Forex Market News
Note: US daylight savings starts this weekend. This means the day bar will end in AxiTrader at 8am Sydney time and a new day bar will begin. Once Sydney comes off daylight savings in early April, it will be 7am.
It’s a good news week! A feeling of euphoria is out there. Aussie stronger on exports and retail sales. Euro stronger on Draghi’s outlook and inflation report and no rate cut. Gold stronger on global economy (we are back to the correlation of higher rates and inflation equals higher gold as the anti-inflation hedge). Loonie stronger on building permits. Cable holds ground as BOE sits, but in relative terms to its peers it has done far more work so is in need of some respite as the others catch up. Yen weakens as the weakest economic link and safe haven flows outwards as Crimean crisis abates. Oil falls another percentage point on stockpiles. Copper has bounced off support this week. VIX is back at 14 and stocks are up as US is upbeat on jobless claims. The Baltic Dry Index continues to rally from recent lows. It’s Friday! AND it will be my last report from the shores of this fair land. I am moving to Bali next Friday! The next report will be from the Island of the Gods after the Ides of March. How good is all of this?!
Last night’s action truly seems to be the breaking of the 3 month range we have been in across many assets. The data, whilst just one month granted, from Canada to Australia, Europe to China all point to steady global growth. The last area of weakness, Japan, has been in that state for 30 years so it is no surprise. It is good to see the Europeans get their head above water as well, and Draghi (Merkel’s puppet) has kept the wolves at bay. Trends are never one directional, but you can expect them to begin now and run until the northern hemisphere summer. Then it will be the old adage, “sell in May, go away”.
Of course, the elephant in the room is Janet. Tonight is Non-Farm Payrolls and Aunty Janet (Alan Greenspan Service Pack 3 – AGSP3) recently stated she is open to cutting the pace of the QE cutting, if the US economy wavers. The US Fed has built up a huge balance sheet of debt and unwinding that will continue to cause ripples in the market for a long time to come.
Anyway, trade safe, be well, stay happy and keep focused. Chat to you all soon.
DATA HIGHLIGHTS TODAY – Canadian unemployment. US unemployment (Non-Farm Payrolls). Chinese Trade Balance.
AUDUSD – Has now breached the 2014 significant high of Jan 13th at 0.9085. Technically this is the signal that ends the downtrend. However, it has done it on an extended bar and one should not trade the break in case it is a false one, trade the retest. This level is also the neck line for a reverse head and shoulder pattern, this sets the Aussie up for an 800 pip run higher…IF it can break the neck then retest it and hold. One month of data has given the spurt to get up here. More data and buyers required and I am just not that sure they have the legs, not when momentum is now close to overbought territory.
EURUSD – Also an extended bar, not something you should trade from, and not yet out of the range either, like the Aussie. Dec high of 13892 is looming large as is overbought momentum. Still staying away from this for the moment.
GBPUSD – A HHHL that is true but it is finding it hard to break higher as it has come much further than its counterparts and therefore funds are looking elsewhere. May struggle in short term.
NZDUSD – Looking strong but not out of the woods yet, there is resistance here from Oct highs at 85¢ and now momentum is exhausted. If it holds above 84 cents as momentum works itself off then I would be impressed and become bullish the kiwi.
USDCAD – Nice pullback to the moving average. I would not be looking to get long this though as the cycles of HH’s is not there. The high of the 21st should have been higher than the Jan highs before it got back to the moving average. The fact that this did not happen is a sign of weakness of the trend.
USDJPY – Broke through the resistance on most pairs, and against the US the 102.70. Look for a cycle above the ema before committing to getting into this, like most, the momentum is too high to suggest it will get through 105 this run.
GOLD – Back up to test the resistance level, whilst momentum is seriously dropping off. Keen to sell this if an opportunity presents itself.
David Long/ Proprietary Trading Manager