Note that this is my current view, but if market conditions change my view can change too. Generally I will trade in alignment with what I have noted here, though I will wait for a set-up before I enter. I base my view on technical and fundamental information. This is my beliefs and you are welcome to have opposite ones. Having a plan is more important than the actual direction for me.
- Wait DXY.– MT is bear normal. In the US while the overall economy is still growing, the month of September saw a decline in PMI numbers. The ISM Manufacturing report hit a 10year low and the services sector showed a pace of expansion which was slower than expected. Unemployment fell to 3.5%, a level not seen since December 1969, but new jobs numbers were down and wage growth was flat which prompted Chair Powell to highlight, in a speech just ahead of the release of the FMOC minutes, that the labour market is weaker than previously thought. The past week also saw disappointing Retail Sales numbers as well as other manufacturing and industrial production figures. The Fed is now in communication blackout and these latest data points could increase the chances of a third consecutive rate cut at the end of October despite the seeming progress toward a trade deal with China. The “Phase One deal” in any case is not due to be finalised until the Asia-Pacific Economic Cooperation summit which takes place on November 16-17 in Chile and much can happen between now and then. In the coming week we will see the release of preliminary Markit PMIs and Durable Goods Orders. After failing to break through the early September high the Dollar Index has now fallen below the September low and is approaching a potential area of support around the August low.
- Wait GBP/USD. – MT is bull fast. As a path to a Brexit deal finally emerged Cable rose strongly from support at 1.22 slicing through potential resistance at 1.25 – 1.27. Subsequently, following the EU approval of the proposal submitted by the UK Government, the pair quickly moved up to the edge of the next resistance area at 1.30 where it ended the past week ahead of the now failed ratification vote by the UK Parliament. PM Johnson had to reluctantly comply with the legislated requirement to ask the EU for an extension to the October 31st deadline but at the same time sent a separate message reinforcing his Government determination to get the deal ratified by the current deadline and that granting an extension would be a mistake. There is a good chance that the Pound will fall on Monday as uncertainty resurfaces. The protracted political drama seems to be having a real impact on the economy with the most recent PMI data confirming that all sectors are now in contraction territory which was also reflected in a disappointing GDP. The market however is fully focused on the Brexit fireworks and until the dust settles macroeconomic data is unlikely to be of any consequence.
- Wait USD/JPY. – MT is bull normal. Earlier in the week the pair managed to break through recent resistance at 108.50 but due to broad-based USD weakness could not proceed further stalling just ahead of the 109 handle. If support from buyers doesn’t come in at current levels we might see it drift back lower towards 107. However, if price manages to get through 109 we should see the pair starting to move toward the next resistance level at 112 over the coming weeks.
- Buy AUD/USD. – MT is bull normal. Following this month’s rate cut the Aussie put in place a fourth rejection of 0.67 indicating that the pair might have found a bottom. The catalyst to potentially justify higher prices came shortly after in the form of the U.S. – China positive trade talks in Washington. This past week we have also seen a modest fall in the unemployment rate which while not a game-changer from a fundamentals point of view has certainly given the pair enough strength to push through resistance at 0.68 and put it on course to re-test 0.69 as a November rate cut now becomes unlikely.
- Buy EUR/USD. – MT is bull normal. The downtrend which started at the end of June is now broken with the pair convincingly surging above 1.11. While conditions remain dire for the European economy the Euro seems to have benefited from the prospect of an imminent resolution to the Brexit saga as well as from a broad USD weakness. The upcoming ECB meeting will be the last with Mario Draghi as President and after having introduced significant measures in September it is unlikely that we will see any policy change, while we will probably hear another call for fiscal stimulus. On the same day we will see the latest PMI data followed by German Consumer and Business Confidence readings the next day.
- Buy NZD/USD.– MT is bull normal. Together with the Aussie the Kiwi has benefitted from the recent improvement in risk sentiment following the positive U.S. – China trade talks. Whilst the economic backdrop remains weak the aggressive RBNZ action back in August seems to have started filtering through to the consumer with a pick-up in in the housing market and this week an uptick in inflation readings. In addition, on the export front there has been a stabilization in log prices and milk auction prices have been holding up better than expected. A further rate cut at the RBNZ November meeting is still expected, however that might be the last one for this easing cycle.
- Sell USD/CHF. – MT is bear normal. After failing to break through parity at the beginning of the month the Swissie failed a further attempt this week and the pair was sent sharply lower turning our Market Type indicator from sideways to bear. From here we could see further falls toward the bottom of the current sideways range at 0.97.
- Sell USD/CAD. – MT is bear normal. The previous move up stalled at the August resistance levels and then stronger than expected Employment figures sent the Loonie sharply lower just ahead of the Canadian Thanksgiving long weekend. USD weakness this past week brought the pair further down just below potential support at 1.315. The next downside target is at 1.30. This week Canada holds a Federal Election, Statistic Canada releases data on Retail Sales and the BOC publishes its quarterly Business Outlook Survey.
- Wait EUR/GBP. – MT is bear fast. The Market Type has changed to bear fast. The downtrend which kicked off in mid-August resumed strongly after a 2 week pause thanks to the emerging Brexit deal. The Euro however seems to have been benefiting also from the easing in geopolitical tensions, Brexit and the US/China Trade War. The chart has printed a couple of indecision candles and an inside period and we could see a short term bounce up before the downtrend resumes toward support at 0.85.
- Wait EUR/CHF. – MT is sideways normal.
- Buy AUD/JPY. – MT is bull normal.
- Buy NZD/JPY. – MT is bull normal.
- Buy GBP/JPY. – MT is bull fast.
- Buy EUR/JPY. – MT is bull normal.
- Buy CAD/JPY. – MT is bull normal.
- Buy CHF/JPY. – MT is bull normal.
- Wait GBP/NZD. – MT is bull normal.
- Wait EUR/NZD. – MT is bull normal.
- Wait AUD/NZD. – MT is sideways normal.
- Wait EUR/AUD. – MT is bull normal.
- Wait GBP/AUD. – MT is bull normal.
- Wait AUD/CAD. – MT is sideways normal.
- Wait GBP/CAD. – MT is bull fast.
- Wait EUR/CAD. – MT is sideways normal.
- Wait NZD/CAD. – MT is sideways normal.
- Wait GBP/CHF. – MT is bull normal.
- Wait CAD/CHF. – MT is bull normal.
- Wait NZD/CHF. – MT is sideways normal.
- Wait AUD/CHF. – MT is sideways normal.
- Wait Gold. – MT is sideways normal.
- Wait Oil. – MT is bear normal.
- Wait S&P 500. – MT is sideways normal.
- Wait DAX. – MT is bull normal.
- Wait Nikkei. – MT is bull normal.
- Wait T-Notes. – MT is sideways normal.
(MT = Market Type: Click for more information on market types.)