This may be another volatile week ahead, as we wait in anticipation upon the developments of the US Debt Ceiling crisis which has yet to find a resolution. As the deadline draws near, the current lack of progress will continue to air uncertainty as many keep cautious ahead of the outcome.
Possibilities:
a) Should the US avoid a government shutdown, this may spark relief across the financial markets sending momentary strength to the USD
b) The announcement of a partial government shutdown may send a message of internal instability to the financial markets (which is already the case) and see investors move away from US based assets including its domestic currency, as correlation between the US stock market and the USD re-align once again.
c) If the debt ceiling is raised, this may provide a collective sigh of relief as the US will now be able to meet their payment deadlines resulting in momentary strength in favour of the USD, however it may also carry additional consequences given that the US will be now be carrying more debt on its shoulders. This includes the possibility of a future ratings downgrade if they are unable to maintain payments. This will once again see a sell off in the USD.
Either way, the outcome and resolution to this crisis holds great potential for strong movement across the the FX majors. To see how the markets reacted to the last Debt Ceiling crisis, refer to August 2 2011 on to chart i.e. (UJ).
Looking at the week ahead, it will be busy in the next few days with the central banks announcing their Interest Rate decisions and the US NFP figure due out on Friday. A few opportunities this week to capture a few pips.
Goodluck!
Possibilities:
a) Should the US avoid a government shutdown, this may spark relief across the financial markets sending momentary strength to the USD
b) The announcement of a partial government shutdown may send a message of internal instability to the financial markets (which is already the case) and see investors move away from US based assets including its domestic currency, as correlation between the US stock market and the USD re-align once again.
c) If the debt ceiling is raised, this may provide a collective sigh of relief as the US will now be able to meet their payment deadlines resulting in momentary strength in favour of the USD, however it may also carry additional consequences given that the US will be now be carrying more debt on its shoulders. This includes the possibility of a future ratings downgrade if they are unable to maintain payments. This will once again see a sell off in the USD.
Either way, the outcome and resolution to this crisis holds great potential for strong movement across the the FX majors. To see how the markets reacted to the last Debt Ceiling crisis, refer to August 2 2011 on to chart i.e. (UJ).
Looking at the week ahead, it will be busy in the next few days with the central banks announcing their Interest Rate decisions and the US NFP figure due out on Friday. A few opportunities this week to capture a few pips.
Goodluck!
GBPUSD
GU started the week fairly optimistic until the release of weaker GDP figures, which led to a sell off from the top to a low of 159989. However, this move quickly reversed upon a news headline quoting Mark Carney as saying that he did not think there would be a need for further easing. Having retraced from the highs back to the lows upon the GDP figure, the news bolstered the pair back above 161, reaching a new high of 161454, closing NY in positive territory.
In regards to what to expect this week,there is a possibility that we may see a retracement from the highs should domestic data disappoint and break the positive streak, or if the USD find strength upon risk aversion or developments in the US. There is not much movement in Asia as buyers remain a little weary. I have noted 161454 as the level to watch,but wait for a pullback and the reaction to this pullback before considering entry.
Level to Watch:
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161454
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What to look for:
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BUY: 161454(break above)
SELL: 161100(break below)
161454 represents a key level that will act as either support or continuation for a bearish reversal. What to look for: Look for a retracement back to this level. A break below will see lower targets come into play while support at this level will see the bullish run continue higher A break clean break above 161454 after a pullback will see GU reach for higher targets while supported at a higher price level.having found higher support. A break above 161454 will then see 161904 come into view, followed by 162394 and then 163346. Even with current moment in favour of risk, there will be sellers at the higher key levels looking for opportunities to short GU back towards 160. Alternatively, a bearish scenario will need to see a break lower through 161100 (76%) followed by a break through 1160925 (DP) and then 160567(23%). Breaking through the 23% level, will expose: the following targets: 160407, 159456 and then 159000. |
Bullish Levels:
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T1: 161904, T2: 162394, T3: 163346
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Bearish Levels
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T1: 160407, T2: 159456, T3: 159000
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Potential Catalysts:
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Mortgage Approvals (30 Sept), PMI (Oct 1), PMI Construction (Oct 2)
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EURUSD
Unlike the Pound who remained resilient at the top moving into the new trading week, EU opened the Asia session lower and has so far produced very small movement in either direction. Currently price sits at 135 (23%) which holds great potential as a support level. However a break lower will instigate further selling towards the targets noted below.
Level to Watch:
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135220
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What to look for:
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BUY: 135500 (break above)
SELL: 135000 (break below)
Watching 135220 (DP), a move higher from this level will see 135426 (76%) tested for resistance. If this level breaks higher, enter on a clear break above 135550. This will will then see 135639 (previous day high) tested and breaking higher from here will open the following targets: 135710, 136123 and 136634.
Alternatively, a break through 135220(DP) will see 134950 (23%) as the next support level. A confirmed break through the 23% level, will promote further bearish momentum and expose the following levels: 134800, 134287 and 133874. |
Bullish Levels:
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T1: 135710, T2: 136123, T3: 136634
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Bearish Levels
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T1: 134800, T2: 134287, T3: 133874
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Potential Catalysts:
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CPI, Retail Sales, GER PMI, GER Unemployment Change, GER Unemployment Rate (30 Sept), ITA Unemployment (Oct 1), ECB Interest Rate Decision (Oct 2), PMI, Retail Sales (Oct 3)
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AUDUSD
AU commenced
the week lower than its NY close, opening the Asia session at 93678 from its NY close 93912. So far we are seeing AU continue its move away from the high of 95281 made after the FOMC announcement last week. With price now back at the 93 level, a break lower will promote a continuation of the major bearish trend with 91, and 90 in further view. However with the RBA due to announce the Interest Rate decision tomorrow, we may see this completely turn around, should no change be made to the cash rate. A hold of the current cash rate will mean the the recovery is still progressing and that the current standing of the domestic currency has not interfered with its role in "re-balancing" the economy.
If the rates do reflect no change and the market takes this favourably, we may see AU move north targeting previous key levels as retracement tops. With improvements in the global economy now starting to take form, the RBA may feel less inclined to be protective about the domestic economy, especially if combined with steady progress within its own domestic recovery. If this is the case, then AU will find support around current levels in preparation for another move north. However, any retracement higher should still be viewed as "corrective" until further confirmation both technically and fundamentally are in place.
If the rates do reflect no change and the market takes this favourably, we may see AU move north targeting previous key levels as retracement tops. With improvements in the global economy now starting to take form, the RBA may feel less inclined to be protective about the domestic economy, especially if combined with steady progress within its own domestic recovery. If this is the case, then AU will find support around current levels in preparation for another move north. However, any retracement higher should still be viewed as "corrective" until further confirmation both technically and fundamentally are in place.
Level to Watch:
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93340
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What to look for:
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BUY: 933600 (break above)
SELL:93152 (break below)
A break above 93340 (DP) will see AU test 93561 (76%). Moving north from this level will then see AU extend its retracement, opening the following targets: 93760 , followed by 94410 and then 94800.
Alternatively, a break through 93340 (DP) will then see the next support level sitting at 93152 (23%). A break through the 23% level will promote bearish momentum exposing the following levels: 92695, 92303 and 91654.
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Bullish Levels:
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T1: 93760, T2: 94410 , T3: 94800
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Bearish Levels
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T1: 92695, T2: 92303, T3: 91654
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Potential Catalysts:
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TD Securities Inflation, AIG Performance (Sept 30), Retail Sales, RBA Interest Rate Decision, RBA Rate Statement (Oct 1) New Home Sales, Building Permits, Trade Balance, AIG Performance of Services Index (Oct 2)
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USDJPY
It has not been a good start for UJ, who commenced this new week opening lower from its NY close. Currently positioned at DS1, UJ holds a bearish bias based upon the current uncertainty in the US. With the non farm payroll figure due at the end of the week, this may be the catalyst to boost USD on the back of positive domestic data. However, a boost a may also come earlier in the form of supporting developments with the debt ceiling crisis.
98465 (DP) stands as the level to watch for direction.
98465 (DP) stands as the level to watch for direction.
Level to Watch:
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98465
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What to look for:
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BUY: 99003 (break above)
SELL: 97600 (break below) or upon a retracement back to 98465(breaking DP)
A break above 9903 will promote bullish momentum level which will see the following targets come into view: 999475, followed by 99885 and then the psychological 10000 level.
Alternatively, a break lower through 98465(DP) will expose the following levels: 97400, 96790 and 96454. |
Bullish Levels:
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T1: 99475, T2: 99885, T3: 100000
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Bearish Levels
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T1: 97400, T2: 96790, T3: 96454
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Potential Catalysts:
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Chicago Purchasing Manager's Index (Sept 30)JPY Household Spending, JPY Unemployment Rate (Sept 30), PMI, Construction Spending, ISM Manufacturing PMI, ISM Prices Paid (Oct 1), Mortgage Applications, ADP Employment Change, ISM NY Index, JPY Foreign Investment, JPY Folreign Investment in Stocks (Oct 2), FED Speech, Initial Jobless Claims, Factory Orders, Non Manufacturing PMI (Oct 3), NFP, Average Earnings, Average Weekly Hours, Unemployment Rate (Oct 4)
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* Please note that all trade set ups provided in this post are suggestions only and no responsibility will be taken for any loss of money in the FX markets. If you have any feedback or comments, please feel free to leave a comment or email liveforextradingmarketanalysis@gmail.com..
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