@faithmight, Author at FaithMight

December 22, 2015

EUR WTF

The European Central Bank (ECB) lowered its deposit rate this month by 10 basis points to -0.3%, moving rates further into negative territory. Additionally, the ECB extended its current quantitative easing (QE) program well into 2017 while maintaining the amount of bonds purchased each month. The ECB wants to support Europe for as long as possible. They need to. While these changes in policy constitutes huge monetary action by the ECB, the market was expecting an increase in QE not just an extension and slight adjustments of the same program. The market also anticipated a larger interest rate cut than 10 basis points. This was less aggressive easing than the market was actually expecting. For this reason, the euro continues to rally tremendously (Volume 41). Despite the strong rally that gripped the $EURGBP in the aftermath of the ECB monetary policy easing, there had been no real follow through in either direction for the past two weeks. Dips were met with buyers while sellers capped rallies. Consolidation below the 0.7250 resistance level was not necessarily bearish price action. Despite breaking above the 0.7250 resistance level, the $EURGBP was unable to close above it until the Friday close last week. Additionally, the Friday close remains above the key 0.7100 level (Volume 22) and is a higher close than the previous close on the weekly chart. As such, the $EURGBP maintains its bullish bias for the new trading week.

The $EURGBP has to move below the 0.7200 support and psychological level in order to change the bullish momentum. Last week, sellers continued to step in at and above the 0.7250 level. However, the lows were also met with its own supply. Buyers have been stepping in at the lows above the 0.7200 level. After the volatile surge higher, two weeks of consolidation does not signal a reversal. In fact, consolidating at the highs actually signals a move higher, depending on how the new week opens (Volume 42). As the new trading week opens, this nascent bullish signal has manifested as the $EURGBP has finally moved higher to break above the 0.7300 resistance level that had capped rallies for the past two weeks. This explosive move higher will likely be met with profit-taking after the long consolidation. Pullbacks off the highs need to find support above the 0.7300, now turned, support level. Given price action during consolidation, it is highly likely that it will.

Premium trade setups with targets and stops are published in the $EURGBP Outlook for the Week in Volume 43, this week’s Quid Report.

December 17, 2015December 18, 2015

Ode to Canada

Break the 61.8

This trade could be great.

With the fundies aligned

Long term action divine.

Be patient. The targets

Are a long ways away!

Premium trade setups with targets and stops are published in the $GBPCAD Outlook for the Week in Volume 42, this week’s Quid Report.

December 16, 2015

Will They Deliver?

All eyes on the Federal Reserve this afternoon. Will they raise interest rates? Will they sound hawkish? Will the USD rally? Watch this big picture view headed into, and immediately after, the Federal Reserve announcement for future direction in price action for the $GBPUSD.

Premium trade setups with targets and stops are published in the $GBPUSD Outlook for the Week (Volume 42, this week’s Quid Report).

December 15, 2015

Australian Dollar Defies Commodities

The Australian dollar found strength when the Reserve Bank of Australia (RBA) monetary policy minutes confirmed that the central bank would not move on monetary policy again this year. Though the RBA believes that monetary policy needs to remain accommodative, markets have reacted positively to the decision to leave monetary policy as is. The $GBPAUD has since moved in a down channel on the back of Australian dollar strength. Last week, the weakness in commodities finally caught up with the Australian dollar. The Australian dollar finally weakened in the face of extended new, multi-year lows in commodities. After moving to the bottom of the channel, the $GBPAUD respected support at the lower trendline of the channel. Price rallied higher on the back of the weak Australian dollar. A rally in the $GBPAUD was expected to rally back to the trendline at the top of the down channel. Given the velocity of the moves in commodities, the $GBPAUD managed to return to the top of the channel in just one week of trading. While the $GBPAUD was met with profit-taking just ahead of the key 2.1200 resistance level, the new trading week opened with a move above resistance to 2.1216. However, sellers stepped in at the highs ultimately respecting the upper trendline resistance and moving price back to the key 2.0800 support level.

The top of the channel here has confluence with the key 2.1200 resistance level. For the $GBPAUD to continue to rally, the $GBPAUD needs a confirmed close above the 2.1200 level. Ahead of the channel bottom is first the major 2.0800, now turned, support level. There is also confluence with that support level at the 50% Fibonacci level of last week’s rally. The 2.0800 level remains the key level for direction. With no confirmation on the break above the 2.1200 level, the $GBPAUD actually opens the new trading week bearish even with a Friday close at the highs. The $GBPAUD continues to trade in this channel. As such, after reaching the top of the channel, the $GBPAUD is biased bearish based on the technical developments in price action. Price has already moved to 2.0818 finding support just above the 2.0800 support level. With commodities crashing again as they did this time last year, the Australian dollar should experience another tremendous selloff. However, $GBPAUD price action suggests further Australian dollar strength in the face of weak commodities.

Premium trade setups with targets and stops are published in the $GBPAUD Outlook for the Week (Volume 42, this week’s Quid Report).

December 9, 2015

My Appearance on FXStreet’s Live Analysis Room

I just had my last interview appearance of the year with FXStreet this morning. I always have fun talking with Dale, host of the Live Analysis Room – the #FXRoom. We talked all things currencies and discussed my market forecasts for the new year.

The biggest takeaway is that the GBP is positioned at at some very critical levels headed into the end of the year. This could set up for some great swing trades in the new year. Take a listen!

The FXStreet article for the interview can be found here.

To receive forex forecasts on the GBP every week delivered straight to your inbox, subscribe to the QUID REPORT today!

October 29, 2015October 30, 2015

King Dollar Won’t or Must Weaken

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.

October 28, 2015October 28, 2015

Kiwi May Fly, But Stuck For Now

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….

October 9, 2015October 9, 2015

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.

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:

October 7, 2015

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.

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…

October 4, 2015

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: