trend-analysis

Swing/trend trading analysis for week beginning February 24th

Feb 24 • Is The Trend Still Your Friend • 1313 Views • No Comments

trend-analysisOur weekly trend/swing trading analysis consists of two parts; firstly, we analyse the fundamental policy decisions and medium/high impact news events for the coming week. Secondly, we use technical analysis in an attempt to determine any potential trading opportunities by way of trend analysis. Traders reading our key calendar event highlights 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.

Traders should also note that if the data is relevant to, for example, European countries, then a print that misses expectations (or surpasses expectations) may affect the value of the leading pairs if the euro is the base. Similarly UK news will affect the price of sterling versus its major peer currencies in similar ways.

Monday sees the German IFO business climate index printed with the expectation that the print comes in at 110.7, a slight improvement on the 110.6 previously. It’s a survey of about 7,000 businesses which asks respondents to rate the relative level of current business conditions and expectations for the next 6 months. CPI in Europe is expected in at 0.7%.

In the USA the flash services PMI is expected in at 56.9. The day’s medium to high impact news events concludes with the Japanese corporation inflation reading, expected in at 1.2% for the month. It’s a leading indicator of consumer inflation – when corporations pay more for services the higher costs are usually passed on to the consumer.

Tuesday sees Germany’s final GPD published which is anticipated to come in at 0.4% quarter on quarter. In the UK the Nationwide house price inflation data is expected to show house prices rose by 0.6% month on month in February. The UK will publish its mortgage approvals via the BBA, expected to show a rise to 47.9K. Later in the day the USA will also publish its house price inflation data by way of the Case Shiller Composite index, expected to show house riches rose by 13.3% nationally on an annual basis.

Italian retail growth is expected in up 0.4%, CBI realised sales for the UK is predicted to show a reading of 14. The EU will publish its economic forecasts.

Back to the USA the Conference Board consumer confidence index is published with the reading expected to fall to 80.2. It’s a survey of about 5,000 households which asks respondents to rate the relative level of current and future economic conditions including labour availability, business conditions, and overall economic situation. The Richmond Manufacturing index is also published on Tuesday and is expected to show a reading of 13. Thereafter FOMC member Tarullo speaks. Federal Reserve FOMC members vote on where to set the nation’s key interest rates and their public engagements are often used to drop subtle clues regarding future monetary policy.

Wednesday Australia chips in with data on construction work done, expected in up 0.4%. The GFK German consumer climate reading is published expected in at 8.3. A member of the UK’s BoE, (Broadbent) MPC speaks; BOE MPC members vote on where to set the nation’s key interest rates and their public engagements are often used to drop subtle clues regarding future monetary policy. The second estimate for the UK’s GDP will be published, expected in at 0.7% up. Preliminary business investment is expected to have risen in the UK to 2.6%. A sale of 30 year German bonds will take place on Wednesday; the rate is expected to be 2.64%.

Attention then turns to the USA where new home sales are expected to show 406K new home sales. Crude oil inventories are expected to come in at, or around the previous level of one million barrels.

Finally on Wednesday attention shifts to New Zealand, where the trade balance is expected to fall to positive $230 ml. Visitor arrivals are expected in at a similar level to that previously at a 0.2% rise.

Thursday private capital expenditure in Australia is expected in at -1.0%, FOMC member Pianalto speaks, Swiss GDP is expected in at 0.4% for the quarter. German import prices are expected in at -0.1% down, preliminary German GDP is anticipated to come in at 0.6% up in the latest Q. German unemployment is expected to come in at -10K down.

Canada’s current account is expected to have fallen to -$16.5 bn. Core durable orders in the USA are expected to have fallen by 0.1%. Unemployment claims (weekly) are expected to come in at 333K. Natural gas storage is expected to be similar to last month at -250 bn therms. Building consents in New Zealand are expected to rise at a similar level to previously, at 7.6%.

Attention then turns to Japan, where household spending is expected to rise by 0.5%, national core CPI is expected in at 1.3%, the unemployment rate is expected in at 3.7%. Retail sales in Japan are expected in at 3.9% up.

Friday the ANZ business confidence index is published expected in similar to previously at 61.1. Private sector debt data from Australia is published, expected in at 0.5% up for the month. Housing starts in Japan are expected to show a 15.3% rise.

German retail sales are expected in up 1.2%, French consumer spending is expected to have fallen by 0.8%, Italy’s unemployment rate is expected in at 12.7%, quarterly rate at 12.4%. Italy’s preliminary CPI month on month is expected in at 0.5%.

Flash estimate for European inflation is expected to come in at 0.7%, with unemployment in the region expected in at 12%.

FOMC member Fisher will be speaking, Canada’s GDP will be published, expected in at -0.2%, preliminary GDP for the USA will be published, expected to come in at 2.6%. Chicago PMI is expected in at 57.9. Revised university of Michigan sentiment is expected to come in at 81.4, pending home sales in the USA are expected in up 2.9%. FOMC Member Kocherlakota Speaks, FOMC Member Stein Speaks, BOE Gov Carney 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 began its break to the upside on February 6th, currently PSAR is positive, price is above the middle Bollinger band, but not threatening the upper band. Price is above all the key moving averages where a ribbon of 21, 50, 100 SMAs have congregated. In terms of price action the last two days of the preceding week illustrated two pronounced dojis using Heikin Ashi as the daily bars. The DMI is positive as is the MACD and using the histogram visual for both of the indicators they are failing to make any higher highs or print and lower lows. Both stochastic lines are close to the overbought zone but have failed to cross. The RSI is at 60, with the ADX at 12 and falling. Traders long would be best advised to remain so until as a minimum the PSAR has become negative, thereafter traders should be looking for several of the key indicators to turn negative before committing to the downside.

AUD/USD broke to the upside on February 4th, price is currently above the 21 and 50 day SMA and has breached the middle Bollinger to the downside. The price action displayed by the Heikin Ashi candles suggests that price is coiling ready to break to the downside. The DMI is negative and making lower lows, whilst the MACD is positive but making lower highs. The stochastic lines are in the overbought area and have crossed. The ADX is at 17, with a downward trajectory, whilst the RSI is at 53. Traders who have been long since the beginning of this trend should have locked in substantial pips by way of using a trailing (PSAR) stop. This security is displaying all the hallmarks of a security ready to break to the downside. Much depends on any damaging Australian data and the relative strength of the USA dollar. Traders looking for a reason to close would be advised to look towards the PSAR turning negative as a minimum reason to close and look for reversal opportunities.

USD/JPY began a weak and unconvincing break to the upside on or around February 6th. Currently PSAR is below price, which is above both the 100 and 200 SMA. Price is threatening to breach the upper Bollinger band, whilst the Heikin Ashi daily bar on Friday was positive with an upper shadow. The stochastic lines are approaching the overbought area, but have failed to cross. The DMI is negative but making higher lows, the MACD is positive and making higher highs. The RSI is at 49, with the ADX at 24 with a downward trajectory. Traders still long need to proceed with caution as the security has remained in a tight range for over two trading weeks. Traders looking to short could, as a minimum, look towards the PSAR to become negative by appearing above price as a reason to close the trade and perhaps consider trades to the downside.

The DJIA broke to the upside on February 6th-7th. Currently PSAR is below price, price is above all the major SMAs, bar the 50, where price is currently sitting on the 50 SMA. Price is above the middle Bollinger band, but some distance short of the higher band. Current Heikin Ashi price action is inconclusive with the last two days’ of the preceding week being dojis. The DMI is negative; the MACD is positive but failing to make higher highs. The RSI is at 54 with the ADX at 21 sloping downwards. Stochastic lines on the adjusted setting of 10, 10, 5 are in the overbought territory, but are yet to cross. Traders long this security need to exercise extreme caution as the indice is displaying many of the characteristics of a security ready to break to the downside. As a minimum PSAR appearing negative and above price could be the reason to close and wait for a cluster of indicators to turn negative.

WTI oil began its break to the upside on or around January 15th. The gain has been circa 1000 points from circa $92 a barrel to over $103 per barrel. Price is above all the major SMAs including the 200 SMA. Price is above the middle Bollinger band, but short of the upper Bollinger. The latest daily candle of the preceding week was an inconclusive doji using Heikin Ashi bars. The DMI is positive but making lower highs, as is the MACD using the histogram visuals. RSI is at 67, ADX at 29 with an upward trajectory. Traders long will have locked in substantial points by way of trailing a stop through the use of the PSAR. This must continue given WTI oil’s propensity to suddenly stop and reverse.


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