Comdoll Trading Kit (May 14-18, 2012): Midweek Market Analysis

What economic themes have been dominating market newswires so far this week? Here’s my list!

Midweek Market Analysis

Greece, Greece, and more Greece
Greece is at the center stage of market talks this week as the country heads for a new election in about a month. If you haven’t already noticed, the possibility of not having a Greek government that would approve austerity measures in time for the next bailout tranche has been weighing on high-yielding currencies, and dictating appetite for risk. Of course, it doesn’t help that Greece’s 2023 bond yields are above 30% for the first time in history, while Greek depositors withdrew 700 million EUR from local banks on Monday alone. Yikes!

China cuts RRR by 50 basis points
Even before Greek government talks completely broke down, China has already set the tone for risk last weekend when it cut its reserve requirement ratio by another 50 basis points to only 20%. The move might be in line with the government’s goal of boosting domestic economic activity, but it has also signaled that China’s growth isn’t as strong as market players think it is. This led to selling of export-related currencies like the comdolls early in the week.

Commodities and Comdolls drop sharply
Comdolls
With the commodity-lovin’ China signaling weaker-than-expected growth and concerns on a euro contagion dominating markets, it’s no surprise that commodities and the comdolls are taking on big losses across the board. Oil fell to its lowest level since December early today, while gold also surprisingly fell to its December lows.

Almost all of the Greenback’s counterparts weakened this week, but NZD/USD dropped the sharpest with a 1.64% plunge as of Wednesday UK session. Hmm, must be the disappointing retail sales numbers we saw last weekend. Meanwhile, AUD/USD is also down by 0.75% since the start of the week, while USD/CAD is up by 0.81%. Good thing I closed my USD/CAD trade last week!

That’s it for my midweek analysis today! Did I miss any other market theme that had a big influence on price action?

Potential Trade Setups

AUD/USD: Bullish divergence forming?
AUD/USD Divergence
This pair has been ridiculously oversold for the past few weeks and I’m thinking that a reversal could be in the works. Right now, a bullish divergence seems to be brewing on the 1-hour time frame, with stochastic making higher lows and AUD/USD making lower lows. Join our discussion!

NZD/USD: Potential retracement play
As Big Pippin pointed out, NZD/USD looks ready to pullback to the falling trend line, former support, and 50% Fibonacci retracement level. See the setup.

USD/CAD: On breakout watch
Alas! Parity just won’t let up! Could this mean that USD/CAD is revving for an upside breakout beyond the 1.0050 resistance? How high can it possibly go? See the setup.

Comdoll Event Highlights for May 14-18, 2012

Calendar

Interest rate speculations will most likely dominate this week’s comdoll trades as the RBA releases its meeting minutes; Canada prints its CPI report, and the FOMC conducts its meeting. Will we see changes in the central banks’ plans? Right now analysts are predicting more rate cuts from the RBA, a rate hike from the BOC, and no policy change from the Fed. Should be an interesting week, don’t you think?

But enough about the central banks. Let’s take a look at the significant inflection points on our comdoll charts:

Significant Levels to Watch Out For


AUD/USD USD/CAD NZD/USD
Week Open (WO)
1.0044
0.9993
0.7846
Previous Week High (PWH)
1.0221
1.0063
0.7974
Previous Week Low (PWL)
1.0018
0.9923
0.7811
Top Weekly ATR (tWATR)
1.0157
1.0069
0.7940
Bottom Weekly ATR (bWATR)
0.9931
0.9915
0.7753
Other significant levels
1.0130, 1.0000
1.0050, 0.9850
0.8100, 0.7870

In case you’re wondering what ATRs are all about and how I computed those figures, make sure you check out my entry explaining my trading strategies.

If you’ve got any trade setups you’d like to share, you know where to reach me!

@Happy_pip Twitter
Playing with Comdolls Facebook page
Happy Pip Comdoll Corners
MeetPips.com

Good luck in your trades this week, buddies!

Happy time

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  • JJ6845616

    So we should hope for a better than expected CPI to make our expectation strong for the rate hike?

    • happypip

      Are you referring to Canada’s CPI release? That is a possibility, considering how Canada is one of the relatively stronger economies around. A strong CPI would mean that inflationary pressures are strong, which could give the BOC additional reason to tighten monetary policy, aside from the fact that the Canadian economy seems to be on stable footing already. Let’s see how it goes!