EURUSD- bids arrive 1.3600/95 with stops below 1.3585, topside weak stops above 1.3625, offers 1.3640/45, stops above 1.3665
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We must be extremely selective during the summer doldrums so the only interesting pairs for the coming week, combining strength vs. weakness, are:
Sentiment Analysis on relevant assets
Summer doldrums are here so we need to be more and more selective if we want to remain operational (and mentally sane) in the current environment. Going into the week, unless another plane falls over Russia or Ukraine, or some major development breaks loose, he focus will return to earnings and three key debates in the US economy. Then there was this: in her semi-annual report to Congress, Fed Chairman Janet Yellen said that “The FOMC recognizes that low interest rates may provide incentives for some investors to ‘reach for yield,’ and those actions could increase vulnerabilities in the financial system to adverse events.”. “Bubblewatch” is what we can call this stage...and how much longer can Yellen cheer for new all-time highs in the Dow and S&P before the bubble pops? Fed policy is the primary culprit for rising equity prices, but we're getting another quarterly reminder of how earnings remain the dominant driver of valuations. So far, 80 S&P500 firms have posted average earnings growth of 10% and sales growth of 4% with healthy beats on both. 144 firms listed on the S&P500 report next week. Key names include Apple, Microsoft, Texas Instruments, Whirlpool and Ford. Super Thursday brings out 49 firms on that day alone.
USD: sentiment is bullish. In the US, earnings and a few macro debates will take center stage this week. First of all, investors will watch the CPI data, curious to see whether inflation is still north of 2%. Headline inflation is expected by consensus to come in at about 2.1% y/y. The Fed’s preferred measure is the price deflator on total consumer spending because it changes the spending weights on products and sales channels dynamically as opposed to the periodic rebasing of CPI, and that measure has been a little lighter but also on the rise. Then the focus will be on to the (potential) recovery in housing and after that, on business investment.
Euro: sentiment is negative. Eurozone developments will focus on the blame game in Ukraine, and sentiment data. That includes influential surveys such as PMIs for the manufacturing and services sectors plus German IFO business confidence. Not much of a shift is expected in the mildly expansionary Eurozone manufacturing PMI, while Germany’s IFO reading might decline with an escalation of western sanctions against Russia and the tragic downing of a passenger jet feeding concerns that Germany’s important economic relationship with Russia is poised to deteriorate further. It's becoming more evident that the EU must back the US in sanctioning Russia over the lack of influence/control on their separatist group in Ukraine.
NZD: sentiment is neutral. The Reserve Bank of New Zealand is expected to hike its cash rate by 25bps to 3.5% on Wednesday. This is overall positive for “the bird”. The recent drop is due to the recent Dairy auction and some downbeat data – but there have also been cross-currents from AUDNZD buying. When sentiment is neutral we tend to follow momentum and also keep an eye on headline data for further clues.
For updates on sentiment as it progresses throughout the week, stay active in our Live Trading Floor.
To sum up: best looking charts & comments
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NZDUSD – fresh bearish momentum noted
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EURUSD – shorts have no intention of taking their foot off the pedal for now.
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USDCHF – still bullish momentum in the pipe
It’s a tough challenge to combine sentiment, price action, technical analysis, and fundamental analysis all together to turn these thoughts in to actionable order flow trade ideas.