Poslano: Sobota, 7th Marec 2009 Avtor: admin
Another Round of Bulls vs. Bears
Fundamental releases around the world continue to worsen and risk
aversion still grips market sentiments. This week, there was a
jolt of risk appetite mid-week as China hinted at a very
aggressive fiscal stimulus in order to maintain a 8% annual
growth rate, a very optimistic target as China is facing what
Prime Minister Wen Jiabao calls “unprecedented difficulties”.
Before more details came out, the market already rumored an
extension of this stimulus. However, Wen only elaborated on the
original plan, giving focus to infrastructure investment while
also encouraging the public to spend rather than save. The non
-mention of another round of the stimulus pulled back what risk
appetite the market had in mid-week.
The continuingly poor Non-farm Payroll employment report from the
US government was also a culprit to the end of week risk
aversion. January’s figures were heavily revised higher, and
this month’s figure was worse than forecasted, pushing the
unemployment rate to 8.1%.
Central Bank Decisions
RBA: Instead of cutting rates as economists expected, Australia’s
central bank held rates at 3.25% on Monday, noting that its
economic contraction has not been as severe as in many other
countries. However on Wednesday, the 2008 Q4 GDP release started
to threaten this notion, with a Q4 GDP of -0.5%, and a 2008 GDP
of an anemic 0.3%. Although Autralia is not technically in a
recession, this is the first quarterly contraction in 8 years.
BoC: The Canadian central bank noted its deepening recession
worsened by sharp declines in global demand for the country’s
exports. Monday’s GDP report for 2008 Q4 reported a worse than
expected contraction of 1.0% in the quarter, and 0.8%
contraction for the 2008 year. The BoC followed by slashing its
key interest rate by 50 bps to 0.50%.
ECB: As expected, the European Central Bank slashed the key rate
by 50 bps to its record low at 1.50%.
BoE: The central bank slashed another 50bps as expected, also to
its record low at 0.50%. The bank will no longer have interest
rate policy as an effective tool for stimulating the economy. It
will have to utilize other monetary policy instruments and apply
quantitative easing (basically pumping money into the economy).
All but the RBA cut rates this week, and by 50 basis points.
These expected rate cuts were not of much impact.
USD/CHF Begins Descent; One More Big Test
We have been following this pair’s completion of a 78.6%
retracement. Subsequently we have seen many sell signals
triggered. Listed on the above chart are the different entry
signals that appeared for different type of traders, from the
aggressive to the more conservative. Also, the possibility of a
downtrend was improved by establishment of 3-pt pivot (labeled
in blue, this confirms 1.19000 as a true high thus anchoring a
new bearish trend). Let’s look back and study the signals this
pair provided:
1st: Anticipation of retracement to the 78.6% is a fair entry for
the most aggressive traders.
2nd: A sharp decline broke below a wedge (or ascending triangle)
pattern, signaling that many have picked up on this retracement
and gotten in short positions. However, others found this new
price to be a discount and thus a kickbac ensued.
3rd: The decline met demand at this level (1.1450 - 1.1500),
which pushed the prices back up. This could be considered a
kickback if the high from this rally does not exceed previous
one. Indeed, the rally came back a little pass 78.6% before
another sharp decline. The kickback entry also had an aggressive
trigger at 78.6%, and a more conservative one at the break of
short-term upward support.
4th: This week ended with the pair resting upon intermediate
upward support. This is sort of a “final test” before we can
confirm the end to the bullish momentum, giving way to possible
bearish momentum. This upcoming week will give a clue to weather
the pair passes.
There is also a 5th possible entry. If a breakdown is strong,
this may be met with high demand and thus push the price back
towards the broken support, for yet another kickback. This
doesn’t always happen, and those waiting for this entry may
simply miss the trade. However, note the axiom: It is better to
miss a good trade then prematurely enter a bad one.
GBP/JPY Testing Resistance to Confirm Uptrend
The seesawing of risk appetite and aversion held the GBP/JPY in
range this week. With much of same indication of global
recession from fundamental releases, the market did not find any
reason to break the resistance level at the 141.00-142.00 zone.
The good news for those following the current intermediate
uptrend is that strong demand is coming in at higher prices
(thus the upward support, and forming a right angle, ascending
triangle)). As these supply and demand levels converge, it will
be important to watch upcoming week’s price actions to see if
demand can sustain if the pair is above the current resistance
level. (Basically watch out for a breakout next week, with a
first possible target at 148-150 level, and a more aggressive
one at around 167.00(50.00% retracement). Otherwise a breakdown
below 136.00 may signal a rundown to 129.00 in the short term.)
GBP/USD Gartley Foreshadows Dollar Weakness
Technical Setup:
The GBP/USD pair have been channeling downwards after sharper
declines of 2008. A possible Elliott Wave count puts the recent
choppy rundown to be a terminal wave. With that premise, it is a
matter of time that the pair has a major rally. This week’s
completion of a classically qualified Gartley pattern gives us a
hint that this time may be nearing, hinting USD weakness. One
note however is that the pattern was completed in a relatively
short period of time (1 month) compared to the downtrend (about
13 months). Therefore, the Gartley pattern doesn’t foreshadow
this “significant rally” I just mentioned, but rather, an
intermediate rally. The appropriate targets may be 1.5000, and
more aggressively at 1.5400 with possible drawdown to 1.3500.
EUR/CHF: Breakout of Triangle, Caution Imminent Kickback
Technical Setup:
The breakout below the triangle formation on February 16th
triggered a sell signal. So far there has been a very dull and
choppy decline. Looking at the underlying market conditions, one
should caution a possible short to intermediate term rally,
since price is at 78.6% retracement, and a downward support. The
RSI is also eyeing a bullish divergence. Of course all these
“warnings” basically caution that price action is showing
oversold and retracement support levels, applicable only if the
pair is to stay in consolidation. Thus for if the EUR/CHF pair
stays in consolidation mode, these are signals to buy.
Anticipate some to act on this, and consequently a possible
short term rally, with a fair target at 1.4900 and slightly more
aggressively at 1.5100. A possible trigger is a failure of the
powerline at 1.4650 to hold as resistance as the market is
retesting that level to end this week.
