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 movements, depending on the consequential shifts in sentiment caused if the data comes in above, or below expectations.
Monday sees data from China published to include new loans, predicted to come in at 1000bn and the money supply (M2) thought to print at 13.1%. Industrial production for Europe is expected to come in at 0.3% up, USA core retail sales are predicted to come in up 0.5% whilst retail sales are predicted in up 0.8% month on month. Later that day FOMC member Tarullo speaks.
Tuesday sees the publication from the RBA in Australia of the latest monetary policy minutes. From the UK in the morning session we receive the latest data for inflation, scheduled to come in at 1.6%, RPI is expected in at 2.5%, HPI is expected in at 7.2% year on year. Europe’s trade balance is anticipated to show a figure of €13.9 billion. Germany’s ZEW sentiment index is expected in at 46.3, with Europe’s ZEW index in at 60.7. Focus then turns to North America where Canada’s manufacturing sales expected to come in up 1.1% and the USA CPI month on month expected in at 0.1% positive. The Empire State Manufacturing survey is expected in up to a figure of 8.2. Later that day Janet Yellen speaks, the NAHB housing index is expected in at 50. Later Fed member Plosser will speak. Late evening the New Zealand quarterly inflation data is published expected in at 0.5%.
Wednesday sees China publishing its annualised GDP figure, expected in at 7.4%, industrial production is expected to come in at 9.1%. Retail sales are predicted to come in up 11.2% year on year. Later focus turns to Japan where data on Industrial production is expected to have fallen by 2.3%, BOJ governor Kuroda will speak. From the UK unemployment is expected down by circa 30K, with the rate expected down to 7.2%. Europe’s CPI is anticipated in at 0.5% up. Germany will hold a bond auction, the FOMC member Stein will speak, whilst building permits in the USA are expected in at a one million figure. Housing starts are expected in at 0.97 million year on year. USA industrial production is expected in at 0.5% up.
Canada’s BOC publishes its monetary policy report, issues a rate statement and is expected to keep its base interest rate at 1.00%. The BOC will hold a press conference to explain away its decisions. Later the Fed chairperson Yellen will speak as will FOMC member Fisher. The USA Fed will then publish its Beige Book. This analysis is used by the FOMC to help make their next decision on interest rates. However, it tends to produce a mild impact as the FOMC also receives 2 non-public books – the Green Book and the Blue Book – which are widely believed to be more influential to their rate decision, Anecdotal evidence supplied by the 12 Federal Reserve banks regarding local economic conditions in their district produces the data.
Thursday witnesses the BOJ governor Kuroda speaking; Australia publishes the latest NAB business confidence survey. German PPI is published, predicted to come in at 0.1%. Europe’s current account balance is expected in at €22.3 billion. CPI from Canada is anticipated to be at a reading of 0.4%, unemployment claims are expected in at 316K in the USA. The Philly Fed manufacturing index is expected to deliver a reading of 9.6.
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 broke to the upside on April 8th since which time the gains have been significant. Currently price is above the PSAR and price has breached the upper Bollinger band. Price is above all the major SMAs – 21, 50, 100 and the 200 SMA. The last daily candles of the week were closed, full bodied and with upward shadows. Both the MACD and DMI were positive and making higher highs using the histogram visuals. The stochastic lines have crossed but are mid territory, still far short of overbought conditions. The ADX is at 15 with the RSI reading at 60. Traders who took the long trade, based on the price action on the 8th, would be advised to stay long until several of the afore-mentioned indicators have turned bearish.
AUD/USD continued its momentum move to the upside during the preceding week. Currently PSAR is below price, price has breached the upper Bollinger band, the daily candles during the week were mainly; closed, full bodied and with upper shadows. Price is above all of the afore -mentioned significant SMAs. Both the DMI and the MACD are positive, but are failing to make higher highs. The stochastic lines have crossed and are in the overbought area. ADX is at 34 with the RSI at 71. Traders who have enjoyed the significant pip gains, since the security broke to the upside in March, would be advised to trail their stops to ensure that very little of the pip gains are given back. The security is, through the evidence of the stochastic lines, the ADX and the RSI, now exhibiting the tendencies of a security that is overbought.
USD/JPY broke to the downside on April 4th. Since which time the pip gain has been considerable. Currently PSAR is above price; price has breached the middle Bollinger band and has breached all the major SMAs other than the 200 SMA. The price action displayed by the HA candles is extremely bearish, the preceding week’s candles were all closed, full bodied and with downward shadows. Both the DMI and the MACD are making lower lows using the histogram visuals, the stochastic lines have crossed, but are short of the oversold area. The ADX is at 17 whilst the RSI is at 40. Traders short need to adjust their stops according to the price action displayed over the coming week, perhaps using the PSAR as a method to trail the stop would be advisable.
The DJIA broke to the downside on April 4th, since which time the pip gains have been considerable. Currently PSAR is above price and price has breached all the major SMAs to the downside bar the 200 SMA. The DMI and the MACD are negative and making lower lows, the stochastic lines have crossed, but are short of the oversold area. The ADX is at 12 with the RSI at 40. Traders short would be advised to stay so until at least the PSAR has turned positive would be the ideal stop signal to await a reversal in sentiment of several other of the afore mentioned indicators.