GBPCAD adds to Sterling Weakness

September 20, 2016 Forex Analysis

GBPCAD, Daily

The pressure on the pound continued today following some relief yesterday. The GBPUSD (Cable) level at 1.30000 remains a very key area, buyers came in around here yesterday but so far today its GBP being sold short and the pair are currently trading at 1.2970 with worries over upcoming Brexit negotiations beginning to weigh significantly.

The GBPCAD breached and broke the key 20 DMA on Friday following the rejection of the 200 DMA last Wednesday and Thursday. Yesterdays close below the 20 DMA and the turn of the Parabolic SAR on Friday suggested further weakness and a SHORT trade was entered on Mondays close at 1.7202. The 50 DMA could provide support before a further move lower to Target 1 at 1.7022 and further down to Target 2 at 1.6830.

Weakness in the Oil price is hampering the CAD currently; however, the on-going uncertainty surrounding the Brexit negotiations continue to undermine the pound.

Janne Muta

Chief Market Analyst

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jmuta Janne Muta is a seasoned industry professional with over 16 years experience in the global markets. Originally from Finland, Janne has worked for institutions in both Helsinki and London as an institutional fund manager, global market analyst and FX educator.

Traders and fund managers from around the world have benefited greatly from Janne’s technical analysis methods. The indicators and price action based trading models he has developed, have, after rigorous testing, proven to be invaluable in identifying high probability trades.

“My mission is to help you to become a confident and successful trader”

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GBPJPY & Cable Hit Target 2 – Sterling Sags

September 19, 2016 Forex Analysis

GBPJPY, Daily

Sterling suffered on Friday from reports on Bloomberg that the UK finance minister (Philip Hammond) is ready to accept the fact that the UK may have to give up single-market membership in the European Union to achieve the immigration restrictions voters demanded in the Brexit vote. Cable closed the day and week down 1.8 percent and GBPJPY slumped from north of 135.00 to close under 133.00.

The slip in sterling has helped both our SHORT GBP trades reach Target 2 – GBYJPY (132.80) and GBPUSD (1.3070) for a net gain on both trades of over 600 pips.

2016-09-19_16-58-32

Today the USD has traded softer and corrected some of its outperformance from Friday, Market conditions have been thin with Tokyo markets absent and with market participants largely on the sidelines ahead of the Fed and BoJ policy decisions this week. USDJPY ebbed back under 102.00, breached Friday’s low on route to a four-session low at 101.69. EURUSD traded in a narrow orbit of 1.1150. Cable recouped some of the sharp losses seen on Friday, lifting above 1.3080, well over half a big figure up on the day.

However, the close of the day and week below the psychological 1.3000 level is definitely one to watch. Next break lower would be the August low of 1.2860, the post Brexit low of 1.2780 and then 1.2500.

Janne Muta

Chief Market Analyst

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Copper – In every trade there is a lesson

September 16, 2016 Forex Analysis

Copper, Daily

Following the Commodity Webinar I posted a LONG position on Copper on September 7 and suggested that it was time for copper to catch a bid …… “the strong close yesterday (a 7 day high and strong body on the candle together with a break above the seven day range) triggered a LONG trade at 2.0874. Target 1 is 2.1150 which coincides with the 20 DMA and 23.6 Fib level and Target 2 is 2.1450. The current 14 day ATR is 0.200. This trade is very much against the long term monthly down trend and bear market in Copper that has been in place for some six years.”

Following a positive start last week the traded was closed on Monday (September 12) as it spiked down intra-day to just below the floor of the recent congestion zone, only to close the day positively at 2.1011. Subsequently, following good industrial news from China on Wednesday it has gone on to hit both Target 1 and Target 2 for what would have been a net gain of 576. Instead I had a net loss of 210.

The moral of this one is to always double check your positions; if I had doubled checked the Risk Reward ratio the trade would have remained open. Another entry in the trading journal and another reminder that the market is always right and the market will do what it will do.

Janne Muta

Chief Market Analyst

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NZDUSD – Trendline Support and Tweezer Bottom

September 16, 2016 Forex Analysis

NZDUSD, Daily

The NZD has had a great 2016 so far and continues to look strong against the AUD and USD. The NZDUSD traded as low as 0.6328 back in January and since has rallied to its recent high on September 7 at 0.7484, a move of some 18%. The inevitable profit taking that was triggered by the Tweezer Top on September 8 and the subsequent move down to some long term support and Tweezer Bottom, tweaked my interest yesterday for a move to the LONG side. The support area around the confluence of the 50 DMA, 38.2 Fibonacci level and the long term monthly channel suggest evidence of further upside potential. The break and hold of the 20 DMA on yesterday’s weak US data confirmed the entry at 0.7280. Target 1, a little over the 14 Day ATR is at 0.7370 and Target 2 close to the recent high at 0.7450.

The Parabolic SAR remains negative as the pair trade below 0.7300 and any break of the 50 DMA and 38.2 Fibonacci level could move the pair lower. However, the RBNZ are expected to cut interest rates again before the year end following their 25 basis point cut (from 2.25% to 2.00%) in the Official Cash Rate last month. Governor Wheeler said at the time “…further policy easing may be required to ensure that inflation settles near the middle of the target range. We will continue to watch closely the emerging flow of economic data.” As the FED is widely expected to remain unmoved on rates next week the fundamentals remain positive for the Kiwi.

Janne Muta

Chief Market Analyst

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EURGBP Hits Target 1 and BOE – No change

September 15, 2016 Forex Analysis

EURGBP, Daily

On Monday (September 12^th) I wrote “The EURGBP created a Hammer candle low on Tuesday (September 6) at 0.8332 from the recent high (August 12) at 0.8723. Two strong up days last week, through the 23.6 Fibonacci level and a touch of the 50 DMA and 38.2 Fib level spiked my interest on Friday. A close above the 0.8360 level on the Daily candle would generate a LONG position from here. Target 1 would be 0.8540 and Target 2 0.8624”

The trade hit Target 1 yesterday (September 14) for an 80 pip gain; this was the third of the three SHORT GBP positions to complete this week for a net gain of 375 pips.

The BOE,as widely anticipated made no change. Sterling is down by an average 0.3% on the day versus the G3 currencies, although off intraday lows. Despite the less pessimistic tone of the MPC minutes relative to August, policymakers stuck to forecasts for economic slowdown. The minutes noted that “a majority of members expect to support a further cut … at one of the MPC’s forthcoming meetings during the course of this year” — if, that is, the outlook at the November forecast round “is judged to be broadly consistent” with the August Inflation Report projections. The BoE are likely to remain on hold into 2017, seeing some sustainability in the recent economic revival and with the MPC likely to wait for the detailing of expected fiscal stimulus measures at the government’s mid-government budget review on November 23. Further out, there is risk of further easing measures, anticipating that the eventual commencement of exit negotiations with the EU will sharpen concerns about the near- to medium-term success of project Brexit.

Janne Muta

Chief Market Analyst

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US Data Deluge – Weaker than expected

September 15, 2016 Forex Analysis

EURUSD, H4

U.S. August retail sales fell 0.3%, while ex-autos slid 0.1%. The unchanged reading in July was bumped up to 0.1% but June’s 0.8% was nudged down to 0.7%, for a wash. The 0.3% drop for the July ex-auto figure was revised lower to -0.4%, the 0.9% June figure revised to 0.8%. Sales excluding autos, gas, and building materials was flat from -0.1%. Motor vehicles and parts sales declined 0.9% after a 1.7% July jump (revised from 1.1%). Gas station sales fell 0.8%. Building materials dropped 1.4%, while furniture declined 0.7%. Miscellaneous sales crashed 2.4%. Health and personal care dipped 0.1%. Sporting goods slid another 1.4%. Non-store retailers saw a 0.3% slide. Electronics inched up 0.1%.

Today’s U.S. sentiment reports were weaker than expected, thanks to component weakness underlying the divergent headline moves. We saw a Philly Fed pop to a 19-month high of 12.8 in September from 2.0 in August and -2.9 in July that left a big rise from the 3-year low of -10.2 last December. Yet, component weakness after an already-weak August performance left an ISM-adjusted drop to 44.9 from 47.2 in August and 51.3 in July, hence leaving only a modest rise from the 44.1 expansion-low in April. The Empire State headline rose to -1.99 after falling to -4.21 in August from 0.55 in July and 6.01 in June, but the component data for that report were also weak, and the ISM-adjusted measure fell to an 8-month low of 45.1 from 50.2 in August, 48.8 in July and 50.0 in June. We saw expansion-lows in January of -19.37 for the headline and 43.4 for the ISM-adjusted measure. For later month-surveys, we expect a Richmond Fed rise to -2.0 from -11.0, a Dallas Fed bounce to -2.0 from -6.2, a Chicago PMI rise to 53.5 from 51.4, an ISM rise to 50.0 from 49.4, and an ISM-NMI rise to 53.5 from 51.4, versus a 53.1 two-year low in May. The mix should allow the ISM-adjusted average of the major surveys to fall to the 49 expansion-low seen in January and February and previously in October of 2012, from the 50 average in August, and previously in May and June. We saw a 12-month high of 52 in July that was also seen in March.

Fed funds futures are higher on the back of rather tepid data that further reduced the odds for a Fed tightening next week. The data-dependent FOMC will be hard pressed to make a credible case for a hike given the weakness in August retail sales and industrial production, as well as the poor September sentiment reports (and especially in the component readings) and the subdued inflation readings. With the Fed’s policy decision less than a week away, implied rates are suggesting only about an 18% chance for a rate increase. The probability had risen to over 60% after the hawkish tilt from Fed Chair Yellen and especially VC Fischer back in August at the Jackson Hole central banker meeting, and following a less than dovish ECB stance last Thursday. The recent market volatility can’t give the FOMC much footing either. We’ve thought the December13, 14 FOMC was the better bet all along due to the potential instability from the October 14 money market reform deadline, and the November 8 elections.

EURUSD tracks sideways between 1.1250 – 1.1215, Cable trades both sides of 1.3200 and USDJPY ticks higher to 102.60.

Janne Muta

Chief Market Analyst

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GBPJPY looking to go lower

September 9, 2016 Forex Analysis

GBPJPY, Daily

The GBPJPY has been in a steady uptrend from the August 16 low (below 130.00) to the September 2 high (138.72). That now looks to be fading, following three days of falls followed by a reprieve yesterday. The pair remained below the 23.6 Fib level from the pre Brexit high and although still above the 20 DMA and with positive SAR a SHORT trade was triggered at 136.18. Target 1 is 134.50 and Target 2 132.80. Support at the 50 DMA and psychological 135.00 level will provide resistance to the move lower. The current 14 Day ATR is 1.435.

The UK trade deficit narrowed in July data, with the balance ebbing to a GBP 4.5 bln deficit from GBP 5.6 bln in June. The goods deficit fell to GBP 11.8 bln from GBP 12.4. The Official for National Statistics doesn’t attribute the narrowing in the deficit to post-Brexit vote fall in the pound, which by its trade-weighted calculation of the sterling Exchange Rate Index fell 6.6% in July versus the average level in June and by 15.0% versus July 2015. The stats office highlights studies on the impact of sterling weakness on trade, showing that the sharp declines in the pound in 2008/9 led to import price rising more than export prices, for instance, suggesting that there is no guarantee that a weaker currency will translate into improved net export performance in the UK economy.

Janne Muta

Chief Market Analyst

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About Janne Muta, HotForex’s Chief Market Analyst

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USDCAD down again – triggers short position

September 6, 2016 Forex Analysis

USDCAD, Daily

USDCAD is down for a third consecutive day, this time making 11-day lows under 1.2900. The pair has been hit by two things, one being Friday’s post-U.S. jobs report losses, which has eroded Fed tightening expectations, and the other being a rally in oil prices. News that Russia and Saudi Arabia had signed an agreement to set up a “working group” to think of ways to curtail crude market volatility boosted oil prices. The drop in USDCAD since Friday has breached below both the 20- and 50-day moving averages, at 1.2956 and 1.3010, respectively, which now revert as resistance markers. The pair remains without bigger-picture direction, having continued to trade in a broadly sideways manner since March. Focus this week will fall on Wednesday’s BoC policy meeting and Friday’s Canadian August employment report, which we don’t expect will upset prevailing USDCAD sentiment.

The breach and break of the 20 DMA yesterday triggered our SHORT position at 1.2930 near term Target 1 at 1.2875 and Target 2 below the recent 23.6 Fibonacci level and set at the two week ATR 1.2835. Further down support arrives at the August low 1.2770 and the June low at 1.2690.

Janne Muta

Chief Market Analyst

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UK Services PMI Much stronger than expected

September 5, 2016September 6, 2016 Forex Analysis

GBPUSD, Daily

Last week’s good data from the UK continued this morning; UK August services PMI came in much stronger than expected at 52.9. in the headline business activity index, up over five points from July’s post-Brexit vote nadir of 47.4. This is the largest month-on-month gain in the 20-year history of the data series, and follows the record 4.9 point drop between June and July. At 52.9, the heading reading is the best since May, but remains below the long-run average. The volatility and uncertainty caused by the Brexit vote clearly reflected in these wild monthly swings. New work rose at the fastest pace in four months, with companies reporting that the weak pound has helped win new business, including from tourism, along with returning confidence following the initial disruption caused by the vote to leave the EU. Job creation also resumed, while input price inflation rose to a 33-month high on the back of the weaker pound. With the construction and manufacturing PMI surveys having shown a similar rebound from July weakness, the composite PMI worked out at 53.6 in August, up from 47.6 in July. The data suggest the UK economy will avoid recession in Q3. The blot on the horizon is the exit negotiation process the UK has to undergo with the EU.

Cable continues to rally on the news. It failed to hold the 1.3300 level on Fridays close, but this morning GBPUSD is now trading well north of this key psychological level at 1.3350. Should it hold above 1.3330 then the Daily chart shows short term resistance at 1.3400 and support at 1.3115.

Janne Muta

Chief Market Analyst

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About Janne Muta, HotForex’s Chief Market Analyst

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Strong UK Data – Cable Contained by 1.3300

September 2, 2016 Forex Analysis

GBPUSD, Daily

The good news keeps coming from the UK this week. UK construction PMI recovered much better than expected in August, lifting to a headline reading of 49.2 after July’s post-Brexit vote reading of 45.9. The median forecast had been for 46.5. This follows the stellar rebound in the manufacturing PMI in August, and the hope is that the PMI for the dominant service sector, which will be released on Monday, will follow suit. Offsetting the good news to an extent, was guidance from retirement home builder McCarthy & Stone, who said it had seen “evidence of some weakness.”

Cable initially rallied on the news, before hitting resistance at 133.00, NFP data is awaited as a potential catalyst for the break of the 1.3300 -1.3100 range.

Janne Muta

Chief Market Analyst

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About Janne Muta, HotForex’s Chief Market Analyst

“My mission is to help you to become a confident and successful trader”