Comdoll Trading Kit (October 22-26, 2012): Midweek Market Analysis

Hey guys!

Now that the charts are starting to show some action, it’s important that we know what market themes have been dominating the forex scene this week. Here’s my list!

Midweek Market Analysis

Weak U.S. corporate earnings
As excited as we are about the new and improved (a.k.a. resized) Apple products, investors are still finding it hard to shake off the underwhelming corporate earnings that have been parading in the Wall Street lately. Stocks are falling and for some traders, this means that they would have to exit their long currency positions in order to remain liquid. Eeep!

To bailout or not to bailout?
After the relatively euro-bullish Spanish elections last weekend, Spain is back under the bailout spotlight as Moody’s downgraded five Spanish regions including Catalonia. As a result, European bond yields are on their way back up together with investors’ expectations that Spain will ask for a package soon. Is it me or is the Spanish bailout saga getting a bit old?

Tricks and treats from the BOC and China
ComdollsThe Loonie avoided the comdoll crash against the dollar when the BOC was surprisingly more hawkish in its latest interest rate decision. Contrary to Carney’s earlier hints, the BOC now thinks that easing stimulus “will likely be required.” Meanwhile, China’s HSBC manufacturing PMI also boosted the Asian markets when it rose to 49.1 from 47.9 last month.

Right now the Loonie is enjoying a nice 0.53% gain against the dollar while AUD/USD is not too far behind with a 0.23% intraweek gain. The Kiwi has a bit of catching up to do though, as it’s down by 0.12% against the Greenback so far this week. Will risk appetite lift the comdolls higher against the dollar for the rest of the week? If so, what do you think could influence a risk rally?

Potential Trade Setups

AUD/USD: Bullish Divergence on a Fib
AUD/USD Divergence on a FibThere’s this nice bullish divergence materializing on AUD/USD’s 4-hour time frame, hinting at an upcoming Aussie rally. Even better, it lines up with the 50% Fib and rising trend line! If you scroll back a little further, you’d notice that this potential support zone is also the neckline of the inverse head and shoulders pattern. See the setup

USD/CAD: Potential Pullback
USD/CAD Potential PullbackFancy a long-term retracement play? Then this USD/CAD trade setup might be for you! The pair just broke above the .9850 minor psychological resistance but seems to be pulling back from its recent rally. It could retrace until the 50% Fib, which is in line with the rising trend line on that time frame. See the setup

NZD/USD: Falling Channel Holding
NZD/USD Falling ChannelLooks like the Kiwi’s downtrend is still very much intact! On NZD/USD’s 4-hour chart, the falling channel is still holding as the pair appears poised to test the bottom once more. However, stochastic is currently making its way out of the oversold territory, suggesting that a Kiwi rally might be in the cards. See the setup

Comdoll Event Highlights for October 22-26, 2012

Calendar

Looks like the comdoll calendar is pretty light this week although China is set to release its manufacturing and leading index numbers. New Zealand is chipping in its trade balance figures, but the spotlight will likely be on the BOC, which is scheduled to give its interest rate decision, economic growth outlook and a press conference. Can’t wait!

But before you start coming up with trade setups for these events, better mark these potential inflection points on your comdoll charts!

Significant Levels to Watch Out For


AUD/USD USD/CAD NZD/USD
Week Open (WO)
1.0316
0.9946
0.8155
Previous Week High (PWH)
1.0412
0.9940
0.8231
Previous Week Low (PWL)
1.0202
0.9764
0.8109
Top Weekly ATR (tWATR)
1.0412
1.0010
0.8232
Bottom Weekly ATR (bWATR)
1.0220
0.9883
0.8077
Other significant levels
1.0400, 1.0280
1.0000, 0.9850
0.8200, 0.8150

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.

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Have fun and good luck trading this week, friends!

Happy time

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