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January 21, 2016

Canadian Dollar Looks for the Rally

The Canadian dollar is starting to decouple from the crude oil markets. As crude oil markets plunge, the Canadian dollar also moves lower but not particularly against the pound sterling. The $GBPCAD reached multi-year highs just below the 2.1000 major resistance and psychological level twice in 2015. But despite crude oil prices crashing lower in 2016, the $GBPCAD has been unable to break above the 2.1000 level to new multi-year highs. The oil glut that caused the oil markets to accelerate its decline in the past seven months continues to persist. There is an oversupply of oil in the markets. Oil producers remain in denial to decreased demand for fossil fuels and refuse to cut production. Or perhaps some oil-producing nations are conducting economic warfare as they continue to pump oil. Regardless of the reason, this supply glut will keep crude oil prices low in 2016. Oil markets open the new trading week moving lower still even after the multi-year low Friday close. The crude oil markets continue to lead all commodity markets lower as the new trading week gets underway. However, while last week we believed that any strength in oil would present a buying opportunity in the $GBPCAD (Volume 45), this week that perspective has changed. Any rally in the $GBPCAD this week will be seen as a selling opportunity. Only a close above the 2.1000 resistance level will keep the bullish trend intact.

With the weak pound sterling, it is difficult for the $GBPCAD to rally even with the weak oil market. The moves have become biased to the downside this week as price continues to print lower highs and decreasing bullish momentum. Signaled by the Friday close, the new trading week opens with sellers stepping in at the gap-open highs. As price moves higher, the 2.1000 resistance level will be the signal for future price action. A confirmed close above the 2.1000 level will allow buyers to gain position and base for a move higher. However, if price rallies again and holds below the 2.1000 resistance level, the $GBPCAD will move to the 61.8% Fibonacci level on the daily chart. A rally in price back to the highs will be an opportunity for buyers to cover long positions. The failed high at 2.0949 continues to signal a deeper correction to the 1.9800 support level.

Premium trade setups with targets and stops are published in the GBP/CAD Outlook for the Week in Volume 46, this week’s Quid Report. This is an excerpt from Quid Report.

January 15, 2016August 28, 2018

Euro Exuberance

This week, the $EURGBP broke above the 0.7500 resistance level for the first in 12 months. Given the context of the break lower back in January last year, the break higher this week holds real implications for price action in 2016. In the face of QE and rate cuts, the euro has rallied over 500 pips. This is a complete break from its fundamentals. Or is it?

Premium trade setups with targets and stops are published in the EUR/GBP Outlook for the Week in Volume 45, this week’s Quid Report.

January 13, 2016

Strong Yen Implications

The $GBPJPY continues to slide. The Japanese yen rally has become sustainable as the Bank of Japan (BoJ) continues to give indications that it is considering a shift away from its quantitative and qualitative easing (QQE) program. This is a very subtle shift in BoJ sentiment that is not getting much media attention. Less QQE means that the BoJ erodes at the divergence gap in monetary policy that it has had with other major central banks for several years. Manufacturing PMI released last week was higher than expected, helping to confirm the BoJ’s optimistic economic outlooks for Japan. This hawkish tone is helping to strengthen the Japanese yen now at a time when risk aversion flows may be re-entering capital markets. The geopolitical wars and diplomacy tensions around the globe are starting to wear on investor sentiment. As U.S. equities weaken, the Japanese yen continues to be the largest beneficiary of increases in risk aversion flows. The new trading week opens with the $GBPJPY trading at extremely oversold levels. Despite its bearish sentiment in the medium term, the $GBPJPY may consolidate the new lows below the major 170.00 psychological level.

The $GBPJPY has not staged a correction since breaking below the 184.00 support level back in early December. The break below the 175.00 support level with the extremely shallow rallies is a major signal of bear strength as the $GBPJPY continues to grind lower. The $GBPJPY breaks nominally below the 170.00 psychological level as the new trading week begins, subtly indicating that the staunch support level is being met with more bearish psychology than last year. Perhaps with the RSI at extremely oversold levels, the $GBPJPY will bounce higher as sellers exhaust. A “healthy” correction off the new 169.30 lows moves the $GBPJPY back toward the 175.00 level to the sell zone starting at the 173.45, 38.2% Fibonacci level. Sellers are lined up to the 176.00 resistance level. Given the importance of the 170.00 support level on a bearish move that has seen very little retracement, a strong bounce is highly likely. More aggressive traders will look to take advantage of any move higher to establish a short position in the $GBPJPY. Continued strength in the Japanese yen is likely especially as crude oil prices remain so low, which is an aide to the Japanese economy.

Premium trade setups with targets and stops are published in the $GBPJPY Outlook for the Week in Volume 45, this week’s Quid Report.

January 7, 2016

Harmony in the Fed

The new year opens with a very significant start for the pound against the U.S. dollar. The only other time in recent history that the $GBPUSD opened the new year at lows was back in January 2002. At that time, the $GBPUSD bottomed as buying momentum picked up with the RSI finding support at the 40.0 level on the monthly chart. This time, however, is actually a bit different. Momentum is sliding to lows on the RSI. The $GBPUSD has gapped lower as the first trading week of 2016 gets underway. This gap down has cleared the zone of support between the 1.4750 level and the 1.4800 level. This zone has been an area of supply for the $GBPUSD eight times in the past sixteen years. It supported price last week as sellers took profits and established new positions against the support zone. Now this gap and subsequent move lower is a strong indication of further selling in the $GBPUSD. Strong economic reports from the UK may give sellers a reprieve. But the calendar is dominated by economic news out of the United States this week. Risk aversion is already entering markets as U.S. equities open 2016 with pronounced weakness. Any strong news about the U.S. economy is likely to rally the U.S. dollar further. Having broken below the 1.4680 level, the $GBPUSD is poised to test lows at 1.4565.

Premium trade setups with targets and stops are published in the $GBPUSD Outlook for the Week in Volume 44, this week’s Quid Report.

December 30, 2015

QUID REPORT LIVE

Due to the holiday shortened week and it being the very last week of 2015, no Quid Report was published this week. Instead, I am doing a video update to last week’s written report. While I have been on many forex shows, this is my first time hosting a live broadcast. This should be a quick update and review for the week in progress. Enjoy! And please leave your feedback in the comments. Perhaps this will be a new thing for me in 2016.

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.

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