Source: DailyFX.com
The oil ‘crisis’ is dominating financial headlines, business shows, and even congress’ agenda. When the price of a commodity commands this level of publicity, the probability of a sharp reversal is heightened. As a currency trader, one way to speculate on an oil reversal is with the USDCAD. What’s more, risk is well defined.
This is a longer term look at the decline from the 2002 top near 1.60. The drop is in 7 waves (to this point), and could be complete as a double zigzag correction. If this pattern holds, then a multi-year low is in place at .9055 and the USDCAD is headed much higher in the coming months. A word of caution though; there is an alternate bearish pattern that holds just as much weight and allows for a new low (below .9055) before a major low is considered in place. For bulls though, risk is low. We’ll address this in shorter term charts.
The break of a trendline a few weeks ago is worrisome but as long as price is above .9710 (keeping a series of higher lows intact), a bullish argument can be made. A drop below .9710 will either lead to a drop below .9055 (and final low) quickly or complete wave B of a triangle. In the case of the latter, the USDCAD would trade in a range for probably the rest of the year. In summary, a drop below .9710 warrants a bearish bias. Even in the case of the triangle, the pair likely drops into the .9300 area to complete wave B.
This is the chart that we have been showing in the technicals for some time and illustrates why we have favored the bull side. We are treating the advance from .9710 to 1.0324 as wave 1 (probably of a larger C wave) of a bull cycle. The slow drop from 1.0324 has all the earmarks of a correction; time consuming and consisting of 3 wave movements. The bullish line in the sand is .9710. With price so close to there, reward/risk is heavily skewed in favor of bulls. The minimum objective is above 1.0324.
Saturday, May 24, 2008
USD/CAD - This Week's Technical Opportunity [26-05-2008] - [30-05-2008]
The U.S. dollar is at key technical levels
Source: Forexnews.com
The economy in the United States stays vulnerable, mostly supported by the international trade. Consolidation, rather than growth, could the be scenario of the next months/years, as the global credit bubble is fading away. The U.S. dollar, in the mean time, reached an important short term top against major currencies.
Consumes to decline further in the U.S.
Lower employment, housing declines and high oil prices might be stronger than the coming fiscal stimulus. Americans are pessimistic about the present and future state of the economy, while inflation is expected to pick up substantially in the coming months. Consequently, consumes should retreat further, although the fiscal package might give a brief boost to sells over the Summer.
The preliminary report of the Reuters/University of Michigan consumer sentiment index slumped 3.1 points to 59.5 (-1.5 expected), the worst numbers in almost thirty years. Retail sales declined 0.2% in April from March’s increase of 0.2%. Consumption has been almost flat so far with motor vehicles and parts showing the largest losses. Excluding the autos component, retail sales moved up 0.5% (+0.2% expected).
In reality, latest housing data was better than expected, but results should be observed over a larger period of time, since starts are down almost 30% compared to one year ago. In April, housing starts jumped 8.2%, the strongest move in more than two years, while permits increased 4.9%. Starts were supported by the construction of multi-family homes, as single-family houses declined to the lowest level in seventeen years.
Manufacturing production fading locally
A weak domestic market is subduing manufacturing production in the United States. In April, industrial production slid 0.7% (-0.3% expected). Capacity utilization declined to the lowest level of the past three years at 79.7%. Manufacturing production is very weak locally and moved down 0.8%, after remaining flat in March and falling 0.7% in February. Motor vehicles and part production slumped more than 8.0%. Finally, business equipment production, an indicator of capital spending, decreased 1.1% versus March’s up move of 0.7%.
Despite the economy clearly moderating, the Federal Reserve should implement a “wait and watch” approach supported by milder inflation data. Starting in June or the subsequent meeting will depend on the coming economic numbers. In April, the Consumer Price Index (CPI) rose only 0.2% month over month and declined 3.9% from 4.% on an annual basis. The core index fell instead to 2.3% from 2.4%.
A strong GDP in Europe. Will it last?
As more current data is producing weaker numbers in Europe, growth has been quite good during the first three months of the year. In the first quarter of 2008, the Euro zone Gross Domestic Product (GDP) showed a 0.7% growth month on month (+0.5% expected), above the previous 0.4%, and 2.2% year on year. Euro zone industrial production declined instead 0.2% month on month (-0.1% expected) in March, versus February’s +0.3%, and is now 2.0% year on year (+2.4% expected).
German and France have been two important assets to the European economy. In fact, in the first quarter of this year, the economy grew 1.5% (+0.7% expected) in Germany compared the 0.3% registered in the last quarter of 2007. Annually, it has been 2.6% (+1.7% expected). In France, growth has been 0.6% month on month (+0.4% expected) and 2.2% year on year (+1.9% expected).
Inflation is ECB’s main target
Economic expansion is expected to decline in the second part of 2008, since many emerging markets should surrender to the global slowdown. However, the European Central Bank (ECB) will not change its policy for now, although inflation receded a bit lately. In fact, Euro zone inflation stays strong at 3.0%, but core inflation declined to 1.6%, the lowest level of the past two years.
In April, German Consumer Price Index (CPI) declined 0.2% month on month, after increasing 0.3% in March, and is 2.4% annually versus 3.1%. German inflation represents almost 30% of the total monetary union inflation rate. In France, the Consumer Price Index (CPI) rose 0.3% in April on the top of March’s 0.8%. Annually, CPI is now 3.0% from 3.2%.
USD/JPY targeting support again
EUR/USD found an important support on the lower Bollinger band at 1.53. The short term trend is neutral. A move above 1.5690 would lift the European currency to 1.5780, 1.5850. A decline below 1.5170 would instead target 1.5050.
GBP/USD rebounded from the important support a 1.9400/1.9500. The next target could eventually be 1.9650, eventually 1.9750. Only a move below 1.9320 would eventually target 1.9250, 1.9160.
USD/JPY continues to consolidate between 106 and 102. The market appears to be targeting again 103.00/102.60. A move below 101.40 could eventually let prices to slip to 100.40, 100.00. A move above 106.30 would instead lift the USD to 107.00.
Friday, May 23, 2008
No Signs Of A Bottom In The US Housing Recession From Existing Sales
Source: Daily FX
The FOMC's remarks that there have been few signs that the housing market has bottomed out were given weight with today's existing home sales report. According to the National Association of Realtors report, purchases of previously owned homes slipped 1.0 percent to a 4.89 million annual pace. For a market driver, this data was better than economists forcasts for a 1.6 percent drop to 4.85 million homes; yet this contraction still marks the ninth contraction for the past year and a new low for records gong back to 1999. Looking into the details of the report, the foundation of the market in single family homes was faring just as badly as the headline number would suggest. Single family home sales slipped 0.5 percent to a 4.34 million clip, while supplies surged to a 10.7 months supply from 9.6 months in March. On the other hand, while sales and inventories extend the recession, the ongoing decline in prices brings the market closer to a buyers market. The median price of sales through the month dropped 8.0 percent from last year, though there was a second consecutive increase on a monthly basis. Going forward, existing home sales will be the bellweather for gauging the eventual turn in the housing market as sales of existing homes will preceed a rebound in price and construction activity.
Thursday, May 22, 2008
Welcome BACK!!!
Hope your meditation was fruitful :) Welcome back to the trading arena.
Peace and trade safely everyone...
Warmest Regards,
Ash
Tuesday, May 20, 2008
Back!
PS Just closed my position with 1pip gain when AUD/USD went historic high.
This week's sensitive price for [19-05-2008] - [23-05-2008]...
Hello everyone,
This week's sensitive price are as follow:
1) EUR/USD >>> 1.5535
2) GBP/USD >>> 1.9533
3) EUR/GBP >>> 0.7946
4) USD/JPY >>> 104.06
5) USD/CHF >>> 1.0490
6) EUR/JPY >>> 161.53
7) GBP/JPY >>> 203.17
8) NZD/JPY >>> 79.99
9) AUD/USD >>> 0.9483
10) USD/CAD >>> 1.0009
Peace and trade safely everyone...
Global Events Calendar [19-05-2008] - [23-05-2008]
*Time displayed is based on Singapore Time (GMT+8:00)
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Global Events Calendar [19-05-2008] - [23-05-2008]
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Monday [19-05-2008]
7:01am--------------GBP Rightmove House Price Index m/m
[Whole Day Event]---CAD Holiday: Victoria Day
10:00pm-------------USD Fed Holds TAF Auction
10:00pm-------------USD Leading Index m/m
Tuesday [20-05-2008]
6:45am-----------NZD Visitor Arrivals m/m
7:50am-----------JPY Tertiary Industry Activity Index m/m
9:30am-----------AUD RBA Meeting Minutes
[Time Unknown]---JPY Overnight Call Rate
2:00pm-----------EUR German PPI m/m
2:00pm-----------JPY BOJ Monthly Report
[Time Unknown]---JPY BOJ Press Conference
3:15pm-----------CHF PPI m/m
5:00pm-----------EUR German ZEW Economic Sentiment
5:00pm-----------EUR ZEW Economic Sentiment
8:30pm-----------CAD Foreign Securities Purchases
8:30pm-----------CAD Wholesale Sales m/m
8:30pm-----------USD PPI m/m
8:30pm-----------USD Core PPI m/m
9:00pm-----------USD Fed Vice Chairman Kohn Speaks
9:00pm-----------USD IBD/TIPP Economic Optimism
10:00pm----------USD Fed Publishes TAF Summary
Wednesday [21-05-2008]
8:30am---AUD WMI Consumer Sentiment m/m
9:30am---AUD New Motor Vehicle Sales m/m
11:00am--NZD Credit Card Spending y/y
4:00pm---EUR German Ifo Business Climate Index
4:00pm---EUR German Ifo Business Expectations Index
4:30pm---GBP MPC Meeting Minutes
4:30pm---GBP M4 Money Supply m/m
4:30pm---GBP Public Sector Net Borrowing
5:00pm---CHF ZEW Expectations
7:00pm---CAD Core CPI m/m
7:00pm---CAD CPI m/m
8:30pm---CAD Leading Indicators m/m
10:30pm--USD Crude Oil Inventories
Thursday [22-05-2008]
1:00am--------------USD Fed Governor Warsh Speaks
2:00am--------------USD FOMC Meeting Minutes
7:50am--------------JPY All Industries Activity Index m/m
7:50am--------------JPY Trade Balance
10:00am-------------NZD NZ Annual Budget
[Whole Day Event]---EUR Holiday: Corpus Christi Day
4:00pm--------------EUR Italian Retail Sales m/m
4:30pm--------------GBP Retail Sales m/m
4:30pm--------------GBP Business Investment q/q (p)
5:00pm--------------EUR Industrial New Orders m/m
6:00pm--------------GBP CBI Industrial Trends Orders
8:30pm--------------CAD Core Retail Sales m/m
8:30pm--------------CAD Retail Sales m/m
8:30pm--------------USD Unemployment Claims
9:00pm--------------USD Fed Governor Kroszner Speaks
10:00pm-------------USD House Price Index m/m
10:30pm-------------USD Natural Gas Storage
Friday [23-05-2008]
1:20am---CAD BOC Governor Carney Speaks
7:50am---JPY Monetary Policy Meeting Minutes
2:15pm---CHF Trade Balance
2:45pm---EUR French Consumer Spending m/m
3:30pm---EUR German Manufacturing PMI (p)
3:30pm---EUR German Services PMI (p)
4:00pm---EUR Manufacturing PMI (p)
4:00pm---EUR Services PMI (p)
4:30pm---GBP Second Estimate GDP q/q
4:30pm---GBP Index of Services 3m/3m
5:00pm---EUR Italian GDP q/q
10:00pm--USD Existing Home Sales
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