Last week was a long week that provided a list of important economic figures (to name a few… several Central Banks Interest Rate decisions, US housing/consumer confidence/GDP, UK GDP), and political events (State of the Union, World Economic Forum, Egypt turmoil) which made for a very rough week. It felt like FX market sat there waiting for the economic numbers to be released before it decided to budge out of it’s tough price action (in some ways, it is still trying to budge out of it). Other traders echoed this sentiment on Twitter this week as well.
@dennisgjones Many great trade set ups have turned sour. When renowned professional #fx traders are beating their heads then you have to wonder.
@brasil61 FX currency traders ..if you were shaken rattled and rolled this month ..dont worry the best in the business were too – stay positive
@JamieSaettele these market will drive a trader mad – an overleveraged trader broke – i’d rather be mad than broke
Another interesting piece of sentiment I gathered from other traders most part of this week is a lot of people have different views of the market. Granted, it is normal, but it just seems more different views then normal.
As I reviewed the charts (challenging this week), the price action is making me really think about what is ahead next couple of weeks. My sentiment is telling me we are due for a correction (especially after Friday). A few things have to occur, plus confirmation, which will be discussed below.
Sometimes, a catalyst is needed & things need to be played out. This feeling was also expressed on Twitter by couple analysts.
@alaidi IRAQ, GRCE, EGPT; Cradles of Civilisation All Catalysts to Major Market Tops http://bit.ly/9UuPYo CHINA NEXT ? $FXE $SPX $SPY $USO $$
@JohnKicklighter Looks like we will end this week off with the first nudge for a reversal on the S&P 500; but we still need confirmation and conviction.
Note: Before the charts are reviewed, most of you know I like to use fib levels. After reviewing this week’s action (with & with out fib levels), I decided they will not be included in most charts in this week’s outlook.
US Dollar Index
Solely by looking at the chart, I see it going lower, at least testing the 61.8 fib at 77.46. Although, after reviewing the individual pairs, the US Dollar Index will be going up, as I see US Dollar strength ahead.
US Dollar Index
It was a virtual grind upwards for most of last week, with little luck of holding on to a position before the stop is triggered. Wednesday & Thursday was as close to sideways as you can get, but still closed positive. Price action was saying it was getting exhausted. It touched the 61.8 of the 1.4284 high/1.2869 low, thus another reason for a sell-off. Friday was the day it got out of it’s messy action. Confirmation is needed Monday & Tuesday on this though, and 1.3500 is key support if more downside will occur.
Euro / US Dollar
The Pound was a total mess all week. On the daily chart, it was consolidating on the upper trendline of the symmetrical triangle. One can make a case it is a sign it is preparing to break the upper trendline of the triangle to go higher. There were a few days though where the moves were pretty dramatic & messy. 1.5750 is key for further downside, but also watch out for the lower trendline of the triangle. The break of the lower trendline will prove of it wants to go lower.
British Pound / US Dollar
I pointed out a bear flag last week, which was broken. Only then, it decided to go in a sideways direction, with dramatic moves up & down (this is why confirmation is needed). It is also in a tight symmetrical triangle. It has just gone upwards, but price action has been uneven since Fall 2010. It has all the elements of a major correction. The two support levels to look out for is 0.9832 & 0.9726. The break of the triangle in my opinion will not be enough for a correction, due to it’s inability to hold 1.000 for more then 2 weeks at a time.
Australian Dollar / US Dollar
I continue to be neutral in this pair. It is a pair worth looking at intraday, for market moving clues, but the daily cannot go above 83.00 or below 82.00. One thing I can take way from here is it wants to go lower, so look for a big move lower with a daily close below 82.00. It could very well happen with the turmoil in the Middle East.
US Dollar / Japanese Yen
Economic outlook: The State of the Union & the World Economic Forum proved to be non-market moving, but the turmoil in Egypt was one of several elements that caused volatility Friday (weaker then expected US GDP & stronger then expected US consumer confidence). The FOMC was close to a non-event as you can get, with little change in the statement. In the UK, Bank of England Governor, Mervyn King, said he will not raise interest rates any time soon & a worse then expected GDP was released. On the other hand, in Australia, there is talk of lowering interest rates, after a lower CPI/PPI & signs of a slowing economy. Japan’s debt was downgraded as well.
Next week, we have EuroZone & Australia interest rate announcements, US unemployment numbers, housing & PMI figures out of the UK. The wildcard is will happen in the Middle East, which remains to be seen. Regardless what happens, it is expected to be a market mover (especially if Saudi Arabia is next).
On a side note, if you are not watching Al Jazeera for Egypt coverage, then you are not getting the best coverage around.
This Week’s Major Economic Numbers (all times EST):
- Monday: 8:30 AM Canada GDP
- Monday: 8:00 PM China Manufacturing PMI
- Monday: 10:30 Australia Interest Rate
- Tuesday: 2:00 AM UK Halifax HPI
- Tuesday: 4:30 AM UK Manufacturing PMI
- Tuesday: 10:00 US ISM
- Tuesday: China Bank Holiday
- Wednesday: 8:15 AM ADP Unemployment
- Wednesday: 4:45 PM New Zealand Unemployment
- Wednesday: 7:30 PM Australia Building Approvals/Trade Balance
- Thursday: 4:30 AM UK Services PMI
- Thursday: 5:00 AM EuroZone Retail Sales
- Thursday: 7:45 AM Interest Rate Decision (8:30 Press Conference)
- Thursday: 8:30 AM US Unemployment Claims
- Thursday: 10:00 AM ISM Non-Manufactoring PMI
- Thursday: 1:00 PM US Fed Chairman Ben Bernanke Speaks
- Thursday: 7:30 AM Australia Interest Rate
- Friday: 7:00 AM Canada Unemployment
- Friday: 8:30 AM US Unemployment
- Friday: 10:00 AM Canada PMI