Greg’s Weekly Analysis W/C 6th November 2017

Fundamentals: Despite some significant strength over the last weeks the US Dollar was mainly sideways throughout the week with the NFP numbers managing to accelerate it to previous highs. The nomination of Jerome Powell from Pres. Trump and announcement did not rattle the markets and more focus was put on the US jobs numbers in which the employment rebounded from the hurricanes while the Fed rate hike probability now stands at 98%. The possible USD strength from now on will be based on the 2018 and 2019 outlook from the FED, whether they are able to keep the gradual path of interest rate increases with inflation picking up as well wage growth. The Australian dollar had a quiet week with Chinese data having a limited impact while weakness emerged at the last day of the trading week. Next week the RBA will deliver its rate statement as well as Cash rate with consensus being for no change while risks remain, including the housing market and sluggish wage growth.

Technicals: The expectation for the aussie was for a run up to the breakout zone from where new sell positions would emerge. That happened surely but the rejection of the breakout price wasn’t clear cut and confirmation was barely a valid one and the position was caught mostly by day traders as the daily did not confirm accordingly. That said the wedge and trend line is broken to the downside which means that any intra-day pullbacks come next week should provide high probability entries.

Fundamentals: The euro posted some mixed German retail sales numbers as well as CPI estimates which were weaker than forecast, with QE still in place and investors knowing that the ECB will take its time to tighten monetary policy, there’s not a lot that would push the euro higher as equities based on earnings and growth are much more preferred. The Dollar still remains the stronger currency between the two despite some investors warning that if global outlook keeps up the hawkishness we could enter an era of central bank convergence where almost all central banks would be increasing rates or at least have tightening monetary policy stance, this is not the case as of right now which means that we can consider a strong USD against a stagnating EUR.

Technicals: The euro found itself in a similar situation to the other USD crosses as it moved sideways with a slight bullish bias without managing to properly retest the breakout zone. With the last daily candle on the week falling lower than the previous days’ we can anticipate further downside and time a decent reward to risk trade.

Fundamentals: The pound fell more than 1% with what many call as a ‘wrong’ move and knee jerk reaction due to the BoE raising rates but at the same time having an overly dovish outlook. However the pound was set to strengthen and form new highs in the wake of the BoE signalling that this rate hike is part of a gradual one going into 2018, instead they mentioned it as a ‘one and done’ hike and are expecting inflation at the current high of 3.2%. If this will the case going forward the pound does not have much of a chance against the USD however based on wage growth and future statements from the central bank it could rally against weaker currencies such as the JPY.

Technicals: The pound suffered a massive accelerated pullback and prices broke below the 1.3100 support for the first time in weeks but considering the higher timeframes there are still no new swing lows. Technical wise the pair will a hard one to trade until it price makes up its mind whether we are turning into a new bearish phase, remain consolidated or reverse to the upside. Judging by how price action formed all of these are feasible and none provide enough probability over another for now.

Fundamentals: The surge to the upside from the dollars part was mainly attributed to the proposed Tax Plan by the US administration who are in desperate need to actually deliver a policy that is seen positive and does what the taxpayers expect which is lower taxes. The so called ‘Cut cut cut Act’ is still in early stages and will have several revisions but if the its seen as positive along with the Fed policy the USDollar will ultimately prevail against other currencies including the Canadian. The Canadian economy is robust but they are fighting the same issues as the rest of the world because of low wages and unemployment numbers. Despite the canadian economy adding 35k jobs the unemployment rate increased with 0.1% and tared balance posted weaker number as well. Next week Gov Polozs’speech will be closely monitored by investors to gauge the outlook going into year end and the start of 2018.

Technicals: The Canadian pair reached the new highs of the 1.2900 but was met with rejection after which prices fell back below the 1.28000. Although a bit late, this is in line with our expectation of a larger pullback that will result in rejecting the 1.2600 support price before resuming the uptrend. Since price is still far from that area intra-day traders can take advantage of the having short positions before support is being established.

Fundamentals: After falling to extended lows and weakening due to the Gov change with labour taking over, the NZD strengthened from the lows only to be met by rejection. Next week the RBNZ rate statement along with Monetary policy outlook will the key driver of the single currency, however coupled with the USD, strength on the NZD will most likely be seen as longer term shorting opportunity by the market.

Technicals: The new Zealand pair formed a bullish wedge as well and rejected with a high probability candle pattern on the last day of the trading week. Next week if price continue sto tilt to the bearish side, timing shorts will be feasible.

Fundamentals: No change from the BoJ from their policy meeting with Kuroda noting that no change in stance will be made to the BoJ while they proceed with strong monetary easing in hope of inflation reaching the 2% and any debate on stimulus exit would send the wrong message to the markets due to Japans inflation being below expectations along with weak prices. These statements largely are putting the USD in the drivers’ seat for the time being.

Technicals: The yen pair has a hard time breaking to form a new high above the 114.300. It has been met with rejection over 5 times during the last 2 weeks, that could be a signal that a pullback is imminent. Either way until price remains below the 114.30 buys are not recommended, if a deeper pullback occurs which results in high probability support than going long in anticipation for the breakout could be a decent trading plan.

The FTSE rallied from a higher low to an almost record high above the 7550. With this new bullish presence we can erase the probability of sells and switch to intra-day to wait and see if pullbacks hold up for the new high to emerge.

The dax accelerated once more and with prices reaching the 13500 buying high is not recommended and in order to buy from the lows a pullback is needed until than finding value on other markets is more plausible.

The DOW had some initial rejection which would’ve turned into something bigger, supposedly a pullback to value but later quickly return to the highs of the 23500 making us approach the same way as we would the DAX.


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