Outlook for 23rd - 27th Feb 2015

Fundamental Analysis:

From next month, I will be doing a separate fundamental analysis report in the first week of each month. This is because the fundamentals rarely change from one week to another. Therefore, I think that once is a month is sufficient to keep to update with the fundamentals while allowing me more time to include more technical analysis on more currency pairs on a weekly basis.

News summary:

AUD – RBA meeting minutes suggest another rate cut for this year although timing will be up to market conditions

GBP – 0.1% dropped in unemployment rate and slight fall in unemployment claim

EUR – Greece received a 4 months extension in its debt repayment after talks broke down early in the week

Upcoming news:

EUR – Mario Draghi speaks in front of European Parliament (Wednesday)

USD – Fed Chair Janet Yellen testify on monetary policy report (Wednesday)

AUDUSD

Technical:

From last week, I mentioned a pattern of a double bottom and higher high during the ranging phase before continuation of the down trend. So far this week price has been ranging again but it has closed the week above 0.7840 for the first time in 3 weeks. The case is still on for price to retest the high 0.7875 made on 6/2/2015 and if so it would be the higher high to complete this pattern.

EURUSD

Technical:

Price has been ranging for much of the week with some intraday volatility as market reacts and overreacts to the news that talks had broken down on Tuesday. Now that a definite outcome has been reached (4 months extension as mentioned above) it should make a move in the next week or two. Right now I am unsure what this pair is trying to do. I will be looking for shorts if price tests 1.1500 resistance.

GBPAUD

Technical:

Last week I mentioned that I will be looking for a retracement at around 1.9720 to go long on 4hr chart. Well, price retraced much lower than I had expected. It went as low as 1.9600 before heading up when the unemployment figure was released. My trade was taken on 1 hour chart when I see evidence of consolidation above support level 1.9620 . Price tested this support level again on Friday and finished the week with a possible long setup on 4 hour.

Long on 17/2/2015
Entry @ 1.9640
Stop @ 1.9600 (-40)
TP @ 1.9790 (+150) achieved, final RR is 3.75

USDCAD

Technical:

I noticed that this pair is showing a symmetrical triangle which is a continuation pattern. A break about 1.2600 could signal the next push up to 1.3000 where weekly resistance lies.

GBPUSD

Technical:

The short term rally continues and now price is within 100 pips of resistance at 1.5500 . Breaking this resistance will be important for this pair as it signals the end of a very strong bearish trend. Alternatively, resistance could hold and provide excellent opportunities to short again with great risk reward. Fundamentals are still bearish therefore if given the choice I would favour shorts over longs.

EURJPY

Technical:

Price has consolidated right on weekly resistance 135.00 . I had recently learnt about Elliot Wave Theory and it appears that this pair has just completed a 5-wave pattern. Right now it is clear that a short term rally is happening. I will be watching to see if it breaks the top of  wave 4 at 137.60 as that could be the start of a long term uptrend.

Outlook for 16th - 20th Feb 2015

News summary:

AUD – Unemployment up 0.2%. RBA said more action is needed to bring AUD down to its fair value.

JPY – BoJ said there's no need for further stimulus at the moment.

GBP – Mark Carney said that BoE is comfortable with low inflation and the next interest rate move will be up, not down.

EUR – Greece was given 6 months to come up with ways of meeting interest payment on loans.

Upcoming news:

AUD – Monetary Policy Meeting Minutes (Tuesday)

JPY – Monetary Policy Statement (Wednesday)

GBP – Votes on interest rate (Wednesday)

USD – FOMC (Wednesday)

AUDUSD

Fundamental:

Fundamentals remain bearish as Australia is adjusting to the drop in commodities prices which makes up the majority of the country's income. Market is also pricing in another rate cut from the RBA next month and traders will look for confirmation of this prediction in this week's Monetary Policy Meeting minutes.

Technical:

While the overall trend is bearish, it is worthwhile to note that price have been ranging between 0.7880 and 0.7630 for 2 weeks. This is the third time the pair has been ranging since its fall from 0.9400 in September last year. I noticed a pattern of a double bottom and higher high during the ranging phase before continuation of the down trend. So, if price retests the high 0.7875 from 6/2/2015 then I will observe price action on 1 hour chart for signs to short again. It's not a textbook pattern but it's one that price is showing me.

GBPAUD

Fundamental:

Moderately bullish if you believe what Mark Carney said about Bank of England's acceptance of low inflation and that their next interest rate move would up and not down. Otherwise slightly bullish as I have said last week.

Technical:

The ascending triangle pattern on 4 hour chart that I identified last week indeed provided the break out that I was looking for but price didn't retrace enough to hit my buy limit orders at 1.9680 (it was 33 pips too low). Just come to show that even if you get it right it doesn't mean that you can profit from it. Right now, the preferred trading direction is up with the daily trend. I can see resistance at 2.0250. If price comes down to 1.9720 area I will look for signs of strong buying on 4 hour charts to go long.

  

EURUSD

Fundamental:

Overall bearish but it see temporary signs of bullish sentiment with Greece being given 6 months to sort out its debt repayments.

Technical:

Since its low of 1.1096 on 26/1/2015, price has been been testing the 1.1500 resistance multiple times in the last 2 weeks. A higher low of 1.1269 on 9/2/2015 is in place and now if price can close above 1.1500 on daily chart we would have a second higher high which I think is significant because 2 higher highs and higher lows on the daily chart could lead to a short term rally to test the next high at 1.1679 on 21/1/2015.

 

GBPUSD

Fundamental:

Despite what Mark Carney said last week, my view on the fundamentals of this pair remain bearish. Inflation is a measure of increased earnings and with such a low inflation rate despite the 

 £375 billions asset purchase program I am skeptical that a rate increase should be on the table.

Technical:

This pair has enjoyed a short trend rally in the last few weeks and has finished the week right at the top of the trend line channels. I will wait and see if price would test resistance around 1.5550 and look for opportunities to short from there. Alternatively, a long trade is possible if price retests dual support (horizontal and trend line) at around 1.5030. When given the choice, I prefer to trade in the same direction as my fundamental views.

 

Outlook for 9th – 13th Feb 2015

News summary:

AUD – Reverse Bank of Australia cut interest rate by 0.25% . Trade balance was about $400M better than forecast.

CAD – Job numbers improved and 0.1% drop in unemployment. Trade balance was $600M better than forecast.

GBP – Positive figures for Construction and Services PMI.

USD – NFP figure was 20k better than forecast. Unemployment increased by 0.1%

Upcoming news:

AUD – Chinese trade balance (Sunday). Chinese CPI yearly (Tuesday). Unemployment rate (Thursday).

GBP – Inflation report (Thursday)

AUDUSD

Fundamental:

The rate cut seemed to have no effect on AUD and it has closed the week 40 pips higher. USD produced mixed results with good NFP number but a slight increase in unemployment rate. Fundamentals remain bearish for this pair. Next week will be another news heavy week for the Aussie.

Technical:

Price has been ranging for most of the week with the exception of the spike down Tuesday when rate cut was announced. This pair has not been able to close above 0.7800 on daily chart. On the 4 hour, I can see intraday resistance around 0.7850 as price tested this level 3 times this week. If price tests this resistance level again then a possible short could be at 0.7850 with 30 pips stop and 50 pips target. I still have my stop at 0.7900 for the remainder 20% of my short from 2 weeks ago. If price gets to 0.8000 level again I will consider going short again.

GBPAUD

Fundamental:

Same as last week (slightly bullish) even though RBA has cut rates. Important news for this week will be the inflation report from Bank of England.

Technical:

My long trade at 1.9220 hit both targets as soon as RBA announced rate cut. It’s nice to be on the right side of the news sometimes. On 4 hour, I can see resistance around 1.9650 as price was rejected at this level 3 times this week. Interestingly, the 4 hourly is showing an ascending triangle pattern which suggests that a break above resistance is the more likely scenario. I will be looking for a daily close above 1.9700 as evidence of this break out. If so, I will look to go long if price retraces back to 1.9680

  

EURUSD

Fundamental:

Bearish with no sign of any change until the outcome of the Greek debt negotiation. Rallies are the preferred selling opportunities.

Technical:

My trailing stop at 1.1385 was hit from last week’s short. On 4 hour chart price has been ranging between 1.1330 and 1.1500 for most of the week. While the 1.1500 is not a historical support resistance level, I much prefer recent price action which suggests that it is. If price gets to this level again I will look for sign of strong selling to go short.

 

EURJPY

Fundamental:

I am not familiar with Japanese fundamentals so no comment from me.

Technical:

This pair is approaching the weekly resistance level 135.00 and this could present opportunities to go short on daily or smaller time frames.

 

GBPJPY

Fundamental:

I am not familiar with Japanese fundamentals so no comment from me.  

Technical:

This pair is approaching daily resistance level 181.40 and this could present opportunities to short once on the smaller time frames. Keep watch for signs of indecision and selling prior to the inflation report on Thursday.

Outlook for 2nd - 6th Feb 2015

It has been a very profitable week for me shorting AUDUSD and EURUSD which I mentioned in the last report. Next week's outlook will also focus on trade management. Let's review the economic news that have came out last week:

News summary

GBP - Preliminary GDP quarter-to-quarter was 0.5% (less than forecast of 0.6%) so GBP fundamentals took another hit on the bearish side

USD - Unemployment claim was 265,000 much less than 301,000 forecast. GDP quarter-to-quarter was 2.6% but the show stopper was the revised figure for the previous quarter which now stands at 5.0% . USD fundamentals are looking better and better.

Upcoming news

AUD - This will be a big week for the Australian Dollar with interest rates, trade balance and Chinese Manufacturing PMI to come out (EDIT: Chinese Manufacturing PMI was 49.8 when I finished this report which I expect to cause AUD to gap down when market opens).

USD - Trade balance on Thursday and NFP on Friday so expect increased volatility from Wednesday as big traders begin to set their positions for the news.

GBP - Manufacturing PMI on Monday and Construction PMI on Tuesday are the key numbers to look for. Anything lower than expected is an opportunity to look for short entries on GBPUSD.

CAD - Trade balance on Thursday and unemployment rate on Friday which could give opportunities to buy on pullbacks if you are looking to go long on USDCAD.

AUDUSD 

Fundamental:

Market has been selling AUD on the expectation that the Reserve Bank of Australia (RBA) will cut interest rate on Tuesday. In fact, everyone in the economic spheres is so certain of the interest rate cut that I am going to take the other side of the bet. In RBA minutes meeting for November 2014 they gave a target for AUDUSD of 0.75 . If the RBA has not cut rate when it was 0.85 then I don't see why they would do it now when the target is only 300 pips away. Let's see how my contrarian perspective hold up on Tuesday.

Technical:

Short on 28th Jan

Entry on 6 hour chart @ 0.7970

Stop @ 0.8020 (-50 pips), moved to 0.7900 after TP1

TP1 @ 0.7810 (+170 pips), exited 80% of position, RR is 3.4 for 1st target

TP2 @ 0.7580 (+400 pips)

EURUSD

Fundamental:

Bearish and looking even more bearish with yearly CPI estimate for the Eurozone came in at -0.6% and USD continued to produce positive numbers.

Technical:

Price tested the 1.1380 resistance level 7 times on the 1 hour chart last week. This is why I prefer to plot support resistance on daily chart because they tend to hold up much better than smaller time frame charts. My short was triggered on the second time price hit 1.1380 on Wednesday 28/1/2015:

Entry on 1 hour chart @ 1.1380

Stop @ 1.1430 (-50), moved to 1.1385 after TP1

TP1 @ 1.1280 (+100), exited 80% of position, RR is 2.0 for 1st target

TP2 @ 1.1140 (+240)

GBPAUD

Fundamental:

The Pound has a slight edge over the Australian Dollar although they're both bearish on their own. AUD has more weakness ahead due to drop in commodities prices and a Chinese slowdown. Overall, fundamentals are slightly bullish on this pair but it's important to note that this is not due to anything positive.

Technical:

This pair has broken through recent strong daily resistance 1.9200 and I will be watching for a retracement back to this level to go long:

Entry @ 1.9220

Stop @ 1.9150 (-70)

TP1 @ 1.9350 (+130)

TP2 @ 1.9450 (+230)