Greg’s Weekly Analysis W/C 25th September 2017

Fundamentals: Iron Ore prices hit some new lows which affected the Australian currency as well as Chinese data, their biggest trade partner. We could see the aussie decline against its US counter-part. The FED FOMC meetings showed us that the FED is reducing its balance sheet come next month and the rate hike expectations are still alive as the statement was hawkish enough with prediction of 2 more rate hike in 2018, while it is less than market participants were waiting for just 6 months ago, it’s enough to keep the dollar alive and bring back some positive expectations given the sell off of the dollar. Next week we can expect USDollar to be stronger than the AUD especially that the RBA has not delivered anything significant regarding the adjustment of their policy. Final GDP from the US which is expected to hit the markets on Thursday is sure to bring volatility and decide the direction of the pair if it won’t be by then.

Technicals: The technical finally came through on the aussie and we could see the second major rejection of the highs which set thing in motion for a fall below the support and trend line to occur. Price formed a pinbar followed by a bearish engulfing candle formation. Going into next week, the pair has the highest probability to sell off and Fridays intra-day pullback serves as a means to get in for a sell with a better reward to risk.

Fundamentals: With the ECB tapering QE next month and market participants realizing that there’s not much upside for price to move on the tapering action taken by the ECB since the run seems over ahead of its time just like it strengthened ahead of its time based on expectations. Probability tends to point to the fact that the ‘buy the rumour, sell the fact’ scenario is alive and well and the euro might act based on the ‘sell the fact’ part going ahead. That said the german election results are due on Monday and we could see euro strength especially if the CDU and Angela Merkel win and for now there’s no reason to expect otherwise.

Technicals: Despite having expectation for the euro to fall as well, it held onto the recent support of 1.18500 and traded in a daily range. The only feasible approach is to wait for a break below the support to place sell positions or a bullish break above the 1.2000 wold confirm the upside in which case we would need to switch our stance.

Fundamentals: The BoE turned surprisingly hawkish so much that many are calling it a bluff and some are certain that on future announcements the BoE will turn more neutral again, this is the something that the BoE has been done recently and the main contributor of future monetary stance change is non other than Gov. Carney himself who likes changing his outlook on a weekly basis. Nonetheless rate hike in the couple of months is what the pound priced in with its strength if that will not be sustainable we will surely see a sizeable pullback, especially against the USDollar as rate hike expectation for December have increased considerably.

Technicals: After reaching the monthly and weekly highs of 1.3600 last week the pounds price action has been quite unproductive and choppiness is the best way to describe it with traders not being able o push prices neither higher or lower. Buying the pair is feasible only on a deeper pullback to around the 1.3300 price level, however selling it could be on the cards if prices breaks lower and forms a new daily and intra-day low.

Fundamentals: There has been talk by the BoC for possible future rate increases however nothing was set in stone and we got comments talking down the currency as it would possibly hurt inflation and the countries’ GDP for the foreseeable future. The Canadian currency weakened due to the speech but also the pair saw new highs due to the rebound in the USDollar. If this continues we can expect a reversal to upside which will be met with sharp pullbacks based on positive numbers from Canada, long term the USDollar should prevail.

Technicals: Despite having a clear bullish bias and advancing ahead, the Canadian pair is met with sell offs after each small rally, with momentum to the upside being met with sharp sell offs it’s harder to position ourselves. That said with a larger stop loss making it more safe to trade as well as with decent reward to risk, this pair should continue ahead judging by the higher low formations on the lower timeframes.

Fundamentals: With the USDollar experiencing some strength and risk on dissipating from the antipodeans as well the safe haven JPY, the NZD weakened against the USDollar and based on short and long term fundamental expectations this should continue. On Wednesday evening we’ll receive the RBNZ Rate Statement as well as cash rate, while the cash rate is expected to stay unchanged, price will react to the statement and the outlook ahead. The consensus shows that USD will strengthen against the NZD but surprises can not be ruled out.

Technicals: Similarly to the aussie, the NZD rallied to that point of confluence from where it formed a lower high on the daily. It’s a bit early to tell whether the pair is ready to sell off come Monday but it’s definitely one the keep on our radar and positions size accordingly if the bearish momentum prevails.

Fundamentals: On Thursday the BoJ released its monetary policy statement, policy remained unchanged with little to no market reaction, we can see that the predicted long term fundamentals have been at play as expected for a few months now with USD showing strength against the JPY against the major monetary policy divergence, this is expected to be sustained going ahead with sharp pullbacks to value based on positive Japanese numbers such as the inflation reading which could post better than expected numbers in the future.

Technicals: As anticipated the yen pair rallied ahead, however it is yet provide a high probability entry for those who didn’t catch the run or are yet to go long on the pair. This can be done once profit taking and short term sells occur and looking at the end of the week price action, the initial signs of a temporary decline are there. Next week if prices fall further we’ll be able to pin point the reversal based on a higher low on the daily and intra-day price action formations.

The FTSE bounced from the lows and it seemed to be able to sustain the freshly made intraday highs. Next week if the 7250 price level holds further then we’ll be able to look for buy back targeting that well familiar 7400 price level.

After some consolidation the DAX made a run for some new highs and reached the 12640 price level after which it was met by bearish pressure. If price fails to break above the 12650 and rejection occurs selling into the index is feasible however the pullback should short lived after which once  a higher low forms on the daily traders will look to buy from value once again.

The Wall Street index is a strong as ever since it bounced from the daily 50 emas from which it confirmed with higher lows. With prices touching the 22400 there’s not too much to go on as selling the can be tricky if sudden reversal to the upside happens, therefore waiting until pullback to value and confluence occurs is the best plan.

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