MARKET NEWS
The week opened without much a theme across the markets. With London closed and the US calendar filled with only fourth-tier data, EUR/USD was held in a 40 pip range at the beginning of the week. The week didn't get any better for the greenback and its counterparts as traders take a breather before the Jackson Hole summit to ascertain the Fed's stance on additional quantitative easing. Interestingly, Draghi has cancelled several meetings in the coming week so all eyes will now be on US data. USDCAD experienced some volatile swings as the effect of Hurricane Isaac took its toll on the Oil markets, as well as comments from the summit stating '[they] are watching the Oil markets closely'. The drop in US consumer confidence to 60.6 from 66.6 had no real effect, neither did the upwards revision of US Q2 GDP to 1.7% from 1.5%. The real action was in the commodity currencies as traders looked to bank profits from the previous rally on a string of negative comments coming out from Australia. Chatter about the end of the mining boom and the collapse in iron ore prices all effected the Australian Dollar and New Zealand Dollar. Also the heavy overweight shorts on EURAUD will be short covering on any type of hint that Spain will be bailed out which may lead to the AUD being dumped. The Italian bond auction went relatively well as yields fell back in Spain and Italy, however, so close to the end of the week the market preferred to stay range based while these key news announcements are released.
TOP TRADES OF THE PAST WEEK
1. GBPUSD - Ascending Triangle Retest Long 28.08.2012 Cable broke out of its ascending triangle and retraced back to support at 1.5770. Trading the higher low double low test bar off the support level resulted in +2%
2. USDCAD - Inside Bar Breakout Long 29.08.2012 USDCAD double bottomed off the horizontal level at 0.9850. The inside bar provided the entry for this trade which is still running, up +0.5%
3. NZDUSD - Pivot Bounce Short 29.08.2012 This pair is in an aggressive trend down and trading intra-day levels of resistance has provided some decent trading opportunities. Selling on the pivot retracement with the previous days low and 50ema resulted in +1.5%
5. GBPNZD - Pivot Bounce Long 29.08.2012 Capitalising on the sell off in the NZD, trading the bounce of the pivot with a stop protected by the 50ema just below S1 resulted in +1.5%
EFFECT OF THE NEWS LOOKING FORWARD
Price Action from the Jackson Hole summit will be key to trends going forward. Look towards Gold as some direction for the US Dollar. Fed Chairman Ben Bernanke is known for his dovish stance and eventually many are forecasting another wave of QE will come, in which case the US Dollar will most likely fall and Gold rally. If some clearer action on the ECB ESFS bond buying scheme is released then we could see some aggressive US Dollar selling. Seasonally, Gold has a bullish run mid-September due to various religious festivals and the run up to Christmas so we could see an aggressive rally depending on the outcome of the Jackson Hole summit and/or September 13 FOMC statement.
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