Our swing trend analysis will begin by featuring the fundamental policy decisions and high impact news events that will fashion the week’s sentiment and therefore could dictate any significant market moves. Thereafter we’ll move on to discussing the technical analysis by way of using the majority of the most commonly used and accepted trend trading indicators and tools…
Our fundamental policy and high impact news events begins Sunday with Japan’s current account which should come in at -¥0.06 trillion. Consumer confidence is predicted to come in at 43.9.
Monday witnesses the Swiss unemployment rate, predicted to remain at 3.2%. French industrial production is predicted to fall to -0.1%, whilst Italy’s is expected to come in flat at 0.00%. Europe’s Sentix confidence index is expected to come in at 10.3. It’s a leading indicator of economic health – investors and analysts are highly informed by virtue of their job, and changes in their sentiment can be an early signal of future economic activity. Survey of about 2,800 investors and analysts which asks respondents to rate the relative 6-month economic outlook for the Eurozone.
Attention then moves to North America where Canadian housing starts are scheduled to come in at 184K, only down 4K from the previous figure. A member of Canada’s central bank will give a speech. Mortgage delinquencies in the USA are published, with the last figure at 6.41% finalizing the last major news event of the day.
Tuesday Japan has a bank holiday all day therefore yen and Nikkei index trades and performance will be affected. The UK’s BRC will publish its retail sales monitor figure, expected in at 0.4%, similar to the previous month.
Australia’s business confidence is published, expected in at 6, similar to the previous month’s data. House price inflation for Australia is expected to come in at 3.1%+, with home loans, month on month, up 0.9%. China’s trade balance is predicted to come in tentatively at 24.2 billion for the month. With new Chinese loans up by a similar amount to the previous month of 483 billion.
Attention shifts to North America as the USA NFIB number is published, expected in at 93.6. The FOMC member Plosser will speak, then the new chair-person Janet Yellen will accept her nomination by way of her first testimony. Jolts job openings in the USA should come in at circa 4 million, with wholesale inventories at 0.5%. Finally, for North America, Canada’s annual budget release will be published.
Australia’s Westpac consumer sentiment will be published, expected in at an improvement versus the previous -1.7% last month. Japan’s core machinery data is published, expected in at -3.7% down, whilst tertiary industrial activity is expected in at -0.2% down.
Wednesday Swiss CPI is published, expected in down -0.2%, whilst industrial production for Europe is expected in at -0.2% for the month. Attention then turns to the UK with the Conference Board number expected in at 0.5, similar to the previous reading. The Bank of England produces its inflation report, as the UK BoE governor Mark Carney delivers a speech. In Europe the ECB president Mario Draghi will conclude the same.
In the USA crude oil inventories are published, expected in at 0.4 million barrels similar to the previous week, whilst a ten year bond auction is scheduled with the bid cover ratio expected at 2.7 and the interest rate at 3.01%. The Fed’s budget balance is expected in at -€28.2 bn.
Attention then shifts to New Zealand’s manufacturing index expected in at 56.4, similar to the previous month’s reading.
Thursday sees Australia’s inflation from the Melbourne Institute published, expected in at 2.3%, similar to previous readings. From the UK we receive the RICS house price balance, with 59% of surveyors expected to have seen house price rises. In Australia we expect to see employment up 15.3K from the previous month’s negative print, with unemployment to come in at 5.9%. The two RBA deputy governors will also speak after the release of this employment data.
In Europe the ECB’s monthly bulletin will be published, whilst the Swiss PPI inflation is expected to come in at -0.2%. Italy and the UK hold bond auctions.
As attention switches to the USA we receive data for core retail sales, expected in at 0.2% up. Retail sales are expected to be flat. With unemployment claims at 331K, business inventories are expected in at 0.4% up. The fed chairperson Yellen will once again testify.
Friday begins with Chinese CPI and PPI CPI expected in at 2.4%+ and PPI at -1.6%. French preliminary GDP is expected in at 0.2%, Germany’s expected in at 0.3%, Italy’s at 0.1% with Europe’s flash GDP at 0.2%. France’s non-farm payroll is expected to slip by 0.1%. Europe’s trade balance is expected in at €14.5 billion for the month down from the previous months.
Canada’s manufacturing sales is expected in at 0.3% up, as USA import prices are scheduled to come in at -0.1% down. The USA capitalization rate is expected to come in at 79.4%. Industrial production for the USA is expected in at 0.2% up, whilst the USA preliminary University of Michigan sentiment index is predicted to show a reading of 80.6.
Technical analysis on several of the main currency pairs, indices and commodities
In this section we’ll concentrate on the technical analysis using several of the most commonly used indicators. The PSAR, DMI, MACD, ADX, RSI, Bollinger bands and stochastic lines. All indicators will be left on their standard settings with the exception of stochastic adjusted to 10, 10, 5. We’ll refer to several of the key moving averages, looming round numbers and key psyche numbers where orders; buy, sell and limit will be clustered. All analysis will be conducted on the daily time frame only and we’ll use Heikin Ashi candles given that their OHLC measurement makes it for easier for the majority of traders (of all abilities) to observe price action.
EUR/USD broke to the downside on February 31st; however, on February 6th sentiment began to reverse. By seventh of Feb. the DMI and MACD became positive and making higher highs, the middle Bollinger had been breached to the upside, as had the 21 SMA, the 100 SMA and the 50 day SMA. Price is still significantly above the 200 SMA. RSI is at 52, ADX at 14. The ADX not yet indicating a trend, the stochastic lines yet to cross on their adjusted setting, whilst being in mid territory away from oversold and overbought zones and the PSAR yet to reverse sentiment to appear below price, might be the only technical preventing traders from taking long positions. The Heikin Ashi candle for the 7th was closed with a full body and upward shadow suggesting buyers are firmly in control of this sentiment. In terms of looming round numbers 13600 is still critical and needs to be firmly broken to the upside to convince many of this bullish breakout move. Should these indicators turn bullish in sentiment then traders might then be committed to trade long.
AUD/USD reversed trend on February 4th. Currently PSAR is below price, the 21 and 50 day moving average have been breached to the upside. The upper Bollinger band has been breached to the upside. Both the MACD and DMI are positive and making higher highs using the histogram visual. Stochastic lines have crossed and are midway and some distance from both overbought and oversold areas. RSI is at 57 and the ADX at 23, suggesting that the trend is beginning to develop. The last three days’ HA candles were closed, full and with upward shadows. In terms of looming round and psyche numbers the key handle on the upside is 0.9000. Traders long would be advised to stay so until several of the leading indicators have reversed their readings and sentiment to bearish.
USD/JPY appeared to be at the genesis of a reverse in sentiment on February 6th. The 7th saw the sessions close with a bullish day candle, closed, full bodied with an upward shadow. The middle Bollinger band has been reached as has the 21 SMA. Both the DMI and MACD are negative, but making higher lows when observed through the prism of the histogram visual. The stochastic lines have crossed on the adjusted setting and are exiting the oversold territory. RSI reading is at 45 with ADX at 26. PSAR is still above price. Traders considering long opportunities may wish to await further confirmation, by way of many indicators turning positive. 103.00 may prove to be the next critical psyche number and handle.
DJIA appeared to reverse trend on February 6th, as it then broke to the upside on February 7th ending the bearish trend which began developing on January 23rd. Currently PSAR is above price, the MACD and DMI are both negative, but making higher lows viewed through the prism of the histogram visual. Price and investors appear to have ‘rejected’ the 200 SMA to the downside with the final candle of the week seeing a closed full body with an upward shadow. The stochastic lines have crossed and are threatening to exit the oversold territory. ADX is at 38 with RSI at 45, indicating a strong trend. The middle Bollinger band has been breached to the upside. Traders considering long trades may prefer to wait for all or several of the most commonly used indicators to turn bullish before entering long trades.
WTI oil began its upward trend from January 15th since which time the pip/points gain has been considerable with price rising circa by 800 points. Hopefully many of our regular readers have stayed on trend in this move as per our direction and instruction; price has finally breached the 200 SMA. Currently PSAR is below price, the MACD and DMI are positive and making higher highs using the histogram visual. RSI is still short the overbought territory at 64, ADX is at 19. The upper Bollinger band has been breached to the upside. If we’re looking for reasons to carefully consider our positions then the stochastic (on the adjusted setting) being in the overbought zone could be a pre-cursor to a sentiment change. Naturally having reached 100.00 we can anticipate many buy, sell and take profit limit orders to be clustered at this handle and key psyche level. Traders long will have surely closed a significant proportion of their gains by the use of trailing stops. Traders should continue to exercise caution now this key handle has been breached.