GROWTHACES.COM Forex Trading Strategies
Taken Positions
USD/CHF: long at 0.9640, if filled – target 0.9790, stop-loss 0.9570, risk factor ***
USD/CAD: long at 1.2280, if filled - target 1.2480, stop-loss 1.2180, risk factor **
EUR/JPY: short at 127.70, if filled – target 124.70, stop-loss 129.10, risk factor **
GBP/JPY: short at 177.00, if filled – target 173.00, stop-loss 179.00, risk factor **
Pending Orders
EUR/USD: sell at 1.0675, if filled – target 1.0460, stop-loss 1.0770, risk factor ***
CHF/JPY: sell at 123.70, if filled – target 121.80, stop-loss 124.60, risk factor ***
AUD/NZD: buy at 1.0120, if filled – target 1.0300, stop-loss 1.0060, risk factor **
EUR/USD: U.S. Economy Suffers From Strong USD
(sell at 1.0675)
- U.S. industrial production fell 0.6% in March after edging up 0.1% in February. March's decline was the largest since August 2012 and was worse than market expectations for only a 0.3% drop. A 17.7% plunge in oil and gas well drilling pulled mining production down 0.7% in March, marking the third straight month of declines in mining output.
- For the first quarter, industrial production declined at an annual rate of 1.0%, the first quarterly decrease since the second quarter of 2009. While manufacturing output ticked up 0.1% mom in March, the first gain since last November, it fell at a 1.2% rate in the first quarter, the first decline since the second quarter of 2009.
- In a separate report, the New York Fed said its Empire State general business conditions index fell to -1.19 in April from March's 6.90. This was the first negative read for the index since December
- The weakness in manufacturing, which accounts for about 12% of the economy, is the result of strengthening USD, bad weather and supply chain disruptions from the ports dispute. We have said since long that the Fed could delay raising interest rates until later this year due to weakening economic recovery caused by the strong USD and this scenario is taking place now.
- The latest Fed Beige Book reinforced what we already knew from the data - headwinds from the stronger dollar and cheap oil are dragging on the economy and making the near-term outlook uncertain. The Fed noted that the economy continued to expand throughout most regions. However, the assessment of labor market conditions softened a bit, now described as stable or showing modest improvement (“modest” was added over the prior report).
- Richmond Federal Reserve President Jeffrey Lacker (hawk, voting this year) said on Wednesday that the current 5.5% unemployment rate was well within range of what would be considered the natural rate, a sign that the Fed should hike rates soon. In his opinion steady signs of a growing economy mean there will be a strong case for the Fed to raise interest rates in June. We should notice, however, that Lacker is probably the most hawkish FOMC member this year, so his comments may be ignored by the market, as he is in a minority in generally dovish FOMC composition this year.
- As we wrote in our yesterday’s Forex Trading Strategies Update there were no surprises at yesterday’s press conference of ECB President Mario Draghi after the ECB meeting. Draghi dismissed recent comments that the improvement in economic conditions means that the QE programme might be terminated early. He said: “Our focus will be on the full implementation of our monetary policy measures.” Draghi said he was surprised at speculation about exiting the programme early since it was only a month old.
- The market triggered stops on the EUR/USD in early Asia above 1.0720 to 1.0748, just below our sell order. The EUR/USD drifted back below 1.0700 in the morning of the European session. We have lowered our sell order to 1.0675, the short-term target is still at 1.0460, just above this-year lows. The EUR/USD is likely to weaken on carry trades in the short term. The medium-term outlook is unclear due to weakening recovery in the USA and possible delay of Fed rates hikes.
Significant technical analysis' levels:
Resistance: 1.0748 (hourly high Apr 16), 1.0788 (high Apr 9), 1.0889 (high Apr 8)
Support: 1.0571 (low Apr 14), 1.0532 (low Apr 14), 1.0521 (low Apr 13)
AUD/USD Jumped On Strong Jobs Report
(stay sideways)
- Today's figures from the Australian Bureau of Statistics showed employment rose 37.7k in March, more than double the market forecast of 15k. The data were also better than our quite optimistic forecast for 20k rise. February's increase was also revised up to show a rousing 41.9k increase. The statistics bureau said the number of full-time jobs rose by 31.5 in March, and part-time employment rose by 6.1k. Higher demand for labor drove the unemployment rate down to 6.1%.
- 184.2k net new jobs were created in the year to March, while the labor force expanded by 226.8k.
- After strong jobs report market estimates the probability of a rate cut at 50% now. We maintain our baseline scenario that the RBA will not change interest rates this year. However, we should closely watch inflation data, which will be released next week.
- The AUD/USD gained a lift from strong Australian jobs data, as we expected in our Monday’s Market Overview. The rate found a resistance at a long-term trendline and reached a day’s high at 0.7782.
- The short-term outlook is uncertain – we will probably see a corrective move after a strong rise. However, the AUD may stay relatively strong in the medium term, as we expect that there will be no rate cut in May. We are looking to get long on the AUD/NZD at 1.0120.
Significant technical analysis' levels:
Resistance: 0.7782 (hourly high Apr 16), 0.7834 (high Mar 27), 0.7884 (high Mar 26)
Support: 0.7674 (hourly low Apr 16), 0.7573 (low Apr 15), 0.7556 (low Apr 14)
Source: Growth Aces Forex Trading Strategies