trading View Script:
Yield
USDJPY bulls want to believe in BoJ’s defense of easy money poliBe it the triangle breakout or the Bank of Japan (BoJ) officials’ dovish signals ahead of the monetary policy announcements, not to forget the Fed’s hawkish pause, the USDJPY pair has all that’s needed to ride north. However, the overbought RSI conditions suggest a gradual run-up with intermediate pullbacks. That said, the aforementioned two-week-old symmetrical triangle’s top line, close to 140.20, appears immediate support for the Yen pair. Following that, the 140.00 round figure and the stated triangle’s bottom line surrounding 139.00 can challenge the pair sellers. It’s worth noting that the buyers are likely to remain unshaken beyond the 200-SMA support of 138.00, a break of which could give rise to short-term setbacks for the optimists.
Meanwhile, the 141.00 round figure precedes the latest peak of around 141.50 to guard the immediate upside of the USDJPY pair during its fresh rebound. In a case where the BoJ manages to defend the policy doves, the 61.8% Fibonacci Expansion (FE) of its May 16 to June 01 moves, near 141.70, precedes the 142.00 threshold and the 78.6% FE level around 142.55 to challenge the Yen pair bulls. Above all, an upward-sloping support resistance line from early May, at 143.00 by the press time, seems a tough nut to crack for the buyers to crack.
USDJPY prints bear flag as Bank of Japan gains attentionUSDJPY is likely to end 2022 on a negative note, despite bracing for the biggest yearly run-up since 2013. However, the Yen pair portrays a bearish chart pattern, a bear flag on the four-hour play as traders keep their eyes on the Bank of Japan (BOJ). Given the downbeat oscillators and hawkish expectations from the BOJ, the bearish chart formation amplifies the downside expectations. As a result, bears could wait for a clear downside break of 134.90, to refresh the monthly low of 133.60. In that case, the August 2020 low near 130.40 and the 130.00 psychological magnet will gain major attention during the south run aiming for the theoretical target surrounding 120.00.
Meanwhile, the top line of the stated bear channel, close to 138.50, restricts short-term USDJPY recovery moves. A clear upside break of the same will defy the bearish chart pattern and could poke the 200-SMA surrounding 140.80. In a case where the Yen pair buyers manage to cross the last hurdle, namely the 200-SMA, late November swing high near 142.25 and the 145.20 resistance could flash on their radars.
Overall, USDJPY is on the bear’s radar after two years of a bullish move.
USDJPY bulls need to cross 147.70 to stay on the tableUSDJPY poked the year 1998 high on Thursday while piercing a weekly resistance line, staying near the immediate resistance line of late. That said, the RSI is overbought as the pair struggles with the 24-year high near 147.70, which in turn suggests hardships for the further upside move. If the quote crosses the 147.70 hurdle, its run-up towards an upward-sloping trend line from late April, near 149.00, and the 150.00 psychological magnet will become imminent. It’s worth noting, however, that the buyer’s dominance past 150.00 won’t hesitate to challenge the late 1990 peak surrounding 151.65.
Meanwhile, sellers could take entries if the USDJPY pair breaks a 2.5-month-old support line, currently around 144.60. Following that, a south-run to late September low near 140.35 and then to the 140.00 round figure can’t be ruled out. However, July’s top near 139.40 could challenge the sellers afterward, failing to do so can draw a gradual south-run towards August month’s bottom close to 130.40.
Overall, USDJPY is near the key resistances as the overbought RSI suggests that the bulls are running out of steam. Hence, a pullback is well-expected but the change of trend is off the table unless the quote breaks 144.60.
AUDUSD bears again aim for sub-0.6400 areaAUDUSD fails to extend the previous day’s corrective bounce off the two-year low as a 12-day-old resistance line joins the 61.8% Fibonacci Expansion (FE) of April-August moves, around 0.6530, to recall the bears. The nearly oversold RSI conditions, however, challenge the pullback moves, which in turn suggest limited downside and highlight the 78.6% FE level near 0.6365. In a case where the pair declines below 0.6365, the 0.6300 and the 0.6200 thresholds may please the bears before directing them to the 100% FE level near 0.6150.
Alternatively, recovery moves must stay successfully beyond the 0.6530 resistance confluence to aim for the 2.5-month-old hurdle, around 0.6680-85. Following that, the monthly high near 0.6915 and a downward sloping resistance line from early June, close to 0.7020, will be in focus.
Overall, AUDUSD is up for further downside but the room to the south appears limited.
USDJPY bulls are bracing for 147.00USDJPY has been navigating inside the 300-pip trading range at a 24-year high in the last three weeks. Despite the yen pair’s latest inaction, the lower low on prices joins the lower bottom on the RSI (14), which in turn joins firmer MACD to keep the buyers hopeful. However, a clear upside break of 144.75, comprising the 78.6% Fibonacci Expansion (FE) of the pair’s late March to early August moves, becomes necessary to poke a five-month-old ascending trend line resistance near 147.00. During the rise, the latest swing top around 146.00 could probe the buyers while a successful rise beyond the 147.00 hurdle might flash the 150.00 threshold on the chart.
Alternatively, the 21-DMA support around 142.60 may act as an immediate halt during the USDJPY pair’s pullback before highlighting the stated range’s bottom, including the 61.8% FE level near 141.60. In a case where the pair drops below 141.60, the 140.00 round figure and July’s high near 139.40 could lure the bears. It should be noted that the sustained downtrend past 139.40 could drag prices towards the 100-DMA support of 135.70.
Overall, USDJPY remains on the buyer’s radar but needs a trigger to activate the next leg to the north.
USDJPY stays on the way to 150.00Despite the latest pullback from a 24-year high, the USDJPY remains inside a five-month-old megaphone formation suggesting a further widening of the uptrend. Even so, the overbought RSI (14) suggests a pullback of the yen pair, which in turn highlights a two-month-old horizontal support area surrounding 134.00-134.40. Following that, the 50-DMA and 100-DMA could test the pair sellers around 136.80 and 134.00 respectively. It’s worth noting that the stated megaphone’s lower line, near 132.40, appears the last defense for the pair buyers.
Meanwhile, recovery moves may initially aim for the 78.6% Fibonacci Expansion (FE) of the pair’s late March to early August moves, near 144.75, before challenging the megaphone’s top, close to 145.75. In a case where USDJPY bulls keep reins, the tops marked during the June and August months of 1998, close to 146.80 and 147.70 in that order, could probe the upside momentum towards the 150.00 psychological magnet.
Overall, a shift in the market sentiment isn’t a trend change and hence the bulls can keep control.
USDJPY breaks key support before Fed’s preferred inflation gaugeUSDJPY broke a five-week-old support line, as well as a horizontal area around 134.25 that comprises the levels marked since June 17, to refresh the monthly low near 133.75. It’s worth noting, however, that oversold RSI conditions challenge the bears ahead of the US PCE Price Index for July, the Fed’s preferred inflation data. However, the corrective pullback needs validation from the immediate horizontal support-turned-resistance around 134.20, as well as the ascending trend line from June 23, near 135.75, to recall the buyers. Even so, the 200-SMA near 136.20 will test the upside momentum.
On the contrary, the pair’s further downside aims at the 78.6% Fibonacci retracement of the June-July upside, around 133.15. Following that, the 131.50-25 area comprising mid-June lows and highs marked in April, as well as in May, will be a tough nut to crack for the pair bears. It’s worth noting that the pair’s sustained declines past 131.25 could make it vulnerable to revisiting May’s low around 126.35.
Overall, USDJPY recently broke the crucial support but the odds favoring further downside are fewer.
USDJPY has limited downside room, BOJ, Fed’s Powell in focusA clear downside break of the fortnight-old support line, favored USDJPY bears in the last few days. However, a convergence of the 100-EMA and 38.2% Fibonacci retracement of May 24 to June 14 upside, around 132.00, seemed to have triggered the latest rebound. Also acting as short-term key support is a horizontal area comprising tops marked during late April and early May, surrounding 131.25-35. As the RSI (14) bounces off oversold territory, the aforementioned supports could form the pair’s bottom as traders await Bank of Japan (BOJ) monetary policy meeting results and a speech from Fed Chairman Jerome Powell. Should the quote drop below 131.25, the 61.8% Fibo. level near 129.80 might return to the charts.
Meanwhile, a confluence of the 50-EMA and 23.6% Fibonacci retracement level, close to 133.40, guards the immediate upside. Following that, the support-turned-resistance from early June and the latest peak could challenge the USDJPY buyers around 135.60. If at all the quote rises past 135.60, the late 1998swing highs near 137.30 and 138.30 could probe the bulls before directing them to the 140.00 psychological magnet.
On the fundamental side, the BOJ isn’t expected to announce any major changes to its monetary policies, which in turn makes the event less important than Powell’s speech. Though, the current environment of central banks providing hawkish surprises might push the traditional dove, which in turn can entertain USDJPY traders.
us10y - us2ycomparing the yields of the US10 and US2 years spread with the EURUSD.
So far, we've discovered a negative correlation with the US dollar
since traders priced in monetary policy expectations.
Bond prices are essentially reactive before then currency or equity
XAUUSD ShortGold into heavy resistance here. Indices are making new highs so risk on trade coupled with overbought conditions on gold will drive this quote down. A break below $1724 support and we see $1700
Nifty: A Simple Strategy Yielding Lacs.I am surprised to see how this simple strategy could yield such handsome return in the Index futures.
Time Period= 1 June till date
Chart= 15 min.
Rules:
1. Divergence on Stochastics associated with inverse price movement
2. Entry @ break above/below immediately preceding "minor" swing high/low
3. Stop @ below/above immediately preceding "significant" swing low/high
4. Target @ immediately preceding "significant" swing high/low point
5. Would not trigger entry on gap openings, wait for price to pull back to entry or else trade will be missed
6. After entry, if target missed by few points then close position on break of a succeeding minor swing or consolidation pattern, whichever hits earlier
7. Minimum Risk to Reward Ratio should be 1:1 or else trade will be missed.
8. No support or resistance from higher time frame taken into account
9. All the entries taken with Stop loss and Limit orders.
10. Carry forward as long as target or stop is not hit.
Trades:
Trade1=33 pts.
Trade2=16*
Trade3=31
Trade4=34
Trade5=32
Trade6=13*
Trade7=47
Trade8=37
Total= 243
Profit on single lot= 243*75=18225
For earning 1 Lac or more one should have traded at least 6 lots.
* In Trade 2 and 6 target was missed by a few points so as per rules the position is closed at the break of succeeding consolidations pattern.
#Trade missed @ Divergence 3 because of poor RRR
Although this strategy yielded 100% success with no Stops hit yet it should be noted that we totally missed the shorting opportunity from 9700 to 9565 on 22nd June. The strategy might be successful in sideways to moderately bearish/bullish environment. Will it be good in a trending market is still a question mark for me, perhaps we will get the answer in coming days.
Kindly cooperate if am wrong in my calculations somewhere but i suppose the purpose of this post is clear to everybody.
Trade safe, stay healthy.
Best Regards
Afraidtotrade
