Trend Analysis For The Week Beginning September 15th 2013
Before we look at the fundamental policy decisions and high impact news events that could impact this week, it’s worth delivering a quick assessment of the key events of last week…
China’s CPI remained steady at 2.6%, whilst industrial production rose to 10.4%. Japan’s final GDP figure came in better than expected at 0.9%, whilst its consumer confidence number remained steady at 43. During its monetary policy meeting officials at the BOJ re-asserted their commitment to an open ended monetary stimulus and the money stock remained at 3.7%. Tool orders, although negative at -1.8%, was a huge improvement on the previous month’s -12.1%. Japan’s BSI index rose to 15.2 from the previous month’s 5, whilst core machinery orders posted a disappointing zero print. Revised industrial production figures came in better than expected at 5.4%.
The UK unemployment rate fell by 0.1% to 7.7%, whilst the claimant count fell by 31,000. The UK BoE governor Mark Carney came under intense scrutiny during an inflation panel hearing.
Looking towards Australasia the Aussie consumer sentiment rose to 4.7%, inflation fell to 1.5%, whilst unemployment remained steady at 5.8%. The New Zealand RBA kept its base rate at 2.5% and during the proceeding press conference the RBA maintained its commitment the keep the rate steady.
USA consumer credit rose less than expected at 10.4bn, whilst a small business index remained static at 94. Job openings fell to 3.69 million. Although weekly unemployment claims fell to 292K this failed to take into account the missing two states’ figures given their computers were ‘off grid’. Retail sales missed their expectations only rising by 0.2% versus expectations of 0.5%. The Michigan consumer sentiment fell to 76.8, significantly below the 82.2 predicted and posted the previous month.
Europe’s sentiment index rose to 6.5 from the previous -4.9. Employment fell by 0.1%, whilst industrial production posted a disappointing print at -1.1%
Weekly fundamental policy decisions and high impact news events that could affect sentiment in the current week.
European inflation figures are published on Monday, the expectation is for the core rate to remain at 1.1%. The USA publishes the Empire state manufacturing index predicted to come in at 9.2, whilst industrial production is predicted to rise to 0.5%. Aussie monetary meeting minutes are printed with investors looking for clues that that RBA will reduce the rate from 2.5%.
Tuesday sees the publication of the UK consumer and retail inflation figures. Consumer is expected to print at 2.7% and retail at 3.2%. The influential German ZEW index is printed which is expected to print at 45.3. Canada’s manufacturing sales index is published the expectation being a 0.6% rise. Core inflation for the USA is predicted to come in at 0.1% month on month.
Wednesday sees the UK publishing the results of the MPC meeting vote in relation to the base rate setting and the monetary/asset purchase scheme. Building permits for the USA are published as is the USA’s FOMC’s economic predictions, whilst the base rate is expected to remain at 0.25%.
Thursday will see the BOJ publish its thoughts via the president Mr Kuroda. The Swiss will publish their monetary policy assessment. UK retail sales are predicted to rise by 0.5%, whilst the CBI in the UK produces its industrial orders expectations. The USA unemployment claims is expected to rise back to the levels of circa 332K, whilst home sales are predicted to print at 5.27 million. The Philly Fed index is predicted to rise to 10.5.
Friday sees the BOJ president Kuroda speak again, whilst the UK publishes its public net sector borrowing, which is expected to rise to £11.9bn from -£1.6bn.
Technical analysis attempting to detect confirmed trends for the current week
As is our habit we’ll use many of the preferred swing trading indicators in an attempt to determine the medium to long term trend. These comprise; MACD, RSI, DMI, stochastic lines, Bollinger bands and PSAR. We’ll refer to key moving averages such as the 200 and 50 SMA, critical levels, Fibonacci retracement and ’round numbers’. We’ll look for price action by way of Heikin Ashi candles/bars and all the afore-mentioned will be plotted on the daily chart, with the occasional reference to the higher time frame of the weekly…
EUR/USD reversed trend dramatically on September 9th. PSAR is below price, the MACD is positive as is the DMI. Stochastic lines, on an adjusted setting of 9,9,5 have crossed, but are some distance from either the oversold or overbought territory. The RSI is printing at 53 just above the median line. The middle Bollinger line has been breached, whilst price has breached to the upside the 50 SMA. Traders currently long would be advised to lock in profits by way of trailing their stops and to wait for a reversal of several, or all of these key indicators in order to reverse their trade to short.
GBP/USD has continued its bullish move witnessed since the end of August. PSAR is below price, the MACD and DMI are both positive and making higher highs using the histogram visual, the RSI is at 73, whilst one stochastic line has reached the oversold area of 80 on an adjusted setting of 9,9,5. The upper Bollinger line has been breached. The price action during the previous week was extremely bullish, closed candles with upper shadows. Traders who have ridden this trend from end August must adjust their stops to ensure a sharp reversal does not eliminate their gains. Similarly many traders may look at the RSI and the stochastic lines as evidence that the momentum on this security may be reaching its point of exhaustion.
AUD/USD began its bullish trend early September, however, towards the end of last week’s trading session the security was exhibiting characteristic suggesting that the trend may have reached a point of exhaustion particularly evidenced by the stochastic lines, which on an adjusted setting of 9,9,5 have both reached the overbought zone. PSAR is below price, MACD and DMI have failed to make higher highs using the histogram visual. Price is marginally above the 50 SMA with the gap of the 200 SMA quite considerable. The last Heikin Ashi candle on Friday, followed by the classic doji on Thursday indicated a modest reversal in sentiment that many traders may have taken as a reason to close a long trade, or reverse to go short. Traders would be advised to look for further bearish indicator confirmation before taking a short trend trade.
DJIA has staged a considerable bullish recovery after threatening to collapse further to the downside once the critical psyche level of 15,000 was breached. At 15,380 the momentum recovery has been consistent through last week’s trading sessions. PSAR is below price, both the DMI and MACD are positive and making higher highs using both histogram visuals. The RSI is at 63, with the stochastic lines are approaching the overbought zone with readings of 76 and 62 on an adjusted setting of 9,9,5 chosen to smooth out ‘noise’. The upper Bollinger band has been breached to the upside. Traders long the index should have locked in profit by way of adjusting their stops. Given that several indicators namely; the RSI, stochastic lines and upper Bollinger are exhibiting overbought tendencies traders may wish to close their profits on this move, particularly if they’ve ridden the trend from circa 15,000.
WTI oil has naturally been sensitive to the crisis in Syria. Transportation and extraction fears causing price to rise past $110 per barrel on occasion. Currently oil is in a downward trend with PSAR above price, the MACD and DMI making lower lows and both negative using the histogram visuals. The lower Bollinger band has been breached with stochastic lines and the RSI not yet reaching the oversold zone. Traders need to exercise caution if trading oil given the potential resolution reached over the weekend proposed by Russia and the USA, the affect of which could see a further fall to the downside.
Spot gold has not acted as the safe haven many market analysts and investors would have predicted during the heightened tensions in Syria. Looking at the current indications traders could be forgiven for believing that this fall to the downside has more dynamism. PSAR is above price, the DMI and MACD are negative and making lower lows using the histogram visual. RSI is at 40 with the stochastics also approaching the oversold zone, traders would be advised to manage their stops to ensure they lock in their current gains. Many traders may feel obliged to close their short trades, if they’ve enjoyed the majority of the move to the downside, given the profit currently on offer.
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