Happy Monday-after-Thanksgiving weekend! Not only it was a slow one here in the US (in terms of trading of course… because in term of eating and having fun it definitely was NOT slow!) but a lot of European market participants also followed suit. The data that was out barely moved markets, and upon market open Sunday night New York time, Japan’s downgrade by Moody’s set the tone of the session, as a strong rejection of USD/JPY from fresh 7-year highs above 119.00, weakened the Ms. USA across the board.
European Inflation
EUR/USD is forming a nice-o bullish sentiment likely thanks to European inflation, which is now just 0.3%, which is a five year low and obviously only a bit away from deflation territory. The news comes ahead of this week’s monthly ECB meeting, but despite the data people aren’t expecting the ECB to act. Instead, most think that Mario Draghi will change the wording of his statement again to reassure people, again, that the ECB is ready to act with broader measures of support. We understand that it’s nice to have a new year’s resolution up your sleeve, but there are certainly those that would argue it would have been better not to wait. In the wake of the announcement, Mr. Euro jumped up as investors teed up further short positions in the currency, awaiting the inevitable QE that is due soon.
Elsewhere in Europe, Greece look to be coming round to the idea of accepting further support as their bailout officially comes to an end this month. Athens had been resisting further support, preferring to try and go it alone in a ‘clean’ exit from its years of bailouts. However the ECB has said that they won’t accept Greek bonds as collateral unless the country has a credit line in place with the IMF as a route to emergency funding if needs be.
From France, Nicolas Sarkozy has been elected as the new leader of the Conservative Party. The victory was by a narrow margin and meant Mr Sarkozy’s first call was for stronger unity within his party. He wants to “offer the French something different from the humiliation today of Francois Hollande, and the humiliation tomorrow of Madame Le Pen”. France are also still arguing with the EU, who say that they haven’t done enough to balance the books this year and that next year’s budget isn’t looking good either. Brussels have postponed until March a ruling that could see France hit with huge fines for failing to adhere to the budget rules that were drawn up in the aftermath of the financial crisis.
Oily Shenanigan
Overnight oil has continued to fall, now down to a five year low as Asia digested the news that Opec wouldn’t be reining in supply. Oil wasn’t alone in price falls though as gold fell hard in Asia as news that the Swiss have voted not to go ahead with proposed gold purchases. The result was widely expected but with it off the table there seems like very little incentive to buy the metal as an investment or a hedge against inflation.
What’s up in the coming days
Today started off to a busy during London session with manufacturing PMI readings from Europe, the UK.Coming up is the PMI data from the US, as well as some mortgage approval numbers from the Bank of England. Overnight the Aussie Dollar will be in focus as the Reserve Bank of Australia announce any changes to their interest rate (they are unlikely to cut rates, but the text of the speech might be more dovish as Glenn Stevens starts to feel the pressure of falling commodity prices hitting exports)
The PMI numbers continue through Tuesday and Wednesday with construction and services data released respectively. Thursday could be seen as the big day, with the ECB announcement a real risk to the strength of the single currency. Round the week off with non-farm payrolls from the US and we’ve got some real potential for volatility before December trading volumes start to tail off as we move closer to the Christmas and New Year break.
I have an announcement to make in tomorrow’s video so make sure you click and open!
Intraday Forex Technical Levels
EUR/USD 4-hour: Teasing the resistance level.
Invest Diva positioning: Long positions above 1.2481 with targets at 1.2559 and 1.2621 in extension.
Technical reasons why: The pair is teasing the 23% Fibonacci level and the upper boundary of the Ichimoku’s cloud at 1.2481. The RSI is around the neutrality area.
Alternative Scenario: Below 1.2481 look for further downside towards 1.2356 and 1.2299.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.2256 | 1.2481 | 1.2621 |
| 1.2299 | 1.2559 |
GBP/USD 4-hour: Teasing the 23% Fibonacci level.
Invest Diva positioning: Long positions above 1.5731 with targets at 1.5817 and 1.5887 in extension.
Technical reasons why: The pair is testing the 23% Fibonacci level as breaking above the Ichimoku’s cloud. The RSI is heading up from the oversold zone.
Alternative Scenario: Below 1.5731 look for further downside towards 1.5591 and 1.5481.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.5591 | 1.5731 | 1.5887 |
| 1.5481 | 1.5817 |
AUD/USD 4-hour: Teasing the 23% Fibonacci level.
Invest Diva positioning: Long positions above 0.8528 with targets at 0.8598 and 0.8654 in extension.
Technical reasons why: The pair is heading to the 23% Fibonacci level after rebounding from the previous bottom forming a strong bullish sentiment. A break below the support level at 0.8415 will change our outlook back to bearish. The RSI is moving up to the neutrality area.
Alternative Scenario: Below 0.8528 look for further downside towards 0.8415 and 0.8318.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.8415 | 0.8528 | 0.8654 |
| 0.8318 | 0.8598 |
USD/CAD 4-hour: Pulling back
Invest Diva positioning: Short positions below 1.1372 with targets at 1.1317 and 1.1272 in extension.
Technical reasons why: The pair is rebounding after failing to break above the previous top at 1.1463 above the Ichimoku’s cloud. The RSI is heading down to the neutrality area.
Alternative Scenario: Above 1.1372 look for further upside towards 1.1463 and 1.1570.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.1272 | 1.1372 | 1.1570 |
| 1.1317 | 1.1463 |
USD/JPY 4-hour: Consolidating.
Invest Diva positioning: Long positions above 118.86 with targets at 119.78 and 120.88 in extension.
Technical reasons why: The pair is teasing the Ichimoku’s cloud after failing to break above our bullish target and the resistance level at 188.86. The RSI is above the neutrality area.
Alternative Scenario: Below 117.50 look for further downside towards 116.56 and 115.60.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 116.56 | 118.86 | 120.88 |
| 115.60 | 117.50 | 119.78 |
NZD/USD 4-hour: Consolidating.
Invest Diva positioning: Short positions below 0.7924 with targets at 0.7875 and 0.7835 in extension.
Technical reasons why: The pair again failed to break above the resistance level around the 76% Fibonacci level above the Ichimoku’s clud. The RSI is moving back to the neutrality area.
Alternative Scenario: Above 0.7924 look for further upside towards 0.8003 and 0.8076.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.7875 | 0.7924 | 0.8076 |
| 0.7835 | 0.8003 |
