Friday wrap and trades...

MARKET NEWS

Whilst last week saw a US Dollar rally on the back of a deal to avert the fiscal cliff, this week was risk on. Now that the US politicians are working out a deal before the US hits its debt ceiling on 28 February, all eyes were on central banks and the strength of the Eurozone. The beginning of the week saw little volume as Euro was held in a 3 day 150 pip range. Light volumes from the Equity markets, due to Q4 earnings announcements, clearly spilled over into FX trades. However, the market was poised for a break on Thursday as ECB President Draghi spoke. After strong Chinese data, traders were looking for a bullish tone to get long on risk trades. They were not disappointed as Draghi played down the chance of a possible rate cut, as was previously suggested in the last ECB meeting. The 'rate decision was unanimous' as the 'Eurozone has experienced strong capital inflows'. This risk carried on in the Asian session as the Japanese government approved an emergency stimulus package at their Cabinet meeting. This includes targeting a 2% inflation target and creating over 600,000 jobs. 

TOP 5 TRADES OF THE PAST WEEK

1. EURUSD - Long 07.01.2013 - Support is found at 1.3030, the 50dma and 61.8% Fib retracement. The low test bar/hammer candle confirmed the bullish bias. This trade is still running currently up +1.5%

2. USDCHF - Short 07.01.2013 - Resistance is found at 0.9270, the 50dma and 61.8% Fib retracement. The high test bar/hanging man candle confirmed the bearish bias. This trade is still running currently up 1.5%

3. NZDCAD - Long 07.01.2013 60m chart - Support is found at 0.9250, the 50ema, previous days high and 61.8% Fib retracement. The 12pm bullish engulfing bar/candle confirmed the move higher resulting in +2

4. EURNZD - Short 08.01.2013 60m chart - Resistance is found at 1.5705, the 50ema and 50% retracement level. The series of high test bars/hanging man candles over the Asian session confirmed the bearish bias resulting in +2

5. EURJPY - Long 08.01.2013 240m chart - Support is found at the double bottom 113.60. The ring low confirmed the move higher just before the Asian session open resulting in +2%

EFFECT OF THE NEWS LOOKING FORWARD

US Federal Reserve Chairman Ben Bernanke's speech on Monday may set the tone for the week as he discusses policy measures and their quantitative easing program. Q4 earnings in US equities also may have an effect on risk trades as the markets seem to have bought back the time old correlation between equities and FX.  However, all eyes are on the US debt ceiling issues up until reaching the limit on 28 February. As the negotiations will have positive and negative moments, always follow price action for a more conservative and consistent way to trade.