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 the key fundamental news begin with Japanese retail figures expected to come in at 10.9% up year on year. Germany’s Bundesbank will publish its latest report in the morning European session. From the USA in the afternoon session we receive data on the latest pending home sales in the USA expected to be up 1%. Thereafter attention turns to New Zealand where late on we receive data on the trade balance, expected in at $919 ml.
Tuesday sees the latest German GFK business climate reading published, expected to come in at no change at 8.5. Spanish unemployment is expected to have fallen slightly at 25.6%. Germany’s preliminary CPI is expected to come in at -0.1%, preliminary GDP for the UK is expected to come in at 0.9% for the quarter. The index of services for the UK is also expected in at 0.9%. An Italian ten year bond auction takes place in the afternoon as does a UK ten year bond auction. From the USA in the afternoon we receive the latest house price inflation data expected to come in at 12.9%. The CB Consumer confidence survey is published in the afternoon session with the print predicted to come in at 82.9. Later the Canadian central bank governor Poloz speaks. In the evening the New Zealand monthly building consents number is published.
Wednesday the preliminary industrial production month on month data for Japan is published with the prediction that the figure will be 0.6%. The ANZ business confidence survey is also published. From Japan we receive the monetary policy report, whilst housing starts are predicted to have fallen by -2.8%. German retail sales are anticipated to have fallen by -0.6%. The BOJ will publish its outlook report and will hold a press conference. French consumer spending month on month is expected to have risen by 0.3%. Spanish flash GDP QoQ is expected to have risen by 0.2%. Germany’s unemployment number is expected to have fallen by -10K. Italy’s unemployment rate is predicted to remain at 13%. The CPI flash estimate for Europe is anticipated in at 0.8% year on year.
From the USA we receive the latest ADP jobs report with the anticipation that an extra 203K jobs will have been created. Canada’s GDP is expected to come in at 0.2% up month on month, whilst the advance GDP quarter reading for the USA is expected in at 1.2%. The Chicago PMI is expected in at 56.6. The FOMC will issue a statement, with the funding rate predicted to stay at 0.25%.
Thursday’s fundamental news begins with the manufacturing PMI for China expected in at 50.5. Quarterly import prices for Australia are published expected in at 1.9% up. From the UK we’ll receive the latest HPI inflation from the Nationwide expected in at 0.6% up on the month. Manufacturing PMI for the UK is expected in at 55.4, mortgage approvals in the UK are expected to have risen to 73K for the last month.
From the USA we’ll receive the latest Challenger job cuts, Janet Yellen will speak whilst the latest unemployment claims are expected in at 317K. Personal spending is anticipated to have risen by 0.7% with personal income up 0.4%. Final manufacturing PMI for the USA should come in at 55.8, with ISM manufacturing PMI anticipated to come in at 54.3. Total vehicle sales in the USA should print at 16.2 mn annual rate.
Friday sees Japan’s unemployment number printed expected in at 3.6% with annual household spending up 1.7% year on year. Australia’s PPI QoQ is predicted in at 0.6%, Spanish manufacturing PMI is expected in at 53.2, Italian manufacturing PMI is predicted in at 53, whilst the final manufacturing PMI for Europe is expected in at 53.3. Construction PMI for the UK is expected in at 62.2, whilst a German ten year bond auction takes place. Europe’s unemployment rate is expected in at 11.9%, whilst from the USA the non-farm employment number is expected to reveal that 207K extra jobs have been created. The unemployment rate in the USA is expected to print at 6.6%. Factory orders in the USA is anticipated to have fallen to 1.5%.
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 7th. Currently PSAR is below price and positive, the MACD and DMI are positive and making higher highs using the histogram visuals. The middle Bollinger band has been breached to the upside whilst price is above all the major SMAs having lastly breached the 21 SMA. The last days’ HA candles were inconclusive with Friday’s candle being positive, closed, with a shallow body and a small shadow to the upside. The stochastic lines have crossed to the downside but are short of either oversold or overbought conditions. The ADX is at circa 12 with the RSI at 55. Traders who have been long this security since the 7th would be advised to stay so until perhaps as a minimum the PSAR has reversed to negative sentiment. Thereafter any short trades would be best executed when several of the afore mentioned indicators have turned negative and price has breached many of the moving averages to the downside.
AUD/USD broke to the downside on April 16th, currently the PSAR is negative and above price. Price has breached the lower Bollinger band. Price is still above the 50, 100 and 200 SMAs. The DMI is positive and failing to make lower highs, whilst the MACD is negative but making lower lows. The stochastic lines have crossed and have exited the overbought area. The last two HA candles of the week were closed, full bodied with downward shadows. The ADX is at 33, whilst the RSI is at 51. Traders who are currently short would be advised to stay so until, for example, the PSAR has turned positive when they could consider closing their short trade to await further confirmation of other indicators before considering reversing their trade direction.
USD/JPY broke to the downside on April 7th, currently PSAR is negative and above price. Price has breached the middle Bollinger to the downside and price is below all the main SMAs with the exception of the 200 SMA. Both the MACD and DMI are negative and making lower lows. The stochastic lines have crossed to the upside but are short of the overbought and oversold area. The ADX is at 14 and the RSI is at circa 47. Traders will have done well to have held their short position for the duration since the 7th given that midweek last week the price action displayed had all the evidence of a security coiling to break to the upside. However, in the current situation traders would be advised to hold their short positions until several of the afore mentioned indicators have registered positive.
The DJIA broke to the upside on April 15th, the PSAR is positive and below price, price has breached the middle Bollinger band to the downside. Price has breached the 21 SMA to the downside, Friday’s HA candle was closed, full bodied and with a downward shadow. The MACD and DMI are positive, but making lower highs using the histogram visual. The stochastic lines have crossed, but are short of oversold or overbought conditions. The ADX is at 12 and the RSI is at 51. Traders need to proceed with caution given that the security appears coiled to break to the downside. As a minimum requirement traders should consider short trades if several of the afore mentioned indicators revert to bearish sentiment.