Hello everybody. I hope you have had a successful time whilst I have been gone. Some good trades were available and so I hope you took some of the money available to be taken from the market.
I have kept one eye on the fundamentals of the market and the key thing to be taken from it is that now that the US politicians have destroyed their own creditability the markets are now back to being focused on the Fed tapering. Tonight’s’ US jobs data may give us an indication of the US strength but I would take it with a grain of salt after the debacle of the US government shut down. So the markets sold the US$ down last week in a sign that tapering is far from starting, in fact that it won’t happen anytime soon now. With the debt ceiling kicked down the street until Feb 2014 the market is now expecting tapering only to kick in mid-2014.
Looking at the pure data we see the poms continuing to gain strength with last week’s unemployment data, inflation and retail sales. I expect 1.63 to be threatened with real intention this week. Across the channel the Germans are powering along, whilst the Chinese also continue to defy the pundits as its growth maintains above 7%, per annum!!
I like the data coming out of most economic zones, although the commodity countries (Australia and Canada) are lagging behind. I guess it is natural for commodities to be affected slower on the economic curve, so these two should turn the corner within the next 2 quarters as the global economy stabilises and bounds ahead with China leading the charge.
Overnight the markets had little to do with the stand out move coming from oil, down 1.65%. Otherwise it was a lacklustre session ahead of tonight’s NFP. Expect that to be the same in today’s Asian and European sessions.
DATA HIGHLIGHTS TODAY – CAD Retail Sales. US Non-Farm Payrolls.
AUDUSD – Well extended into a trend and starting to overheat up here. I have a 50% fib at 9703 which could prove to be the resistance to have the Aussie reverse. The economic position of Australia does not warrant such strength yet, this move has been driven by the greenbacks weakness so any sign of strength in that will see the Aussie fall.
EURUSD – Has posted a swing high right on the 1.618% fib at 1.3668 which could signal a reversal. I don’t see the sellers stepping in yet and I would rather wait until NFP is out tonight before committing myself to shorting this.
GBPUSD – I am bullish the cable from a fundamental position however it also has formed a swing high and in fact, it has also formed a head and shoulder pattern with the neck line in a rather aggressive negative incline.
NZDUSD – The kiwi has reversed with RSI divergence above the 1.618 (0.8437) and has done this so well that I am considering taking this trade even in front of tonight’s data.
USDCAD – I am tempted to take this too however it is not as clear as the kiwi and has spent the better part of last 6 months between 1.03 and 1.04 so am going to leave it. No clear direction yet.
USDJPY – Even after two weeks I am still not interested with no clear trend. It is stuck between 100 and 95 ¥ but also being squeezed in a pincer move of trend lines, otherwise known by some pundits as a wedge or a pennet.
GOLD – A nice tag of the 50ema last week, but I would stay out of this for the time being. Fundamentally I would be a buyer but technically I would be a seller. With that dichotomy I stay away.
David Long / Proprietary Trading Manager