Swing-trend trading analysis for the week beginning March 9th
Our weekly trend/swing trading analysis consists of two parts; firstly we analyse the fundamental policy decisions and news events for the coming week. Secondly we use technical analysis in an attempt to determine any potential trading opportunities. Traders reading our key calendar events for the week should note the predictions, as any deviation, from that predicted by the economists polled, can result in major currency pair moves, depending on the consequential shifts in sentiment caused if the data comes in above, or below expectations.
Our weekly fundamental analysis begins with New Zealand’s quarterly manufacturing sales being published. The last QoQ came in at 4.7% up. We then move on to a raft of information from Japan; the current account is expected in at -¥0.57 trillion, final GDP at 0.2%, bank lending data is published and the economy watchers’ index expected in at 54.3.
French industrial production is expected in at 0.6% up month on month. Swiss retail sales are predicted to have risen by 2.6% year on year. Italian industrial production is expected in at 0.4% up month on month. Europe’s Sentix indicator is expected in at 14.3. Eurogroup meetings are taking place all day on Monday, whilst a member of the FOMC – Plosser, speaks. Housing starts for Canada are published, expected to come in at 190K. A MPC member – Bean, speaks.
Tuesday sees the publication of the Australian NAB confidence survey, expected in at 8. The BOJ will publish a monetary policy statement, as well as preliminary tool orders expected in at similar levels to the 40.3% in the previous month.
Germany’s stats agency publishes their trade balance, expected in up €19.3 bn for the month. China’s new loans are expected in at 730 bn up for the month. From the UK we get manufacturing production figures expected to show a 0.3% rise on the month. Industrial production is also expected in at 0.3% up, whilst the UK’s BoE conducts and attends inflation hearings. The UK also conducts a ten year bond auction. ECOFIN meetings are also held throughout the day.
From the USA the NFIB small business index is published, predicted to deliver a reading of 95.3. JOLTS job openings are anticipated in at 4.03 million. Jolts are the number of job openings during the reported month, excluding the farming industry. It’s released late, but can impact the market because job openings are a leading indicator of overall employment. Wholesale inventories are published for the USA expected to come in at 0.5% up for the month.
In the UK a GDP estimate is published by the NIESR, it is expected to come in at 0.8% for the quarter. From Australia the Westpac consumer sentiment index is published, with the anticipation that the reading comes in ahead of the -3% previously.
Japan publishes the print on the BSI manufacturing index, expected in at 11.3%, tertiary industrial activity is expected in at 0.7% up, with CGPI expected in at 2.2% year on year.
Wednesday sees the publication of the home loans in Australia, expected in up 0.8% month on month. Japan publishes its consumer confidence print, expected in at 40.3, whilst the BOJ publishes its monetary policy details.
The UK’s trade balance for the month is expected to come in at -£8.7 bn. whilst the industrial production figure for Europe is expected in at 0.6% up month on month. From the USA the Federal budget balance is expected to come in at the worse for three years at -$223 billion. Shortly after treasury secretary Lew speaks.
New Zealand’s cash rate is expected to remain at 2.5%, a statement from the RBNZ then follows regarding the decision plus an explanation of the bank’s current monetary policy. Core machinery orders from Japan are finally published, expected to come in at 7.3% up.
Thursday sees Australia’s inflation prediction, expected in at 2.3%. The BoE publishes its quarterly publication, whilst the UK’s RICS publishes its house price expectations for the month.
From Australia we receive the latest unemployment data, the rate is expected to remain at 6% with the drop in unemployment at 15.3K. The RBNZ governor Wheeler speaks, whilst later the year on year Chinese industrial production print is expected in at 9.5% year on year. Chinese retail sales are expected in at 13.5% up year on year. European news centres around the ECB publishing its monthly bulletin.
From the USA core retail sales are published with the print expected in at 0.2% up, the retail sales on the month up 0.3%. Unemployment claims (weekly) are expected in at 334K, with import prices up by 0.6% on the month and business inventories up 0.4% on the month.
From New Zealand we get the business manufacturing index, expected in at 56.2 – similar to previous readings, whilst Japan publishes its monetary policy meeting minutes.
Friday sees China’s foreign direct investment numbers published, the previous reading being +16.1%. Japan’s revised industrial production is predicted to come in at 4% up month on month. Germany’s final CPI is expected in at 0.5% up month on month. Swiss CPI is expected in at 0.3% up. Europe’s employment change is expected to remain at zero, quarter on quarter.
From the USA PPI is expected in at 0.2%, core inflation at 0.1%. Preliminary university of Michigan consumer sentiment is expected in at 81.9.
Technical analysis detailing potential trades on several major currency pairs, indices and commodities
Our swing/trend trading technical analysis is comprised using the following indicators which are all left on their standard setting, with the exception of the stochastic lines which are adjusted to 10, 10, 5 in an attempt to dial out false readings. All our analysis is conducted on the daily time frame only. We use: PSAR, Bollinger bands, DMI, MACD, ADX, RSI and the stochastics. We also use the key moving averages of: 21, 50, 100, 200. We look for key price action developments and observe key handles/looming round numbers and psyche levels. For the daily bars the Heikin Ashi method is preferred.
EUR/USD began its break to the upside on February 6th, on the 27th the security was threatening to break to the downside. However, despite a temporary retracement, the security once again regained its bullish move from February 28th onwards. Currently PSAR is below price which is above all the major SMAs. The upper Bollinger band has been breached to the upside whilst the final day’s candle of last week, using the HA bars, was: closed, full bodied with an upward shadow. The DMI and MACD are both bullish making higher highs using the histogram visuals. The stochastic lines are short of the overbought zone whilst the RSI is at 66, with the ADX at 14. Traders would see little reason to reverse their trend trades currently given the bullish nature of the indicators and the price action. Many traders and investors will be eyeing 14000 as the key looming round number should the security achieve a significant break through the 13900 handle.
AUD/USD broke to the upside on March 6th, the PSAR is under price, price has broken through the 100 SMA and breached the upper Bollinger, whilst the HA candle on Friday was closed, full bodied with an upper shadow. The DMI and MACD are both positive and making higher highs. The stochastics have crossed to the upside, but are short of the overbought area. The RSI is at 59, with the ADX at 15. Traders long would be advised to stay so until one or several of the indicators have turned bearish, perhaps as a minimum the PSAR turning negative and appearing above price.
USD/JPY broke to the upside on March 6th, price has broken through the upper Bollinger and the 50 day SMA. The DMI and MACD are both positive and making higher highs using the histogram visual, the stochastic lines have crossed, but at readings of circa 60 are short of the overbought zone. The RSI is at 56 with the ADX at 20. The price action on Friday was positive with the HA candle being full bodied, closed and with an upper shadow. Traders would be advised to stay long and perhaps consider changing sentiment should the PSAR stop and then reverse direction.
The DJIA broke to the upside on February 7th, since which time the points gain has been considerable. Price is above all the key SMAs, whilst the upper Bollinger has been breached. The price action is underpinned by the cluster of favoured indicators suggesting this momentum move may still have some energy. PSAR is below price, the MACD and DMI are positive and making higher highs, the RSI is at 63 with the ADX at 16. The stochastic lines have crossed, but are in the overbought area. Traders must proceed with caution given the substantial gains and will have locked in points by way of trailing stops and the PSAR. Traders long would be advised to stay so until several of the key indicators previously mentioned have turned bearish.
WTI oil broke to the downside on March 5th, currently PSAR is above price and price has breached the middle Bollinger band to the downside and is close to the critical 200 SMA. The DMI is positive, but failing to make higher highs, whilst the MACD is negative but failing to make lower lows, the stochastic lines have crossed and exited the overbought area. The RSI is at 56 with the ADX at 27 and sloping downwards. Traders short could be at the beginnings of a trend, but need to exercise caution given the propensity for the security to suddenly break to either side based on sentiment underpinned by fundamental analysis and macro political events.
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