A faggot of manufacturing PMI figures was thrown onto the bonfire yesterday and didn’t it send the sparks flying! First up was the Chinese which underperformed expectations and has now two months under 50 and declining for 6 months. I also read that iron ore is stacking higher and higher on the wharfs of Chinese ports. So whilst they are buying it up they are not using it at the same rate of purchasing. Not a good sign for the commodity currencies. Then we had European figures and the French are still dragging the chain whilst Germany also slipped but are still in growth territory keeping the overall Euro figure’s head above water albeit slightly lower than last month. European officials are starting to speak about the height of their currency and its detriment to growth. Couple this with the last months headlines of negative bank rates and one would expect to see the group’s coin fall further. Over the Atlantic however, the US figure jumped to 56.7 followed closely by the Philly Fed tanking to -6.3. The Philly Fed Index is the stronger indicator, more closely followed, however the winter in the US has frozen the countryside to a standstill. I would not get too concerned about this standalone number though, the old imperial powers of US and UK are doing a-OK thank you very muchly, taking up the slack from the disappointing Chinese and Europeans.
Other news, oil is barrelling along in its trend for the year from a low of 91.23 in early January it’s now pushing 103. Copper too has recovered from a low of 3.17 to be at 3.27. VIX has bounced of 14 and the Baltic Dry Index too has bounced of 1100, up 1.2% to 1160 overnight. Stocks are climbing higher and in the case of the US its +0.5% today and just a few small ticks from all-time highs set in mid-January. So, what does all that mean? Well my reading of it is that the PMI figures of yesterday whilst not stellar is largely being ignored in the stock and commodity markets. The VIX could indicate that the equity players are gearing up for a failure to break new highs however, globally the world economy is reasonably balanced. Would prefer to see China manufacturing higher though so keep an eye on them.
DATA HIGHLIGHTS TODAY – Japan BOJ Minutes. UK Retail Sales. Canadian CPI. US Existing home sales.
AUDUSD – A nice low test bar off the 50ema. The big question is, have we seen the cycle? Is it time to buy now? I for one am not yet bullish our currency. Not until it breaks the Jan high of 0.9085. Break that and then retest it I will become bullish. For me, there is still much for the government to fix. It is still costly and difficult for business large and small to do business in Australia, therefore difficult for them to produce and be reasonably profitable. The economy is ok, bumbling along, but could and should be much better. Therefore fundamentally I am not bullish the Aussie. Technically I am not bullish until it breaks that high. From a chart point of view, we have not got Higher Highs yet, more of an inverse shoulder pattern. Wait and see.
EURUSD – A reversal bar that is becoming more balanced as I write, looking to close at the mid-point of the day’s range. Price action is opposite to the fundamentals and also to what Roubini suggests (http://www.moneynews.com/markets/nouriel-roubini-europe-ecb-credit/2014/02/20/id/553812). Still, I do not see an entry to go either way for this pair so be patient.
GBPUSD – So we are out of the trade for tidy profit and now watching the pullback play out with a few LHLL’s printed. 1.6480 area would be my target for this market to bounce from but will watch with much anticipation for any sign of the bulls.
NZDUSD – A buyer bar but LHLL, yes it moved off the 50ema and yes it is a complete cycle. However, it’s cycle did not make a Higher High and it did come from a Lower Low. So, there are more sellers and bears in the system than buyers and it is still in a range. Not interested in trading it.
USDCAD – Shocking domestic economic figures, Chinese bearish data and stronger greenbacks saw this take off from the tag of the 50ema. Bummed about it because I was waiting patiently for the entry that was coming but now we get this huge over extended bar that I do not like to trade from. Oh well, look elsewhere or go down time frames for the cycles to participate.
USDJPY – Not really moving as soon as expected but there are still clearly buyers about with two low test bars. Will be patient and wait for the trend to start which is effectively as it heads through 103.
GOLD – As mentioned last post, the bulls would rest and let the momentum work off, and so they did, recent resistance of 1307 though became support and now the bulls are back. 1350 here we come.
USDCHF – Shied away from support of 8840 for the moment. Still in mid phase 1 down.
USDCNH – A huge bar off the news and a break through resistance at 6.06. Well over cooked but would need to see a cycle above before even considering taking on trading against the huge downtrend.
USDCZK – Rather messy and range bound b/w 19.80 and 20.40
USDSGD – A tag of the 50ema and not sure of this one, is it a cycle under or are we now back in an uptrend. That old saying applies here; “if in doubt, stay the $@#! out”
USDZAR – Stronger gold but also stronger greenbacks gives us a HHHL but seller bar. If in this from the swing low earlier in the week from the trend line and moving averages and minor horizontal then, well done, sitting pretty.
USDNOK – This could be interesting for next week if another HHHL bar is printed tomorrow.
USDSEK – More like the Euro this one, chopping either side of the 50ema, the 200ema is flat and I see a flag pattern too. Looking for it to break to the upside soon though.
USDTRY – Made headlines last month as the central bank raised rates to try to keep cash in the country. A bounce off the 50ema though looks like the start of the up trend again.
USDMXN – Had a pretty good 2012 and 2013 but later half of 2013 saw most of it reversed and whilst it is not the purest trending pair, like the other emerging market currencies it has bounced from the 50ema nicely as the greenback continues to suck in cash from around the globe.
USDPLN – 3.00 support. A HHHL, print another and get on board.
USDRON – Nasty chart, stay away.
AUDCAD – Large engulfing bar. No clear sentiment or trend.
AUDCHF – A LHLL potential trend starting here.
AUDJPY – A reversal bar LHLL. Not clear either way yet.
AUDNZD – Some clear buying about but want to see a complete cycle before committing to it.
AUDSGD – Same as the AussieDollar but the level is 1.15
EURAUD – Clearly a bearish bar but it is a HHHL and if price action does get back 1.5390 the buyers have dominated and it would be worth a look to see if the risk/reward is there.
EURCAD – OK, so it took off and not much we can do about that. Look at momentum though, and the recent high of 1.53. I expect if we get to that price the sellers will be back to push this lower again.
EURGBP – A LHLL and doji, what fun. Are we phase 2, 1 or a bounce off 8150? Not clear at this point.
EURJPY – A good looking low test bar and stops should be under that now as this shows signs of gathering buying momentum for a push higher.
EURNZD – Messy and avoid.
GBPAUD – A test bar that took my 4hr trade out at break even. For the day traders your stop should remain under Tues bar at approx. 1.84. For those looking for an entry, there isn’t one.
GBPCAD – Like the eurocad it is heading to resistance with momentum close to overbought. Look for selling opportunities up here.
GBPCHF – Just messy.
GBPJPY – Got that mini cycle above the ema now. A HHHL in today’s bar would set us up for a trade first thing Monday.
GBPNZD – Slowly trotting higher.
CADJPY – A right ol trapper this one. If playing the range, stay put. If playing the trend, stay out.
CADCHF – Nice double bottom with momentum divergence. Need to see buyers though, and a lot of them.
CHFJPY– Same as eurjpy. Stops under the LHLL test bar please, 113.95 will do.
NZDJPY – Not liking this action either way.
David Long/ Proprietary Trading Manager