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Graeme Wheeler raises rates AGAIN – Forex Trading News – July 8th 2014

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Forex Market News

Hi all, sorry I have been off the grid for so long, I have been on the road since Bastille Day really. A lot has happened in the market place and I will go through each economic zone to try and summarise it all for you, to give you an idea of the sentiment out there.

Let’s start at home. With the repelling of the carbon tax it has had little immediate effect. The impact of the tax has had little effect to overall inflation, which has actually been dropping the last few months. So taking it away will have little impact too. Our stock market is on its highs for the month and just shy of the yearly high, but well under all-time highs. With rates staying stable there is a battle going on between the camp that see the dollar as overvalued (I’m in that camp) and those that are in the carry trade business, taking advantage of the relatively high yield. Hence, we are stuck b/w 92 and 95 cents. This month has seen the Chinese data still strong, which is also supporting the Aussie somewhat. I would look to stay out of the Aussie until it broke this range.

The Kiwi. Graeme Wheeler raises rates AGAIN (to 3.5%) this week but says the currency is too high. Well mate, stop raising rates if that is a concern! However, the market it sold off due to his statement and that he won’t raise rates further for some time. Inflation is weaker than he recognises and from what I hear the dairy industry is starting to feel the impact of the currency. Housing and commodity index’s are both coming off too. So fade any rallies in the Kiwi.

Japan is still stagnant, the data is really treading water, so Abe/Kuroda will need to be far more aggressive in their next attempt to get the economy kicking. They have some deep issues in the workforce to battle though so it will not be easy for them.

Over in Europe, despite the Portugal banking crisis and Ukraine they posted some decent data this week and month. It wasn’t stellar but seem to stop the rot for the time being. Again though, Like Kuroda, Draghi will need to get more aggressive with his battle on inflation. The market is largely seeing this has going to happen and the currency sold off strongly, breaking through the major support of 1.35 this week. Fade this too, sell any rally, particular a retest of the support/now resistance of 1.35.

UK. Housing is strong, jobs is strong, inflation is strong, construction is strong, and manufacturing is strong. Therefore the currency is strong. Retail sales disappointed this week but that is minor issue and borne from the high sterling. There are some signs though that the growth is not broad based and that rates won’t be moving higher yet. Still. I would be buying into any dips.

Canada. The downward spiral of their economy has stopped and data has stabilised. We are seeing more and more strong data from them with the odd weaker one mixed amongst them. This has been happening for some months now and to me it is a sign that the bottom of the economic curve has been reached. The only way is up. Buy any dips.

USofA. Jobless claims (ie the dole queue) has been steadily declining for four years now with last night’s print being the lowest since 2006. The strong greenback that the market has expected since the Fed started tapering the QE program is yet to materialise. But it will come, the data flowing from the US is good data, not stellar like the UK but its not far behind it. Not yet ready to buy the dips but against weaker currencies such as euro or yen, then yes I will be.

DATA HIGHLIGHTS TODAY – EU German Biz Climate. UK GDP. US Durable Goods.

AUDUSD – Needs to breach the June high before I get bullish. Ideally, breach it then retest it. With momentum already this high I don’t see that happening. So, we are range bound and will struggle against the resistance level. Still think it should be sub 90c.
Resistance: 9460/9522
Support: 9200/9085/8900

EURUSD – Broke support decisively. Currently we are oversold and with a doji bar I am not looking at trading this. Would like to see a min run back to ema and resistance at 1.35. A sell signal there will see me taking this short.
Resistance: 13500/13650/13890/14050
Support: 13416/13300/13170

GBPUSD – Has come back to the ema nicely and momentum is showing oversold. Will look for buyers in the market today and early next week. If they show up we will join them.
Resistance: 1.7183/1.731.7370
Support: 1.66/1.63

NZDUSD – Smoked! No chance to short it and so we must wait for a cycle under the ema before we can. Support in the low 85c’s may offer a turning point, but it is the resistance at 8650 that will be ideal to get short from.
Resistance: 8745/8842
Support: 8523/8434/8090

USDCAD – Bit of a battle between the two North Americans. Ideally looking for a shorting opportunity but in the price action I do not see anything just yet.
Resistance: 10802/10950
Support: 10683/10655/10486

USDJPY – Really is just chopping about, frothing. STILL have little interest in this.
Resistance: 105.57/108.35/110.50
Support: 101.30/100.62/100/99.80

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