This past week was an overall good week with plenty of opportunities, although it did not appear to be the case on Monday & Tuesday where plenty of traders wished they stayed on the sidelines. China decided to mix things up at weeks end. After doing weekend analysis, it appears Monday & Tuesday will be key days on the direction of the FX market.
I am going to start this week with the US Dollar Index, which was not included last week.
US Dollar Index
Monday & Tuesday will be key times for the US Dollar Index. I am neutral on it until I see further price action. I could continue be non-trending between 81.50/79 or it could give another reason to be a bear on the dollar.
- It has been respecting the key 79 level. A break below will send it to 78.62 support, then 78, then 77.
- 79 level is also 38.2 retracement of the 74.85 low/87.67 high.
I was telling people I was bullish mid-way through the week. As I examine the daily chart at the moment, I am neutral & want to see what it does Monday/Tuesday. Could we be in a non-trending market between 1.3000 (which has turned into a key level) & 1.3400, 400 pip spread, or will there be a breakout?
- It hit the 38.2 fib level of the 1.4277 high/1.2853 low at 1.3397.
- It hit the 50 fib level of 1.3418 of the 1.4277 high/1.2559 low.
- No notable or clear trendlines to identify.
- If breakout occurs, 1.3941 on the upside, 1.2559 on the downside are the next targets.
The Pound is funky, but then again, what else is new. Just like the Euro, I need to see Monday & Tuesday action. It is a hair away from 2 key resistance points. If it breaks, bull. If it does not, then consolidation or bear.
- It broke an upper trendline that started in November 2010.
- 1.5900 has proven to be a key resistance level, 30 pips away from Friday’s close.
- 61.8 fib level at 1.5932 is retracement of the 1.6292 to 1.5350 downtrend.
Last week I said I am a bull & I am still a bull inside. Finding technical reasons to be a bull are becoming tough though, same goes with being a bear. It chopped around this past week, providing no real clear indication of it continuing or if it will go one way or another. Fundamentals has played a factor in this pair, along with the price of gold.
- I pointed out a trendline last week that it was respecting. It has been whipsawing in & out of it most of this week, thus the reason I am disregarding it.
- Touched the 61.8 of the retracement of the uptrend from 0.9528 low to 1.0255 high.
There are signs of short term bullishness, but sticking to my neutral position. This is also the only pair I did not redraw indicators.
- This past week formed a bull flag, like it up to 85.74/90 (85.74 61.8 fib level retracement of downtrend of 89.15 high/80.22 low & 100 fib level of retracement of 85.90 high/80.20 low).
- Been respecting the fibs, hit 38.2 fib level of the 89.15 high/80.22 low & bounced off 38.2 fib level of 85.90 high/80.20 low.
Economic outlook: Not much changed this past week on the economic front. UK housing prices are continuing to decline. Inflation fears in the US, UK & Europe have been reenforced. Inflation worries can spread fear of higher interest rates thus a stronger currency. China raised there banks requirements Friday. Banks will be able to loan less, so companies will have less money to buy products & expand. Since China has been expanding & developing rapidly, it will be expected to slow. Australia exports a lot of natural resources to China, so the Aussie got hit. China is scheduled to release a lot of numbers Wednesday night/Thursday morning (depending on your time zone), that will assist on providing a direction.
This Week’s Major Economic Numbers (all times EST):
- Monday: US Bank Holiday (Martin Luther King Jr. Day)
- Tuesday: 4:30 AM UK CPI
- Tuesday: 5:00 AM German Economic Sentiment
- Tuesday: 9:00 AM Canada Interest Rate (Policy Report & Press Conference Wednesday 10:30/11:15 respectfully)
- Wednesday: 4:30 AM UK Claimant Count Change
- Wednesday: 9:00 PM China CPI/GDP/PPI/Retail Sales
- Thursday: 8:30 US Unemployment Claims
- Thursday: 10:00 US Existing Home Sales & Philly Fed Manufacturing
- Friday: 4:00 AM EuroZone German Business Climate
- Friday: 4:30 AM UK Retail Sales
- Friday: 8:30 AM Canada Core Retail Sales