We head into the first week of April this midweek and it will be a NFP week, with an exception. A very unique strange lineup of events will prove to be a special NFP day this time around. More of that to come at the end of this post.
Good Monday morning folks, i hope you have had another good trading month for Mar. We had an excellent week in trades last week. Bagging almost 380 pips on the Euro pairs and close to 300 pips on Gbp pairs, it was a textbook week in trading. We had our bearish outlook in alignment with what the market had given us for the whole week, except for the closure of the week. God bless, it has been a very profitable week and i end my trading month very much in the black. Having an almost BE month just about 2 weeks ago.
Now, another trade that has worked out very well is our call to buy Cad/Jpy. I have been speaking of this since the year begun and when the alignment of all signals was just right, we went in for the trade and this has turned out to be the best performer of the month. Cad/Jpy has since soared about 350 pips and since this is a long term position, i have been adding to it constantly while taking out profits and closing my risks. I did speak of this again almost a month ago on this post . I did also write many times throughout the week for my readers to make call on the pairs that could have growth propelled by oil and risk appetite and Cad/Jpy by far, has achieved the best results so far.
Ok, so let us get back to this week and see what the markets could have in store for us. Once again, we review what has happened last week with all the currencies shaping up against the USD;
1) Eur – -ve 0.8%
Outlook : Bearish – Cautious
Our longer term outlook of Euro declining is still in perspective. However, in the short term, especially for this week, please be cautious of playing all your cards short.
Here are my reasons; Greece might get bailed out eventually with funding from IMF and cooperation with the European union. Market open saw a big gap up already and this signals intent of the immediate pressure relieved off Euro. Having said that, only the “G” is out of the “PIIGS” and this is an ambiguous, indefinite statement. There isn’t much clarity as to where this money is being raised from and how is it going to be repaid back. Greece meanwhile has attempted to get more money by selling $5 bonds which goes to show the desperate state that they are in. Therefore, in my opinion, there could be a short term rally/correction due to the sense of “relief” of this immediate Greece saga, but the problems overall are too much and we are confident of more euro decline.
If you are looking to sell the euro, get cautious for the 1.32 area holds lots of confluence of levels. With a cautious setup, you should honour all stops not beyond 1.3500 level.
2) Gbp – -ve 0.62%
We are still bearish on the Gbp. There are no signs of recovery or of positive impact for the moment and we have no reason to change the outlook as yet.
3) Jpy - -ve 2.2%
Due to seasonal cycles and recent suggestions of BOJ intervention, the Yen has suffered one of its worst declines against the USD since Nov last year. We believe this will continue given the outlook of a strong dollar and the seasonal pattern of yen from now till June.
We have upside limited till 94 level set by November’s high but it is possible to achieve that by May-June.
4) Chf – -ve 0.4%
Notice the correlation with Eur for the Chf changing rather dramatically over the last few weeks.
5) Cad – -ve 0.99%
6) Aud – -ve 1.07%
Though the Aussie dollar is the biggest com-dollar loser for the last week, our outlook on Aussie dollar is still very bullish. “Interest rates may need to be increased further to contain inflation” Reserve Bank of Australia Governor Glenn Stevens.
7) Nzd – -ve 0.35%
8 ) Gold – +ve 0.33%
Gold has been ranging for the 3rd week running now, stuck within a range of about 280 pips from 1086 and 1114.
Interestingly, as you can see, the USD has done very well, unanimously, across the board. This is not a state of risk aversion as JPY lost heavily to the USD. This is pure USD strength by itself and it is obvious that the USD is probably one of the most preferred currencies on most portfolios.
So, it is no surprise as the USD Index gained in strength.
USD Index - Continued Strength
USD Bulls are getting stronger
I always have an anti-thesis to what the market does but i don’t trade it, as yet. My anti-thesis now is that the USD is really strong. Almost every Tom Dick and Harry is propping up dollar strength. With the way things are going, i have no reason to believe otherwise. There are even talks about the Fed increasing interest rates? I mean, we had almost everyone writing off the US dollar just about 4-5 months ago and now they are all expecting US dollar strength to outpace every other currency.
Well, as i have always said and believed, no expert truly can predict what will happen and they simply go with the herd. The market has extreme short term memory and it just forgets what happened prior and simply focuses on its current myopic view.
When everyone is flocking to the USD, you know that spells trouble. I am not asking you to short it, but just don’t buy it. Not at this late stage. Base your bias on other faltering currencies such as the Eur and the Gbp, going down against the US dollar. Don’t simply buy majors based on USD strength throughout. That can be suicidal.
Ok, big news this week:
This week is NFP Week. We have other key indicators coming from UK, Aus, and Japan but all eyes and trading speculation will be on NFP release this friday.
The best part is, it is a holiday! Yes, strange as it seems, almost every major country is having its holiday on Friday, except the US, and that is when NFP data is released.
2 things are going to happen and you want to keep your eyes peeled for this;
Regardless of the data being released;
1) Market will be extremely volatile. Not to mention volatility beyond normal trading days is expected during NFP trading days. However, volatility beyond these levels can be expected as there is very thin liquidity and almost all of the other trades(except the US) will not be taking part in this event.
2) There will be lots of profit taking and volume movement on Thursday. Since most markets will be closed for the week and to protect their positions against NFP release, most traders will close/hedge their positions on Thursday itself. Depending on the outcome of trends this week, we can use the simple trade setup trick to benefit from reversals on Thursday.
