King Dollar Won’t or Must Weaken

GBPUSD WEEKLY CHART

The USD found renewed strength last week as the ECB and PBoC ease monetary policy further. The new failed high on the breakout rally from 1.5109 to 1.5507 signaled a move back to the 1.5162 support level. A move to the downside is first met by the 1.5250, now turned, support level. A move lower in the $GBPUSD will be largely dictated by the moves in the S&P 500. If equities continue to advance, it is more likely that the USD weakens yet again sending the $GBPUSD to rally. Today’s release of the core PCE price index has markets back to expecting the first Federal Reserve interest rate hike to take place after June 2016. Risk appetite returning to markets on the back of S&P 500 strength has also added to USD woes. TWith risk appetite returning to markets on the back of S&P 500 strength, however, the USD strength has not been sustainable.
Outlook for the week:…


This is an excerpt from this week’s issue of QUID REPORT. Subscribers receive my research on all major GBP pairs at the beginning of the week, including access to @faithmightfx on Twitter for daily, real-time updates to the weekly report. AVAILABLE NOW.

Kiwi May Fly, But Stuck For Now

GBPNZD DAILY CHART

In light of the substantial dip lower in dairy prices last week, this week’s interest rate announcement from the Reserve Bank of New Zealand (RBNZ) should be given attention. If the RBNZ expresses caution about dairy and commodity prices, the New Zealand dollar will weaken. Dairy prices led other commodities with a bottom over five weeks ago. This consequently exhausted buying momentum in the $GBPNZD due to NZD strength. The decreasing momentum allowed the $GBPNZD to break lower in the past four weeks of trading. The new lows find support ahead of the large 50% Fibonacci level at 2.2307. The correction higher into the sell zone also finds resistance against the 2.3000 psychological level. The confluence here makes a break above the 2.3000 level a significant technical development. However, this may not be likely if the RBNZ remains neutral in sentiment and monetary policy. Rather, the $GBPNZD is carving out a range for itself between the 2.3000 level to the upside and the 2.2400 level to the downside. A break to the downside could potentially be a false break with the 50% Fibonacci level just below the support level at 2.2307. Therefore, the $GBPNZD may continue range bound for the week depending on how the market reacts to the RBNZ and Federal Reserve interest rate announcements.

OUTLOOK FOR THE WEEK….


This is an excerpt from this week’s issue of QUID REPORT. Subscribers receive my research on all major GBP pairs at the beginning of the week, including access to @faithmightfx on Twitter for daily, real-time updates to the weekly report. AVAILABLE NOW.

Dollar Dump

Federal Reserve Chairwoman Janet Yellen continues to insist that the central bank will raise interest rates this year. As such, the USD is showing strength on Yellen’s jawboning. The Federal Reserve has 3 months and only 2 more meetings scheduled ahead of the year end. Up until the release of the U.S. non-farm payrolls report, U.S. equities were not responding to the hawkish calls. Further weakness plagued the $SPX after it declined to the August 24th Black Monday lows. It was unable to sustain any rallies until Friday’s release of the weak U.S. jobs report. As long as industrial sectors are tepid, inflation is low, and the labor markets are softening, the Federal Reserve members don’t seem to agree that raising rates after ending QE is the correct course of action. Despite the Federal Reserve delaying to increase interest rates, the rally that occurred on the back of USD weakness (Volume 30) was completely reversed. Now that the market finally believes that the Federal Reserve will take no action on monetary policy, the $GBPUSD will likely rally on risk appetite and USD weakness. The failed high on the upside break of the consolidation range resulted in a new low lower than the previous low at 1.5135. With the move off the failed high complete, the $GBPUSD is free to move in either direction. With risk appetite returning to markets on the back of $SPX strength, the USD may weaken in this new week of trading. The lows circled in orange is a formidable zone of support to the downside. All attempts to move below 1.5162 has been met with supply. The new trading week opens finding resistance at the 1.5250 level. A break above this level fuels a rally back towards the 1.5500 level.

GBPUSD 4 HOUR CHART

After holding below the Friday highs, the $GBPUSD has moved lower as the new trading week gets underway. Price is back below the 1.5200 level signaling a return to the support zone starting at 1.5162 through 1.5100. A break lower moves to the 61.8% Fibonacci level where there is confluence with former lows at 1.5089 and the key 1.5076 level. However, weak fundamentals from the U.S. could also rule price action this week. The week kicks off with the release of the non-manufacturing ISM number during the Monday open. Soft U.S. economic reports will counter intuitively rally the S&P 500 as the market interrupts weak data with dovish U.S. monetary policy. This interpretation weakens the USD because it will signal an increasingly dovish Federal Reserve. If equities respond to weak economic data with more weakness, however, risk aversion will strengthen the USD.

Outlook for the week:


This is an excerpt from this week’s issue of QUID REPORT. Subscribers receive my research on all major GBP pairs at the beginning of the week, including access to @faithmightfx on Twitter for daily, real-time updates to the weekly report. AVAILABLE NOW.

Yen Strength Can’t Persist

The Bank of Japan (BoJ) has not objected to the recent strength in the Japanese yen. The Japanese yen continues to benefit from the risk aversion flows that are clamoring back into the markets when equity markets crashed around the globe. The recent move lower in U.S. equities has been highly correlated with a stronger Japanese yen due to risk aversion flows in the market. This week, however, risk appetite looks to fuel safe haven selling. Additionally, the BoJ may look to increase its already substantial QE program as early as next month. With deflationary pressures still prevalent in the Japanese economy and signs of softening economic data, the GBP/JPY may not be able to continue its descent lower (Volume 31). The weakening Japanese fundamentals is likely to support a rally in the GBP/JPY on the back of sustained JPY weakness. With the recent lows holding in the buy zone above the 61.8% Fibonacci level, a Fibonacci move could spark a rally back to the 195.50 highs.

GBPJPY 4 HOUR CHART

After falling to 180.34, the GBP/JPY staged a corrective rally in the two weeks ago to the 50% Fibonacci level. Making a new high at 188.26 on Federal Reserve volatility in the sell zone, the GBP/JPY made new lows last week to 180.66. Into the end of last week, selling momentum exhausted and price moved higher. The now failed lows signal a move higher for the GBP/JPY. Future direction will be largely dictated by the capital flows in U.S. equity markets. The failed lows in the GBP/JPY also coincide with the aforementioned failed low in the S&P 500. Increasing strength in the S&P 500 will have to overcome the key 2040 resistance level to see a new high higher than the previous 188.26 high in the GBP/JPY. Though a new high can still respect this sell zone, a sustained rally in U.S. equities supports a complete reversal in the GBP/JPY back to the highs. If, however, the S&P 500 retests the 1867 lows, the GBP/JPY can move lower from current levels to its zone of support between 176.20 and 174.86. A confirmed close below the 181.00 support level becomes an early signal of a continuation lower. A confirmed close above the 184.00 resistance level signals a move back to the previous highs above the 188.00 level.

Outlook for the week…


This is an excerpt from this week’s issue of QUID REPORT. Subscribers receive my research on all major GBP pairs at the beginning of the week, including access to @faithmightfx on Twitter for daily, real-time updates to the weekly report. AVAILABLE NOW.

Is This The Bottom?

Last week, I was on the air live with Dale Pinkert, host of FXStreet’s Live Analysis Room. My episode is down below. It’s always fun talking GBP with Dale because he always has insights to share with me as I do with him. His experience in futures on top of the forex always leads to a good conversation. The interview never feels like an interview. Just good trading talk between friends.

The interview took place the day before the September non-farm payrolls dropped. You’ll hear us talk equities quite a bit. With the weakness in the $SPX, I explain why the $GBPJPY was actually looking to fall further to 174.86 and possibly even as low as 167.99. But the weakness in the NFP report may change everything. Apparently, Yellen and the $FED did know something we all didn’t know. The recent global malaise in China, Syria and Brazil are, in fact, starting to show ripple effects in the U.S. economy. And if this economic weakness becomes a trend, interest rate hikes out of the Federal Reserve are off the table. Probably completely. Definitely for 2015. The lack of wage growth and the less-than-expected jobs growth has finally convinced markets that the $FED is not moving on interest rates. In fact, whispers of QE4 are back. Expect that drum to beat louder if the U.S. economy starts to show more weakness in the months ahead.

Looking at the $GBPJPY as our equities proxy, the Friday close above the 181.00 support level is a bullish signal in light of the strong close in the S&P 500. Watch here: