Swing/trend analysis for the week beginning March 31st
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’s news events begin on Sunday with the publication of the building consents in New Zealand which came in down -8.3% in the previous month. Monday morning the Japanese PMI is published and the preliminary industrial production figures which, month on month, should come in at 3.6% according to the analysts polled. The ANZ business confidence print is predicted to come in at a figure close to the previous reading of 70.8. In Australia the new home sales data is published whilst shortly after the print on private sector credit is revealed expected to come in at an increase of 0.4% for the month. Housing starts are also published from Japan.
Attention then turns to Europe where German retail sales are predicted to have fallen by 0.3% in the month, in the UK net lending to individuals is expected to come in at £2.3 bn over the last month, with mortgage approvals scheduled to come in at 75K for the month. European flash estimate for CPI is expected in at 0.6%.
Attention then turns to North America with Canada’s monthly GDP expected in at 0.4%, the Chicago PMI is predicted to come in at 59.2. From the USA Janet Yellen speaks, whilst in the UK the BoE governor Mark Carney speaks.
Tuesday sees the Tankan manufacturing index from Japan published expected in at 19 with the manufacturing predicted in at 24. The Chinese manufacturing PMI is expected to come in at 50.1. The HSBC manufacturing PMI for China is predicted in at 48.5. Australia’s central bank is expected to keep its base interest rate at 2.5% and the RBA will publish a statement to accompany the decision.
Turning to Europe the Spanish manufacturing PMI and the prediction is for the print to come in at 52.9, Italy’s expected in at 52.2. The UK’s PMI is expected in at 56.7. Europe’s unemployment rate is expected in at 12% as ECOFIN meetings take place throughout the day.
From the USA the final manufacturing PMI is published, expected in at 55.9, with the ISM Manufacturing expected in at 54.2. Total vehicle sales in the USA are predicted in at 15.8 million for the month.
Wednesday sees building approvals published from Australia, expected to come in down -1.7% on the month. UK Nationwide HPI is expected in up 0.7% for the month. Spanish unemployment is expected to have fallen by 5.3K. Construction PMI in the UK is expected in at 63.1. Final GDP for Europe is predicted in at 0.3% QoQ whilst day two of the ECOFIN meetings continue.
In the USA we have the ADP private jobs report published, expected to show 192K extra jobs created. Factory orders in the USA are predicted to come in at 1.3% up on the month.
Thursday sees Australia publish its latest retail trade figures, expected to come in up 0.4% with the trade balance in Australia expected in at a positive $0.82 bn for the month. Later the RBA governor Stevens will speak. China will publish its non-manufacturing PMI.
From Europe we receive Spanish services PMI, expected in at 54.1, Italian services PMI expected in at 52.3. Europe’s PMI is expected in at 52.4, with the UK’s at 58.2. Europe’s ECB announces its base rate decision and will hold a press conference to explain the decision.
Canada’s trade balance is predicted to come in at $0.2 bn. The USA trade balance is expected in at -$38.3 bn for the month. Unemployment claims in the USA for the week are scheduled to come in at 317K, whilst the ISM PMI for manufacturing is expected in at 53.5.
Friday sees the Halifax HPI published for the UK expected to come in at 0.7% for the month. Germany’s factory orders are expected in at 0.5% up for the month, employment change in Canada is expected to come in up 25.3K on the month with the unemployment rate at 7%. From the USA non-farm employment data is expected to print at 196K with the unemployment rate predicted to come in at 6.6%.
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 broke to the downside on March 19th since which time the selloff has continued. PSAR is negative and above price, the lower Bollinger band is threatened to the downside, DMI and MACD are negative and making lower lows using the histogram visual, whilst the Heikin Ashi candles are closed with downward shadows. The stochastic lines have crossed, but are short of the oversold territory. The RSI is at 46 with the ADX at 18. Price is threatening to breach the 50 and 100 SMA. Traders short would be advised to stay so until at least the PSAR has reversed trend.
AUD/USD broke to the upside on 5th/6th March, since which time the pip gains have been considerable. Currently the price action remains extremely bullish as do the majority of the indicators. Price breached the 200 SMA to the upside on March 25th. The Heikin Ashi candles towards the end of the preceding week were closed, full bodied and with upward shadows, both the MACD and DMI are positive and making higher highs using the histogram visuals whilst the PSAR is positive and below price. The stochastic lines have crossed and are close to the oversold conditions area. RSI is at 69 with the ADX at 21. Traders long would be advised to stay so but lock in profits by way of trailing stops, perhaps linked to the PSAR. Traders considering short positions may wish to use the 200 SMA being breached to the downside as a minimum reason to consider short opportunities.
USD/JPY broke to the upside on the final day of the preceding week, PSAR is below price with the final Heikin Ashi daily bar being closed full bodied with a long body to the upside. The MACD and DMI are positive and making higher highs using the histogram visual. The RSI is at 50 with the ADX at 12. The stochastic lines have crossed and are mid-range between overbought and oversold conditions. Price has breached the 20, 50 and 100 SMA and is above the 200 SMA. Traders long will have the ideal stop placement being on the recent low of March 14th. Traders who are long should consider staying so until many of the favoured indicators turn bearish particularly the PSAR to turn negative.
The DJIA index has continued to trade within a tight range in last week’s trading sessions. Price has breached the 21 day SMA and is above the 50, 100 and 200 SMA. Price broke to the upside on Friday, but then retreated to leave the security taking on the appearance of indecision with the HA candle having no body and shadows to the upside and downside. Currently trader bias is to the long side with the PSAR being below price, price has come close to the upper Bollinger band. The stochastic lines have crossed, but are neither over sold nor over bought. The DMI and MACD are positive and making higher highs, the RSI is at 53 with the ADX at 12. Traders long should proceed with caution and ensure that they lock in any profits by way of trailing stops aligned with the PSAR. As a reason to stop and reverse traders could use the PSAR for that specific purpose.
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