Double trigger

Greg’s Weekly Analysis W/C 19th February 2018

Fundamentals: The Australian unemployment figures improved 0.1% and now it stands at 5.5%, this alone might not be enough to give the aussie dollar a clear upward trend, at least not until the RBA addresses the improvement and takes a more hawkish stance. On the other side the USD weakened based on momentum sell offs on the DXY which gave aussie a rally, enough to provide value for the bears who didn’t jump on the first pullback. If the USD strength continues we should see a weak aussie in comparison.

Technicals: The aussie rebounded from the lows as expected and by the end of the week rejected the highs of the 0.79800 to form a daily lower high. If price action is consistent and confirm further going for short positions will be the best bet.

Fundamentals: Unexpected market reaction took place when the inflation numbers from the US proved to be positive but the USD bulls wouldn’t have it and price had no other choice but to sell off. That said retail sales were not that attractive but the inflation numbers should have been enough to attract buyers. Consequently the euro rallied as the USD tanked further. This was a unexpected market reaction however we needed confirmation if the same weakness will remain as the week closed, the DXY eventually rallied from a double bottom opening the door for further strength next week. The dot plot now stands at 4 rate hike with March being a live meeting and pricing the rate hike could start with considerable volatility from next week onwards.

Technicals: The euro rallied and it failed to form a lower high as we were anticipating but by the end of the week formed a even higher probability signal resisting the 1.25000 with a daily double bottom. We could be looking for additional downside based on how the bearish engulfing candle accelerated and closed.

Fundamentals: Next week UK jobs data will be in focus while the GBP has been enjoying a weak dollar environment, this has a very good chance of continuing, despite some currencies having a higher probability to fall against the USD, the GBP might actually rally ahead, this is mainly based on a possible BoE rate hike in may which is currently priced in at 65%. The latest inflation numbers showed that inflation is here to stay and its not taking a downward trajectory as the BoE Gov Carney suggested months ago, if we couple this with some improvement on average hourly earnings, the pound might have what it takes to rally against a rebounding USD.

Technicals: The pound sold off on the last day of the trading week as well however not as drastically as the other pairs suggesting the strength that the pound has been proving since its’ breakout. A wait and see mode is a better approach until we gauge whether the pound forms a higher low for buys or clearly confirms the possible lower high on the daily timeframe.

Fundamentals: The CPI on the Canadian economy will be the one to look out for and investor might decide whether they further diversify into CAD based on a possible hawkish BoC and another rate hike or find value elsewhere. The Oil and energy correlation plays a role as well as the debate around NAFTA has not reached any conclusions. The CAD may as well become a weak currency in the long term against the USD but it won’t give up the fight just yet which is why short and medium term we could see the pair range if a bullish USD meets a strong CAD.

Technicals: We could say that the pair is indecisive while showing volatility, facts is we could see a bearish engulfing candle just to have a bullish engulfing rebound 1 day later. This proves indecision but also shows that the 1.25000 price support might be here to stay, if that’s the case we can look for intra-day higher lows targeting levels above the 1.26000 for very decent reward to risk.

Fundamentals: The q/q inflation expectations gave hope for the commodity currency as it ticked above the 2% central bank target however market participants need to see the actual improved figures before committing to buying the NZD, that said NZD could rally against weaker G10 currencies but it might find it hard to form clear rallies in case the USD rebounds which still needs confirmation.

Technicals: The New Zealand rebounded up to the 0.74000 that said it did reject on the last day of the trading week but we wouldn’t characterize this as a high probability rejection which is why adopting a wait and see mode is better than rushing into trading decision quickly.

Fundamentals: The pair failed to find support initially from higher US yields and even the hawkish FOMC FED meeting next week might not able to make difference. After the FOMC meeting we’ll have comments from FED members the following days closing the week and it midst of all this the y/y CPI from Japan will get released, this will either fully support the strength of the Yen or weaken it.

Technicals: After tumbling massively and losing a lot of gains the 106.00 seems to be the preferred support price that the yen wants to adopt. A pinbar candle formation could be seen as the rejection occurred which gives way for possible upside with great reward to risk once multiple timeframes on intra-day confirm the long thesis.

The indices and equities relief rally was in full swing as all major stock indexes rebounded from the reasonable but fearful correction that took place just 2 weeks ago. As we stated in our previous analysis when support seemed to show, there’s no doubt that value resides in the equities and once any fears of further downside are erased and proved by bullish price action, going above the record highs is not ruled out in the medium to long term.

The DAX rebounded as well and price is sitting just below the 12500 level, if intra-days confirms based on bullish price formations and patterns the upward trajectory should have no reason to come to an end.

The DOW managed to recover the most from its losses and price sits above the 25000 as well as the 50 daily ema. Waiting for higher lows on intra-day for value is a must for short term traders while medium long term investor could take advantage of the bulls power as it is.

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