Trend/swing trading analysis for the week beginning January 19th

Jan 20 • Is The Trend Still Your Friend • 2354 Views • Comments Off on Trend/swing trading analysis for the week beginning January 19th

trend-analysisOur swing trading analysis for the coming week concentrates firstly on the fundamental policy decisions and high impact news events for the coming week, secondly we move onto the technical analysis for some of the most popular securities.

The publication of the Australian inflation rate begins our week of high impact news events and fundamental policy events. The prediction is for a rate of 0.2%, similar to the previous rate. Thereafter attention turns to the UK and house prices as Rightmove, a leading home seller website, publishes its latest asking prices report; expected to show a seasonal drop over the Xmas holiday period of -1.9%.

Overnight/early morning we also receive a raft of publications with regards to China. Chinese GDP being the most critical publication, with the expectation of a figure of 7.6% being printed, a drop from the previous month’s print of 7.8%. Industrial production is expected to drop to 9.8% from the previous print of 10.0%. Retail sales in China are predicted to rise by 13.6%, just a tick down from the previous month’s print of 13.7%.

Germany’s PPI is expected to come in up 0.2% up from the previous print of -0.1%. The German central bank, the Bundesbank, also publishes its latest report; it contains relevant articles, speeches, statistical tables, and provides detailed analysis of current and future economic conditions from the bank’s viewpoint.

There is a bank holiday in the USA therefore afternoon trading may be lighter than usual, the trading day’s sessions conclude with the publication of the New Zealand CPI for the quarter which is expected in flat, a fall from the previous quarter reading of 0.9%.

Tuesday we’re anticipating the German ZEW index to come in at 63.4, an increase from the previous month’s reading of 62. The overall ZEW reading for Europe is expected in at 70.2, up from 68.3 the previous month.

Germany’s constitutional court will be ruling on the legality of the ECB outright market transactions, a quantitative easing/asset purchase scheme that may have veered outside of the ECB’s remit. The German Federal Constitutional Court is due to announce a ruling regarding the constitutionality of the ECB’s Outright Monetary Transactions policy (OMT), in Karlsruhe mid-afternoon, quite what the effect would be of a ruling against the programme is tricky to predict.

The UK’s trade body, the CBI, will deliver its reading on the UK’s industrial orders expectations; the print is anticipated to come in at 11, down from 12.

From Canada the manufacturing sales print is expected in at 0.4%, down from 1%. Wholesale sales are predicted to fall to 0.6% monthly from previously 1.4%.

Late Tuesday attention shifts to Australia where the Westpac consumer sentiment index is expected to come in ahead of the negative -4.8% print last month. Australia’s CPI is expected in at 0.5%, down from 1.2% previously. At the end of Tuesday we receive a publication from Japan, the monetary policy statement; it’s amongst the primary tools the BOJ uses to communicate with investors about monetary policy. It contains the outcome of their decision on interest rates and commentary about the economic conditions that influenced their decision. Most importantly, it projects the economic outlook and offers clues on the outcome of future rate decisions.

Wednesday the first high impact news event of the day is the UK’s unemployment/employment numbers. The anticipation is for the claimant count to fall by circa 32K, with the percentage unemployment rate to fall to 7.3%. The UK’s BoE releases the votes for the previous base rate decision by the BoE’s MPC and the level of quantitative easing, both polices expected to have been maintained by majority votes. Average earnings in the UK are expected to have risen by 1.1%, up from the previous print of 0.9%. Whilst public net sector borrowing is expected to print at 12.3 billion for the month.

From Canada we receive the decision on the overnight base rate and the bank of Canada monetary policy statement and the rate statement. Thereafter the BOC will hold a press conference to explain all of these recent decisions.

As the day ends New Zealand publishes its business manufacturing index, last month’s reading coming in at 56.7. From Australia we’ll receive the latest inflation data, expected in at 2.1%.

The HSBC flash manufacturing PMI for China is published late Wednesday; the prediction is for a print of 50.6, only a tick lower than the previous month’s 50.7.

Thursday begins with French PMIs, manufacturing expected to come in at 47.6, with services PMI expected in at 48.2, both an improvement on the previous month’s data. Spain’s unemployment rate is expected to print at a desperate 26%. Germany’s flash manufacturing print is expected in at 54.7, with services in at 54.2, both prints up from the previous month.

Europe’s current account is expected in at €19.2 billion positive, a reduction of the previous month’s figure of €21.8 billion. Europe’s flash PMI is expected in at 53.2, up from 52.7. Services PMI for Europe is expected in at 51.5, up from 51 the previous month.

Core retail sales for Canada are expected in at 0.3%, a fall from 0.4% the previous month. Retail sales is expected in at 0.3%, up from -0.1% previously. In the USA the weekly unemployment claims is expected to come in at 331K, whilst the USA flash manufacturing data is expected to come in at 55.2, up from the previous month’s figure of 54.4. Existing home sales in the USA are expected in at 4.99 million. Gas and crude oil storage inventories may provide reasons for oil and gas prices to rise (or fall) significantly when released on Thursday.

Friday we receive Italian retail sales month on month, the expectation is for a rise to 0.4%, up from the previous month’s negative -0.1% fall. In the UK the latest mortgage numbers are released courtesy of the UK’s BBA. The prediction is for a rise to 47.2K, up from 45K.

The week finishes with Canada’s core CPI data, expected in at -0.4% from -0.1% previously. CPI monthly is expected to have fallen by 0.2% month on month.

Technical analysis for major currency pairs, indices and commodities for the coming week

Our attention now turns to the technical analysis for many of the most popular securities over the coming week. During this analysis we’ll defer to the most commonly used and preferred indicators including: PSAR, Bollinger Bands, MACD, DMI, stochastics, ADX and RSI. We’ll use Heikin Ashi candles to discover price action, whilst referencing many simple moving averages, such as the: 20, 50, 100 and 200. All technical analysis is conducted on the daily time frame only and all indicators are left on their standard settings, with the exception of the stochastics, which are adjusted to 10, 10, 5 in an attempt to dial out false breakouts.

EUR/USD began its break to the downside on January 2nd. Currently the PSAR is above price, the MACD and DMI are negative and both making lower lows observed through using the histogram visual. The lower Bollinger band has been breached to the downside. The 20, 50 and 100 simple moving averages are above price, the RSI reading is at 39 and the ADX at 16. Friday’s Heikin Ashi candle was bearish, with a closed candle and downward shadow.

Traders would be advised to remain short until as a minimum the PSAR has indicated a reversal in sentiment. Thereafter traders would be advised to wait for several of the most commonly used indicators to turn bullish before reversing their trading sentiment and direction.

USD/JPY broke to the downside on January 13th; however, the price action thereafter has been inconclusive. Friday’s candle on the preceding week was shallow with little in the way of determinate sentiment and direction. PSAR is above price, the DMI is positive, but failing to make higher highs. The MACD is negative and making higher lows. The stochastics have yet to cross and are at a median level; neither closing in on oversold, or overbought zones. The RSI is at 53, with the ADX at 34.

Traders short this security would be advised to await further confirmation by way of several indicators before changing their sentiment and direction to bullish. Perhaps as a minimum the PSAR to turn bullish, combined with other indicators and price action, indicating a return to bullish conditions.

AUD/USD broke to the downside on January 15th, PSAR is above price, the lower Bollinger band has been breached. The DMI is negative and making lower lows, the MACD is negative. The RSI is at 35, with the ADX at 26. Price is below all the key moving averages. The stochastic lines have crossed, but are short of the oversold zone. The price action illustrated in the last two days’ candles were bearish, with both Thursday and Friday’s candles being full, with downward shadows. Traders currently short this security would be advised to stay so until several of the afore mentioned indicators reverse sentiment to a bullish appearance.

The DJIA equity index made an attempt to break to the downside on January 9th, however, so far the break has been inconclusive. PSAR is above price, the Bollinger Bands are tightly grouped, with the middle Bollinger sitting tightly grouped with the 20 SMA. Price is above all the other major simple moving averages. The DMI is positive, but failing to make higher highs, the MACD is negative and making lower highs. The stochastic lines have failed to cross and are mid-range between the oversold and overbought zones. The RSI is at 58 and the ADX at 25. The three daily candles of the preceding week were inconclusive, with the last two days’ dojis failing to determine direction.

Traders currently short would be advised to observe the critical psyche level of 16500 should this security break to the upside. At this level many of the afore mentioned indicators would be close to reversing from bearish to bullish.

WTI oil broke to the downside on December 31st, that bearish sell of continued until approx January 15th. Currently the PSAR is below price, the middle Bollinger band has been breached to the upside, price is approaching two of the key moving averages, the 20 and 50. Friday’s Heikin Ashi candle was full, shallow with an upward shadow. The DMI is negative and making higher lows on this histogram visual. The stochastic lines have crossed on their adjusted setting and have exited the oversold zone. The MACD is negative and making higher lows. The RSI is at 45, whilst the ADX is at 30. Traders who have taken long positions would be advised to hold and await further confirmation of bullish sentiment in the form of several other key indices turning bullish. Traders would also be advised to monitor the stockpile information published midweek bearing in mind the harsh winter conditions the USA has experienced.


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