Economic data released so far this week from the U.S. has been horrible.
If we look at today’s data, it was all bad news.
We saw retail sales
The Federal Reserve’s Beige Book
And the Empire State Manufacturing Survey
The U.S. now has 633,267 cases of the coronavirus, the most in the world. Deaths in the U.S. have risen to 28,278, also the most in the world.
The coronavirus pandemic is hitting the U.S. economy harder than expected.
Recently, the market had “looked past” negative economic data releases. After all, it’s an “engineered” shutdown and does not reflect the “fundamentals” of the underlying economy, which “remain strong” so any negative data that comes out is “irrelevant“.
But now (finally?), it looks like Wall Street is finally waking up to reality as the economic data becomes worse than feared.
I have a currency trade to bet on the U.S. stock market falling.
Short AUD/JPY.
The chart above compares AUD/JPYVIX
Also known as the “Fear GaugeFear Index
As you can see from the chart, VIX is negatively.
When fear rises, AUD/JPY goes down.
When fear subsides, AUD/JPY goes up.
With Wall Start starting to get scared, it looks like VIX is starting to turn back up, which is AUD/JPY bearish. 🤔
Let’s compare AUD/JPY with the S&P 500 index.
The S&P 500
As you can see from the chart, the S&P 500 is positively.
When the S&P 500 rises, AUD/JPY rises.
When the S&P 500 falls, AUD/JPY falls.
Notice how both have turned downward? 🤔
Let’s take a look at a daily chart
Price spiked down to 60.00 and has been in a nice short-term uptrend since.
It looks like maybe AUD/JPY has topped out.
I actually thought AUD/JPY would rise to fill the March 6 weekend gap (yellow box) but it wasn’t able to get up there.
Here’s my trade idea.
I’m going to short at market
My stop loss (SL) will be 69.30.
This is right above the most recent swing high on April 14. And also above last week’s high.
I don’t have a set profit target (PT) yet but I am eyeing 64.50.
While I’d like to target something bigger, I’m hesitant at the moment because I don’t like that higher low that was made on April 2.
It gives me the hibbie jibbies that AUD/JPY may have possibly bottomed.
So if price falls, I will monitor price action if we get down to the 64.50ish area and see if I can continue to ride the downtrend further.
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.
Monday, November 18, 2019