is pleased to provide you expert analysis and forecasting for the upcoming week from our resident analyst "Sharp Shooter"

Tuesday, November 5, 2013

Market Analysis: WC 4th November 2013

Last week saw US stocks  mixed and Gold trading lower, taking the opposite side of the   rising DXY index. In the FX markets, the USD found some strength sending the majors against the USD,  obtained from positive economic dat   a results, sending the majors against USD down during the last NY session. This week sees another round of important data for the majors including the ECB who are due  to take the stage with their economic forecasts  alongside focus on the US and possible tapering in the month ahead. Central banks such as the ECB, RBA and  BOE will also release Interest Rate Decisions and offer insight into current domestic economic conditions with their Monetary Policy Statements.


GU started the week opening at 161610 moving to a high of  162072 during the start of the Asia session, which met with strong rejection taking price down to a low of 161349 within the next 3 hourly candles. From here a new base  was created, prompting a continuation with the attempt to form a bearish marubozu, but instead formed a bearish candle (high of 161431 and low of 160364). Rejecting at the low, GU then closed  the candle higher at  160949. From here, GU then re-grouped at current levels forming another lower base around 160804, leading to a decline to a low of  160234. Price hovered in this area first before moving slightly higher, meeting once again  with the bottom of the previous higher base  on two occasions, creating a double top at 160681 on the 31st October.  Following through from an inverted pinbar printed at the top, GU then broke lower through the 76% level (160532) in the form of a bearish marubozu. From here, price dropped even lower to DP (160326), aligning once again with the previous support level. The 1st November saw price create a bear move upon the formation of a bearish marubozu (high of 160389 and low of 160083), leading the way to a descent to DS1 and to target 1 at 160004. Price paused momentarily before continuing on in the form of another bearish marubozu (high of 160062 and low of 159520)indicating that the move was still in play, and a continuation lower was the next step. This  saw GU then reach the next target at DS2 (159709). However this level still did not mark the completion of the move, as price once again paused  for 2 candles before  attempts to create support followed with a dip to 159320 (around DS3 and T3).  Failing to hold, another surge of selling occurred taking GU to close the NY session just under this target at 159211.

The week commencing the 21st October,  saw GU contained within a range between 162255 – 161143  following its decline from the double top formed on the 23rd October. The 4 hour, we can see the same pattern but in reverse, with GU commencing a decline from the 3rd October and finding support around 159578 (MP), to reversing back north on the 17th October, reaching a high of 162244 on the 18th October, in line with the previous peak. This also shows price suspended near the top region of price movement on both the 1 hour and 4 hour while the daily still reflects GU locked in a bull trend from the 10th July with price not making  higher highs, but rather settling back in line with the previous peak formed at the beginning of October.  The descent initiated on the 24th October shows price replicating the ascension from the 22nd October, with a  complete fill of the whole bull move to the point of origin. This then saw  price being locked within range following the rejection of the mid 162 area which subsequently  led to a fall of nearly 100 pips the very next day, breaking the bullish momentum for the moment.

When looking at current price on the 4 hour chart we can see price has now made a complete retracement back to the previous base, completing a double top 162560, with price now aligned with the bottom at 159106. With price current poised around DP (159637),  movement does seem to favour the downside in the more immediate time frames. Only a move back above 160 would place GU within a bullish view. However, a break below 159 will confirm further movement south, with price targeting the 158 (DS2). Looking at GU on the daily we can see the bull move instigated from the 9th June from a low of 148648 now reach the top base from the start of the decline on the 3rd January, having surpassed the 3 peaks and breached the 157 price level as it made its way back towards 160 and higher.  This highly reflects the shift in sentiment driven by the output of positive economic data that has seen support the progress of the UK recovery since the reign of Mark Carney as the new BOE Governor.

Relating this to price movement, it does place GU within the context of a bullish view on the longer time frames  and a breach over 162568 will see GU continue the bull run higher.  However, in the interim, this does not hold the same view. When observing price movement on the 1 hour we can see GU in a clear decline from 162560 on the 23rd October once having broken lower through 161208 which confirmed the direction of price movement, which saw the steady decline back between 160130 - 160454, where price paused before resuming lower on the 1st November towards 159, reaching a low of 159106. Currently price sits just under DP  and a break below 159405 followed by a break below 159081 will see GU test and attempt to break the 159 support level in an effort to reach the lower targets positioned in the 158 area. Given that the higher time frames  are highly suggestive of a different perspective of price movement, I would expect that any move lower towards these new lows will be met with strong buying interest, especially if support from fundamentals remain in place. Confirmation will be reliant on a  re-test and rejection of the lows which should push the pair back towards 160 with the highs back in view. However, this may take time, given the global uncertainty that looms and the highly reactive market which has seen price react impulsively to data first, then to the current market environment second.

So this now bring us to the factors are responsible for the move. Firstly the US and the ramifications of recent events that have placed the US in a position of uncertainty as market participants opted against backing the US in light of rating downgrades, the recent fiscal crisis, government shutdown, weaker economic data figures i.e. NFP and of course the September tapering that did not go ahead.  The lack of certainty behind the US recovery, has been the strongest catalyst more recently, responsible for the aggressive bullish moves against the USD, witnessed since the FOMC announced that they would not commence tapering in September as widely expected. However, will this change now that "tapering" has been brought back to the table? What will happen if the US Fed do actually commence tapering in December as some are already speculating? Will it re-ignite a backing for the USD? For certain, the movements in the US will play a key role in influencing direction as already seen with the overbearing weakness in the USD that fuelled the majors to these new highs not too long ago. For GU, this was just an added incentive on the back of stronger economic data such as the progressive improvement in the Claimant Change,  reduction in public sector net borrowing (€9.368B vs. €10.808B), increase in Mortgage Approvals (43k vs. 38.6k) and improvements in retail sales and the   GDP figures which showed an improvement from 0.8% from 0.7%.    

Looking at the UK economy, the reign of new BOE Governor Mark Carney, has  been well received  as positive changes in the UK economy align with his arrival and show support to the UK recovery.  The optimism behind the recovery has even brought speculation in regards to the nation actually meeting their targets ahead of their intended timeframe. The most recent minutes released by the BOE, reflected improvements in employment, household and businesses which was further supported by Governor Carney in one of his latter press conference speeches, he stated that the improvements of the economy over the last two quarters has helped in positioning the UK towards the "top end" of major economies. This does indicate not only the capability for the UK to meet its goals but also that external environmental factors have not been a major inhibitor in its recent progression.  As such, this also strengthens the idea that the UK will consider increasing rates and adjusting stimulus in the near future. The conservative approach that the BOE has adopted in creating reforms to reshape their economy has also seen the UK adhere strictly to its own indicators as performance measures, rather than market expectancy or reliance of preliminary data to re-adjust their decision.

This is particularly seen with last figures, which once again saw the UK make  no changes to the rate or asset purchasing program, affirming the UK's stance in holding the withdrawal of  stimulus in light of stronger evidence of economic growth. This is, along with  the 7% unemployment target remaining intact as the major indicator.  Within the August forecast, a modest improvement was expected across both consumer borrowing and  income growth despite more recent positive figures. In relation to the concerns regarding a "housing bubble" over the "Help to Buy" program, an initiative to assist with housing purchasing, it has been stated that the FPC have tools in place to address this, should the situation require action. However in a nutshell, according to Governor Carney " the UK economy is still just coming back to its level in 2008, growth, while it’s improved, while it’s strengthened, is still relatively modest relative to historic recovery".  In regards to recent economic data, The October UK manufacturing PMI came in lower at 56.0 from 56.3 in September, however with production indices still on track combined with the recent 0.8% GDP growth recorded Q3 and of course the  continuous improvements in employment,  this lends favourably to the Pound. This week sees the BOE announce the new Interest Rate Decision and Asset Purchasing Facility which currently still stands at £375.  

In regards to where GU sits on the charts. Having  fallen back to the 159 price level and GU opening the week with limited movement between  23% and  DP, it is highly suggestive of uncertainty which may be due to economic data due for the Pound later this week. If following previous event related movement, a positive reaction will see GU make its way back to 160. A break above 160130 will indicate bullish momentum that should take GU higher towards the 161 price level. However a continuation of this decline will be confirmed by a break of  159081 with targets towards  158.


EU opened the week at 138085 continuing  within the consolidation at the highs from the previous  NY session. This consolidation continued into the first day of trading for the new week before EU finally broke out topside (low of 137550 and high of 138130), however was immediately met with sellers upon the break of 138 to 138110 in the next candle which instigated the start of the reversal  as price now found its direction upon the break lower from the consolidation period and follow through with the next candle to a low of  137390.  This then saw EU range at current levels before attempting another break higher with a move back to 137677 and pause here  throughout the 30th October until a break lower from 137814 tested a break through the 137 price level, reaching  136952, which again saw the candle close higher at 137266.  This then saw price maintain at current levels (around 137302), aligning once again with the previous range before finally breaking lower to the 76% level  (136996) on the 31st October. Price hovered here  momentarily before a surge of selling set in upon the break of the 76% level which saw price create a 3 bearish candle move to 136372 (38%), where price paused before resuming with a steady decline, breaking the 23% level ( 136134)  followed by a continued breach through the previous day low at 135743.  This then saw price take a breath, before continuing in its descend , taking EU to DS1 (13526), closing the NY session at a final price of  134849. 

When looking at EU more closely, we can see price locked in a tight consolidation from the 17th October moving into the next week which saw EU breakout over 100 pips  in a bullish 3 candle move from  136720 to 137850 on the 22nd October. From here we can see an attempt to sell from a double top formed on the 23rd October upon the approach to the 138 price level at 137922.  Support was then found  at 137410, springing the pair back north towards 138.  However, the consolidation just under 138, reflects the hesitation in breaking above this level which it only managed to do on the 24th October but  not with the same excessive momentum propelling EU from the upper 136 region. Moving towards the 138 region, we saw price movement reflect uncertainty as  the pair hovered at highs, only managing to break the 76% level (138104) to reach resistance at 138247 around DR1. There are at least 3 notable attempts to short from 138 that rejected , keeping price sustained in this consolidation just under the 76% with  the final rejection at DR1 finally succeeding as the session grew to a close. This saw price break back below DP (137927) to finding support at the 23% level (137782), bring EU back to DP with a final close around the 61% at 138012.

Moving to the daily, we can see the  break of 134033 on the 18th September, paving the way for a bull run once it broke higher to  135415 on the 18th September. This saw  price maintain above the mid 136 point, finding support at 134628,  propelling another installment to the topside. The weekly also showed price breaking slightly above the previous peak top of 137105 and just below DR3 at 138516. This is combined with a small tick upward  in the EURUSD strength meter, indicating  marginal strength against the USD on the longer time frames.  However, this was  not reflective on the 1 hour, which showed the USD stronger than the Euro. On observation, we have seen  the currency  supported by the enthusiasm of the market participants as the Euro embarks on a clear ascension since breaking out from a low of 131041 on the 6th September. This is in high  contrast to the bearish pessimism surrounding the Euro, that recently saw price move in an extended decline from a top of 149394 on the 4th September 2011 that from rejection from a double top created at 142465 (9th April 2011 and 30th October 2011) leading to an extended decline to a low of 120419 with a close of 123212 on the 22nd July 2012.  Now that EU has rejected the 138 region, we have seen EU drop  nearly 300 pips since  last week as  developments or non-developments in the Euro Zone start to take focus and the reality of the "Euro situation" sets in.

On the other side of the picture, to truly understand the situation regarding the Euro and its current position, let us regress back to the time that we saw the massive sell off in the Euro and its correlation to the Euro Crisis.  Firstly, much of  the waning pessimism  regarding the Euro Zone was not really to do with European governments as such, but rather movements in the private sector in the areas of borrowing and interest rates. This consequently led to the emerging of recessions in Spain and Italy who then employed caution in spending in favour of  debt repayment . Along with this, a surge in government borrowing amid the damage to  European economies in the  2008 GFC also developed.  The ramification of this financial crisis saw a rise in unemployment within European countries, reaching an unemployment rate over 20% at one time, while also affecting export markets. Looking at this from an investment perspective, panic erupted in the markets as the reality of  a financial collapse due to economic stagnation set in.  When relating this to the charts at the time,  it can be seen that there was no relief for the Euro which saw traders and investors take every opportunity to sell the Euro at every retracement higher as positions were banked. Recalling back, this was rather a fascinating move, which saw economic data do very little to change the overbearing pessimism in the market even with the print of a positive figure.

Moving to the present, what I have just outlined, is what the Euro Zone has been working to overcome in an effort to reach new milestones for the major economy. There has been actions taken by the ECB in an effort to achieve their targets in relation to objectives such as  price, structural and financial stability  which also includes the introduction of the Banking Union as credit  remains a priority. However, there are now other concerns that now sit on the table. The most notable being that Europe may be looking at following Japan on to a path of deflation with the possibility that the ECB may now have to consider cutting Interest Rates. To date, the ECB have left rates on hold at 0.5%, having already reduced the rate from 2.5% previously.  With a rate that is already close to 0%, the  pending question is, "will the ECB now do what they have to do in an effort to avoid a deflation scenario?" and will this be the next move made by the ECB?  With  Economic forecasts due this week, this may provide some insight in the ECB view of  the economy and their actions.

No doubt the improvements in the Euro zone has seen a turn towards an economic recovery from facing the verge of a financial collapse a few years ago, but even still, we are still far from rejoicing in victory and even in its progression, the improvement to date is still not reflective of a smooth or rapid transition, as the Euro zone continue to face and battle the many internal challenges associated with the reconstruct of its major economy. 
However looking at the Euro specifically, among other things,  a high Euro impacts  its competitiveness with exportation which sits amid the greater issue of a global exportation slowdown, which has seen the World Trade Organisation reduce its forecast for world economic growth to 2.5% and the IMF to 2.9%. 

Should the Euro rebound from the lows and appreciate further, this may reignite prevailing concerns over its effect on their recovery. Already, French Minister Arnaud Montebourg has been noted in urging the ECB to weaken the Euro, given the ramifications of its current travel to higher levels. In a recent comment he has stated that if the Euro depreciated by 10%, it would increase national wealth by 1.2% and create 120,000 jobs while also reducing the deficit by 12b euros.  This has also been supported by other  European officials also voicing their concerns. However on the other side of the coin, the appreciating Euro has also had some positive effects in regards to a macro economic perspective, which has seen the economy shift towards consumption with less reliance on exportation. According to the US Treasury Quarterly Currency Manipulation Report, European trade surpluses have become too large to sustain especially in light of  European countries suffering from high unemployment. This then does lend favourably to the stronger Euro which has helped alleviate the focus on "outside demand" to re-adjusting focus on the internal demand within Europe. But even so, what does this mean for the Euro exactly? I don’t really think there is certainty around this. Currently, the Euro remains driven by events and speculation into the movements of the ECB in addressing the issues surrounding the Euro Zone recovery.  In a market where "global uncertainty" looms, a heavy reliance will be placed on the fundamentals and movements from our political and financial leaders, to provide not only assurance but direction as to where we are going. Like all recovering economies, economic data still remains as the key in determining next steps while providing an indication of progression. Hence while news and events have always propelled movement, it is even more so the case now.

In regards to how all of this relates to the charts, starting with the weekly chart. This still shows EU moving within range and with a lot of room to move while still being "within range".  Looking at the recent turn in market sentiment, the weekly shows a print of a bearish marubozu (high of 138171 and low of 134796), covering a portion of the bullish move made from the triple bottom at 127777, which upon breaking the top of 134177 has pushed the Euro to this recent extreme 138 level which has now just sold back to the 135 range. A follow through of this candle, will most certainly see EU look towards 133 as a target once  breaking the 134 region. However, the pinbar on the 4 hour chart  (low of   134413) may see EU fill higher first before continuing and we will still need a catalyst to push this bear move, especially in light of this extensive sell off which has not really seen much relief.  I still think a move between 135630 - 135888 will be  a nice retracement that may set another whirlwind of selling should we reject from this area. Otherwise, breaking higher, expect EU to look at making a move towards the 136 region first.  I still hold a bearish view on  EU until otherwise noted.


AU opened the week at 95827, moving to  high of 96222, which met with rejection taking AU to a low of 95554. This then saw AU maintain at current levels around 95723  before following through with a bearish break out candle (high of 95744 and low of 95347) Price once again formed a small base around 95308 before resuming with a steady decline to a low of  94582 where support was found, reversing direction back to 195156 which upon the breach of 95 saw sellers step in  taking price back under 95 to 94840. However, this then saw price attempt another move north meeting once again with 95 as a resistance level which upon this attempt higher, saw AU sell off  to a low of  94406. Still reluctant to complete a move lower, price then maintained around the 23% ( 94683), looking for direction, before a bullish break out candle formed (low of 94657 and 950007) taking AU back to the 76% level (95075) where price then attempted to reject once again, finding support upon a bullish pinbar  formed around  DP (94760). This gave AU the push i needed to make its move back to the upside, which saw price break through the 76% level reaching a high of 95251 on the 31st  October.

However replaying the same  move, price once again met with rejection at 95207, sending price down back to DP where an attempt to find support at DP failed, sending price straight through the 23% (94683) to a new low at 94521. Price then continued to saw at the lows before buyers entered upon an attempt to continue lower, forming a bullish pinbar. This then saw price move back up above DP to find resistance at the 50% level (94879).  Shortly after, one last attempt to break higher was made, reaching 94840, before turning into an inverted pinbar as sellers pushed the price back down. This paved the way for another decline, which upon breaking the previous day low of 94507 (former support), saw AU make a new low at 94210 with price closing the NY session at 94350.

When looking at AU on the 4 hour chart, the bearish engulfing pattern formed on the 23rd October shows a rejection of the high of  97574 and then  again a rejection of the  pullback to 96700, placing AU within a bearish trend in the immediate time frames. The rejection of 96113 (76%) also saw AU capped from further movement higher and a re-test of 95842 with a low of 95715  brought AU back within range still capped at the 96113 level (high of 96222), which rejected sending AU lower, with a confirmation of continuation upon the break of 95720. A  move back to 95156 created a double top which rejected on the 31st October sending AU back a low of 94415 before a pull back to 94890 and then further to a low of  94210.  AU commenced this week re-testing the low in early Asia which met with strong rejection, producing a very notable bullish pinbar that has pushed price back over 95, where it has been ranging throughout most of the NY session. With the RBA  on schedule for tomorrow, it is possible that AU is preparing for a move higher in response to no change to the rate. The daily chart  does show the first sign of a pullback  and a positive market reaction tomorrow could see AU re-test the 96 price level once again.  A bullish continuation on this pair would prevail upon a break above 95990, which may see AU re-test 97 while trying to push forward from there. This is backed by the 1 hour chart which also sees   price  sitting within the top end of its recent range which, if price breaks above 95145, will see AU attempt to head north.

In regards to economic data, a fairly consistent flow has kept an optimistic view of the AUD and the idea that the RBA will begin looking at increasing interest rates in the next few months.  Although, its transition into positive territory has also been backed by movements in the commodities markets which despite movements elsewhere, has not really faltered in demand for iron-ore,  Australia's main export. Also in its favour has been stronger figures out of China  such as the stronger PMI figure released by China towards the end of last week, which came in at 51.4 vs. 51.2, adding a little lift to the AUD, before the decline of the majors against the USD at the end of the week. Overall, we are still seeing an slow expansion across some  sectors but a general improvement, which for those sectors at the bottom tier of performance, has been offset by better performance in other areas such as housing, which is to be expected given the current position of the Interest Rate.  More recently, the treasury increased the debt ceiling from $A300b to $A500b on the 31st October.

In a recent speech given at the  CFA Australia Investment Conference, it was highlighted that Australia has been keeping very close to its inflation targets and unlike other advanced countries, has been able to maintain an efficient banking system, while also experiencing an "investment boom"  which has seen business investment reach over 18% of GDP, the highest within the last 50 years.  Compared to other advanced countries, this places Australia in a much stronger position even despite the fact that mining investment has declined over the year as Australia moves away from the mining boom.  When looking at the sentiment of domestic businesses, it has been noted that hesitation regarding expansion and investment still prevail as caution remains  in light of global uncertainty, the high exchange rate and other factors both domestic and otherwise. Essentially, this means that the low interest rate although it has demonstrated its effectiveness in stimulating the economy in some areas, has not fully been maximised by all sectors, which in turn has contributed to the varied pace of the trends within the different   sectors.

Looking at where this stands with the domestic currency, firstly, as mentioned with the Euro, the appreciating currency has most certainly had an adverse effect on exportation, making exports more expensive for trading partners. However, on the other hand, the higher dollar has made  imports more cheaper, thus producing a positive outcome for businesses reliant on  importation. In addition, this has also contributed positively to the cost of production for local exportation. However,  while looking at the pros and cons, it is still worth mentioning here two things. Firstly, the RBA is still supportive of a lower currency  to assist with a progressive economic recovery until otherwise stated. Secondly, looking back at the more recent RBA statements, the reliance on the depreciating currency to offer stimulus to the domestic currency has been most beneficial as an offset measure which has also played a part in the current position of the cash rate which has, in the last few rounds, been kept on hold. There has always been concern over the appreciation of the dollar, which has attracted investors at its lows and more recently at the dips. This has essentially kept the AUD afloat from a further decline and more poised now towards the upper end of the spectrum.

As the economy now starts to gain more confidence in line with their economic data figures, the proposal of another cash rate cut  will seem more unlikely while the economy  continues on this path of recovery. Hence why now we are seeing the AUD maintain a resilient stance on the charts in more recently times with interest from foreign investors and the like.  This is a very big contrast to not long ago when really there was only one direction for the AUD and by that I do not mean up.   Having said that, this does not mean that the AUD cannot fall or will not fall in between the efforts to take the currency to new highs. Remembering that AUD is not only easily influenced by not only its own data and by its counterparts, but is responsive to the other financial markets i.e. commodities (being a commodity currency). We should see the AUD fluctuate within the boundaries of its range before fully breaking out.  For now, it is still important to remember that Australia still remains in recovery mode and the RBA is in favour of a lower currency to assist with "re-balancing" the economy while also depending on economic indicators such as inflation and employment to continually re-assess its position and determine the timing for adjustments in monetary policy. 

When assessing the current position of AU, we are still looking at a scenario of making a clear break above 95, which so far since its efforts to move north since its decline has struggled to do. Therefore this still maintains in place as a strong resistance level having seen the pair sell from here a few times. In light of the RBA favouring  weaker dollar, this will set in on the weaker economic data. The sentiment of the RBA will cap movement higher and should we break above 95 then 97 will be the top resistance area to re-test with the 96 range in full play.  Though this will also require full clearance of the upper half of the 95 price level, which may also serve as a top. However, should price stay contained under the 95 price level, we should see AU make a move back to 94 and breaking this, extending a decline between 92500 and the 93 range. 



UY opened the week at 97727, gapping higher from its  NY close at 97359.  This then followed with UY contained within a range between 97455 - 97783, until a breakout to the upside (low of 97659 and high of  97956) saw UY set its direction with a higher base created around 97914 leading to another break higher to over the 98 price level reaching 98271 on the 29th October. Price then consolidated around this level moving into the 30th October which then saw UY break out  with a surge of bullish momentum, producing a candle with a low of 98078 and high of 98672.  This then saw the sellers step in, pushing price back down to DP (98303) and then lower, piercing  the 23% level (98174) and to a low of  98077. This then saw price move back to DP where resistance was once again found, pushing UY back down through the previous day low on the 1st November, finding support at 97802.

This then followed with a reversal back north, appointing 97802 as the bottom, as price made its way back with another surge of bullish momentum to DP, where it paused before moving to the 76% level (97391). Breaking through the 76%, saw momentum increase as price moved higher through DR1 (98562), reaching a high of 98844 (DR2).  This saw price pause at the high s around 98752,  towards the end of the last NY session, with UY closing slightly lower at 98664.

When observing UJ on a daily chart, UJ is still positioned  within a sideways trend that is yet to break with the last high at 100597 on the 11th September. A confirmed break above 100597 will promote a bullish extension with its sights set on 103 region which it has not managed to reach since early 2013.  However, looking at this pair on an intraday level, there does not seem to be a clear path set as yet and such this may see UJ move into a consolidation or movement within a tight range until further confirmation has been obtained.  Looking at UJ on the 4 hour chart, we can see a complete retracement back to the point previous top rejection at  98836, just under 99 with price poised towards the upper region of its range.  This does suggest that UJ will be looking to reach higher targets once price clearly breaks over 98764 with first targets within the 99 price area before extending higher. However, should price stay contained below  99, a break back below 98164 will see UJ target the high higher 97 area and try to find support there. With price currently sitting between the previous day low and DP,  we will need to see UJ to break above DP (98634) in order to attempt a bull move.  If UJ stays capped in the more immediate time frames under 98601,  the pair will be looking to test lower towards the lower 98 price region.

Since the September “Non-Taper”,  the USD  has suffered from extended weakness due to the following events in the US which dominated not only the headlines but market sentiment. This has  given  strength to the majors against the USD, which helped fuel the recent bull rallies witnessed over the last few weeks. However with the debt ceiling crisis now on the shelf until early 2014 and government workers back at work, focus has  now diverted back to the “taper”  with special attention to the US economic figures, as the market tries to digest information in an effort to find any indication towards potential decisions and actions by the US Fed. Interestingly the figures released after the government shutdown surprised the market somewhat, stumping the general expectation that the government shutdown would  dampen the progress of US economy  even despite the $24b that exited the US economy during that time. This was particularly evident in the ISM figure which came in at 56.4, beating the forecast of 55 and the previous figure 56.2, showing that US manufacturing  still expanded even in light of the 16 days the US government was  shutdown. Consequently the positive ISM figure boosted UJ which saw the pair reach a new high of 98.84.

So with the taper back on the radar, this has set another round of speculation with a split view on  whether the US Fed will actually be ready this time. More recent data still remains a little mixed, which then leaves things a little uncertain on how the US Fed will interpret the current US economic position. In the time around the "September Taper", the last NFP result came in 148k vs. an expectation of  180k, accompanied by an improvement in the unemployment  rate from 7.3% to 7.2%.  This saw many to believe that this was enough of a justification to warrant a “mini taper”, thus holding strong expectations that the US Fed would uphold to this decision – which they did not.  Therefore, it is reasonable to think the US Fed may employ the same rationale should the economic figures fail to sway once again more in favour of a progression since September. If it was not enough last time, it may not be enough this time, which will see this delayed until early next year. This week we have employment data due along with the NFP and unemployment rate.  Current figures show NFP holding a weaker forecast of 130k vs. the previous 148k, while the unemployment rate is tipped to increase from 7.2% to 7.3%.  Any surprises, or non surprises, should see movement in response to the strength/weakness brought to the USD following its economic data releases.

Moving on to Japan.  It has been a long ride but according to the BOJ, all remains on track in meeting their inflation target of 2% in 2015. The improvements in the Japanese economy, have still kept the BOJ confident in meeting their targets and as such, further easing is most likely  not necessary in the near term. However, this may not be the case in 2014, where BOJ Govenor Kuroda believes that additional easing may be necessary and they will do what is needed. In regards to the views on inflation, we could see Japan reach 1% by the end of this fiscal year. However this will not change the pace which still will remain slow even within its incline.  Looking at the current position of UJ, this pair looks more appealing to the upside, which when coupled with USD strength, a break above  the 99 price level will see UJ make its move back to the 100 region.

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Sunday, November 3, 2013

Trade Recommendations: WC 4th November 2013


Last week saw open the Asia session at 161610 closing the week just under 159211 in a surge of selling during the NY session. This week, the BOE will announce their Interest Rate Decision and Asset Purchasing Facility which currently sits at £375. The more recent releases, have seen the BOE refrain from making adjustments to the Asset Purchasing Facility, which in terms of price movement, has translated into prompting a bullish move for the the pair post release. 

Fundamentally, the UK is still on track with its recovery, holding some to speculate that adjustments to Monetary Policy may come earlier than forecasted. This has kept the Pound on the radar for a bounce back in the future, given that economic data continues to support a progressive improvement.  Looking at the upcoming trading sessions, we may see GU consolidate ahead of its events later this week. However movements in the USD may sway this in the interim, which if this  the case, should see GU find support at nearby key levels. 

Level to Watch:
What to look for:

BUY:  159660 (break above)
SELL: 159081 (break below)

A break above 159405 (23%) will see 159660(DP)) as the next test point. A break above this level will then promote a bullish  move towards 160130 (76%) which if price breaks above this level, will see GU aim for higher targets upon breaking resistance at 160454. Targets are: 160230, 161227 and 161802.

Alternatively, there are 3 price levels that will still keep GU within a bearish view.  The first capping level is 159405 (23%), followed by 159660 (DP) and 160130 (76%). A break below 159405 followed by a break below 159081 will see the following targets come into view: 158595 followed by 158031 and then 157011.

Bullish Levels:
T1: 160230,  T2: 161227 T3: 161802
Bearish Levels
T1: 158595, T2: 158031, T3: 157011
Potential Catalysts:
PMI Construction (Nov 4), Markit Services PMI (Nov 5 ), Industrial Production (YoY)(Sept), Manufacturing Production (Nov 6) NIESR GDP (Nov 6), BOE Rate Decision, BOE Assest Purchase Facility (Nov 7), Goods Trade Balance, Total Trade Balance (Nov 8)



Quite an eventful week for the Euro after ascending to a high of 138110, which rejected promptly, sending EU spiraling down to a low of 13492 during the last NY session. The recent appreciation of the Euro has already spurred  a reaction from some European  officials  who have voicing their public concern, urging the ECB to take action. Meanwhile,the Euro Zone still continues to face its challenges in meeting their economic milestones. More recently, are talks circulating that the Euro Zone may be travelling down the same path as Japan as "deflation" now becomes the new topic of conversation.  This has prompted many to think the ECB will now consider cutting Interest Rates as the ECB do what is necessary to avoid a more detrimental outcome. This along with profit taking is what led to the grand slide  from the 138 region, as investors and traders ultimately lost faith in  holding longs over the  138 price mark.

Therefore, this now strengthens the case for a bearish Euro and personally, I am still bearish on the Euro until otherwise  noted and believe it does hold the potential to see 132, 130 and possibly lower, looking ahead. We have the Economic forecasts due this week from ECB, which may provide some sort of indication or clarity over their views regarding the  major economy.

Level to Watch:
135054 (23%)  / 135630 (76%)
What to look for:

BUY:  13507 / 135888 ( break above)
SELL: 135599 (break below)

1st Trade: Buy on break above 135054 with a target of 136530.

Second Trade:

Key Level to watch: 135630

Currently price is trading near the previous day low at 134880. Having closed NY lower and Asia looking to continue A break above  135630 will see 135888 as the next resistance level. A break above 135888 will then promote the following targets: 136528 followed by 137039 and then 137805.

Breaking above 137805 will see EU re-test the previous highs with 138260 as the next target. Breaking above this level places see EU resume its bullish trend prior to its decline late last week.

Alternatively,  a rejection of the 135628 price level will see EU look for support towards 135054(23%).   A confirmed break through the 23% level, will then promote a continuation of the current bearish move with the following targets in view: 133907 followed by 133686 and then 133009. Breaking below 13309 will target the following levels: 132656, 132509, 131380.

Bullish Levels:
T1: 136528, T2: 137039   T3: 137805
Bearish Levels
T1: 133907,  T2: 136860   T3: 133090
Potential Catalysts:
Markit Manufacturing PMI (Nov 4), EC Economic Growth Forecasts, PPI (Nov 5), GER Markit Services, GER Factory Orders (Nov 6), GER Industrial Production, ECB Interest Rate Decision, ECB Monetary Policy  Statement and Press Conference (Nov 7), GER Current Account, GER Trade Balance (Nov 8)        



The start of Asia saw AU re-test and reject the previous day low with price breaking above DP and the 76% (94730) upon retail sales released earlier this morning. However with the RBA announcing the cash rate decision tomorrow, a surge to new highs may be kept on hold until tomorrow's event. AU  is another pair tipped to take the lead with economic recovery. However recent events have inspired an adverse short term view as the pair declined on the back of RBA commentary, coupled by strength in the USD. Unlike the other majors, AU has fought the 9480 level a few times during the more recent intra-day sessions having found support towards the lower region of the 94 price range.

With the Interest Rate Decision due tomorrow, there is an expectancy that the RBA will keep rates on hold in light of supporting data figures showing improvements in various sectors of the economy. In the upcoming London and NY sessions, we will more than likely see AU consolidate ahead of  its upcoming major event, otherwise it may jump on the bandwagon of market sentiment should  we see something move the majors against the USD collectively. This will see AU once again take a free ride until the RBA take the spotlight tomorrow.

Level to Watch:
What to look for:

BUY: 94890(break above)
SELL:94583(break below)

The start of Asia has seen AU re-test and reject the previous day low with price breaking above DP and the 76% (94730) upon retail sales released earlier this morning. However with the RBA announcing the cash rate decision tomorrow, a surge to new highs may be kept on hold until tomorrow's event.

A break above 94890 will see AU reach for the following targets: 94990 followed by 95620 and then 96004.

Alternatively, should AU break back below  94730(76%), the next support level to watch is 94583 (DP) followed by 94370 (23%). Breaking below the 23% level and 94210 (previous day low) will see the following targets come into view: 93960 followed by 93630 and then 93534.

Bullish Levels:
T1: 9499,  T2: 95620 , T3: 96040
Bearish Levels
T1: 93960,  T2:93630,  T3: 93534
Potential Catalysts:
TD Securities Inflation (Nov 03), House Price Index, AIG Performance of Services Index (Nov 4), RBA Interest Rate Decision, RBA Statement (Nov 5), Trade Balance (Nov 6), Unemployment Rate, Employment Change, Full-time employment(Nov 7), RBA Monetary Policy Statement (Nov 8) 


Last week saw UJ summit to new heights as it embarked on an exciting journey to new highs from an open of 97595 to closing the week leaning towards 99 at a final price of 98664.  This is also a full week of economic data for the USD, including NFP and the Unemployment rate. We should see some decent movement on the back of the important events this week. In regards to the US, tapering is still a topic on the table, with speculation as to whether the US Fed will finally set December as the commencement month. Friday's NY session should be interesting, especially following the round of earlier economic releases from the other currencies.

Looking at Japan, "the likelihood of near-term easing is limited, while the likelihood of additional easing next year remains" according to BOJ Governor Kuroda. So far Japan is showing improvements towards rising inflation which is a positive for the economy. This should see the Yen back on track and contained from further appreciation in the future.

Level to Watch:
What to look for:

BUY:  98844 (break above)
SELL: 98446 (break below)

Look for price to move back to 98598 first. Once this level has been re-tested, a break above 98844 will promote bullish momentum opening up the following targets: 99060 followed by 99175 and then 99361. A break above 99361 will see the next set of targets come into view: 99478, 99706 and then 100113. 

Alternatively, a break below 98598 (76%) will see the first test of support at 98407 followed by 98048 (23%). Breaking below the 23% level will see 97802 as the next support level.

Breaking the previous day low will then see the following targets come into view: 98009 followed by 97787 and then 97379. Breaking below 97379 will see UJ target 96969.

Bullish Levels:
T1: 99060, T2: 99175, T3: 99361
Bearish Levels
T1: 98009, T2: 97787, T3: 96969
Potential Catalysts:
US Factory Orders (Nov 4), US ISM Non-Manufacturing PMI (Oct), JPY BOJ Monetary Policy Minutes (Nov 5), Mortgage Applications (Nov 6), US GDP, US Initial Jobs Claims, US Personal Consumption Expenditure, US Core Personal Expenditure, US Consumer Credit Change, JPY Foreign Bond Investment, JPY Foreign Investment in Japan stocks (Nov 7), US Average Hourly Earnings, Average Weekly Hours, US NFP, US Personal Income, US Consumer Personal Expenditure Price Index, US Personal Spending, US Unemployment Rate, US Reuters/Michigan US Consumer Sentiment Index (Nov 8)

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

Sunday, October 27, 2013

Trade Recommendations: WC 28 October 2013


GU started the week opening at  161699, moving steadily in a tight range between 161560 and 161803, before breaking out higher on the 22nd Oct to a high of 162118. This then led to GU reaching a new high of  161560 on the 23rd October which met with resistance, resulting in a sell off from the top to a low of 16189. This then saw GU make another move to the upside, reaching a high of  162224, which upon forming an inverted pinbar, led to  another sell off back to 161370. However, once again, this was short-lived with GU finding support and bouncing back within range to 162461 following after the decline. 

With this high a target for the sellers, GU again made its way back to towards the mid 161 range finding support at 161499 and closing the NY session at 161652.  In regards to upcoming price movement, the weekly chart does suggest the potential for GU to extend higher and  a break over the 162 price level will be key in determining if this will be the set direction. However this is not the same view on the smaller time frames which, actually show GU ending the  week towards  the lower end of its range spectrum closing the NY session at 38%.  This suggests a possible move lower may come first.

Level to Watch:


What to look for:

BUY: 162239 (break above)
SELL: 161726 (break below)
A break above 162239 will promote another bullish attempt north, having first cleared 162468 (previous day high). This will then place the following targets in view: 162301, 162677 and 163190.

Alternatively, a break below 161726 will see 161497 (previous day low) as the first test of support. Breaking this level will then expose the following targets: 161439 followed by 160099 and then 160620.

Bullish Levels:

T1: 162301, T2: 162677, T3: 16319

Bearish Levels

T1: 161439, T2: 160099, T3: 160620


Consumer Credit, Mortgage Approvals, Net Lending to Individuals (29 Oct), Nationwide Housing Prices (31 Oct), Markit Manufacturing PMI (1 Nov)


EU started the week at 136828 resuming the tight from the previous week. This continued into the  new week with the 22nd October finally seeing GU finally break the range with a prominent breakout candle, following by  a sequence of bullish candles to a top of  137918. Price then maintained at the highs locked in a tight consolidation that saw price dip slightly to finding support at 137425.  Once reaching the 138 price level,  a heavy reluctance set in which saw all attempts for price to break out, meet with sellers, resulting in the containment of price at current levels moving into the next day with an advancement to a new high of  138300. This then led to the break down with the formation of a bearish marubozu taking price to a low of  137787 and then back north to the 138 price level where EU closed the NY session. 

Currently, EU remains quite high, however  a further move higher  cannot be ruled out given the bullish momentum behind the Euro, which is currently suspending the pair at the top of its range. However, with concerns voiced from European officials regarding the detrimental effects of the appreciating currency on recovering European economies, this may help in capping further movement  north at the higher key levels in the near future. 

 Level to Watch:


What to look for:

BUY: 138181 (break below)
SELL: 137738 (break below)
A break above 138181 will see the first test        of resistance at 138318 (previous day high). Breaking above this level will see an extension of the bullish run in line with with a long entry above the previous high. This
will then open up to the following targets: 138270 followed by 138560 and then 138862.

Alternatively, a break below 137875 (23%) will see the first test of support at 137738. Breaking below this price will set the following targets: 137633, followed by 137326 and then 137050.

Bullish Levels:

T1: 138270, T2: 138560 T3: 138862

Bearish Levels

T1: 137633, T2: 137326 T3: 137050

Potential Catalysts:

GER Retail Sales (28 Oct), GER Retail Sales (29 Oct), GER Unemployment Rate, GER Unemployment Change (30 Oct),
Consumer Confidence, Business Climate, Services Sentiment, CPI, Harmonised Index of Consumer Prices, GER Gfk Consumer Confidence Survey, Consumer Price Index - Core, Unemployment Rate (31 Oct)


AU started the week at 96698, also resuming the consolidation from the previous week, continuing in a  tight consolidation. The 22nd October saw AU break out to the topside, reaching a high of 97302 before meeting with rejection, bringing AU back to the 97 price level. The 22nd October saw  AU re-attempt another move higher, which saw AU advance slightly to a top of  97575, meeting with rejection and leading to a decline back to 96310.  AU then managed one last attempt north, breaking above the 76% level to 96703, which faced rejection at DR1 (96639). From here, AU proceeded with a decline back to 96207 (DP) where it paused before breaking through and finding support at 95713, closing the NY session at 95816. 

With AU closing the NY session at the lows, there is a good possibility that a re-test and rejection of 96113 (76%) will see AU capped from further gains with a view to target the lower levels towards 95. However breaking above the 76% level, will inspire another attempt and re-test above 96. We have a speech from the RBA Governor due early this week which may provide some inspiration for upcoming intra-day price movement.

Level to Watch:


What to look for:

BUY: 96236 (break above)
SELL: 96715 (break below)
A break above 95967 will promote a bullish setup with an entry above 96236. This will then open up the following targets: 966468, followed by 96727 and then 97120. Breaking above 97 will then see AU extend the daily trend with targets above the 97400 area.

Alternatively, a break through 95838(23%) will see the first test of support at 95715. Breaking this level will then target the following levels: 95669 followed by 95172 and then 94658.

Bullish Levels:

T1: 96468, T2: 96727, T3:97120

Bearish Levels

T1: 95669, T2: 95172, T3: 94658

Potential Catalysts:

RBA Governor Speech (28 Oct), HIA New Home Sales (MoM), Building Permits (31 Oct), CNY Manufacturing PMI (1 Nov)


UJ commenced the week in positive form, opening at 97859, climbing steadily to 98236 before pulling back slightly to 98159. From here, it continued to range with uncertainty until  breaking out higher, reaching a top of 98359. This then saw price hover at the highs moving into the 22nd October until an attempt to break lower resulted in UJ reaching and rejecting a low of 97853 but bouncing quickly back to 98197. Printing a bullish candle, UJ attempted to follow through to the upside, however this notion was quickly abandoned with the formation of an engulfing bearish candle. This provided  the first signal of weakness, which then led the way to a decline, finding initial support at 97128,  pausing momentarily and forming a short consolidation until finally breaking lower to 96936 where final support was found. From here, UJ then took a short step back up  to 97374 where it  closed the NY session with a final price of 97359. 

With the US dominating the economic calendar this week, we should see some movement on this pair. Key events to focus on include: USD Fed Interest Rate, USD Pace of Treasury Purchase Program,, Pace of MBS Purchase Program, Fed Monetary Policy Statement and Press Conference 

Level to Watch:


What to look for:

BUY: 97688 (break above)
SELL: 96936 (break below)

A break above 97389 will see 97511 (76%) as the first point of resistance. A break above 97688 (previous day high) will promote a bullish setup which will open up to to the following targets: 97593, 97815 and then 980567.

Alternatively, a break through 97398 (DP) will see the first test of support at 97113 (23%) and breaking this level will open the following targets: 97094, followed by 96923 and then 96721.

Bullish Levels:

T1: 97591, T2: 97812, T3: 98037

Bearish Levels

T1: 97094, T2: 96923, T3: 96721

Potential Catalysts:

USD Industrial Production (MoM), USD Pending Home Sales (YoY), USD Dallas Fed Manufacturing Business
Index (28 Oct), USD PPI (YoY), USD Retail Sales, USD Business Inventories, USD CB Leading Indicator
(MoM), USD Consumer Confidence, USD Fed Interest Rate, USD Pace of Treasury Purchase Program,, Pace of
MBS Purchase Program, Fed Monetary Policy Statement and Press Conference (30 Oct), Initial Jobless
Claims, Chicago Purchasing Manager's Index (31 Oct), Markit Manufacturing PMI, ISM Prices Paid and ISM
Manufacturing PMI (1 Nov)

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