trend-analysis

Swing/trend trading analysis for the week beginning February 16th

Feb 17 • Is The Trend Still Your Friend • 1477 Views • No Comments

trend-analysisOur 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.

The week began with the retail sales data from New Zealand, expected to come in up 1.7% quarter on quarter, with core retail sales expected in at 1.2%. From Japan we get preliminary GDP figures, expected in at 0.7% up quarter on quarter. Revised industrial production from Japan is expected in up 1.1% for the month. From Australia new motor vehicle sales data is expected to come in at a similar level to the previous month’s figure of 1.7% up for the month.

From the UK the leading property sales website Rightmove will reveal its house price increase from the month of January, expected in at one percent up for the month. There are Eurogroup meetings that take place throughout the day, whilst in the USA there is a bank holiday all day.

Tuesday witnesses Australia’s monetary policy meeting minutes published. China’s foreign directive investment is expected in at a similar level to previous, up 5.3%. Attention then turns to Japan’s monetary policy statement and Japan’s bank of Japan press conference.

Europe’s current account is expected in at €19.8 bn, Italy’s trade balance is expected to come in up €2.79 bn positive. Attention then turns to the UK as the key CPI inflation figure is expected in at a consistent 2%. PPI is expected to be down 0.4%, with RPI expected in at 2.7%. House price inflation, according to the ONS stats, is expected to show house prices rising by 5.8% year on year.

German ZEW sentiment index is predicted in at 61.3, with economic sentiment for Europe at 73.8. During Tuesday the ECOFIN meetings will take place throughout the day.

Attention then switches to North America with Canada’s foreign securities purchases at circa $10 bn for the month. In the USA the Empire manufacturing index is published, expected in at 9.9. The NAHB housing index is expected in at 56.

Wednesday from Australia we receive the wage price increase index data, predicted to come in up 0.7% for the quarter. Japan publishes the BOJ monthly report, whilst the all Industries activity (month on month) for Japan is expected in at 0.2%.

Attention then shifts to the UK with the UK claimant count excepted in down 18.3K for the month, the unemployment rate is expected to stay at 7.1%. We’ll receive the detail regarding the UK’s BoE MPC’s votes regarding quantitative easing and interest rate decision, both expected to have been unanimous. Average earnings are expected to have risen by 0.9% over the year and measured over the quarter.

ZEW economic expectations for Switzerland are predicted to come in at 36.8, similar to the previous month. Germany holds a ten year bond auction. In Canada monthly wholesale sales are expected in up 0.5%, USA building permits up 0.98 million annually, with the housing starts up at 0.95 million annually. USA PPI is expected in at 0.6%, with CPI at 0.4%. Finally for the USA the most recent FOMC meeting minutes will be published.

From New Zealand we receive the latest PPI input, expected at 0.9%, with output up 1.4% quarter on quarter. Japan’s trade balance is expected to be worsening at -¥1.56 trillion.

Thursday begins with China’s flash HSBC manufacturing PMI index, expected to print at 49.4. Germany’s PPI is expected in at 0.3% up, French CPI is expected in at -0.3%. French flash manufacturing PMI is expected in at 49.6, services PMI is expected in at 49.5. Germany’s flash manufacturing PMI is predicted in at 56.4, with services PMI at 53.4. Overall European manufacturing flash PMI should come in at 54.2, with services at 51.9. Spain’s ten year debt auction should see a rate of 4.10% set. The UK’s bond auction should see a rate achieved of 2.87%.

In the USA on Thursday core CPI is expected to be at 0.1%, unemployment claims at 335K will be in the usual range. Flash manufacturing PMI for the USA is expected in at 53.6. Consumer confidence in Europe is expected to fall to -11. In the USA the Philly fed manufacturing index is predicted in at 9.2, with mortgage delinquencies in the USA expected to stay at circa 6.41%. Janet Yellen will be testifying on Thursday, whilst USA gas storage data will be published, as will crude inventories data. The day’s high impact news events close with the publication of the BOJ’s most recent policy meeting minutes.

Friday will see the beginning of the G20 meeting, whilst in the UK retail sales are predicted to have fallen by -0.9% in January. Public net sector borrowing in the UK is predicted to have fallen to -£9.3 bn.

From Canada we receive core inflation data expected in at 0.1% with retail sales up 0.2%. Existing home sales in the USA are expected to come in at an annual rate of 4.73 million. The FOMC member Fisher will speak whilst the G20 meetings will continue over the weekend.

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 – adjusted to 10, 10, 5. 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.

EUR/USD began its break to the upside on February 6th, currently PSAR is below price, the DMI and MACD are positive and making higher highs using the histogram visual. Stochastic lines have crossed, but are in a ‘median’ area same way short of both the oversold and overbought zones. Price is above the 21, 50, 100 and 200 SMAs having breached the fifty day SMA on February 14th. The RSI is above the median line at a reading of 57, whilst the ADX is at 12 and sloping downwards. The upper Bollinger has been reached. 13700 is the next logical target to the upside whilst 13800 would represent the next significant handle thereafter. The price action, observed using Heikin Ashi candles/bars, was extremely positive on Friday, the day’s candle was closed, full bodied with an upper shadow suggesting that the sentiment is still to the bullish side. Traders long, who are considering short swing/trend trading opportunities, would be advised to wait for at least the PSAR to turn negative until closing their trades. Thereafter traders would be advised to await several of the afore mentioned indicators to turn negative before trading short.

USD/JPY made a weak attempt at a break to the upside on February 11th as PSAR appeared below price and the MACD registered positive. Currently PSAR is below price, the DMI is negative and making lower lows, stochastic lines have crossed, but are short of the oversold and overbought areas. The MACD is positive, but failing to make any higher highs. The RSI is at 41 with the ADX at 28 and rising, the middle Bollinger is breached to the downside. Price is above the 200 and 100 SMAs. Traders long must proceed with caution given that the security appears to be taking on the appearance of a bearish breakout to the downside developing. Whilst not a classic Heikin Ashi doji candle the final day of the week saw an inconclusive daily candle suggesting that there is a delicate balance between buyers and sellers. As a minimum the PSAR appearing above price should cause traders to stop their long trade and then await further confirmation by way of other indicators before trading to the downside.

AUD/USD experienced a break to the upside on February 6th as the PSAR and many of the leading indicators registered positive. Currently PSAR is below price, DMI and MACD are positive, but have stalled from making higher highs. Price is above the 21 and 50 day SMAs but below the 100 and 200 SMAs. Price has breached the middle Bollinger band to the upside. The current Heikin Ashi candle is indecisive, having a shallow body and shallow shadows to both sides. RSI is at 59 and the ADX is at 21 and sloping downwards. Traders currently long would be advised to stay so whilst locking in their pip gains by way of trailing stops directed by trailing the PSAR.

The DJIA broke to the upside on February 7th. The final Heikin Ashi candle of last week was closed, full bodied with a long shadow to the upside. Price is above all the major SMAs including the 50 day SMA which was breached last Friday. Price is threatening to breach the upper Bollinger band. Both the MACD and DMI are positive and looking through the prism of the histogram visual both indicators are making higher highs. The RSI is at 57 and the ADX at 29 and sloping downwards. Both stochastic lines have crossed but are short of the overbought and oversold zones. Traders long should lock in their points by way of trailing their stops perhaps by use of the PSAR indicator.

WTI oil broke to the upside on January 15th, since which time the points gain has been considerable. Currently the PSAR is below price, whilst price is right on the 200 SMA line, but above the other key SMAs. Price is above the middle Bollinger, but short of the upper Bollinger band. The last two days’ candles of last week have been inconclusive suggesting that this momentum move has reached an organic end if price fails to break significantly above the 200 SMA which is close to the critical psyche level and handle of 100 per barrel. Traders who took this long opportunity mid-January should have banked considerable points and should have locked these points in by way of trailing stops. This circa 800 point move may be nearing its natural organic end therefore traders need to ensure they remain vigilant and not short this security until a complete confluence of the cluster of indicators are met.


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