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Weekly Market Analysis
Our short trades in GBP were stopped out as the Scottish regions began publishing their voting results. Our bearish outlook for GBP has not been negated but we are struggling to find a decent entry after examining the daily/weekly charts. If GBP weakness continues, we are uncertain we will be able to join the downtrend without taking exceptional risks in the Forex market, which we are unwilling to take at this stage. Scotland referendum may echo in the near future as regions like Catalonia may battle with Madrid to earn its independence.
EURUSD weakness is as a result of the upcoming European Central Bank (QE) in the form of ABS program. Mario Draghi confirmed further details regarding the upcoming QE will be revealed in October’s meeting. Traders are pricing the probability of aggressive actions that are yet to come from the ECB including the additional rate cuts. We do not have a technical entry in Euro-Dollar at the time of this writing. It is more probable corrective gains will emerge, which will then determine our technical entry into the Euro.
The strong weakness of the Japanese yen (JPY) is not random and the Bank of Japan (BOJ) aggressive actions are bearing fruit in the Forex market. The impact of the low yen is felt on South Korea’s exports. From a fundamental angle, EURJPY may be targeted by the market bears at the beginning of October, 2014.
Gold Technical Analysis
Focusing on the commodities market, Gold may have provided a monthly entry in a fairly decent price as we elaborated in our ‘2014 Trading Opportunities.‘ Although the markets are closed at the time of this writing, a gap lower will reduce the protective stop loss order and increase the potential take profit for the long trade. From a fundamental angle, US Lew’s comments from the weekend that China is facing slower growth is not comforting. If found relevant, we will update this page when the markets open and notify our subscribers and publish the update on our Twitter account, Facebook and Google Plus.
Gold Technical Entry
Please click on the chart to enlarge:
Gold is providing us with a bullish entry following our analysis in “Trading Opportunities 2014” capital markets research. We are using the hourly chart for our protective stop loss order (stop loss: 1,206.50), targeting 1,300. We will consider increasing our long trade based on the uptrend we are expecting in the yellow metal.
Gold (XAU.USD) long trade was updated on 22/09/14 at 22:13 GMT.
NZDUSD Technical Analysis
Our technical models are turning bullish for the New Zealand Dollar (NZD) against a basket of currencies. It is difficult to determine the fundamental trigger for the rally aside the upcoming China HSBC Manufacturing PMI. Market expectations are for a reading at 50.0, on the verge of contraction. A positive figure is likely to boost the risk appetite in the Forex market, with noted gains in the Kiwi.
NZDUSD Daily Chart
Please click on the chart to enlarge:
We have noted the bullish harami that formed on the daily chart along with oversold indicators. 0.8062 holds the key support, which could translate into a monthly dip if the monthly close will be above 0.8220. This long trade is likely to carry on into October but we will benefit from positive swap during the rollover. The trading gap (approximately +30 pips) increases the stop (if placed below 0.8062). We are capitalizing over the gap to our advantage by placing our protective stop based on the hourly chart.
The protective stop is layered below the key support at 0.8087, targeting 0.8290. The Risk Ratio (RR) is 1 : 2. It is possible that John Key victory over the weekend, winning his third-term as New Zealand’s prime minister may prompt the bulls into NZD.
Key Economic Figure
We believe the Tokyo core Consumer Price Index (CPI) in the early hours of Friday morning (23:30 GMT) is the key event for this week., particularly for JPY pairs and crosses in the FX markets.
Trade alerts are also issued in the weekly update.