Could the momentum sustained??
Salam Friends,
Last week’s rally in the equity markets saw safe haven currencies i.e USD and JPY weakened against higher yielding currencies. I’m not too confident that the momentum could be sustained for this week. We would need another strong earnings results from major companies plus positive economic data coming out this week.
Fundamental Analysis
Cable – Minutes from the July 9th’s BoE meeting will be out on Wednesday – recent reading of Q1 GDP was unexpectedly revised down to an annual rate of -4.9%, the lowest since recordkeeping began in 1956, from -4.1%.
The figure is at the bottom of the BOE’s previous range of forecasts, which has left speculation that the central bank will expand their quantitative easing (QE) program to fester growth. As a result, if there are signs within the minutes that this is occurring, the British pound could take a hit.
Fibre – Last week, Germany’s ZEW economic sentiment fell when economists had expected it to recover. It recorded 39.5 compared to the expected figure of 48.0. Industrial Production also produced abysmal result; rose 0.5% m/m, missing the predicted 1.5% figure. Still, Fibre traded higher during the week as stock markets rallied.
This week, European companies will start announcing their 2Q09 earnings. This could support futher rally for the Euro currency should the results were better than estimates.
Aussie – Important data from last week, NAB business confidence survey turned positive for the first time since December 2007. This week, minutes from the RBA policy meeting could provide hints on the outlook of the economy.
Credit Suisse overnight index swaps rose to 68 bps from 37 bps last week on expectations that RBA would raise rates over the next twelve months. Dailyfx thinks that inflation should fall to 1% before RBA could consider another rate cut.
Technical Analysis
Cable – This pair is quite volatile. I don’t see any clear signals for me to trade this pair. Will stay aside first and see what happened in the coming 1-2days before deciding on any trade for this pair.
Fibre – Last week’s bull run saw Fibre trading back within the range 1.38 – 1.43 level. This range has been in place since early June. Currently I am bias towards selling the Euro. Why? 1) Candlestick pattern on daily timeframe is showing a bearish engulfing pattern which is a trend reversal signal. 2) Momentum indicators on the 4H timeframe are showing that the recent rally is exhausted.
However trading against the current trend which is uptrend is quite a risk. Therefore I would wait for further confirmation on Monday before I make my decision to trade. Remember that positive earnings results is more than enough to support the momentum to the upside.
Aussie – I’m seeing a similar trade setup with Fibre. Currently the pair is trading within a downtrend channel. The risk is that it could possibly break the channel to the upside, supported by strong rally in the market as well as positive economic data.
Last week’s rally in the equity markets saw safe haven currencies i.e USD and JPY weakened against higher yielding currencies. I’m not too confident that the momentum could be sustained for this week. We would need another strong earnings results from major companies plus positive economic data coming out this week.
Fundamental Analysis
Cable – Minutes from the July 9th’s BoE meeting will be out on Wednesday – recent reading of Q1 GDP was unexpectedly revised down to an annual rate of -4.9%, the lowest since recordkeeping began in 1956, from -4.1%.
The figure is at the bottom of the BOE’s previous range of forecasts, which has left speculation that the central bank will expand their quantitative easing (QE) program to fester growth. As a result, if there are signs within the minutes that this is occurring, the British pound could take a hit.
Fibre – Last week, Germany’s ZEW economic sentiment fell when economists had expected it to recover. It recorded 39.5 compared to the expected figure of 48.0. Industrial Production also produced abysmal result; rose 0.5% m/m, missing the predicted 1.5% figure. Still, Fibre traded higher during the week as stock markets rallied.
This week, European companies will start announcing their 2Q09 earnings. This could support futher rally for the Euro currency should the results were better than estimates.
Aussie – Important data from last week, NAB business confidence survey turned positive for the first time since December 2007. This week, minutes from the RBA policy meeting could provide hints on the outlook of the economy.
Credit Suisse overnight index swaps rose to 68 bps from 37 bps last week on expectations that RBA would raise rates over the next twelve months. Dailyfx thinks that inflation should fall to 1% before RBA could consider another rate cut.
Technical Analysis
Cable – This pair is quite volatile. I don’t see any clear signals for me to trade this pair. Will stay aside first and see what happened in the coming 1-2days before deciding on any trade for this pair.
Fibre – Last week’s bull run saw Fibre trading back within the range 1.38 – 1.43 level. This range has been in place since early June. Currently I am bias towards selling the Euro. Why? 1) Candlestick pattern on daily timeframe is showing a bearish engulfing pattern which is a trend reversal signal. 2) Momentum indicators on the 4H timeframe are showing that the recent rally is exhausted.
However trading against the current trend which is uptrend is quite a risk. Therefore I would wait for further confirmation on Monday before I make my decision to trade. Remember that positive earnings results is more than enough to support the momentum to the upside.
Aussie – I’m seeing a similar trade setup with Fibre. Currently the pair is trading within a downtrend channel. The risk is that it could possibly break the channel to the upside, supported by strong rally in the market as well as positive economic data.
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