Once the Bubble Bursts in the Stock Markets, and it Will Burst – Forex Trading News – July 30th 2014

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Forex Market News

Yet another tough session for trend traders, yet another low volatility day, yet another headline indicating we are not alone http://www.bloomberg.com/news/2014-07-29/top-foreign-exchange-tweeter-branching-out-as-volatility-stings.html . Currency and bond markets are experiencing their dullest times in years, thanks to the central banks locking down volatility with sustained low rates. Those who are chasing yield with the flood of central bank cash are heading to higher ground in the stock markets and emerging markets but also the commodity area seeing the larger daily moves. However, once the bubble bursts in the stock markets, and it will burst (when is the multi-trillion dollar question everyone wants answered), the volatility will come back into bonds and then currencies in a very rude smack across the chops to those who are not prepared.

 

OK, away from the doom and gloom. On a brighter note, the US consumer confidence rocketed higher overnight despite a drop in stocks. Twitter surged after the bell, following in Facebook’s path, which is very much against Aunty Janet’s desire as she thinks these two are in a bubble. “Well Aunty, the bubble just ballooned! What you gonna do?”

 

Tonight/early tomorrow morning we will hear from her via the FOMC statement due out at 4am. No change to the tapering (another $10B shaved of their monthly spending) or rhetoric is expected. Everyone is now looking for hints as to when the rate rise will come in 2015, will it be early in the year or later? This rate rise could well be the catalyst that the bond market, and by default, the currency market are looking for. Since their last meeting though the US jobs market has improved markedly, and that is one of her main focuses. So, investors are leaning towards a stronger dollar and that is surely what we are seeing in price action.

 

However, it is also overdone in the short term, so I expect a pullback before running again.

 

This is an interesting comment I found: HSBC Holdings Plc predicts the kiwi will strengthen to parity with its Australian peer by year-end for the first time, from NZ$1.1031, as monetary policy diverges. “People will be looking for opportunities to sell the currency pair once it becomes clear that the RBNZ’s rate hike story is very much intact,” Paul Mackel, HSBC’s Hong Kong-based head of Asian currency research, said yesterday.

Good luck with that Paul.

 

DATA HIGHLIGHTS TODAY – German CPI. US GDP. US FOMC.

AUDUSD – Engulfing seller bar. Nothing doing, stay away, at least until tomorrow morning anyway.
Resistance: 9460/9522
Support: 9200/9085/8900

EURUSD – Engulfing bear bar, and now with divergence on RSI too. Buyers in the next bar or two will see a pullback commence, the retest of 1.35 we (well I at least) have been waiting for.
Resistance: 13500/13650/13890/14050
Support: 13416/13300/13170

GBPUSD – Nothing happened and now it is testing 1.69 minor support. Oversold so I expect some buying this week to work that off, maybe sideways action will do that too.
Resistance: 1.7183/1.731.7370
Support: 1.66/1.63

NZDUSD – A huge cut to profits http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11301336 for the world’s largest dairy exporter. Blame Wheeler and his instance on higher rates, which buoyed the currency beyond fair value by several cents. The kiwi slipped below support set in Mar-May and stopped on the 200ema, for now.
Resistance: 8745/8842
Support: 8434/8090

USDCAD – Greenback strength continued to push this pair higher. Stopped right on resistance though, so will be keeping a close eye on this one in coming sessions.
Resistance: 10855/10950
Support: 10683/10655/10486

USDJPY – Strong/bullish bar, but without a cycle above the ema, and momentum already this high I am not buying it that this is an uptrend and so will not jump on the bandwagon.
Resistance: 105.57/108.35/110.50
Support: 101.30/100.62/100/99.80

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