Please find below the trade recommendations for this week. Given that the majors are sitting at quite high levels, my preference is to see a retracement from the highs during the early sessions and assess price movement from the lower levels while still maintaining breaks at the higher levels as entry criteria for continuation of current bull tends.
Last week was dominated by USD weakness following the US events and the ratings downgrade and it is possible that we may see some stability or support for the USD this week, given that the US data is now back on the calender and the majors who have taken full advantage of the opportunity to advance, opening this new week poised at the highs. On my radar in particular is AU, as the pair continues in its quest to seek a top while drawing closer to higher key breaking areas. I will be especially observant over Monday/Tuesday given that the NFP figure will be released tomorrow and CPI figures in the days ahead, which indicate a weaker figure. However in addition, AU has aggressively advanced within 8 consecutive candles and in any event will be due for a pullback.
Last week was dominated by USD weakness following the US events and the ratings downgrade and it is possible that we may see some stability or support for the USD this week, given that the US data is now back on the calender and the majors who have taken full advantage of the opportunity to advance, opening this new week poised at the highs. On my radar in particular is AU, as the pair continues in its quest to seek a top while drawing closer to higher key breaking areas. I will be especially observant over Monday/Tuesday given that the NFP figure will be released tomorrow and CPI figures in the days ahead, which indicate a weaker figure. However in addition, AU has aggressively advanced within 8 consecutive candles and in any event will be due for a pullback.
GBPUSD
GU started the week at 159702, finding support at a low of 158939 on the 16th October. From here, GU reversed to the upside upon an 80+ pip break out as it continued on its bull run taking price back over 161, where it consolidated before extending higher to 162246. Meeting with rejection at this level, GU proceeded with an extended decline back below 162, settling around the the mid 161 area.
The release of stronger CPI figures on the 15th Oct re-ignited a bout of confidence, which saw price move back towards 160 from 159141. However, this was offset by the release of mixed economic data later in the week, which included the Claimant Count reflecting a positive change at -41.7k vs. -25k (forecast) and average earnings which were lower at 0.7% vs. 1.2% (previous figure). Meanwhile, the unemployment rate reflected no change at 7.7%. This brought strength to the Pound, which when combined with current USD weakness, prompted GU to reject a further decline and instead climb steadily to a strong finish to the week.
EU commenced the week stronger opening at 135592, making a high of 135973 before retracing back towards the mid 135 range where price consolidated before breaking lower in a bearish 3 candle move to a low of 134789. EU paused briefly around these low levels, before re-aligning back with the open. However, this prompted another attempt lower, which met with the same support level forming a double bottom. This then led the way to a bull run that saw confirmation once breaking above 135669. From here, EU extended its ascension towards 137, reaching a high of 135035, before falling back below the round figure.
To date, 13710 has acted as a strong rejection level that has contained EU previous from further progression higher. The lst attempt at this level can be seen on the 1st February which saw price reject from a top of 137104. This led to an impressive decline down to 127442. Currently, though the Euro zone has shown economic improvement over the last few months, it still qualifies as being within its "infancy" of its recovery, with economic progress expected to remain at a slow pace. A such, it is more than likely that any advancement higher will more than likely be due to USD weakness, with the 13710 area still holding its position as a strong resistance level. A break above here, may see further movement north, however this will has a high probability of being be short-lived.
The US has so far delivered a series of non supportive events for the USD. From the postponement of tapering in September, to the Fiscal Crisis and then there was the US government shutdown. The lack of key US economic data also didn't help the situation for the USD either. If there was even any plan to seek momentary relief, this was shot down further by the announcement of the first US ratings downgrade issued late last week. However, with the US government back to business as usual and key US economic data now on the economic calendar, there is the potential to see some favourable changes this week.
The release of stronger CPI figures on the 15th Oct re-ignited a bout of confidence, which saw price move back towards 160 from 159141. However, this was offset by the release of mixed economic data later in the week, which included the Claimant Count reflecting a positive change at -41.7k vs. -25k (forecast) and average earnings which were lower at 0.7% vs. 1.2% (previous figure). Meanwhile, the unemployment rate reflected no change at 7.7%. This brought strength to the Pound, which when combined with current USD weakness, prompted GU to reject a further decline and instead climb steadily to a strong finish to the week.
Level to Watch:
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162049
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What to look for:
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BUY: 162246 (break above)
SELL: 161900 (break below)
A break above 162246 will promote another bullish move north, placing the following targets in view: 162740, 162888, 163910. Breaking above 163910 will expose 164199.
Alternatively,if GU breaks below 161900, This may promote a retracement or move lower with the first test of support at 161609 (23%). Breaking this level will expose the following targets: 16091 followed by 159920, 159640 and 158181. |
Bullish Levels:
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T1: 162740, T2: 162888, T3: 163910
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Bearish Levels
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T1: 159920, T2: 159640, T3: 158181
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Potential Catalysts:
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Public Sector Net Borrowing (22 Oct), BOE Minutes, BOE MPC Vote Hike, BOE MPC Vote, BBA Mortgage Approvals (23 Oct), GDP (YoY) (Q3), GDP (QoQ) (Q3)
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EURUSD
EU commenced the week stronger opening at 135592, making a high of 135973 before retracing back towards the mid 135 range where price consolidated before breaking lower in a bearish 3 candle move to a low of 134789. EU paused briefly around these low levels, before re-aligning back with the open. However, this prompted another attempt lower, which met with the same support level forming a double bottom. This then led the way to a bull run that saw confirmation once breaking above 135669. From here, EU extended its ascension towards 137, reaching a high of 135035, before falling back below the round figure.
To date, 13710 has acted as a strong rejection level that has contained EU previous from further progression higher. The lst attempt at this level can be seen on the 1st February which saw price reject from a top of 137104. This led to an impressive decline down to 127442. Currently, though the Euro zone has shown economic improvement over the last few months, it still qualifies as being within its "infancy" of its recovery, with economic progress expected to remain at a slow pace. A such, it is more than likely that any advancement higher will more than likely be due to USD weakness, with the 13710 area still holding its position as a strong resistance level. A break above here, may see further movement north, however this will has a high probability of being be short-lived.
Level to Watch:
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136960
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What to look for:
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BUY: 136588 (retracement lower first
followed by break above)
SELL: 136550 (break below)
Given that EU is currently trading near a very prominent resistance level (13710), I am hesitant in recommending a bullish play from current levels. Therefore, an intra-day setup would be a much safer option. If EU pulls back to 136693 with price action supporting a rejection around this level, there may be a nice long opportunity back to 136930.This target will either contain further upside movement or promote another bullish attempt. Therefore only after rejection of the low as well as breaking above the 76% level, should you look for an extended bullish play with an entry above 137035. Breaking above this level will then place the following targets in view: 137494, 137620 and 138.
Alternatively, a break below 136693 (23%) will see the first test of support at 136303. Breaking below this price will set the following targets: 135627, 135340 and 134411. Breaking below the last well, will see an extended decline to: 1333976, 122837 and 133735. |
Bullish Levels:
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T1: 137494, T2: 137620 T3: 138000
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Bearish Levels
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T1: 135627, T2: 135340 T3: 134411
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Potential Catalysts:
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10 YR Bond Auction, Consumer Confidence, (23 Oct), European Council Meeting, Markit Manufacturing PMI, Markit PMI Composite (24 Oct), European Council Meeting, GER IFO Expectations, GER Current Assessment (25 Oct)
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AUDUSD
No relief for AU this week as it opened the week lower, only to steadily progress higher throughout the week with yet a strong finish of 96736 at the close of the last NY session. Riding upon the prevailing USD weakness which was amplified by the ratings downgrade later in the week, AU extended its correction towards the 97 price level, despite the preference and commentary provided by the RBA.
As such, this places AU in a position to possibly extend higher than current levels, however with NFP due long with CPI figures in the latter part of the week, AU may possibly just consolidate or retrace lower ahead of economic data, especially given the weaker CPI forecast. So far AU has already provided a decent correction from the low 88 region, which therefore, places AU on watch for rejection upon further advancement higher. Domestic data will be important in determining direction, however will share the spotlight with the USD, who still have centre stage. This week, UJ opened at 98305 which upon a dip to 98092, reversed north, reaching a high of 98696 before retreating back within range at 98363. A break of this level then saw UJ find new support at the 23% level, which boosted UJ to 98999, forming a double top just under the 99 price level. This then led to a prominent decline from 98999 to 97551, with price ending the week consolidating around the lows at 97790.
As such, this places AU in a position to possibly extend higher than current levels, however with NFP due long with CPI figures in the latter part of the week, AU may possibly just consolidate or retrace lower ahead of economic data, especially given the weaker CPI forecast. So far AU has already provided a decent correction from the low 88 region, which therefore, places AU on watch for rejection upon further advancement higher. Domestic data will be important in determining direction, however will share the spotlight with the USD, who still have centre stage. This week, UJ opened at 98305 which upon a dip to 98092, reversed north, reaching a high of 98696 before retreating back within range at 98363. A break of this level then saw UJ find new support at the 23% level, which boosted UJ to 98999, forming a double top just under the 99 price level. This then led to a prominent decline from 98999 to 97551, with price ending the week consolidating around the lows at 97790.
The US has so far delivered a series of non supportive events for the USD. From the postponement of tapering in September, to the Fiscal Crisis and then there was the US government shutdown. The lack of key US economic data also didn't help the situation for the USD either. If there was even any plan to seek momentary relief, this was shot down further by the announcement of the first US ratings downgrade issued late last week. However, with the US government back to business as usual and key US economic data now on the economic calendar, there is the potential to see some favourable changes this week.
Level to Watch:
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98010
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What toa look for:
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BUY: 98152 (break above)
SELL: 97693 (break below)
A break above 98010 will promote bullish momentum level with a long entry above 98152. This will open up to the following targets: 98584, 98778 and 99 (psychological level). Breaking above 99 will expose 99514 and 100066.
Alternatively, a break through 97693(23%) and 97551 will see UJ target the following levels:97161, 96948 and 96616.
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Bullish Levels:
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T1: 98584, T2: 98778, T3: 99 T4:99514
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Bearish Levels
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T1: 97161, T2: 96948, T3: 96616
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Potential Catalysts:
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Home Loans (14 Oct), RBA Meeting Minutes, Westpac Leading Index (15 Oct), NAB Business Confidence (17 Oct)
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