Last week’s recap
I only caught the moves toward the end of the week, after the non-farm payrolls revision and Warsh’s speech at Jackson Hole. The cleanest of the lot was the Australian dollar. I also took first partials on the pound and on gold, after which both trades were closed at breakeven.
On the currencies I had been watching for a push higher — but given the puts that had been piled on, the working assumption was that an impulse down out of the current ranges would be the short, taken at the intraday entry on the cluster rather than at the range edge. That is exactly what happened on the pound, where the zone was confirmed beautifully from the clusters.
All week the market was getting ready for volatility. The Aussie is the barometer for that: the players showed up and stayed active. There were also position rollovers out of the current contract, in deep profit.
The week ahead — what actually changed
It was 35% odds of a September hike. It is now 57%. As said here last week, Warsh would decide the move on the euro and on the rest — and that is what happened. It was painted as though the exit would be to the upside, and it fell instead. On balance that was the expected outcome.
So the week opens risk-off, with a gap, and then it is a wait for two things: the NFP and the quarterly expiration.
The NFP is worth attention for a reason that is easy to miss. This year’s annual revision is only about minus 79 thousand — not the near-million of the last one. A bounce on 4 September is quite possible on that alone.
This is a single-instrument week. A great deal happened in the markets, and it needs careful thought before it becomes a plan; so the euro is the only market marked up here.
EUR
On the spot, the 1.1527–1.1540 range is being traded for the bounce, and it can be worked confidently.
The markup itself is tentative, and it is on the December contract: the zones of Wednesday and of the Week. The reference is the day’s balance at the open — specifically if the gap down into the Liquidity Trigger plus the Liquidity zone plays out. Every portfolio shown was traded into that area as well, which gives a variation for buys toward the upper zones.
Given the shift in the angle of rate expectations, this is a reasonable chance to see a reversal in risk assets for the near term. A break of the zone below is no more than about 10% — and Friday brings the NFP, so it gets worked on reaching the level, not in anticipation of it.
For shorts, both zones above are workable. On balance every zone marked is live for the coming week.
The plan, in one line
These are zones and scenarios being watched — the market decides, not the trader. Let price come to your levels and let the confirmations line up before you act. New to the terms? The glossary covers every structure named above — and if this is your first visit, where to start lays out a reading order through the free material.