MARKET NEWS
The first day of the week experienced light trading volumes due to a mixture of factors. Whilst the US and Canadian public holiday aided in the range based day, most of low volume was due to a fairly choppy session at the end of the prior week. The Jackson Hole summit produced a string of volatility which started early in London trading as the USD was dumped across the board. Most traders analysing the speech concluded a firmly dovish stance. Predictably markets stayed range based as traders waited for details from ECB President Mario Draghi's speech at the ECB press conference on Thursday. The US ISM Manufacturing data and Non-Farm Payroll were also closely being watched. However, on Wednesday the Euro rallied 100 pips after media reports suggested that the European Central Bank may buy unlimited amounts of short-term government debt to ease the Eurozone's financial crisis. Traders and investors alike have been expecting ECB President Mario Draghi to unveil the bond buying scheme at Thursday's meeting but details were clearly leaked early on. This expectation was clearly priced in as the Euro has been grinding higher the past month supporting the economic theory of 'efficient markets'. Precious metals also experienced volatile price action as it has been the pure QE3 play. As the market fears another round of Fed quantitative easing due to poor US data, gold rallies and vice versa. In Asia, the Australian Dollar found some relief from its one month straight sell off due to positive employment data as well as investment bank reports circulating that Australia is not in a mining bubble. This short covering was also buoyed by the rise in Gold due to Australia's status as the biggest exporter of the yellow metal.
TOP 5 TRADES OF THE PAST WEEK
1. NZDUSD - Pivot Bounce Short 04.09.2012 Trading the bearish trend, simply waiting for a pullback to intra-day levels of resistance has worked very well in recent weeks. This trade was further supported by the 60m 50ema. +2%
2. EURNZD - Low Test Long 05.09.2012 This pair has been rallying aggressively the past month. After four 60m low test bars during the Asian session, this pair was poised for a strong move to the upside. Simply trading off the low test in the London session resulted in +2%
3. GBPAUD - Pivot Bounce Long 04.09.2012 Tracking the sell off in commodity currencies, this pair as been rallying strongly as investors shy away from Europe and look to invest into the stronger UK. This pair low tested on the 60m 50ema on the European open and resulted in +2%
4. GBPNZD - Pivot Bounce Long 04.09.2012 Staying with the theme of the commodity sell off, this market has been highly correlated to GBPAUD. Trading the pivot bounce resulted in +1.5%
5. AUDCAD - Pivot Bounce Short 04.09.2012 As the Australian Dollar has been dumped the rise in Oil prices has made AUDCAD a strong pair to trade. The daily pivot resistance level was further supported by the 60m 50ema and resulted in +1.5%
EFFECT OF THE NEWS LOOKING FORWARD
All eyes are now on the Fed's FOMC statement and economic projections on Thursday as well as the German ruling court announcement. The Fed's actions will typically be priced in from the Non Farm Payroll figures, so analyse and follow price action. Intraday traders be careful of volatility around these news announcements. Thursday also has an Italian 10-year bond auction which depending on results could shed some light on which country may ask for a bailout first. However, with the Fed speaking later in the day, it will have to be a big disappointment or surprise to have any effect. The SNB Monetray Policy Announcement could also be fairly interesting as their view on further diversification to help keep the 1.2500 peg to Euro could affect the markets as traders sit on their positions. In any case follow what the chart is telling you to do, rather than what you think should happen.
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