Trend analysis for the week beginning Sunday 16th March
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 with the Westpac consumer confidence index for New Zealand expected to come in at a level similar to the previous reading of 120.1…
Monday sees the publication of the UK’s Rightmove house price index which showed a previous result of 3.3% increase in February. European CPI is expected in at 0.8% with core CPI at 1%. Germany’s BUBA report is published which will be looked at for clues as to the management of the overall economy from a central bank perspective. The governor of the BUBA, Weidmann, will also hold a press conference.
Attention then turns to the USA in the form of the Empire manufacturing survey, expected to rise to 6.6. Industrial production in the USA is expected to come in at 0.2%, the NAHB house building reading is expected to come in right on the median line of 50.
Tuesday sees Australia’s central bank publish its monetary policy meeting notes, China publishes its foreign investment data year to date, Italy’s trade balance should come in at €2.47 per month positive. The ZEW economic reading for Germany and Europe is published with the expectation that Germany will deliver a reading of 52.8 with Europe’s at 67.3. Europe’s trade balance is expected to show a reading of €13.9 bn.
Canada’s manufacturing sales are expected in at 1.1% up on the month. USA building permits are anticipated to come in at 0.97 million. Core CPI and CPI for the USA is expected in at 0.1%. Housing starts should come in at 0.92. In Canada the central bank governor Poloz speaks as does the UK’s Mark Carney. New Zealand’s trade balance is anticipated to come in at -$1.44 bn. Japan’s trade balance is expected to come in at -¥0.89 trillion.
Wednesday the BOJ governor Kuroda speaks, after the all industries activities index is published. In the UK we receive the unemployment claimant count number expected to show that the number fell by -23K, with the unemployment rate remaining static at 7.2%. The UK central bank’s MPC will reveal its decision regarding the base rate vote and the holding of the quantitative easing programme at £375 bn. Wednesday also sees the UK’s annual budget statement from the UK chancellor George Osborne.
Canada publishes its wholesale sales figure, expected to show a rise of 1.2% per month. The USA current account is expected to come in at -$88bn for the month. The Swiss central bank governor Jordan speaks.
The FOMC publishes its economic projections and analysis and publishes a statement to accompany the central bank’s base interest rate decision, expected to come in at no change at 0.25%. The FOMC will then hold a press conference to highlight the guidance of its economic policy and the explanation regarding its base rate decision. The New Zealand GDP publication rounds of the high impact news events for Wednesday.
Thursday sees the publication in Australia of the RBA bulletin, Germany publishes its PPI, expected in at 0.2% for the month. The bank of Japan governor Kuroda speaks and the Swiss central bank publish their Libor rate combined with their overall monetary policy assessment.
The EU holds an economic summit, whilst the UK CBI publishes its industrial expectation orders, expected to rise to 5 from a reading of 3.
From the USA unemployment claims are expected to come in at 327k for the week. Existing home sales are expected in at 4.65 million on an annual basis. The Philly fed manufacturing index is expected in at 4.2, from the previous print of -6.3. The USA will also publish the results of its recent bank stress tests.
Friday Japan enjoys a bank holiday; Europe’s current account is expected to print at -$18.4 bn. The EU continues with its economic summit. The UK’s public net sector borrowing figure is expected to come in at £7.8 bn. Core CPI and CPI for Canada is expected to come in at 0.5% and 0.6% respectively. Retail sales in Canada are predicted to rise by 0.9%. Consumer confidence for Europe is expected to come in at -12.
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 and despite a brief pause on February 27th the momentum then continued to the upside where it continued to add pips to long positions. Currently the PSAR is below price with the price action suggesting that price may have reached a natural point of exhaustion on Friday as a classic doji Heikin Ashi candle emerged. Price is above all the major simple moving averages, but has retraced from breaching the upper Bollinger band earlier during last week’s trading sessions. The MACD and DMI are positive, but failing to make higher highs using the histogram visual. The stochastic lines are short of the overbought area. The ADX is at 22 and the RSI at 65. Traders long need to adjust their trailing stops to ensure that the pips gained are not given back by way of a significant retrace. Traders considering short positions would be advised to await the PSAR turning negative and above price before closing any long trend trades.
AUD/USD has proved to be an extremely difficult and challenging security to trade over recent days due to its fluctuation on the daily chart. Currently PSAR is positive and beneath price, price is below the 100 and 200 SMA, but above the 21 and 50 SMA. The current price action is inconclusive but suggests (given the HA candles over previous days) that the tendency is still to the upside. The MACD and DMI are positive, but failing to make any higher highs, whilst the stochastic lines have crossed to the upside, but are ‘mid territory’, still some distance from the overbought or oversold conditions. ADX is at 15 with the RSI at 55. Traders need to exercise great caution were this security is concerned given the whipsaws experienced over recent weeks. The use of trailing stops, by way of shadowing the PSAR, would be recommended.
USD/JPY broke to the downside on March 17th. Price has recently breached the 21, 50 and 100 SMA to the downside and is still below the 200 SMA. The price action is very convincing with the last two daily candles of last week being closed, full bodied, with downward shadows. Price has breached the lower Bollinger band to the downside. Both the MACD and DMI are negative and making lower lows, the stochastic lines have crossed, but are mid territory some distance from the oversold area. ADX is at 18 with the RSI at 38. PSAR is above price. Traders short would be advised to stay so until several of the afore mentioned commonly used indicators have turned bullish, as a minimum traders should look towards the PSAR turning positive to stop their current direction and consider trading to the upside.
The DJIA broke to the downside on March 12th/13th after a sustained momentum move to the upside which had seen the DJIA gain considerable points for circa five calendar weeks. The price action is definitive; the last two daily candles of last week were bearish, full bodied, closed with downward shadows. Price breached the 21, 50 and 100 SMA, is above the 200 SMA but has breached the lower Bollinger band to the downside. Both the DMI and MACD are negative and making lower lows, whilst the stochastic lines have crossed and exited the overbought area. PSAR is above price whilst the ADX reading is at 15, with the RSI at 43. The selloff experienced last week was considerable, traders need to lock in their profits by way of the use of perhaps the PSAR as a trailing indicator.
WTI oil began its break to the downside on March 5th since which time the points retracement, after a sustained rally to the upside witnessed over several months, has been considerable. The price action suggests there is more energy to this momentum move to the downside. The majority of the previous week’s candles were bearish, closed, full bodied with downward shadows. Price has recently breached the critical 200 SMA to the downside. The PSAR is above price, the lower Bollinger band has been breached to the downside, both the MACD and DMI are negative but failing to make lower lows. The stochastic lines are close to the oversold area. ADX is 23 RSI is 44. Due to its sensitivity to macro events traders relying on technical analysis only need to proceed with caution in relation to this security.
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