trend-analysis

Swing/trend trading analysis for the week beginning March 2nd

Mar 3 • Is The Trend Still Your Friend • 1189 Views • No Comments

trend-analysisOur weekly trend/swing trading analysis consists of two parts; firstly we analyze 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’s fundamental policy decisions and medium-high impact news events begins on Sunday with New Zealand’s overseas trade index, predicted in at 1.9%. In Australia we’ll receive the AIG Manufacturing index, expected in at a level similar to the previous month’s print of 46.7. Australia’s monthly inflation gauge is expected to come in at 0.1%. From Japan the capital spending number is expected to come in at 5.1%, up from 1.5% previously.

Monday we receive home sales data from Australia predicted in at 0.4% up, job advertisements in Australia are expected to have fallen by -0.3% in the latest month’s data available. Company profits in Australia are expected to come in at 2.3% for the month.

China’s non-manufacturing PMI is expected in at or around last month’s print of 53.4 with HSBC’s print expected to come in at 48.5.

Spain’s manufacturing PMI is expected in at 53.2, with Italy’s in at 53.7. Europe’s final manufacturing PMI is expected to come in at 53.2, with the UK’s in at 56.9. Net lending to individuals in the UK is predicted to have risen by 2.5bn in the latest month, with the latest BoE mortgage approvals at 72K for the latest month available. Later in the day Mario Draghi the ECB president gives a speech.

Personal spending and personal income in the USA is expected in up 0.2% month on month. The final Manufacturing PMI is expected to print at 56.7, with the ISM PMI at 52.3. Construction expenditure is expected to show zero improvement, with total vehicle sales predicted to have risen to 15.3 million.

Tuesday witnesses the data on Australia’s building approvals, expected in at 0.7%+, with the current account predicted to have fallen to -$10.1 billion. Australia’s base rate decision is expected to see the rate stay at 2.5%, the accompanying statement from the RBA will deliver the reasons as to why.

In Europe Spain’s unemployment count is anticipated to show a fall to a rise of circa 74K for latest month available. PPI month on month for Europe is expected to be flat. In the UK the Halifax house price index is expected to show a 0.6% rise, with construction PMI coming in at 63.6.

Wednesday sees the publication of Australia’s GDP QoQ expected in at 0.7%+, Spain’s services PMI is expected to come in at 55.3, Italy’s at 50.6, the UK’s at 58 and Europe’s final services PMI at 51.7. Retail sales for Europe are expected to be up 0.9%, with the revised quarter GDP at 0.3%.

From the USA we receive the ADP jobs report print expected to show a rise of 159K in jobs over the past month. Final services PMI for the USA should come in at 52.7. The ISM non-manufacturing PMI is expected in at 53.8. From Canada we get the statement from the central bank explaining the base rate decision expected to remain the same at 1.0%.

In the USA crude oil inventories are published as is the ‘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.

Thursday sees the publication of Australia’s retail sales expected in up 0.5% with the trade balance at $0.11 bn.

Europe’s retail PMI is published expected in at 50.5, similar to last month’s publication; Spain and France conduct bond auctions, whilst Germany’s factory orders are expected to show a rise of 1.1% on the month.

From the UK we’ll receive notification of the BoE MPC policy decision on base rates combined with a policy statement, expected at no change – to be kept at 0.5%. The asset purchase scheme should remain at the £375 bn with no increase required. Shortly after the ECB will announce their base interest rate and provide narrative in a press conference to accompany the decision.

Monthly building permits data for Canada are published, expected to reveal that permits rose by 1.9% for the month. The Ivey PMI for Canada is expected in at 56.7. It’s a leading indicator of economic health – businesses react quickly to market conditions and their purchasing managers hold perhaps the most current and relevant insight into the company’s view of the economy. Survey of about 175 purchasing managers, selected geographically and by sector of activity to match the economy as a whole, which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.

Challenger jobs cuts in the USA are predicted to print at levels similar to the previous month at 11.5%. Meanwhile unemployment weekly claims in the USA are expected to show that 336K new claims were made during the last week. Factory orders in the USA are expected to have risen to -0.4% for the month.

Various central bank illuminaries will hold court in Thursday; Plosser of the Fed, Murray of the RBC, and governor Stevens of the RBA, whose speech could be highly significant.

Friday we’ll witness the publication of Japan’s leading indicators, expected to show a print of 112.4%. Germany’s industrial production is expected to show a rise of 0.7% for the month.

Canada is predicted to show an increase of circa 17K in employment over the latest month with the unemployment rate at 7% and a trade balance of $1.6bn for the latest month.

The USA NFP data is expected in at 151K jobs for the month with the unemployment rate staying at 6.6%. The trade balance for the month is expected in down circa $40 bn for the month. Average hours worked are expected to show a 0.2% rise with the labour productivity up by 0.6% for the quarter. Consumer credit may have risen by $14.9 bn for the month. Finally on Friday FOMC member Dudley speaks.

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 February 6th. The bullish sentiment came to an abrupt end on February 27th. However, this arrest appeared temporary as bullish conditions once again returned and saw the security break further to the upside on February 28th. Currently PSAR is below price, the upper Bollinger band has been breached, price is above all the major SMAs plotted on the daily time frame/chart. The Heikin Ashi daily bar for Friday was closed, full bodied, with a shadow to the upside. The DMI and MACD are both positive and making higher highs; the stochastic lines have crossed and are in the overbought territory. The RSI is at 63 whilst the ADX is at 14. Traders currently long would be advised to tread with caution given that this security is very sensitive to many of the fundamental rumours concerning the interest rate decisions this coming week from the ECB.

AUD/USD broke the upside on February 4th, that bullish trend was arrested on February 24th. Currently PSAR is above price, price has breached the lower Bollinger band and price is below all the major SMAs. Looking at the price action Friday’s Heikin Ahsi bar was inconclusive; shallow body, open with small shadows to both ends. The DMI is negative but falling to make lower lows, the MACD is negative and making lower lows. Stochastic lines crossed early in the preceding week and have exited the overbought area. The RSI is at 47 with the ADX at 15. Traders will have been encouraged to trade to the downside as many of the preferred indicators will have flagged up bearish opportunities. However, to date, the breakdown to the downside has been inconclusive. Therefore traders who are committed to the downside need to proceed with caution, particularly as there is a base rate decision pending in Australia on Tuesday morning.

USD/JPY reversed trend and broke to the upside on 6th/7th of February, however, the follow through has been inconclusive with the security remaining in a tight range for over three weeks. Currently price has reached the lower Bollinger band; PSAR is below price which is resting on the 100 SMA and above the 200 SMA. Looking at price action through Heikin Ashi bars Friday’s closed bar showed neutral tendencies with the bar having slight prejudice to the downside. MACD is positive but making lower highs, the DMI is negative making lower lows. RSI is at 41, with the ADX at 25. Stochastic lines have crossed and have exited the overbought area. Traders long need to be aware of the precarious nature of the current situation where the security has failed to follow through on a break to the upside and is appearing coiled to now break to the downside. Perhaps the PSAR indicating a reversal of sentiment should be the signal for traders to stop their long positions and reverse.

The DJIA broke to the upside on February 7th, since such time the points gain has been considerable. Price has breached the upper Bollinger band; price is above all the major SMAs with Friday’s Heikin Ashi daily bar being closed with a shadow to the upside. The DMI and MACD are positive and making higher highs, stochastic lines have crossed and are in the overbought area. RSI is at 63 with ADX at 17. Traders long need to be vigilant that the stochastic lines are frilly entrenched in the overbought area and adjust their positions accordingly. As a reason to close long trades, if pre/determined targets haven’t been met, traders could look towards PSAR appearing above price and the stochastic lines exiting the overbought area.

WTI oil broke to the upside on January 15th, since which time the point gains have been significant as price has risen from circa $96 per barrel to past $102. Currently swing traders may be out of the market waiting for further confirmation before shorting oil or re-entering long. PSAR is above price as price has breached the middle Bollinger band to the downside. Price is above all the major SMAs. MACD is negative, but failing to make lower lows, whilst the DMI is positive but, failing to make higher highs. RSI is at 63 ADX at 25. Stochastic lines have crossed but appear deeply entrenched in the overbought area. Traders long may have cause to await further confirmation before committing to the downside.


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