Comdoll Trading Kit (May 7-11, 2012): Midweek Market Analysis

Not too confident on your trades this week? Maybe a midweek market analysis is what you need! Here are the economic themes that have been influencing price action so far this week:

Market Themes

Euro Zone election woes inspire risk aversion
Big changes happened in the euro zone as citizens of France and Greece voted in favor of socialist leaders. Last weekend Francois Hollande beat Nicholas Sarkozy to become France’s first Socialist leader in 17 years. Unfortunately, investors worried that Hollande might make it difficult for the euro region to continue with its austerity-driven plans. Meanwhile, an election in Greece failed to yield a ruling party with enough votes to form a coalition government.

Markets pricing in a “Grexit?”
The problem with Greece not having a coalition government is that it might jeopardize Greece’s chances of receiving its next tranches of bailout money. Alexis Tsipras, leader of the radical leftist party Syriza, even announced that the bailout agreement became “null and void” after the elections. Yikes!

As leader of the party that placed second in the elections, Tsipras is given a few days to form a government after New Democracy leader Antonis Samaras failed to secure the 151 seats needed to form a coalition. If Tsipras manages to secure the majority, then we might see more weakness from the euro.

Mixed Australian data weighing on comdolls
With barely any major economic report out from major economies early this week, reports from Australia got some attention. Surprisingly strong building approvals and retail sales data boosted AUD/USD from its Monday lows, but a wider-than-expected trade deficit soon erased the Aussie’s intraweek gains. Will the weakness continue for the rest of the week?

Comdoll Review

Of course, we can’t talk about Australia without talking about the comdolls!

Comdolls

Commodity-related dollars or “comdolls” like the Aussie, Loonie, and Kiwi are all in the red against the Greenback this week as risk aversion in the euro region got mixed in with Australia’s weak economic data.

The Loonie has tempered its losses to only 0.75% against the dollar, but AUD/USD isn’t so safe with a 1.18% loss. NZD/USD is suffering the most with a 1.13% decline after New Zealand’s employment numbers disappointed expectations last week.

Will risk aversion continue throughout the week, or do you think that we’ll see a midweek reversal? More importantly, how do you think we should trade the major pairs in either scenario? As always, your opinions are much appreciated!

Best of luck to your trades this week!

Comdoll Event Highlights for May 7 – 11, 2012

Calendar

As you’ve probably noticed, this week started off quite well for the Aussie as the Land Down Under printed a few upbeat figures, namely building approvals, retail sales, and NAB business confidence. We’ll have to keep close tabs on the upcoming trade balance and employment figures release to see if Australia’s lucky streak continues!

Meanwhile, Canada has a couple of housing sector reports due this first half of the week and is also set to print its jobs data later on. Only the RBNZ financial stability report and the REINZ HPI are due from New Zealand this week.

Don’t forget that China is set to release a bunch of top-tier reports towards the end of the week. Thursday has the Chinese trade balance on tap while Friday has the PPI and industrial production figures on schedule.

Now 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)
1.0152
0.9952
0.7937
Previous Week High (PWH)
1.0470
0.9964
0.8235
Previous Week Low (PWL)
1.0180
0.9803
0.7938
Top Weekly ATR (tWATR)
1.0268
1.0028
0.8032
Bottom Weekly ATR (bWATR)
1.0036
0.9876
0.7842
Other significant levels
1.0100, 1.0000
1.0050, 0.9850
0.7900, 0.7850

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
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MeetPips.com

Good luck in your trades this week, buddies!

Happy time

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