This week proved to be a challenging week, both in trading, and sentiment on the immediate term direction. Some traders sat it out, but some still wanted to play along. The good news is by weeks end, direction was sorted out, making the game plan for the up coming week a little easier. There were some interesting economic figures released out of China, along with inflation numbers out of Europe, both igniting more fears. On the flip side, confidence worldwide is increasing.
US Dollar Index
Total bear, no questions asked. I will be looking for some retracement on Monday or Tuesday, only because how far it went on Friday.
- It passed the 38.2 fib (important support) at 79.0-06.
- It closed below the 50 fib level (78.26) on Friday.
- Next levels to watch for 77.46 (61.8 fib) & 76.89.
This week was a very tough week to trade the EURUSD. I wrote last week we needed to see what will occur on Monday and Tuesday, to see the direction it wants to go for the foreseeable future. The question was answered on Friday, not Tuesday evening, telling traders it wants to be a bull. It was difficult to trade because of the price action & the fact to kept on whipsawing through 1.3430 resistance first half of the week.
- It has been respecting fibs, both 1.4282 high/1.2860 low & 1.4282 high/1.1874 low.
- It closed past 50 fib (1.3571 of the 1.4282 high/1.2860 low).
- 61.8 at 1.3359 (1.4282 high/1.1874 low) has been proven support.
- Next levels to watch of 1.3710 (76.4 fib 1.4282 high/1.1874 low) & 1.3739 (50 fib 1.4282 high/1.2860 low).
The Pound has been in a sideways channel since Fall. It is respecting the trendline, but we will know soon if it wants to keep going in the channel or if it will breakout. It is easy to say bull, but the technicals is not convincing me.
- The 1.6070/80 area is key resistance. 1.6070 is the 76.4 fib of the 1.6294 high/1.5347 low. 1.6280 is support/resistance.
- Anything above1.6070/80, 1.6262 is next.
- If it breaks the trendline, 1.5500 is next, then 1.5337.
The technical is providing a clear direction it wants to be a bear, with the bear flag broken Thursday only confirming the trend.. There are a number of fundamental factors driving this pair as well, floods, a possible China bubble/slower growth & possible tightening.
- A bear flag continued to be formed & broker, showing it wants to continue on the downside.
- The 61.8 of the 1.0257 high/0.9537 low has been respected at 0.9812. My next target though is the 76.4 at 0.9707, due to the nature of a bear flag, has to decline the same length as the flag, plus 76.4 is the last possible retracement. What happens there will provide direction for most of this year.
Last week, I was neutral & still neutral. It has been a chop fest, but has been respecting the fibs, especially the 85.90 high/80.20 low where 50 fib level has been resistance the past week.
Economic outlook: This week was an interesting week on the economic front. Not much occurred, but what did occur was important. China released a bunch of economic numbers on Wednesday night that was in line with exceptions, but showed slowing in the economy. The numbers were still robust & fears of further tightening by the People’s Bank of China on bank reserves. Confidence in Europe is increasing, but inflation continues to be a worry. Housing numbers in the US continue to improve, and go beyond exceptions. On deck next week is the World Economic Forum (where nothing is expected to happen, but never say never), interest rates in the US/Japan/New Zealand & GDP out of the US/UK.
This Week’s Major Economic Numbers (all times EST):
- All Week: UK Nationwide HOI
- January 26 – 30 World Economic Forum in Davos, Switzerland
- Sunday: 7:30 PM Australia PPI
- Monday: 3:00AM-4:00AM EuroZone PMI (France/Germany/EuroZone)
- Monday: 7:30 Australia CPI
- Monday PM/Tuesday AM: TBD Japan Interest Rate & Statement/Press Conference
- Tuesday: 4:30 AM UK GDP
- Tuesday: 7:00 AM Canada Core CIP
- Tuesday: 10:00 AM Consumer Confidence
- Tuesday: 2:40 PM UK Bank of England Governor King Speaks
- Tuesday PM/Wednesday AM: Australia Bank Holiday
- Wednesday: 4:30 AM AM Bank of England Interest Rate Minutes
- Wednesday: 10:00 AM US New Home Sales
- Wednesday: 2:15 PM US Interest Rate/Statement
- Wednesday: 3:00 PM New Zealand Interest Rate/Statement
- Thursday: 8:30 AM US Durable Goods Orders & Unemployment Claims
- Thursday: 10:00 AM US Pending Home Sales
- Friday: 8:30 AM US GDP
- Friday: 9:55 AM Revised University of Michigan Consumer Confidence