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)
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