Tag: Weekly Update

Categories
Forex Market Analysis

Too Much To Handle?

 

Macroeconomic Outlook

Ahead there is a complex week full of powerful references

–          Apart from the fact that we start from an inconclusive G7

o   More like a G6 + 1

Regarding the references and what needs to be considered

–          Central Banks

o   Fed will raise rates this week to 2% (already discounted)

  • And how many more increases there will be this year
  • Probably one more but open to speculation

o   ECB

  • When will it finish its asset purchase program?

o   Issue of Italian debt

o   Extremely important

  • It will condition what ECB will do

o   Bank of Japan

  • Will repeat with -0.1%

–          Prices

o   Industrial Prices in USA

  • Increase to 2.9 from 2.6

o   European Inflation

  • Remain at 1.9

–          USA – North Korea Meeting

o   Just speculation and news

Bearing in mind all this, it is going to be a hard week, and the best position is to wait on the sidelines to see what the outcome is of all these events and then consider a more clear position.

 

Technical Analysis

US Dollar Index


It is in a danger zone between two monthly bearish trends. Possible rebound from the support one on its way. In the next days, it will clear and show whether it confirms the bounce and breaks the resistance above it or if it is just testing and continuing the monthly bearish trend.

EURUSD


Undecisive, presently, going sideways. For now, we remain bearish as long as it remains below the monthly resistance which it is approaching now. In case it approaches it, we´ll see whether it is just a retest or a breakout creating a bullish trend.

GBPUSD


After breaking out the two resistances, it confirms the creation of a new bullish trend. Hence, we open a new long position looking for a long trend after breaking through the resistances and retesting them afterwards.

USDJPY


As explained in the previous weeks. USDJPY has been and will be going sideways without a clear direction. However, the sideways space is narrowing, and soon, it will be forced to take a side, whether long or short. For now, we wait while the resistances and support get closer to each other.

DAX


It could not close above the resistance we based in our long position. So, this week it will be key to know whether it can close above at some point, eliminating all the fears of a possible bearish trend. In case it does not close above and confirms the retest we will close the position and open a bearish one.

Crude Oil


After breaking the bullish resistance it was holding on to, it is now retesting it. This retest confirms the continuation of the recent bearish trend. For now, we remain bearish.

 

 

Categories
Forex Market Analysis

Slight Change of Context

Weekly Update (June 4th – 10th)

Macroeconomic Outlook

Two main factors need to be considered initially this week-

–          Outcome in Italy

o   More expected

–          Outcome in Spain

o

Weekly Update (June 4th – 10th)

Macroeconomic Outlook

Two main factors need to be considered initially this week-

–          Outcome in Italy

o   More expected

–          Outcome in Spain

o

Weekly Update (June 4th – 10th)

Macroeconomic Outlook

Two main factors need to be considered initially this week-

–          Outcome in Italy

o   More expected

–          Outcome in Spain

o   Less likely to happen

  • The bond spreads of Spain and Italy have had a notable increase over the German ones

However, the midterm elections in the USA are more worrying, which are taking place in November.

–          Which means Trump will put more pressure on trade with other countries.

o   This lead to uncertainty and lower growth in global terms

o   However, also they are useful to clarify ideas

For now, we can rely on the rebound that happened on Friday, due to two things that need to happen this week.

  1. The Italian Government should be formed and avoid other elections which can be interpreted as a danger to the Euro.
  2. In Spain, the budget program should go forward, and there should not be any surprise from the government.

Anyway, we cannot rely on this too much as the protectionism will still grow. In general terms, the investment strategy should not change.

–          We should be still exposed to markets

o   We still are within an expansive economic cycle

–          We elevate the perspective looking to 2019

o   Due to the current change of context to a worst one, returns will be slightly lower but that will not change the overall direction of the markets

 

Technical Outlook

US Dollar Index


After taking profits, the US Dollar Index is hanging between the resistance it just touched and the support it previously broke. So, for now, we´ll wait until it breaks one of them and position in the right direction.

 

EURUSD


EURUSD remains in the green, and there is not any support or resistance that signals a change of trend. Hence, for now, we remain short.

 

GBPUSD


GBPUSD is hanging on a key after breaking the first resistance. Now, it is facing the second monthly resistance. In case it does not break it we´ll remain short. However, if it closes above the bearish trendline that is now facing, we might consider changing the strategy to a more bullish position.

 

USDJPY


It remains in the same situation as we left it. It is going sideways between resistances and supports. Recently it has touched the support confirming it and possibly now it can go up to the resistance. However, for now, the movements are too small to care about them, so we remain on the side, looking at how it behaves and waiting for a clear breakout.

 

CRUDE OIL


US Oil just broke a strong monthly support which creates a strong entry to join the recently formed bearish trend. We captured the initial movement and now can be a good opportunity to join again after this last breakout of a resistance.

 

DAX


As analysed in the macroeconomic outlook, the fundamentals remain solid and the technicals too. If it does not close below the support, it is now facing we´ll remain as bullish as we are now. However, if it breaks the support and retests it, we might change to short, but for now, everything is in place for a low but positive uptrend.

Categories
Forex Market Analysis

Transitioning Week

Macroeconomic Outlook

Bearing in mind the  current situation of the markets, it would be necessary to take positions in line with the three P strategy:

  • Priority
  • Preserve
  • Patience

It is still a good moment to take long positions, to buy banks after sell-offs, to buy retail companies and to buy industrials and technologies.

As references, this week we have:

  • Oil Price: Risk that inflation goes up with oil prices again as Central Banks act in a very dovish way every time there is a risk. Markets in the short term will be conditioned to this risk.
  • Geopolitics: Politics, tariffs and trade deals will condition the markets.

o   In the end, this situation will lead to observe if the USA realises that it does not need China as an intermediary for North Korea which will put pressure on the markets in the short term.

o   On the other side, it is politics. European politics are making a bigger noise with the uncertainty about the Italian government which is not that big, and the risk of a vote of no confidence in Spain.

o   So, bearing this in mind, the immediate influence over the markets is high. Therefore the markets slow down. However, it should not concern us that much as politics have less weight on the economies with time.

Moving to macroeconomics, there are a couple of indicators this week. Most relevant are:

  • Wednesday we have American GDP which should remain at 2.3%
  • Thursday, we have European inflation that should increase to 1.6%
  • Then on Friday, we have American wages which should go to 2.6% – 2.7%

o   Ideally 2.6%

The probability that all this happens is low plus New York and London are closed on Monday leading to a slow start. It will be a week of transition, observing all this information and digesting it to know what the reaction of the markets will be. It will be intense in the short term, but as said in the beginning, it is important to persist, have patience and remain where we are.

  • Indexes should be the place where we should remain since the expansive economic cycle continues, politics have low influence on economics, and we are in a period where global growth is happening in a positive synchronised way.

 

Technical Outlook

 

US Dollar Index


 

As expected, the US Dollar Index retested the recent resistance it broke it, confirming the bull trendline. For now, as we got the retest as confirmation, we remain with our bullish position.

EURUSD


 

After catching the first bearish wave, we are capturing the second one. We were waiting for a retest of the support for confirmation, but we did not even need it as it continued falling without chance of retesting the support. Remain bearish for now unless unexpected circumstances arise.

 

GBPUSD


 

After breaking the strong monthly support on Friday, it opens space for a short position. We were waiting for a rebound, but instead of that, we got a strong breakout which gives us the confirmation of the strength of the bearish trend. Hence, it would be convenient to change the position into a bearish one with a huge risk-reward. As for now, we leave the profit taking open until the next monthly support.

USDJPY


 

We will remain on the side this week as USDJPY is in a dead space between supports and resistance. Hence, we do not take any position, remain neutral and await what direction it takes.

Crude Oil


 

We took profits and now it is time to wait on the sides to see what happens. We’ll look closely to see which trendline it gets closer to if it continues the bullish run or breaks any near support. Looking at its reaction, we’ll take another position next week.

DAX


 

Retest confirmation is on its way creating another good time to enter. We remain bullish as there is nothing to be concerned about for now.

 

Categories
Forex Market Analysis

Opposing forces drive the markets in the upcoming week

Weekly Update

Regarding fundamentals, we are expecting opposing forces drive the markets in the upcoming week. Volatility has sparked bearing in mind the recent intervention of the USA in Syria. However, stock futures are up, and oil is down on hopes Syria attack a one-off.

Thus, we’ll focus on the most foreseeable variables. There are three variables that are mainly moving the markets

  • Protectionism
    • A less negative pressure in the short term as fears erase
    • Recent formal declarations by Chinese president rise expectations of a friendlier trade
    • There are still two months until Trump takes in action any tariff measure
  • Technology
    • Recent testimony by Mark Zuckerberg leaves good feelings and calms the markets
    • Relieves pressure on technology companies
  • Quarterly results
    • 2018 benefits are revised downwards
    • However, 1st quarter is expected to be robust with strong corporate volumes and margins which will be positive in the short term
Macro Data

This week there is no major macroeconomic event that will affect considerably the markets.

On Monday we have American Retail Sales which are expected to increase to 0.4% from the last- 0.1%. This can benefit the US Dollar. On Tuesday, the German ZEW Economic Sentiment can have some impact on the Euro and DAX. It is expected to decrease to -0.8 from 5.1. Finally, on Thursday, the American Manufacturing Index is released, and it is expected to decrease around one point.

In general, the macro outlook is more pessimist than positive. However, the previous three variables provide a more positive outlook and provide a better understanding than the macroeconomics events on how the markets will act this week. So that, we could expect a stabilization phase in the markets after the recent volatility. In general, slightly more positive than negative.

 

 USD Index

Weekly Chart

 

In the weekly chart, it is possible to appreciate how the USD Index is not only below the 200 EMA but also broke below the weekly support that has been retesting in the recent weeks and which has not been successful so far. In the short term is facing a bearish trend line caused by its recent devaluation.

During the first half of this week, there are not big news. However, on Wednesday, American Inflation numbers come out. It is forecasted that the core CPI will increase to 2.1% from previous 1.8%. Furthermore, on Friday, Moody’s published its USA rating, which right now has the highest rating possible with stable perspective. Hence, recent controversial policies from the American government making protectionism and a trade war a reality can alter the expectations for the mention economic events. In case the forecast does not vary the USD should not be hurt. However, an unexpected increase in the Core CPI and a rating downgrade from Moody’s can really hurt the Dollar.

Daily Chart 

The daily chart is similar to the weekly chart. The retest cannot break above the recently broken support and is facing more bearish pressure ahead. Nevertheless, it just formed double bottom pattern followed by a short-term bullish trendline. This week will be critical to know whether the bearish support is strong enough or it holds on to the current bullish trend.

EURUSD

Daily Chart

Regarding the EURUSD, it has been flat since February. Last month it broke its monthly bullish trend, and the consequently retest it.  From there, it has remained flat with no major fluctuations. However, with the recent uncertainties facing both the Eurozone and the USA it will not be surprising to see the EURUSD leaning towards a side. For now, it is holding at a strong resistance that dates back to September of 2017.  It is facing a couple of support and resistance which will help to know towards what side it will lean and leave the rectangle it is in now.

USDJPY

Daily Chart

Moving into the USDJPY, it has just bounced from a monthly bullish trend after doing a fake breakout and consequently bouncing back. A bullish trend could be considered since there are not big resistances ahead part from the 200 EMA and the recent bearish monthly trend. In the short term, there are two resistances not very strong, but that may cause a small retracement. However, the monthly support is stronger than the resistance it is locked up between.

GBPUSD

Daily Chart

GBPUSD seems to have no limits. At the beginning of the year, the Pound broke an important bearish trendline holding to its current bullish trendline. Moreover, last week just broke another key resistance. With no more important resistance ahead it has a clear path to keep up with the current upward trend. Maybe it is possible to do small retest as we saw with the previous one.

Crude Oil

Daily Chart

Recent political events, like the recent issue of the missile attack against Syria, have created volatility in the markets and consequently, the price of oil has been on the rise. After holding to the trendline and breaking above $65 it is possible to see a retest of the recent resistances it just broke above. Without more resistances ahead, analyst set that next target is $70 per barrel.

DAX

Daily Chart

Regarding technical, it is within a bearish trend that can be prolonged as there is still uncertainty in terms of politics and the recent macroeconomics event have not been reaching the forecasted ones. However, an improvement in the economic sentiment and political stability can help the DAX to break the ahead resistance and enter a bullish trend, leaving the current flat to bearish trend it is involved in now.

As commented at the beginning, on Tuesday the German ZEW Economic Sentiment is released. Hence, it can major point to decide whether it breaks the recent resistance and follows the daily bearish trend.

© Forex.Academy