The Long View, 29th May 2013

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Been around as long as I have you get to hear all sorts of crazy conspiracy theories, like stoploss hunters. Whilst that is the funniest of all, all of them seem rather ridiculous to me. One you see often is manipulation of data. This one I have heard since the 90’s. Recently it’s been focused on China’s economic figures. Last night it was the US’s turn, again, this time with the Case-Shiller Housing Index. A few have called it a bogus manipulated figure. The thing with conspiracies they are hard to prove but they do satisfy the untrained mind’s fear factor. I’m not going into the myriad of reasons that could easily debunk the theories, I will just say that the figures we get, we ALL get. If it is all smoke and mirrors it will come out, the markets have a way of rebalancing the frauds.

However, their argument I can understand, the figure is manipulated but not in the way they think. Consider this; the index did come out at a 7 year high, yet the US has lost over 2.6 million full time workers, wages have not increased noticeably, nor has savings. So what is driving the US economy and housing industry to such heights? Uncle Ben and his fabulous printing machines. There is your smoke and mirrors conspiracists! And this one ain’t no lie, nor hidden at all. The US growth is falsely inflated as is their stock market with unearned cash.

So what does this mean for Fx traders? A bullish currency is seen as a sign that an economy is performing. However as the US fed continue their program of QE (to devalue their dollar and stimulate growth) I’m not convinced it is all rosy over there. US stocks also rallied again, funny to see that Tiffany’s rose 4% on this and more so that US consumer confidence hit 5 year highs too. Interestingly VIX is climbing as stocks rise, so more insurance against a fall is being bought by investors. Soft commodities came off further and industrial metals a little off too.

I am concerned about China’s influence in Europe these last days.  Euro is starving, youth unemployment is at 24% across the region (55% in Spain alone) and they are talking of conscription to give them something to do, yet cannot pay them (smart, give an unpaid disillusioned youth a gun!). Austerity is not working and talk of negative interest rates is gaining traction, this will see money flood out of the already struggling region. They must cut spending, simple. Do not spend what you don’t have, economics 101 (not that I would know, so let’s call it common-sense 101). Now China’s Li is touring Europe to open trade between them, this could be a good thing but I see it as a bail out. I do like that the Chinese are seeking stable growth, incredibly they seek 7%. That is gold, we Aussies would love 3-4% and they want 7%! http://www.bloomberg.com/news/2013-05-27/li-says-china-confronts-huge-challenges-as-growth-levels-slow.html the China story is a long way from over, so heads up Australia.

DATA HIGHLIGHTS AHEAD (times are in AEDST) – 10am BOJ Kuroda speaks. 1130am AU Construction. 6pm German employment. 12am CAD Interest Rates.

AUDUSD –The US dollar story is the theme today as the Aussie attempts to hold its head above the 96¢ floor. Large high test bar makes it look weaker than it is, even a foot through I don’t see as moving aggressively. I would be very wary of selling it at these levels, it has come a long way already with little respite, there could be a little more selling but there is not 100’s of pips in it, a couple of dozen at most.
Resistance: 9850/9930/1.00
Support: 9620/9582/9400

EURUSD – A very bearish bar and whilst it appears range bound it is still technically in a downtrend. In short term I would look to sell at 12880 area, on day chart do it at 12840 with a long stop.
Resistance: 13000/13040/13112
Support: 12880/12750/12655/12500

GBPUSD –A ring high (not swing high as it’s still mid trend) and if it breaks £1.50 there is nothing stopping it to £1.48.
Resistance: 15200/15410/15606
Support: 15080/15000/14800

NZDUSD –The kiwi has a floor building of the 8050 foundation however, unlike the Aussie I think the sellers could have the strength to fall down and stay down.
Resistance: 8211/8360/8475
Support: 8050/7913/7815

USDCAD –Tested a TL on my weekly chart (May 2010 high to Oct 2011 high). I think it will break this TL eventually but should pullback off this first.
Resistance: 1.0400/10448/10516
Support: 10287/10184/10100

USDJPY – The buyers sure came in, well ¥ sellers did, a lot earlier than I expected or wanted them too. Kuroda talking today and this could see it continue. It did move off the 20ema as it has often done since late last year. The moves are not as vertical off the 20ema, but still effective. Looking for this to hit the large 61.8% fib at 105.60 I have had since Jun 2012.
Resistance: 102.53/104.10/105.60
Support: 100.00/98.52/9670

GOLD –The little tabby had a hissy fit yesterday and some wild moves in the $28 range.
Resistance: 1425/1440/1477/1525
Support: 1320/1248/1100

David Long/ Proprietary Trading Manager
Knowledge to Action – Specialist Forex Education

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