Market Snapshot:
Soft Chinese data rekindled fears of a global economic slowdown. Saturday's trade balance came in significantly below expectations to post the worst deficit this century whilst yesterday's CPI also came in below par at 2% vs 2.1% expected. Additionally new loans also fell short to suggest a fall in consumer and business confidence.
Money flow highlights these uncertainties as we saw bond yields and Equity markets decline, with Copper trading back at 8-month lows.
NYLON ROUNDUP (New York - London):
- EUR: Investor confidence is down; Italian industrial production m/m highest in 17 months at 1% vs 0.4% expected; French Industrial production fell short at -0.2% vs 0.6% expected;
- CHF: Retail sales lowest since May '13 at 0.3% vs 2.7% expected;
- CAD: Housing starts increase to highest level in 3 months at 192k vs 190k expected;
ASIA ROUNDUP:
- AUD: NAB business confidence is came in lower at 7 vs 9 last month.
- CNY: USDCNH approached 8-month highs during intraday trading but
- JPY: M2 Money Supply fell short at 4% vs 4.4% expected. Monetary policy remains unchanged at 270trl.
- NZD: The New Zealand dollar is enjoying the most action as it gains strength across all Major crosses seeing NZDCAD back at record highs.
- INDICES: Sideways trading
COMING UP:
- EUR: German trade balance;
- GBP: Inflation report; Manufacturing production m/m; Industrial production m/m; GDP estimate
- USD: Wholesale inventories; Job openings
CHARTS OF THE DAY:
CHF/JPY: Above 116.70 Targets 118.70
CHF/JPY Daily Chart" title="CHF/JPY Daily Chart" width="699" height="667">
This pair was last covered on the 6th Feb where the bias as to hold above the secondary trendline and resume the dominant uptrend. While it did take longer than expected the trend now seems underway and on track to trade back up to the 118.70 highs and beyond.
As the markets are sideways trading as we await news for the week there is the chance of a retracement, but we do have support close by around 117.17 and 116.71 which may produce bullish setups to be considered.
For those trading the daily timeframe may want to see if we see a pullback to support to get long at a better price. However, intraday traders may want to consider continuation patterns (such as pennant or triangle) in the event we do see a resumption of yen weakness sooner than later.
EUR/JPY: Bullish Triangle Targets 144.40
EUR/JPY 30 Min Chart" title="EUR/JPY 30 Min Chart" width="700" height="667">
A very similar setup up to the CHF/JPY, but here we will focus on intraday. A potential continuation pattern is forming - one approach is to wait for a break above the previous swing high and assume a continuation to target 143.7 and 144.40.
If however we trade towards 142.90 then then triangle would be invalidated and opens the potential for a bullish flag to form.
To take a more bearish view we would need to see direct losses to invalidate the continuation pattern bias. Below 142.30 targets 141.25.
This is what makes patterns so difficult to trade as they morph over time.
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