USD / JPY: Shutdown; Apple and Banca Carige

Trading 03 jan 2019 Commentaire »

Yesterday's forecast for the yen came to life quite quickly - even too quickly, given the ambiguous fundamental background. I believe the dynamics of the USD/JPY pair surprised many currency strategists because in just a few hours the price impulsively collapsed to the lows of 2018, reaching the 104th figure. After that, a corrective pullback followed but the general mood for the pair still remained bearish.

What is the reason for such a powerful price impulse? According to most experts, the blame for everything is a sharp surge of anti-risk sentiment, which was caused by several factors at once. First, meeting between the American president and the leaders of both parties of the House of Representatives and the US Senate ended in failure yesterday. Trump rejected the Democrats 'plan, suggesting a fourfold decrease in the cost of the wall with Mexico instead of $ 5 billion, Democrats agreed to allocate 1.3. This means that the "Shutdown" regime continues and the political opposition is entering a protracted phase.

The second reason for risk aversion is China. This week there were published disappointing data indicating a slowdown in Chinese industry. Thus, the PMI index for the manufacturing sector dropped to 49.8 points which was the worst result last year, as well as the PMI Caixin/Markit manufacturing index, which for the first time since spring 2017 was in the contraction zone and fell below 50. The market started talking once again about slowing the global economy with all the ensuing consequences.

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In addition, the strengthening of the yen contributed to other equally important circumstances. Yesterday in particular , Apple CEO Tim Cook sharply lowered the revenue forecast for the first quarter by 8 percent at once from 91 to 84 billion dollars. It is noteworthy that Apple revised upwardly to a fairly fresh forecast and the target of 91 billion was set only two months ago. According to Tim Cook, the negative dynamics is associated with the US-China trade conflict, as well as with a decrease in the cost of smartphone batteries. In addition, he stressed that the company is under certain pressure from the Fed policy. Tightening monetary policy contributes to the inflow of foreign capital and the strengthening of the dollar.

The stock market reacted to this unexpected news accordingly: the company's quotes fell by more than seven percent. The yield on 10-year-old treasures dropped to 2.633% and the foreign exchange market did not stand aside because we are talking about the world's largest company by capitalization. Apple's problems only increased the demand for "safe haven" currencies, including the yen. Moreover, unpleasant "surprises" were not limited to American events.

Hence, the ECB yesterday took control of the tenth largest bank in Italy, Banca Carige, after most of the board members of the financial institution resigned. The European regulator has appointed three temporary administrators and a supervisory committee, thereby replacing the bank's board of directors. Banca Carige is one of the most troubled Italian banks that was already provided with assistance last fall worth 320 million euros from the Italian Interbank Fund. However, the bank failed to restructure and get rid of "bad" debts because of the inefficient management and the conflict of shareholders.

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Fitch Ratings has lowered the bank's credit rating to CCC+ with a negative outlook, while warning that Carige could go bankrupt. As a result, the Italian National Commission on Companies and Stock Exchanges ceased trading in bank shares, as the board of directors was unable to reach an agreement on raising capital. This was the last straw for the majority of the members of the Board of Carige after which the leadership passed to the temporary administrators appointed by the European Central Bank.

Against this background, the German government bonds collapsed, especially the 7-year and 8-year bonds. Although, almost all were in the "red zone". The sharp collapse supplemented a very unambiguous fundamental picture, after which the yen, in tandem with the dollar, broke through many months of support in the area of the 104th figure. This impulse attracted buyers to itself. Therefore, the pair rebounded to the current mark of 107.70, but in my opinion, the southern dynamics still have not exhausted themselves.

After all, very soon another one will be added to the above fundamental factors of Brexit. Until March 29, that is, before the date of Britain's exit from the EU, there are only a few months left, so the tension in the markets on this issue will only increase. In addition, Nonfarm may further weaken the dollar against a basket of major currencies tomorrow. Therefore, the USD/JPY pair still has the potential to continue the downward trend to the nearest support level of 106.80 (the bottom line of the Bollinger Bands on the monthly chart).

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GBP / USD: plan for the US session on January 3. Pound buyers are trying to return to the market

Trading 03 jan 2019 Commentaire »

To open long positions on GBP / USD, you need:

Weak PMI data for the UK construction sector limited the upward correction in the pound, which could be observed at the opening of the European session. At the moment, only a breakthrough of the resistance level of 1.2582 will be a signal to buy the pound in order to update today's high near 1.2622, where I recommend fixing the profits. In the case of a decrease under the support area of 1.2536, long positions in GBP / USD is best to look at the rebound from the support of 1.2482.

To open short positions on GBP / USD, you need:

An unfortunate consolidation above the resistance of 1.2582 and breakthrough support of 1.2536 will be a direct signal to open short positions in the pound, the goal of which will be the lows around 1.2482 and 1.2439, where I recommend fixing the profits. In the case of weak statistics on the American economy, the output of which is scheduled for the second half of the day, we can consider selling the pound to rebound from the resistance of 1.2622.

Indicator signals:

Moving Averages

Trade is conducted below the 30-day and 50-day moving, which more indicates a persisting bearish trend.

Bollinger bands

In the case of a decrease in the pound by the trend, support will be provided by the lower limit of the Bollinger Bands indicator around 1.2500.

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Description of indicators

MA (moving average) 50 days - yellow

MA (moving average) 30 days - green

MACD: fast EMA 12, slow EMA 26, SMA 9

Bollinger Bands 20

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EUR/USD analysis for January 03, 2019

Trading 03 jan 2019 Commentaire »

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Recently, the EUR/USD pair has been trading downwards. The price tested the level of 1.1284. According to the H1 time – frame, the price is trading below the Ichimoku cloud and below the daily pivot at the 1.1387, which is a sign that sellers are in control. I also found the confirmed breakout of the triple bottom (bearish) pattern, which is another sign of the weakness. My advice is to watch for selling opportunities. The downward targets are set at the price of 1.1283 and at the price of 1.1215.

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Simplified wave analysis of GBP / JPY pair for the week of January 3

Trading 03 jan 2019 Commentaire »

Large-scale graph:

Throughout the past year, the main vector of the short-term trend of the cross was a decline. By November, the first 2 parts of the wave (A-B) were fully formed on the graph.

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Medium-scale graph:

From November 8, the price began to form a bearish plot. It completes a larger model tool.

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Small-scale graph:

In the last wave of December 13, a long flat prepared the conditions for the final spurt down. In the coming days, you can expect to roll back up.

Forecast and recommendations:

The current downtrend shows the first signs of probable completion. In the coming weeks, the vector of price movement may change. However, while the turn signals are not observed and sales remain the main direction of trade transactions.

Resistance zones:

- 137.00 / 137.50

Support areas:

- 131.00 / 130.50

Explanations of the figures:

The simplified wave analysis uses 3 parts (A – B – C). For the analysis, three main TFs are used. On every last part, the incomplete wave is analyzed. Zones show calculated areas with the highest probability of reversal. The arrows indicate the number of wave markings used by the author. While the dotted shows the formed movement.

Note: The wave algorithm doesn't take into account the duration of tool movements over time. To trade a trade transaction, you need to use signals!

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Technical analysis of EUR/USD for January 3, 2019

Trading 03 jan 2019 Commentaire »

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Overview:

The EUR/USD pair continues to move upwards from the level of 1.1342. Today, the first support level is currently seen at 1.1342, and the price is moving in a bullish channel now. Furthermore, the price has been set above the strong support at the level of 1.1342, which coincides with the 61.8% Fibonacci retracement level. This support has been rejected three times confirming the uptrend. According to the previous events, we expect the EUR/USD pair to trade between 1.1342 and 1.1550. So, the support stands at 1.1342, while daily resistance is found at 1.1550. Therefore, the market is likely to show signs of a bullish trend around the spot of 1.1342. In other words, buy orders are recommended to be placed above the spot of 1.1342 with the first target at the level of 1.1550; and then towards 1.1603. However, if the EUR/USD pair fails to break through the resistance level of 1.1550 today, the market will decline further to 1.1257.

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Technical analysis of GBP/USD for January 3, 2019

Trading 03 jan 2019 Commentaire »

analytics5c2ddea49e89b.pngHowever, if the NZD/USD pair fails to break through the resistance level of 1.2612 today, the market will decline further to 1.2440.

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Technical analysis for Gold for January 3, 2019

Trading 03 jan 2019 Commentaire »

Gold price remains in a bullish trend. Price made a shallow pullback yesterday from $1,288 to $1,278 and then continued to make a new higher high. There are some bearish divergence signs in the 4-hour chart but not on the Daily chart. Gold could soon make a deeper pullback but the uptrend has not finished yet.

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Gold line - RSI trend line support

Blue line - short-term trend line support

Green line - major trend line support

Gold price is now trading above the 61.8% Fibonacci retracement. As long as price is above yesterday's lows, we will be expecting $1,300 to be reached. If yesterday's low at $1,278 is broken I would expect Gold price to move towards the blue trend line support and towards $1,270-65 area. There is no sign of weakening the uptrend. So far all pullbacks are considered buying opportunities.

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Technical analysis for EUR/USD for January 3, 2019

Trading 03 jan 2019 Commentaire »

EUR/USD got rejected yesterday at the upper trading range boundary and pushed towards our second support level of 1.1340 after breaking below 1.14. The inability to break above 1.15 combined with the break below 1.14 is a sign of weakness. Although support at 1.13-1.1340 has held, trend remains neutral trapped inside the trading range.

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Yellow rectangles - trading range

Red line - major trend line resistance

Green line - RSI major support trend line

Gold line - RSI short-term trend line support

EUR/USD got rejected at the major trend line resistance. The RSI has reached the short-term support trend line and stopped the decline. If the gold trend line RSI support fails to hold, we should expect EUR/USD to move lower or even provide a new low below 1.12 with the RSI challenging the green trend line support. If price manages to recapture 1.14-1.1430 we could see prices move towards 1.15 and higher. I prefer to be bullish at current levels with stops at 1.1260.

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Wave analysis of EUR / USD for January 3. Euro remains within the trend correction section

Trading 03 jan 2019 Commentaire »

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Wave counting analysis:

On Wednesday, January 2, trading ended for EUR / USD by 105 bpts. However, taking into account the specificity and ambiguity of the entire trend section, which originated as early as December 13, the proposed wave can take an even more complex form and continue its construction with targets located near the 50.0% level on the older Fibonacci grid. At the same time, the internal wave structure of this wave already looks quite complicated now, and the correctional status of the entire trend section leads to frequent correctional waves.

Sales targets:

1.1315 - 23.6% Fibonacci

1.1266 - 0.0% Fibonacci

Shopping goals:

1.1528 - 127.2% Fibonacci

1.1599 - 161.8% Fibonacci

General conclusions and trading recommendations:

The pair continues to build a wave and the entire portion of the trend, taking its beginning on November 13. Thus, now I recommend buying in small volumes (due to the ambiguity of the current wave marking) with targets located near the marks of 1.1528 and 1.1599. Yesterday's fall makes current levels attractive for purchases. At the same time, I once again pay attention to the correctional status of the trend section, which leads to frequent and strong internal correctional waves.

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Indicator analysis. Daily review for January 3, 2019 for the EUR / USD pair

Trading 03 jan 2019 Commentaire »

On Thursday, rather by inertia, the price moved down and reached the historical support level of 1.1307 (blue dashed line). Breaking this level from the first time is unlikely, which means the price will move upwards, into a rollback, with the first target 1.1382 - a rolling level of 38.2% (yellow dotted line).

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Fig. 1 (daily schedule).

Comprehensive analysis:

- indicator analysis - down;

- Fibonacci levels - up;

- volumes - down;

- candlestick analysis - up;

- trend analysis - down;

- Bollinger lines - down;

- weekly schedule - up.

General conclusion:

On Thursday, the price will move up going into a pullback, with the first target of 1.1382 - a rolling level of 38.2% (yellow dashed line). From this level, it is possible to resume downward movement.

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