Greg’s Weekly Analysis W/C 16th October 2017

Fundamentals: The RBA is in a wait and see mode however we could hear speeches coming from the staff of the central bank arguing that a cut on the cash rate is not excluded from the RBA’s outlook. This was met with further sell offs coupled with a stronger USD. Things have slightly changed as the aussie gained some strength on the back of the recent USD weakness due to the FOMC meeting being labelled as having a dovish tone as well as CPI figures missing expectation despite market participants anticipating higher numbers to the Hurricanes which naturally should’ve supported the buying of goods and services.

Technicals: Despite waiting for lower levels the aussie found support at the 0.7700 level and we could see acceleration to the upside. The daily 50 ema seems intact and the 0.79000 is still holding, if price closes above the resistance level we’ll be looking for further bullish price action and if it rejects the 0.7900 then a decline will hold a great amount of probability.

Fundamentals: The ECB is no hurry to end QE as it let us know in the form of President Mario Draghi’s speech in Washington. The ECB President declared that it will be a slow process and that rate hike expectation should not be in the minds of market participants. Based on this the euro should weaken based on the short to medium term outlook, however prices might be supported the USD will be weaker on the same time horizon. Just 2 weeks ago rate hike expectations were above 85% on the USD and the FED and many called a hike in December inevitable, since then the weak NFP numbers an almost dovish FOMC and missed expectations on CPI rolled back the rate hike prospect with non voting members even arguing for no hike at all this year.

Technicals: The euro held onto its 1.1700 support price and traders could take advantage of the anticipated retrace. We knew that the retrace should be short lived and that’s exactly what occurred on the last of trading days of the week as the euro found resistance and sold off, forming a head and shoulders pattern on the daily coupled with candle patterns suggesting an early fall as soon as markets are open.

Fundamentals: The pound and UK economy finds itself in a battle since the triggering of article 50 especially due to the BoE not being able to forecast the outlook accurately. Firstly we had the negative comments out of the EU negotiator which hit the pound directly and acted in a volatile manner. Investors are unable to gauge the outlook as well which is why we could see a rebound from the sharp losses mainly attributed to the fact that it seems that the BoE will raise rates once this year to counter the rate cut it did back when the pound fell on the Brexit vote results. If the potential raising of the rates stays within the market sentiment alongside a dovish dollar sentiment then the upside should be significant.

Technicals: The pound experienced some shaky price action due to the increased volatility, and despite intra-day declines it managed to prevail and was showing bullish signs as it closed the week. The 1.33500 could act as resistance going forward which is why only if price pulls back to value we would be able to position ourselves for better reward to risk.

Fundamentals:  Canada is in a upward momentum with their economy with the occasional pullbacks due to transitory effects which sometimes translates into slightly below expectations on some economic figures, despite that the USD seems much weaker based on the recent sentiment, the secret is in timing if the sentiment will actually turn into a full blown bear market on the USD, if that’s the case the pair will see further monthly lows.

Technicals: The Canadian pair had a difficult time closing above the 1.2500 level and this weeks price action demonstrated at least for now that the probability will stay below that level turning the tide into the bears’ favour. Next week we can sell into the pair based on the short term bearish price movements. Any close on the daily above the 1.25000 would render the trade invalid which would prompt a shift to the bullish side.

Fundamentals: Like any commodity currency the NZD has risk on appetite especially when the USD its counter-part is losing momentum to the upside as the economy is not performing as predictions have shown. Going into next week we have a weak NZD currency based on the long term but if USD weakness continues then the upside should be clear ahead.

Technicals: The NZD rallied from the lows but as it looks right now, the rally is merely occurring so it gives us a lower high on the higher timeframes providing value for sellers. If the resistance price of 0.72000 rejects further we can plan to sell the pair next week.

Fundamentals: The Japanese yen is a currency that is favoured by investor due to the repatriation of currency and the reserves it holds. In timers of geopolitical risk the yen is known to strengthen however it was the weak dollar that dragged the pair further down. If the USD will not find support within the next couple of weeks the yen could see the monthly lows it rallied from 10 months ago.

Technicals:  The yen pair was a deceiving one as price action moved sideways not respecting the weekly and daily signs of deceleration. Ultimately the sellers prevailed and price formed a lower low on the last trading day of the week. Going forward we can look for new sells on the pair as intra-days will provide value.

Most of the indices have hit all time highs and showed signs of decline, I the case of the FTSE the 7550 price level provided rejection and even double, triple top formations on the higher timeframes. Price is too extended for buys and if a pullbacks is due waiting and positioning ourselves on intra-day is the best possible action.

In a similar way the DAX rejected the 1.3000 all time high and with deceleration showing it’s a only a matter of time until buyers will take profit and invite sellers which will result in a pullback from the highs.

The DOW reached the 22900 and we could hear that a lot of analysts were sceptical of its all time high, that doesn’t mean that prices won’t continue further however a pullback might be imminent which will give more opportunities for those who missed the initial run.

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