Over in the good ol’ USofA their economic data slipped a little late in the week with unemployment rising and New Home Sales missing the mark big time. Remember that the housing industry is where the US is seeing most of its growth and that unemployment is the figure Uncle Ben is targeting for reduction of his bond purchase program, QE3 part 2. So the US stock market was down for the week but closed a little stronger at the end of it. The greenback has been in an uptrend for 2 years now, from 73¢ in March 2011 to 85¢ in July 2013. Recently it has fallen from 85 to 80.75 to form a double low just above 80¢. It has chopped around here for the last two weeks and has worked off any buying or selling momentum in all indicators. This means, it could go either way from here.
In Europe and UK the data is showing growth again, as is the same in China. The bull market is still here to stay, the China story is far from over. It seems to me that the global economy has finally turned the corner. Yes there are still major structural issues in European PIGS, China shadow banking and US bond price spikes, but the worst it behind us. I will continue to be bullish and buying into any pullbacks.
A relatively quiet week ahead, UK is on holidays today and the major headlines are out on Wednesday and Thursday, to which I will point out when we get there. Otherwise it will be a market driven by technicals and price discovery, the purest form of a market.
DATA HIGHLIGHTS TODAY – NZ trade balance. US Durable Goods.
AUDUSD – Bounced off minor support last week but has been held down by minor resistance. The buyers dominated late into the week but I see this more as a US$ story rather than any major shift in sentiment on the Aussie. Some key data out later in week, however price will be driven the greenback and commodities, with copper attempting to push through resistance at $3.40.
EURUSD – Is still tapping away at the ceiling of €1.34, with sellers forming a line in the sand at that price. However, the buyers are not giving up and are coming in at every higher lows, thereby forming a rising wedge, hemmed in between the 20ema and the ceiling.
GBPUSD – In an opposing view to the above euro and aussie, the cable actually rolled over last week and capitulated at 1.57 with no sign of buyers since. Sellers are dominating at the moment and the move looks to be back towards the 50ema or support above £1.54.
NZDUSD – Despite winning the Bledisloe, the kiwi has been hammered in the last 5 trading sessions. For the last 2 and a bit months has been stuck between 81 and 77¢’s. Halted on minor support of 7760 and looking to rotate back to resistance.
USDCAD – Oil, the Loonie’s bellwether, has been in a $2 range since early July. The sell off to the lower end of the range saw the Loonie weaken significantly against the greenback, posting a 200pip run. Friday saw some sellers back into the market but I expect we will have Higher Highs this week.
USDJPY – Still stuck in the range of 95/100 as the 50ema is now practically horizontal. Some buying has come in but I am not seeing an entry to warrant a trade just yet.
GOLD – Busted through minor resistance and is looking strong again. How it handles major resistance at $1,425 will be interesting. I am in two minds about the longer term prospects for gold. It has a production floor of approximately $1,200 per troy ounce but there is now reason to own it either.
David Long / Proprietary Trading Manager