Comdoll Trading Kit (October 8-12, 2012): Midweek Market Analysis

With no market-moving reports coming out from the major economies, what exactly is influencing currency price action this week? Here’s my list:

Midweek Market Analysis

IMF downgrades global growth forecasts
The IMF inspired risk aversion early in the week when it downgraded its global growth forecasts. It now expects the global economy to grow at 3.3% instead of 3.5% in 2012 and 3.6% instead of 3.9% in 2013. The IMF also warned that the world’s major economies could slide into a recession if the head honchos in the euro zone and the U.S. don’t do anything to combat their fiscal problems.

EZ officials huddle up for the ECOFIN meetings
With the next tranche of bailout money nearly due for Greece and Spain, it’s no surprise that bailouts are one of the major topics in this week’s ECOFIN meetings. While Angela Merkel is enjoying Spanakopita in her visit to Athens, EU head Olli Rehn and ECB boss Mario Draghi are giving statements left and right about how happy they are with Spain’s plans. Will their optimism rub off on the investors?

Chinese data boost the comdolls
Fresh from their Golden Week celebrations, China has been providing good vibes from the comdolls. ComdollsThe stronger-than-expected HSBC services PMI halted the Aussie and Kiwi’s slide early in the week. The comdoll recovery also speeded up yesterday when the PBoC pumped $42 billion in their economy, their second largest liquidity injection to date.

Right now the Aussie is enjoying a nice 0.54% gain against the Greenback, but the Kiwi isn’t too far behind as it’s only down by 0.11% against the dollar. The Loonie could catch up too, with only a 0.13% loss so far this week.

With major reports like Australia’s employment data and China and the U.S.’s trade balance data left for the week, which direction do you think will the major currencies go? Will we see risk appetite or risk aversion?

Potential Trade Setups

AUD/USD: Potential Retracement Spotted!
AUD/USD Falling Channel RetracementIt looks like that falling channel is still holding for AUD/USD! I zoomed out to the 4-hour chart to get a look at the bigger picture. There’s a potential retracement to the top of the falling channel, right around the 38.2% to 50% Fibonacci levels. That’s also closely in line with the former support near the 1.0300 handle. See the setup

USD/CAD: How Low Can You Go?
USD/CAD Yearly LowsHow low can USD/CAD go? The long-term falling trend line on the daily chart has held once more as the pair bounced off the 38.2% Fibonacci level. However, it seems that dollar bears aren’t done yet! USD/CAD might be on its way to test its previous lows below .9700 since stochastic is still pointing down. See the setup

NZD/USD: Bullish Divergence
NZD/USD Bullish DivergenceDon’t look now but there’s a bullish divergence right at the bottom of NZD/USD’s 4-hour range! The pair bounced a couple of times off the .8200 major psychological area and it seems that this level won’t give way. If it keeps rallying, it has a good 100 pips to go until the top of the range around .8330. See the setup

Comdoll Event Highlights for October 8-12, 2012

Calendar

Not much major data from comdoll countries this week, but Australia will publish its employment numbers and Canada will also print its trade data on Thursday. The U.S. is taking over the stage with its trade balance, Beige book, and UoM consumer sentiment reports

China isn’t one to be left behind though, as it’s also due to release its new loans and trade balance numbers. With the lack of market-moving comdoll reports, keep a closer eye on the euro zone and any news about Spain or Greece! For all we know, risk sentiment could dictate the comdolls’ price action!

Now, it’s time to check the major weekly inflection points to see if we can spot trade setups that would complement our news events:

Significant Levels to Watch Out For


AUD/USD USD/CAD NZD/USD
Week Open (WO)
1.0159
0.9779
0.8171
Previous Week High (PWH)
1.0404
0.9886
0.8338
Previous Week Low (PWL)
1.0152
0.9735
0.8153
Top Weekly ATR (tWATR)
1.0258
0.9843
0.8254
Bottom Weekly ATR (bWATR)
1.0060
0.9716
0.8087
Other significant levels
1.0200, 1.0000
0.9740, 0.9820
0.8125, 0.8250

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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