Trend analysis for the week beginning March 23rd
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.
The week begins Monday with a raft of PMIs, the first beginning with the HSBC China flash manufacturing PMI excepted to come in at 48.7. Europe’s flash manufacturing PMI is predicted to come in at 55.3, with services PMI anticipated to come in at 52.6. French flash services PMI is expected to print at 47.9. Germany’s flash manufacturing PMI is expected to come in at 55.8, Germany’s flash services PMI is anticipated to come in at 55.8. Germany’s central bank publishes its BUBA report. Later in the afternoon the flash manufacturing PMI for the USA is published.
Tuesday sees China’s conference board LEI published, later the RBA governor Lowe speaks, in the UK the Nationwide house price index is published, the German IFO business climate index is published, with an expected reading of 110.9. The UK’s CPI is published expected in at 1.7% year on year. The BBA mortgage approvals are predicted to come in at 50K for the last month. PPI for the UK is predicted to come in at 0.4% for the month, with RPI expected in at 2.7% year on year. HPI, house price inflation, is predicted to have increased by 5.7% year on year according to the ONS.
Europe’s trade balance is anticipated to come in at €13.9 bn positive for the month. UK CBI realized sales are predicted to come in at 30. From the USA the Case Shilller house price index is published, expected in at 13.3% year on year, with HPI month on month expected in at 0.7%. Consumer confidence in the USA is expected to print at 78.7. New home sales are expected to come in at 447K. The Richmond manufacturing index is predicted in at -1. Deputy Governor of the RBA Lowe speaks. Later FOMC Plosser speaks.
Wednesday sees the RBA financial stability report published and the RBA Governor Stevens speaks. From Europe we receive the GFK German consumer confidence reading predicted to come in at 8.5. Italian retail sales are expected in at 0.4% up on the month. Core durable goods orders in the USA are expected to come in at 0.3% with durable goods orders predicted in up 1.1% month on month. Flash services PMI for the USA is predicted in at 54.2. The USA also publishes the results of the banking stress tests. The New Zealand trade balance is expected to come in at a positive $600 ml for the month.
Thursday witnesses the private loans data for Europe published expected in at 2.1% down. Retail sales for the UK are expected to come in at 0.5% up for the month, weekly unemployment claims in the USA are predicted in at 326K. FOMC member Pianalto speaks whilst the USA final GDP is published, expected in at 2.7% quarter on quarter. Pending home sales in the USA are anticipated to come in at 0.2% up on the month.
Household spending in Japan is anticipated to have risen by 0.3%, core Tokyo CPI by 0.9% with national core CPI by 1.9%. Unemployment in Japan is expected to print at 3.7% with retail sales in Japan expected to have improved by 3.6% year on year.
Friday German CPI is anticipated to come in at 0.4% with import prices at 0.3%. The UK current account is expected to print at -$13.5 bn. Final GDP is expected to come in at 0.7% for the quarter. Index of services for the quarter in the UK is predicted to come in at 0.6%.
Personal spending details are published in the USA, expected in at 0.3% month on month up with personal income up 0.4% month on month. The revised university of Michigan consumer sentiment index is published expected to come in at 80.6.
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 finally broke to the downside on March 20th. Currently the price action is bearish, the last two HA daily candles are full bodied, closed with downward shadows; price has breached the lower Bollinger band, but is above the 200, 50 and 100 SMAs. The DMI is positive, but making lower highs, whilst the MACD is negative and making lower lows. PSAR is above price, RSI is at 49 with the ADX at 22. The stochastic lines have crossed and have exited the overbought territory. Traders short would be advised to stay so until several of the afore-mentioned indicators have reversed trend. Traders may wish to add to their positions should price approach the 200 SMA, above the critical round number of 13400.
AUD/USD broke to the upside on March 5th since which time the security has behaved in a volatile manner when judged on the daily time frame. However, the trend has remained bullish with PSAR below price, price breaching the main SMAs with the exception of the 200 SMA. Price had breached the upper Bollinger, but has now retraced back to the middle Bollinger. Friday’s HA candle was inconclusive taking on a similar appearance to a classic doji candle. Currently, when observed on the histogram visual, both the MACD and DMI are positive and making higher highs, the stochastic lines have yet to cross but are short of the overbought zone. The RSI is at 57 with the ADX at 15. Traders long would be advised to stay so until several of the afore-mentioned indicators exhibit bearish tendencies. Traders looking to close could (as a minimum) look towards the PSAR appearing above price as a reason to close the long trades.
USD/JPY broke to the downside on March 12th; however, traders must be on alert that the chart pattern has all the appearance of a security coiled to break to the upside. Currently PSAR is above price, price is above the 200 SMA. Both the DMI and MACD are positive and making higher highs, price has breached the middle Bollinger band. The stochastic lines are short of both the overbought and oversold area and have crossed to the downside. RSI is at 49 and the ADX is at 15. Traders short would be advised to proceed with caution given the mixed signals the indicators and price action is exhibiting.
The DJIA broke to the upside in the last daily session of the preceding week. Currently the PSAR is below price and positive, both the MACD and DMI are positive and making higher highs. The stochastic lines have crossed to the downside early in the month and are yet to reverse given the suddenness of the break to the upside. The RSI is at 52 with the ADX at 11. Price has breached the middle Bollinger and is above all the key SMAs. Traders long would be advised to make good use of trailing stops via the use of the PSAR given the current unpredictable nature of the markets and their inextricable link to the geo political tensions in the Ukraine area.
« USA banks pass stress tests, Fitch affirms USA AAA rating whilst Euro area balance of payments improves France leads the way with a sharp increase in its Markit Economics Composite »
