David Long

Market Bounced Overnight As Draghi Failed Requirements

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Forex Market News

Before I start on the wet wimp in the ECB, let me cover other actions. The UK is still sitting on the fence with their rates and QE program. Carney is not silly, in fact he’s the best Central Banker out there. The UK economy is doing very well, but looks to have peaked with several economic indicators showing a steady decline. Still in growth territory but not as hot as it was running late last year. So, staying put is a good idea to see if the economy balances out and maintains steady growth. Some heat needs to come out of their housing market in particular.
The US is still going well, not on fire and that is ok, but steadily improving each quarter and this with the Fed reducing their cash printing, so this is a good sign. The beige book showed a broad based improvement along with other indicators this week.
Poloz unfortunately has one leg over the fence, but is still decidedly worried about the future and inflation in particular, or the lack thereof and maintained his negative stance on the Canadian economy. This will keep pressure on the Loonie, which I think is wrong, it is ok and needs to fly…fly little birdy! Let it out of its cage mate!
Elsewhere it is all pretty quiet so let’s come back to muppet number 1, Draghi. As his name suggests, it is dragging it, and it is high. Great fun price action overnight and was good trading conditions that was taken advantage of like the old days. Had a ball and made good dosh, sold it, then reversed and bought the bottom at 1.3510. But it was easy to read because Draghi clearly failed to do what was required. The initial sell-off was due to the predicted cut to the benchmark rate and even negative on the deposit rate. But he stopped there. It was implied that he left the door open for further action and stimulus but in the conference this was not given any emphasis nor timeline. So, seen as Draghing (sic) his heels, the market bounced. We are back to the 2011/2012 era of kicking the can down the road and hoping that something will come along and fix it because he is too scared to do it himself, the tit. Still, that all said and done, I am still bearish the currency and will be looking for shorting opportunities against all pairs. Although some are calling 1.50…
Bill Gross, a very smart man, has highlighted what is bothering most brokers out there, low volatility. He also discuss the stagnation that will occur due to neutral rates and low growth. Have a read over the weekend. http://www.pimco.com/EN/Insights/Pages/Time-and-Money-in-a-Cellphone.aspx
Have a goodun, and beware the NFP tonight, it won’t do much but if your trading the hourly I would stay out.
DATA HIGHLIGHTS TODAY – Canadian and USA un-employment data
AUDUSD – A strong HHHL as markets chased yield. This move needs to break 9410 before I become convinced we are in an uptrend.
Resistance: 9460/9522
Support: 9200/9085/8900
EURUSD – A lovely 160pip range in one day! Not something you can trade from though, so leave this till next week, there may be an opportunity on Monday or Tuesday.
Resistance: 13890/14050/14260/14320
Support: 13565/13488
GBPUSD – Having broken lows and having lower highs, I am not convinced of its intentions with this HHHL bar. Again, it is more about funds chasing yield and in the UK they are talking of raising rates.
Resistance: 1.70/1.7060/1.7370
Support: 1.66/1.63
NZDUSD – That is the retest of the break line I have been waiting for. Now just to see the sellers before jumping on board for the ride south.
Resistance: 8745/8842
Support: 8523/8434/8090
USDCAD – Wandering aimlessly is how I see this, not interested.
Resistance: 11170/11233
Support: 10802/10715
USDJPY – A reversal bar to the uptrend with a LHLL, stops should be tightened again locking in more profit. This could easily fall back as the markets show little interest in
David Long/ Proprietary Trading Manager

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