Archive for October, 2014

FOREX Technical Analysis & Review 29 Oct

Posted: October 29, 2014 in Forex

The EUR/USD pair had a volatile session during the day on Tuesday, but truthfully I believe that this market is waiting to see went the Federal Reserve does as far as an interest rate decision today. EUR-USDI recognize that the Federal Reserve more than likely will keep rates exactly where they are, but will really get the market moving is the statement. If there is hints of the Federal Reserve tightening of monetary policies or at least some type of hawkish behavior, that will be very good for the US dollar, and send this pair much lower. On the other hand, if they make it abundantly clear that the market should and anticipate any type of hawkish stance from the Federal Reserve anytime soon, then this pair could go higher.
The GBP/USD pair went back and forth during the day showing quite a bit of volatility, but in the end formed a very neutral candle. GBP-USDBecause of this, we feel that the market is probably waiting on the statement coming out of the Federal Reserve, and as a result it’s a little bit difficult to imagine what the market is going to do ahead of time. We do think that a sustained move above the 1.62 level is a buying signal though, and that’s quite frankly we were hoping for. In the meantime, we will be patient.
The Australian dollar rose during the session on Tuesday as you can see, but remains in the previous consolidation area. Besides, we have beenAUD-USD saying for some time we expect to see a significant amount of resistance all the way to the 0.90 handle, and as a result we are not interested in buying it. In fact, we would love to see some type of resistant candle in order to start selling yet again. Keep an eye on the gold markets though, as they tend to be major drivers of where this pair goes.
The USD/JPY pair bounced off of the support level below, breaking the top of the hammer from the Monday session on Tuesday. Because of this, we believe that this market is readyUSD-JPY to go higher, and as we are bullish, we have no concerns whatsoever about buying. Keep in mind that there is an interest-rate announcement today, and more importantly a statement coming out of the Federal Reserve, but ultimately we believe that the longer-term trend is always going to be to the upside and we are still targeting the 110 level.

Data Update for 29th Oct 2014

Time Currency Impact Particualr Forecast Previous
5:20am JPY Prelim Industrial Production m/m 2.30% -1.90%
5:30am NZD High ANZ Business Confidence 13.4
3:00pm GBP Net Lending to Individuals m/m 2.8B 3.2B
GBP M4 Money Supply m/m 0.50% 0.30%
GBP Mortgage Approvals 63K 64K
Tentative EUR German 10-y Bond Auction
6:00pm CAD RMPI m/m 1.50% -2.20%
CAD IPPI m/m 0.30% 0.20%
8:00pm USD Crude Oil Inventories 7.1M
11:00pm GBP MPC Member Haldane Speaks
11:30pm USD High FOMC Statement
USD High Federal Funds Rate <0.25% <0.25%

The EUR/USD pair fell hard during the course of the week, slamming into the 1.25 level. That level of course is a large, round, psychologically significant number and therefore we would not be surprise at all to see a little bit of a bounce from here. However, we believe that the 1.28 level above is massively resistive, and as a result we would be willing to sell on some type of pullback at this point in time. EUR-USDWe have no interest in buying, as we believe that although this market is oversold, it is far too risky to go long of the Euro right now.

After trading down to 1.2500 on Friday, the EUR/USD is posting an inside day with a bias to the upside. Prior to Friday’s U.S. jobs report, the Euro had been consolidating against the U.S. Dollar. This was because the European Central Bank’s monetary policy decision on Thursday was a little less than traders expected. Most traders were looking for the announcement of more aggressive stimulus measures. Instead the ECB maintained its current status, opting instead to release additional stimulus as needed. This decision could be behind this morning’s slight upside bias. If the rally continues today then look for a test of the long-term downtrending angle at 1.2612. The market picks up strength on a breakout over this level with the next target 1.2714.Based on the short-term range of 1.2994 to 1.2500, the main objective of this developing rally is 1.2747 to 1.2805.
The AUD/USD pair initially rallied during the course of the week, slamming into the 0.88 handle. That level of course is massively resistive, and as a result we feel that the sellers will continue to step into this marketplace every time we rally. AUD-USDAfter all, the gold markets have been absolutely brutalize lately, and have broken down below the $1200 level, which is a sell signal for the longer-term charts as well. We believe that the gold markets are heading down to the $1000 handle, and that should translate into a much lower valued Australian dollar.
Technically, the AUD/USD traded through the January 24 bottom at .8659, making a new low for the year. It did close over back over this level, suggesting weak sell stops were hit. Today, sellers are likely to go after this level with more conviction.The first downside target is a steep downtrending angle at .8561. Crossing over to the bearish side of this angle should lead to a test of the major multi-year 50% level at .8544. Traders should watch for a technical bounce, following a test of this level.
Fundamentally, sellers took control of the market, following the release of the September jobs report which showed the U.S. economy added 248,000 new jobs versus pre-report estimates of 215,000. The unemployment rate also fell below 6.0%. The news drove up U.S. interest rates which made the U.S. Dollar a more attractive investment than the Australian Dollar.
The GBP/USD pair initially tried to rally during the course of the week, but then fell hard. We ultimately broke down below the bottom of the 1.60 handle, and as a result it looks like we are testing serious support levels right now. GBP-USDThe British pound continues to suffer overall, and we believe that if we can break down below the 1.58 level, we should then head to the 1.55 handle next. Any rally at this point time will be treated with suspicion, and we believe the sellers will get involved when those happen.
Rally should continue to offer selling opportunities, and that’s exactly what we will treat them as. We don’t have any interest in buying this pair right now, so this is a “sell only” type of market. We believe that the US dollar will continue to reign supreme given the fact that the employment numbers were so strong.
The USD/JPY pair fell to the 108 level during the course of the week, but then bounced enough to form a hammer. The hammer of course is a very bullish sign, and as a result we feel that this market is going to continue going higher. On top of that, the Bank of Japan continues its ultra-easy monetary policy, which of course will ring down the value of the Japanese yen overall. USD-JPYOn the other side the Pacific, we have the Federal Reserve and the tightening of monetary policy via tapering off of quantitative easing, which of course should bring up the value the US dollar.
The 110 level above of course is massively resistive, and as a result the market needs to close above that level on a daily timeframe in order for us to start buying, which would send the market heading back towards the 115 level, and continue to offer “buy on the dips” type of opportunities. Any pullback from here should offer buying opportunities as well, as the 105 level is the “floor” in this market.
Data Update for 6th to 10th Oct 2014

Time Currency Impact Particualr Forecast Previous
7:30pm CAD High Ivey PMI 53.4 50.9
2:30am NZD High NZIER Business Confidence 32
Tentative JPY High Monetary Policy Statement
9:00am AUD High Cash Rate 2.50% 2.50%
AUD High RBA Rate Statement
Tentative JPY High BOJ Press Conference
2:00pm GBP High Manufacturing Production m/m 0.20% 0.30%
6:00pm CAD High Building Permits m/m 11.80%
11:30pm USD High FOMC Meeting Minutes
6:00am AUD High Employment Change -29.6K 121.0K
AUD High Unemployment Rate 6.20% 6.10%
4:30pm GBP High Asset Purchase Facility 375B 375B
GBP High Official Bank Rate 0.50% 0.50%
Tentative GBP High MPC Rate Statement
USD High Unemployment Claims 291K 287K
8:30pm EUR High ECB President Draghi Speaks
6:00pm CAD High Employment Change -11.0K
CAD High Unemployment Rate 7.00%