AUDNZD - Trading recommendation

Using a daily time frame and taking into consideration the structure present in the market since the low at 1.1655, a reasonable point of entry for longs would be around the 1.2350 region (close to the 38.2% retrace of the 1.1655-1.2800 uptrend). Stops should be placed under 1.2200. Click on the chart for a larger image and further reasoning. Good luck.

AUDNZD - Big picture update with a new monthly candle

For those of you who do not have access to OHLC data I thought it might be useful to provide an update of the chart that first featured in; http://you-buy-the-high-i-sell-the-low.blogspot.com/2008/11/audnzd-history-and-outlook.html . As you can see we are approaching the monthly wedge resistance which comes in at about 1.2915. A break of 2008's high at 1.2970 would thus also lead to a break out of the wedge.

It seems that my expectation of a swift move higher has been proved wrong, but an attempt on the wedge resistance is still expected and indeed favoured by the technical structure. I will post a more short term chart and trade idea shortly.

EURGBP - Potential lower high in place at .9520

Those of you who have been watching EURGBP will have noted it's failure to push substantially higher than the 61.8% retrace of the .9805 - .8833 fall and it's failure to close above that particular retrace level reaching .9520 on 26 January. The weakness since then has now fallen below the 61.8% retrace of the .8833 - .9520 rise! (Hope I haven't lost you). This increases the probability of a push through trendline support off .7806/.8844. A push under this trendline, which is this writer's favoured outcome, would target .8833/.8844 initially, then .8548/.8233 and in my best case scenario outcome, .7947 is possible (see the above chart for details). I give my fundamental reasoning for this trade in

- http://you-buy-the-high-i-sell-the-low.blogspot.com/2009/01/eurgbp-weakness-likely-to-continue.html

and:

- http://you-buy-the-high-i-sell-the-low.blogspot.com/2008/12/from-sweats-to-shivers-eurgbp-one-to.html

so apologies for the highly technical approach now. Click on the image for a larger and clearer picture. I have a GBPJPY idea brewing so perhaps more on that tomorrow. Good luck.

AUDNZD - Building for a break higher and possibly out of the monthly wedge

Long suffering readers of this blog may be fed up with AUDNZD, but I can tell you that now is time to get very interested indeed. We recently met 1.2620 a major extension of the recovery seen since 1.1655. 1.2620 has since been left behind with a minimal retrace. With the RBNZ cutting by 150 basis points yesterday, I belive that the structure I pointed out in http://you-buy-the-high-i-sell-the-low.blogspot.com/2009/01/nzdusd-event-risk-may-extend-negative.html is even more likely to pan out. If AUDUSD maintains a degree of strength which it has so far (I have been watching it all day), then there is every chance that we get a significant extension higher perhaps towards 1.3180/1.4170 as detailed in one of my first posts (http://you-buy-the-high-i-sell-the-low.blogspot.com/2008/11/audnzd-history-and-outlook.html). This would mark the break out of the monthly wedge which is also detailed in the history and outlook post. If that does take place we could potentially have much more of the same to come. We are at a crucial juncture for AUDNZD. It either maintains its twenty year wedge range, or as the AUD now yields more than the NZD it finally makes a break for it and does the decent thing. Here's hopeing for a violent extension and break out higher. There is likely to be a battle by the wedge resistance but it will be stop city just above it. Lets hope those stops are triggered.

Alternatively we see a more substantial retrace, but that is not my favoured outcome due to the failure to stop for breath at 1.2620, but either way it's got to have a go at the wedge this time, surely!

By the way for those not aware, by clicking on the chart above you can view a larger image and stand a chance of reading the text!

A Good Read - The Holy Grail of Macroeconomics ; Lessons from Japan's Great Recession

A book I have been reading recently is a good example of how conventional wisdom can be challenged. The auther Richard Koo puts forward a very compelling arguement based on his observations of corporate Japan, about how corporate psychology changes in the aftermath of a bubble bursting. In essence one of the major assumptions of macroeconomics, that of profit maximization by the private sector is challenged. Evidence seems to suggest that they turn to debt minimization as opposed to profit maximization. Definitely gives the reader plenty to consider, and if anything is a potentially great example of behavioural finance. Here is the amazon link for those that might be interested: http://www.amazon.co.uk/Holy-Grail-Macroeconomics-Lessons-Recession/dp/0470823879/ref=sr_1_1?ie=UTF8&s=books&qid=1233259091&sr=8-1

If you do read it let me know what you think in the comments section.

An AUDNZD update should be with you shortly!

A new deal or a continuation of the bear?

I was looking at the Dow Jones chart after watching a documentary on the 1929 stock market crash and thought about what Franklin Roosevelt must have been faced with back in 1933. He followed the Republican Herbert Hoover, and adopted an economy in total disarray. Sound familiar? Well, look at what happened to the Dow Jones after the FDR inauguration:

So what will happen in 2009?

USD Index chart - Will the reversal pattern be triggered?

So here you go, the USD Index chart (Monthly candles):


The question is; will the reversal pattern be triggered, and if so, will it meets it's objective?

NZDUSD - Event risk may extend negative structure

This Thursday the RBNZ will announce it's next move in the OCR. The current market consensus is for a cut to 4% from 5%, with the likelihood of more thereafter. The structure of NZDUSD is bearish with an extension lower favoured. In holding this bias there is an assumption that the USD will continue to strengthen. That is the only part of the trade that I have a reservation with, as I see the USD index approaching a monthly inverted head a shoulders neckline. It is a somewhat unorthodox inverted head and shoulders, but a reversal pattern never-the-less. I personally favour a failure of the pattern! For those unable to view dollar index data, I will post a USD index chart so that you can make up your own mind!

Returning to NZDUSD, I would suggest getting short on pullbacks towards .5544 with a stop over .5651/.5760 depending on your risk tolerance. Initial target lies on the bear channel support close to the 100% extension of .6080-.5272 from .5544 at .4736. A push out of the channel would ultimately target .4237 the 161.8% extension of the same initial move down.

FTSE100 - Speculative trade

The recent structure of the FTSE 100 lends itself to an opportunistic trade idea. I would suggest buying inbetween 3734.07 and 3665.21 with a target back up at 4530.73. Your stop needs to be placed at a level that is consistent with your own risk tolerance. For a minimum 2:1 profit to loss ratio a stop under 3232.45 is appropriate for entry around 3665.21. In the case of an entry at 3734.07 stops should be under 3335.74.

Alternatively barring a false break under 3665.21, a push lower could be viewed as very bearish, so a tight stop could be employed. That is an individual trade decision. Personally I would allow for a small false break lower.

AUDNZD - New trade suggestion

Last weeks push over 1.2285 has increased the likelihood of a return to 1.2970, and further bolsters the positive structure. I would suggest trying to buy on a return to the the old trend line resistance running off 1.2285 and 1.2200. Idealy a push back to 1.2100 intraday would enable a good risk reward ratio, as any stop would have to be placed under 1.1740.

AUDNZD - The thin end of the wedge

Firstly sorry for the lack of updates I have been very busy indeed.

As returning readers will know I have been touting AUDNZD longs since this blog began. As time passes I feel that this is shaping up to be quite a decent macro trade. Unfortunately my trade suggestion did not get filled for those that placed orders, however, it was well intended. As I hope you are all aware S&P, for what they are worth, have warned that they may cut New Zealands foreign currency rating. On top of that business confidence has hit a fresh 34 year low.

Although the business confidence figures are not unique to New Zealand, the S&P attention highlights just how shallow the New Zealand economy is when compared with Australia. This will simply increase the rate at which capital will leave the country and accentuate the funding problems that the country may be beginning to face.

I will try and provide a technical update at the end of the week, but lets just say that we are on track to re-test the old 2008 high from last July and with that the potential of the wedge break just increases. Once out of the wedge the trade becomes a monster. It is by no means too late to contemplate getting in on pullbacks. Again, I will try and provide some direction on that front, but it will have to be later, probably over the weekend.....

AUDNZD - An opportunistic trading suggestion

What would this website be if it wasn't for AUDNZD! The desired push over 1.2280 did not materialise at first attempt. This could never the less be an opportunity for those wishing to get long to place orders below the recent low at 1.1655, as detailed in the chart above. A complex retracement may be forming with a false break under 1.1655 the favoured outcome. You guessed it, I'm still bullish.....

Whilst writing I would like to point out, however obvious it may seem, that any references to trade ideas are my suggestions, and that anyone wishing to speculate should consider carefully their own parameters and risk tolerance when formulating trades. All trades are executed at the traders own risk.

Indias Nifty 50 - Even more favourable levels

Well what can I say! Considering that most equity markets have had a down week, I think the fall seen in the Indian markets is quite reasonable considering the Satyam news. I continue to be bullish emerging markets, although not all of them, and think that just because 1 in 50 companies has been practicing fraudulent accounting procedures does not imply that they all are. If we assume that this is an isolated case, then this is just a better opportunity to buy into the 50 stock NSEI index. Furthermore, it is my understanding that Satyam will be removed from the index on Monday so it should not really have a long term effect. My prior projections still hold, and lower prices just make the stocks more attractive for a medium term trading opportunity.

EURGBP - Weakness likely to continue.

As per my earlier post (From sweats to shivers; EURGBP, one to watch), there finally now appears to be a more widely held realisation that Germany is going to be effected a lot harder then previously expected. The statistics continue to worsen and now economic confidence in the 16 country eurozone has fallen to levels not seen in the previous 24 years.

Being the worlds largest exporter (Using 2007 figures) and having a strong currency has finally been recognised as a bad mixture! It would seem an export driven market will be fast to recover when there is finally some kind of global recovery, but in the meantime any such region is likely to feel the pinch even harder. It is thus my contention that there are probably many opportunities in markets based on the sudden reversal of perceived fate of the Eurozone. EURGBP may be one good way of playing this theme. The dog of the currency markets, sterling, has armageddon priced in, whereas the EUR is only just turning. Perhaps, as hinted in my prior EURGBP post, the best trade would be to sell a basket of currencies versus the EUR (EURSEK, EURNOK, EURCAD, EURGBP to name a few). In any case you have to choose your own adventure, but I think EURGBP is a good short on pullbacks and see a return to .8233 as likely (see chart above). Another good trade would be to sell EURAUD, which I intend to look at in a fresh post.

It was also interesting to note that a german bond auction failed to be fully covered recently when the equivalent auction in the US was, I believe, covered 2.5 times. Is the bond market also coming to the same realisation now?

USD Index - Slight downwards bias, but pick your pair wisely

Above is an almost up to date weekly chart of the USD index. It is missing the last few hours of trade from yesterday but is more then adequate for my puposes. I continue to be mildly bearish on the USD given the movement of equities and the structure of currency pairs like AUDUSD which I believe has some more upside (I will provide a post about this if time permits). I do however continue to believe that the ECB does not know what is about to hit them. The belief that Germany can avoid deflation or is better prepared to weather the impending storm is ludicrous. It reminds me of the decoupling nonsense that was touted last year. Being the worlds largest exporter and with demand being destroyed virtually everywhere, combined with a strong currency, is a recipe for disaster. Thus playing weakness in the USD index may not be a case of going long EURUSD. If a sell off in EURNOK, EURSEK, EURGBP, EURCAD materialises, on the back of a realisation that a weaker currency may be favoured, for a period, by an export orientated region, the last thing you want to be is long EURUSD. So it's not totally clearcut, hence my slight downwards bias.

Fresh year, same old trade thank goodness!

I thought I would take advantage of the time to take a fresh look at AUDNZD. It appears that the pullback that was expected in my earlier post materialised and has provided a potential higher low from where a substantial extension higher is possible. I hope that some of you have managed to get long on the back of the recent pullback. Yesterdays 'quiet' trade in the currency markets has given us a decent push above 1.2025. I believe a re-test of the high seen on 08 Dec (1.2280) is now highly likely, and with it a return to the old highs from the end of (last) July. As returning readers will know I am an AUDNZD bull on fundamental and technical grounds. Provided we see a push over 1.2280, I think that the projections shown on the chart above are achievable over time. It is also possible that the envisaged extension could enable a break out of the monthly wedge that was referred to in an earlier post (see below). If that does materialise, this is only the beginning of a much bigger move. One step at a time........