A big week for data and the biggest is tomorrow morning with Uncle Ben at the FOMC at 4am AEST. FOMC (the US Federal Open Market Committee) is the BIGGEST MONTHLY ECONOMIC ANNOUNCEMENT. It is the US monetary policy statement and interest rate setting. Stocks have crawled higher as we wait for the Fed announcement and there have been many headlines and guessing about what will happen. Trying to second guess the Fed seems to be all the rage recently. What we need to know is if he does or doesn’t and we won’t know that till the morning. Ben has gone on record, and is firm on this, that QE will not stop until jobs rate is at 6.5%. 2 weeks ago this edged slightly higher to 7.6%. So there will be no stopping the machines any time soon, not this year. However, if he does “taper” the QE (slow down the rate from $85B per month to a lesser amount), which seems to be the topic of most discussion, then the market will react strongly.
So, if he does nothing tomorrow, no change in his stance, then it is business as usual and the markets will continue in their little trends. If he does hint at “tapering” though, then the US$ will move sharply to the upside, due to the drop in supply of greenbacks whilst demand is still strong.
Therefore, if you have US$ exposure, you may want to consider reducing, or closing, that until tomorrow – general advice peoples, you can make up your own mind.
DATA HIGHLIGHTS AHEAD (times are in AEST) – 950am JAP Trade Balance. 630pm UK MPC Minutes. 240am BOC Governor speaks. 4am FOMC STATEMENT. 430AM FOMC PRESS CONFERENCE.
AUDUSD –Having had 3 days of buying last week, tagging the 20ema, the Aussie has come under pressure again this week. RSI is posting higher lows as the selling momentum wanes and I cannot see the Aussie getting through 9390 this week. If anything the US$ will strengthen this week, QE tapering or not. Be cautious trading ahead of FOMC
EURUSD –A string of higher lows as we approach $1.34 resistance. We have a slight divergence in RSI and it is also overbought in RSI but the individual bar continues to show the dominance of buyers.
GBPUSD –Reversed strongly off £1.5755, which was a lid on the cable from May to Aug last year, will we repeat last year and be held under for the summer? Time will tell. Price stopped on the 200ema and finished above support. What we do have though is a ring high and potential pull back to the 50ema beginning.
NZDUSD – A repeat of the Aussie as the antipodes’ currencies have fallen out of favour having been over valued for too long. Or having held funds enjoying the high yielding interest rates we have, but our central banks being 6 months behind the curve, our rates have now fallen so low that we are not attracting funds anymore, better yields elsewhere. I do see the kiwi and Aussie lower by year end but not this week.
USDCAD – Missed this yesterday being in class, disappointed with that. A swing low (13th, 14th, 17th) and should have traded yesterday at 1.0210. Will place a limit buy order for it today with stop below the swing at 1.0125. I like the swing low, I like that price has turned before making a lower low than May. I like that it turned on the trend line from Sep 2012 lows. I like that it swung on the 61.8% retracement fib from May low to May high. I like that it is above the 50ema again. I like that it swung off two (minor) support lines of 1.0145 and 1.0185.
Yes it is trading US$, but I like it that much.
USDJPY – Has held above the long term fib level at 94.15 and also the previous uptrend structural low. So it hasn’t made a lower low in the cycle of the trend. Promising but will see what happens when price gets back up to the 50ema around ¥98.
GOLD – Broke out of the NR4 overnight with a $24 range. Still, it held in by the fibs at the moment and still don’t like this unless it gets outside the $100 range of 1325-1425.
David Long/ Proprietary Trading Manager