Weeks like this can be frustrating for trend-following traders as ranges get compacted. The good news is if you can remain disciplined and avoid getting chopped up, there will be an explosive range expansion to look forward to in the coming sessions or days. Lots of central bankers talking today will probably make today's trading very similar to yesterday’s action.
Today’s London session will be starting quietly as the markets wait for European news from the ZEW. German ZEW economic sentiment for November is expected to have dropped from the previous month. Euro Area ZEW's economic sentiment has been dropping for the past 5 months and is probably going to drop again.
The EURUSD has been trading in a tight range for over a week now, so an extension of the range after this compression is getting more likely. It may spike on the ZEW data but the real move will probably come after ECB President Lagarde speaks around 1 pm (GMT).
The forex heatmap is leaning towards a risk-off day with moves out of the Antipodean currencies and into the yen and Swiss franc. Euro, the dollar is mixed, but strength is found in the CAD and pound.
The ActivTrades sentiment indicator also helps define where retail traders are looking for value, as the sentiment is for the euro to strengthen against the US dollar but weaken against the yen. So, looking at the USDJPY could be a good idea today too.
I am still waiting to see if the bull flag pattern breakout works out, but so far the USDJPY has been tracking lower with the US 10-year yields as Notes and Bonds rise. Today there is a US 10-year bond auction so we could get a reversal or continuation trade after that.
Brent oil could be about to break out to the upside of its own daily bull flag. Recently there has been a positive spin on the world's 2nd largest economy as China’s exports rose significantly. This is good news for global macroeconomics as it shows that inventory is being shipped out of China to the rest of the world. Meaning supply chains and bottlenecks will ease and inflationary pressures will come down.
Getting global supply chains back to pre-pandemic levels will side business and be great for the economies. Which is good for oil. The USA has also dropped some restrictions on who can enter the country, so flights out of the UK to the USA have restarted. This is great for air travel and energy prices as demand will begin to increase.
This afternoon there is US PPI data as well as central bank talking heads, US EIA STEO with the US API crude stocks ending the day.
With all of this happening, I am expecting to see some moves in the USDCAD, but it may not happen until all the news is out, meaning a volatile end to the trading day. Currently, the USDCAD daily price action is finding it hard to get through the resistance levels and the ActivTrader sentiment indicator is telling anyone who is a contrarian to stay short.