It was another week of “risk on” for the majors who ended the week higher than their Asia open. Fueled by strong domestic data and other external factors, the week saw currency pairs revisit old highs and open the door to new levels. GU and its impressive 250 pip climb stood out as the best performer of the pack , while AU assumed its position on the other end. In other markets, Gold retracted by 3.25% with the US equities followed suit also ended the week slightly lower. Meanwhile the Syria crisis still remains on the table with the US proposing possible action as nations find their allies. No doubt that developments in this situation may affect the financial markets across the board and as such, keeping informed is not such a bad idea. This week sees the US Fed announce their tapering decision along with important data figures across the majors including Interest Rate Decisions, GDP and CPI figures. Be prepared, as this may be a week for some some serious forex movement.
GPBUSD
Opening the week at 156156, GU started the week in positive form, climbing to a high of 157317 before retreating back under 157 where it proceeded to consolidate in a tight range between 156886 – 157056 until the 10th September. This led to another re-test of 157, followed by price advancing slightly higher around 157300 where it consolidated once again in preparation for its next move. The 11th Sept finally saw GU break out from the range, printing a bullish break out candle (low of 15226 and high of 158254), closing at 157869. Selling then stepped in taking the cue from move breaching the 158 level, but further move lower got stumped upon approaching 15546, which saw buyers intervene and take control, carefully pushing price back north, breaking over the 158 once again. Support was found around 158229 (76%) and GU remained locked in a tight consolidation moving into the 12th September. Now poised at the top, price then retraced back down to 157861 early in the new session, finding new support at the 23%.
From here, GU immediately bounced back to a high of 158223 , re-attempting a move to the 76% level, which upon its first effort rejected, sending GU in a decline back to 23%. This was followed shortly with another attempt higher resulting once more in rejection, that saw GU trail lower to 157757, finding immediate support, breaking back above 158039 (DP) with the next candle. GU then continued to range briefly around DP, before making a prominent move back north in the form of a bullish marubozu (low of 158159 and high of 158665). Still not faltering, price maintained its position around 158582, where it paused before pushing higher, breaking above DR2 as a new high of 158827 was reached. With the weekend now approaching, GU retraced back to DR2 towards the end of the final NY session, closing at 158717.
It was a relentless climb for GU as it marked over 250 pips from its Asia open at 156156. When looking at the 4 hour chart, it can be seen that once price broke above 156471 and renewed support was secured, 157168 (21 Aug top) became the next target and the pursuit for high levels was now in focus. Bullish momentum was hardly swayed as attempts to follow through lower from key levels remained supported, which kept GU moving north. The 11th September marked a significant breakout when GU successfully made the transition into the 158 region upon positive economic data figures. In particular, the Claimant Count change surprised the market with a stronger than expected improvement of -32.6k vs. the forecasted -22k. This followed with an improvement in the unemployment rate which dropped from 7.8% to 7.7%. Combining both results, this re-fueled optimism over the reassurance that the BOE will be able to deliver on meeting their economics targets as Britain continues to progress within its recovery. In response, GU reached a high of 158254, while paving the way for an extension higher.
Evidently, the last few weeks have provided supporting data figures for the Pound, contributing to positive view of the BOE’s actions As such, this has led to the expectation that the British economy will expand by 1.3% this year and again by another 2% in 2014. This of course alongside the recent improvements in employment, which show support towards the possibility of interest rate adjustments being moved forward from 2016 to 2015. Given the importance, this also lends to the rational behind the recent market reaction, as the unemployment rate remains appointed as the economic indicator for adjusting Monetary Policy.
However on the other side of the argument, even with economic data demonstrating improvements in the domestic economy, this is not to say that the expanding stimulus won’t be implemented in the future. While there is excitement regarding progression, it is still too early and continual evidence supporting the recovery is still needed. As it stands, even the unemployment rate target at 7% is still only regarded as a “threshold” and not a definitive deciding factor. Furthermore, BOE Governor Carney still perceives 2016 as a practical target for initiating any action in this regard, while focus still remains on seeing a stronger economic recovery.
Moving to the charts, this week's price action shows an extension of the positive move made by GU as Britain continues in “progressive mode” .When looking at the 11th Sept on the 4 hour chart, a consistent move directly to 158297 can be seen before selling stepped in, hence illustrating the support and optimism surrounding the last few weeks of domestic data combined with fluctuations in the weakness of the US dollar. Clearly 158 has been identified as a possible topping area as seen by the bearish red candle reflecting indecision in anticipation of the upcoming US economic data figures on Friday. However, any preparation to reject the 158 level in favour of a bear move was soon stumped with the release of weaker US data figures which showed that both US retail sales and the Reuters/Michigan Consumer Index underperformed in the last round of figures.
In regards to where market sentiment now lies, new support created around 157875 (23%), led to a forceful move north , surpassing the 76% level as it made its way towards DR3 (158966), reaching a high of 158841. Currently this still shows GU in the midst of an extended correction higher that upon breaking through 159, will expose GU to the 160 level should the bullish momentum fail to exhaust. With the weekly chart ending the week with a bullish marubozu, it very possible that if resistance is not found around the 159 region, we will most likely see targets around 160 with possible containment at 160450 (MR2), having already broken through MR1 at 157639.
Looking at the immediate levels, 158585 holds as the 76% level followed by 159100 (DR1), 159550 (DR2) and then 160026 (DR3). A move breaking higher from DR3 will place 160500 into view. While a break through the previous day's high of 158841 will need to then break support at the 76% level, placing DP as the next support base at 158420. A confirmed break through DP will see 158013 (23%) re-tested with stronger bearish momentum exposing 157690 (DS1), then 157252 (DS2) and finally 156844 (DS3).
EURUSD
EU opened the Asia session in a consolidation from its open at 131617, slightly lower than the previous NY close. Starting the session in a tight range between 131660 – 131804, EU proceeded to edge up to 131890 where it stayed briefly in preparation for attempt up to 132. This saw EU slightly pause at 132175 before moving higher to 132444 , continuing to 132799 forming a bearish inverted pinbar as it drew nearer to 133. Price struggled momentarily around current levels as an attempt to push higher was met with sellers taking EU down to 132504 before buyers intervened taking EU back to the 132749. Once again this level met with resistance pushing price back lower in 4 bearish candles, finding support at 132432. The struggle for direction continued as price kept contained between the buying and selling action seen within the range of 132530 -132751, which after some time finally saw the buyers take control, breaking higher from 132610, reaching a high of 133003 with a close of 132930.
However, this new surge of bullish momentum then paused for a moment, as sellers perched just above 133 pushed price down upon its approach to 132135, forming another inverted pinbar. Upon a follow through lower, support was found just below at 132897, turning the candle into a bullish pinbar that followed with a break to a new high of 133238. Now settled above 132, price continued to range around current levels, moving into the 12th September, which saw EU break this top range and fall back to 132552, a familiar support level. This then led to another move north towards a high of 133241, which once again confirmed resistance, as price rejected accordingly, moving back under 133. This followed with a pause at 132978 (61%),before resuming lower to 132815 (38%). With support found at 132715 (23%) upon a low of 132638, price then bounced back to 132904 (DP) which led to a move back above 133078 (78%), still keeping movement contained under the high of 133211. With price now unable to break the 78% level, sellers seized the opportunity to step in, taking EU from a high of 133101 to a low of 132588. This followed through with another break below 23% upon a low of 132531. With support found at 132610 (DS1), EU then bounced back to resistance at 76%, followed by a late retracement back to DP, closing the NY session with a final price of 132918.
Like the other majors, it was a positive week for the Euro, starting the week just above the mid 131 range at 131617 and closing over 130 pips higher at 132918. Though the ascension was not as dramatic as GU, the consistent pace does reflect EU moving with the flow , yet its non-aggressive approach to its travel upwards still hints caution as price continues higher in the absence of domestic encouragement. Looking at the 1 hour chart, the most significant move for this pair stands with the breakout/bullish marubozu printed on the 9th September (low of 132109 and high of 132544) confirming the test of the 132 level, which also set the precedent for the price to maintain its position above 132, as this became the new support level. When observing this more closely, the slow incline to the top supports hesitation and to a degree, a slightly bearish tone, as price continued to challenge itself moving towards the top end of its range. As it stands, EU still continues to move higher, following the other majors, but not without caution. Without a strong catalyst to support the move, it is more likely that resistance will be found in its exploration of the higher price regions.
In regards to data, the week was rather light, with the ECB Monthly Bulletin holding the most significance. However, some other results include an improvement in the Sentix Investor Confidence with a result of 6.5 vs. the forecasted -2.8 while German CPI met expectations at 1.5% though still lower than 1.9%, the previous figure. The German 10 year bond auction also came in a little higher, showing an increase from 1.8% to 2.08%. On the downside, industrial Production came in lower at -2.1% vs. -.04% missing expectations of -0.1% and Italian GDP (Q2) remained unchanged at 2.1% vs. the expected 2.0%. With respect to a more broader outlook, Europe is still on track with keeping inflation within the 2% threshold while the more recent GDP figures show an improvement from the earlier months. Therefore, although projections for GDP show a slight decline for 2013, a 1% increase is forecasted for 2014. Meanwhile, monetary policy still remains flexible while Europe is still in the early stages of its recovery.
Looking at the immediate levels, 133051 is seen as the pivotal level (76%) with a break north seeing resistance at 133260 (DR1), followed by 133589 (DR2), 159550 (DR2) and then 133990 (DR3). A move breaking higher from DR3 will place 134301 into contention. Alternatively, a break through the previous day's high of 133211 will need to then break support at 133051 (76%), placing DP as the next support base at 132900. A confirmed break through DP will see 132691 (23%) re-tested with stronger bearish momentum exposing 132514 (DS1), then 132144(DS2) and finally 131808 (DS3.
AUDUSD
AU commenced the week in positive form opening at 92022, higher from NY's close at 91806. Starting with a re-test below 92, AU found support at 91669 in the form of a bullish pinbar, breaking out to 92239 which saw price immediately retract back to 91986. However the momentum was not lost as buyers stepped in the dips taking AU first to 92413 and then again on a dip at 92160, pushing AU to 92883 just above DP (91830). This immediately met with selling taking AU back down to 92400 which found buyers at this drop, pushing price back to test 93, first reaching 93129 and then 93180 (61%). This then followed with price retracing back to DP followed by a sharp move towards the 76% which capped price movement, sending price down to DP once again.
From here, AU then made a move to the 38% level (92750), which rejected accordingly upon buyers taking price back above DP, closing the candle at 93004. Backed by bullish momentum, the 76% level once again became the target and when broken, placed DR1(93364) firmly in view. AU managed to climb to a high of 93533 in anticipation of receiving support from stronger employment change figures forecasting an increase of 10,000 more employed individuals. However the result was a surprising disappointment, that not only missed the forecast completely but saw a decline of 10,800 instead. This immediately sparked an aggressive sell straight from the top down to 92661 in the form of a strong bearish marubozu candle that continued to follow through lower finding support at 92266. Settling in a small consolidation just under the 23% level, AU then broke higher finding resistance slightly higher at the 38% level. This saw AU close the NY session consolidating around the 23% level, closing with a final price of 92413.
Expanding further on economic data, the week started strong with China posting positive figures in Monday’s trading session including improvements in CPI for the month of August as well as positive figures for Industrial Production and stronger Retail Sales. This worked well with the earlier release of domestic data showing improvements in NAB Business Confidence (August) at 6 vs. the previous figure -3 and the Westpac Consumer Confidence also showing more optimism at 4.7% vs. 3.5%. However, this was later offset by the release of weaker figures towards the end of the week including Consumer Inflation Expectations which were lower at 1.5% vs. 2.3% and the negative Employment Change which was accompanied by a rise in the unemployment rate from 5.7% to 5.8%.
Looking at price movement on a 4 hour chart, we can see price pausing at 91875 in line with the high of the previous two peaks on the 4th September, which highlights as a potential top resistance area. However in this case, the level was used as a resting point which saw AU pause momentarily, supporting a minor attempt to break down as buyers entered upon a dip towards 91. This then saw a bullish breakout candle form from a low of 91377 to a high of 92160, provided the signal for a continuation, resuming the momentum from the start of the week. With a break above the 91900 level, higher targets have now come into view along with 93 now open as a strong possibility given that previous resistance has now broken and the next resistance level is positioned at 93203 (refer to daily chart).
When observing AU’s current position, it still suggests price moving within a correction formed upon a reversal upon a low of 88918 on the 30th August. Since then, AU has marking over 400 pips as it continues north and re-visits the 93 range. To date, I have mentioned to watch for sellers poised at key levels who are using the retracements to move with the major trend, utilizing the movement as opportunities to go short. Once again this pattern remains in effect especially given the strong reaction to domestic data. This can be seen with the bearish move towards the end of the NY session which resulted in a sell off of over 100 pips in one 4 hour candle. The fact that the weaker USD figures did not support a strong finish to week as seen with the other majors, does lend to the idea that a possible reality check over its domestic economic position may be starting to factor in. As such, there is still a prevailing bearish tone underlying any correction higher and this is seen with AU still selling at the highs.
Since its fall from parity to the break of 90, a significant correction has always been anticipated along with the high 80 area being identified as a possible bottom or attractive corrective entry point. With no firm indication from economic data or the charts that a bottom has been printed, it is still a very plausible scenario to see the lower price regions re-visited in due time. Another break below 90, will most certainly place 87 on the target list having failed to produce a double bottom somewhere a little higher. However having said this, close observation around the 90 level is still advised.
Looking at the immediate levels, 92608 holds as the 76% level, with a break north seeing resistance at 93200 (DR1), followed by 94003 (DR2) and then 94493 (DR3). A move breaking higher from DR3 will place 195201 into view. Alternatively, a break through the previous day's high of 92725 will need to then break support at 92608 (76%), placing DP as the next support base at 92962. A confirmed break through DP will see 92345 (23%) re-tested with stronger bearish momentum exposing 91875 (DS1), then 91389 (DS2) and finally 90586 (DS3).
USDJPY
It was another positive start for UJ, opening at near 70 pips higher at 99695, from NY's close. This then led to an attempt to 100, reaching a high of 100093 before sellers stepped in around current levels taking UJ back down to 99619 in the next candle. This followed by a steady consolidation retracing slowly towards DP (99458), reaching a low of 93309 as support. UJ then moved higher to DP where it stayed until breaking out on the 10th September from DP straight to the 76% level (99751) reaching a high of 99941 (DR1). With bullish sentiment clearly still prevailing, UJ then moved higher towards 100429 (DR2) reaching a high of 100597 on the 11th September. However this met with uncertainty, and unable to push higher, saw UJ decline steadily, first pausing around 100254 before breaking lower below 100 (99965). This led to further consolidation that saw UJ move cautiously back towards DP (99500) and continue south back towards 99, finding support upon breaching the 99236 ( 23%),forming a pinbar at a low of 99189.
UJ continued range at current levels with another attempt to the 76% level following shortly after. This saw UJ reject a high of 99716, keeping price contained under 76% as resistance. This followed with an immediate move south with price closing at 99508, setting a temporary bias in favour of a short, following through lower within the next 2 candles as it broke the 23% level, reaching 99006 just above DS1 (98969). With new support found at DS1, UJ then reversed its direction north, climbing back to DP and then higher to the 76% level, where price paused before one more final attempt towards 100. However this attempt only managed to reach 99969 before meeting with resistance, taking UJ back to 99680 in the next candle. This then followed with more ranging at current levels before moving back lower, finding final support at the 23% level, closing the NY session at 99354.
Looking at the charts, it shows UJ reaching familiar territory having reached a high of 100597 on the 11th September, aligning with the top of the recent range during early July before it fell to the 97 region moving into the month of August. Once again on approach to the 100600 level, UJ broke down, sending price lower in a steady decline back towards 99, finding temporary support at 99189 before pushing lower to reach a new low of 99006 just above DS1. Holding support just above 99, UJ made another attempt towards the 100 level (psychological level), reaching a high of 99969 on the 13th September, which formed an inverted doji, followed by further selling, taking UJ back towards DP (99500), where it found support at the 23% as it tested the parameters of the intra-day top and bottom levels. With a decline over 120 pips from the high of 100597 made on Tuesday, it can be seen that bullish sentiment for UJ has not managed to sustain as the other majors ascended higher during the same time frame. Clearly favour has not been in support o the USD with risk firmly in place which has been attributed by a few factors one being the weakness in the USD over the release of weaker US economic figures which has helped to maintain the bullish sentiment and push the higher key levels of the other majors which saw new highs reached over the week.
When observing economic data for the US over the longer term, it can be seen that perhaps the US Fed has been too lenient in their projections without fully accounting for the external factors that have played an important role in the global economy. There has been more than one instance of economic projections missing its target, which is particularly the case with its projections regarding economic expansion which saw the US economy expand at 3.2% vs, 4.2% in 2011, 3.4% vs. 4.5% in 2012 and for 2013, the projection stands a little lower at 2.9%. Looking more closely at data, we have seen NFP figures disappoint along with a reduction in productivity and capital spending. With the US Fed due to announce their “tapering” decision later in the week, a general consensus does support some sort of action in this direction, though this must not be misconstrued for a sign of strong economic recovery. In fact, as it stands, we are still seeing mixed figures come out of the US along with a few weaker numbers. The most recent releases being last Friday’s US data which saw retail sales lower at 0.2% vs. 0.4% and the Reuters/Michigan Consumer Sentiment Index which missed the mark completely at 76.8 vs. the forecasted 82.
As such, the very action of tapering has questioned whether the economic data is actually strong enough to warrant the taper. Not too long ago there was expectancy for the NFP to deliver an improvement in the employment status, however it failed to do so, printing a weaker figure of 169 vs. a forecasted 180 instead. Though this disappointment was quickly overcome, as speculation shifted to the improvement in the unemployment rate which saw a reduction at 7.3% vs. 7.4%. So far, this is perceived as suffice in its contribution to green lighting the commencement of tapering later this month.
Looking at the immediate levels, 99784 holds as the 76% level, with a break north seeing resistance at 99850 (DR1), followed by 100354 (DR2) and then 100803 (DR3). A move breaking higher from DR3 will place 101205 into view. Alternatively, a break through the previous day's high of 99969 will need to then break support at 99784 (76%), placing DP as the next support base at 99399. A confirmed break through DP will see 99371 (23%) re-tested with stronger bearish momentum exposing 98913 (DS1), then 98472 (DS2) and finally 97883 (DS3).
No comments:
Post a Comment