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.

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Forex Outlook for the week

Salam Friends,

Some minor changes to my blog. I have added several new information on candlestick patterns and stock market news. I have also added non-forex info such as prayer time and qiblat finder for my easy reference and I hope that you all will find it useful as well. If you guys have any comments or suggestion on the additional info or layout of my blog, please do so. I would really appreciate it!

Ok, now let’s go on and take a look at what’s the Fundamental and Technical outlook for this week:

Fundamental
Last week USD saw little movement against other major pairs such as EUR, GBP and AUD. Altough the first 3 days saw USD gain momentum as investors seek more reason to buy into the rally that is becoming exhaustive, on Thursday we saw that USD gave back some of its gain. And on Friday, market seems incline towards more USD bull.

In the G8 meeting, leaders agreed that there were early signs of economic stabilization and they are not ready yet to pull back their stimulus plan.

Cable – CPI is expected to decline to 1.8% y/y vs. 2.2% last mth while Claimant Count Change is expected to rise from a mth ago. Both shows the state of consumer in UK are still weak but is slowly recovering.

Fibre - Look out for the German ZEW Economic Sentiment and Eurozone Industrial Production figures. Both are expected to be announced on Tuesday and expected to show improvement. Failure to do so could potentially see the Fibre go south further.

Aussie – RBA maintained its rate at 3% but they did see a scope for further easing if conditions deteriorated which is a scenario that traders are starting to gravitate toward. Although Credit Suisse overnight index swaps are still pricing in 39 bps of a rate increase, it has actually fallen from 78 in early May and 58 a week ago.

Technical

Cable – I can see a chart pattern known as Three Line Strike Pattern - three long black candlesticks with consecutively lower closes followed by a long candlestick on the 4th day which closes above the open of the pattern’s 1st day. This indicates a continuation of downtrend.

I’ve already placed a short position near the top of the 4th candlestick and have since move my SL to a slight profit. Now let’s see if the journey to the south materializes.

Fibre – No clear indication to where the pair is heading to.

Aussie – Still trading within the downtrend channel (purple lines). Price could bounced back up supported by the trendline and indicators such as RSI,Stoch and Demarker are more inclined towards the uptrend. However Aussie could break that channel to the downside if carry trade unwinds.

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What I'm seeing this week...

Salam my friends,

Last week, currency markets were largely seen moving in the same sideway direction since early June. Volatility is still high with economic data giving mixed indication towards recovery. Economists kept on mentioning a new term called 'green shoots' - positive economic data that indicates that the economy is recovering, slowly.. Interesting to see this term picked up across the globe..they like to create catchy phrases which people could remember.. just like 'decoupling' some time ago..hehe

Ok, now let's see what is the fundamental and technical analysis for this week (I'll try to be short and concise this time..no promise..hehe ):

Fundamental

This week, the key economic data would be the rate announcement by RBA and BOE. Both are expected to maintain their respective current rate. This follows the same decision by FOMC made during its last meeting. Analysts are expecting FOMC to maintain the rates at 0.25% at least by the end of the year. The same thing goes to other major countries.

I think markets has already pricing-in the rate decision but what is more important is to hear what RBA and BOE say about the future outlook of the economy.

There would be no major economic data from the US this week except for ISM non-manufacturing index which is forecasted to improve. Following the negative result from NFP on Thursday, any further negative news could potentially see the bear taking control.

However, strong earnings result from Alcoa who will kick-start the earning season as well as positive outcome from the G8 summit could prevent the slide.

In the Euro zone, key economic data would include UK manufacturing production, German IP and revised 1Q09 GDP. Any surprises from these results could have an impact to the market.

Based on the expected mixed data, I am thinking that the currency markets would remain sideways at best, and possibly heads down further as investors become more risk-averse if more bad economic data came out.

Technical

Cable - My bias would be towards sell. My LT upward TL has been broken and price could find its next support level at around 1.6220-1.6240. This represents 100pips return based on the closing price on Friday. If the price breaks that level, we could see potential retracement towards the 1.60 level( Fib 23.6) . Risk: +ve ISM Non-manufacturing index on Monday.



Fibre - I am not too sure about this pair. Although the upward TL has already been broken, the last daily candlestick formation on Friday is a 'hammer', which could indicate a reversal of trend, i.e price could went up. As the reversal signal is of low reliability, I will wait for the next price action to decide on my strategy.



Aussie - Same as Fibre, I don't see any clear signs. Again, the upward trendline is still intact (red line) but I can also see that it is trading in a downward channel (purple lines). If the price breaks below the trendline, we could potentially see the price reach 0.77-0.78 levels. My indicators are also pointing a decline.



P/s: This is a summary of what my analysis is telling me based on my readings. It is intended for my own record. Forex is a risky business so pls don't follow blindly! TAYOR!

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