This week we are combining our weekly review and week ahead posts.
Towards the end of the week we saw some initial risk off trading and this was really sparked by two key areas (discussed in the 77SigmaTrading Closing Thoughts)
- Corporate earnings results really haven't been anything to shout about in the US with some big names including Google missing expectations
- In Europe we heard some key commentary out of both Merkel and Rajoy. Merkel highlighted that although the ECB will take responsibility for overseeing the euro zone banks from next year, that would not lead to the ESM rescue fund taking over member states’ liabilities such as Spain for past bank rescues. Rajoy on the other hand highlighted our overall concern that there has been no pressure on Spain taking a bailout. We've highlighted this previously that either this needs to come from the markets or ECB in order to actually push Spains hand otherwise why wouldn't Rajoy wait until after elections as any bailout is likely to have further conditions on it which may potentially make him more unpopular (already quite a close run situation).
Neither of these things bode well for risk, but the market has been buoyant to the upside recently (all be it pretty choppy in the process).
We maintain our fundamental concerns on Spain and therefore the euro, however for next week we currently sit at or above some key levels and whilst these hold we should maintain a choppy but conservative Bullish outlook.
Before we get onto next weeks action though let's quickly review last weeks trades. We actually carried a fair few trades into the week which is relatively unusual although noted we have done the same this week as well (normally a sign of choppy markets)
- GBP/NZD long, played out nicely to the upside before reversing after T2. Some good signals on the intraday allowed us to move stops and capture some good profit before revsering and taking out our stop; +200 pips (although 250 was possible)
- NZD/USD short, a trade potentially you could still be holding, however we closed the majority on hitting our rising trendline and then finnaly the rest stopped out on a retracement from this; however movement was limited in this pair +40 pips (booking at T1 and the rising trendline would have yielded +75 pips)
- AUD/CAD short, stopped out after a couple of choppy days; on reflection not thebest level for the trade - 55pips
- GBP/AUD long, stopped out for breakeven on a retracement; half of the profit booked at T1; +50 pips
- EUR/USD long from Monday night, nice set-up yielded T2 before reversing; + 170 pips were possible but we booked 124 pips in total
- GBP/USD, again from Monday night but we preferred to play a break of the previous high to ensure momentum and use a tight trailing stop. Pair hit T1 and got close to T2 before reversing; we locked in some small profit (30 pips or so) but we claim this as breakeven
- AUD/CAD short, we got another bite at the AUD/CAD short later in the week which we took at better levels but this again stopped out for -70 pips
We also took an aussie breakout trade which played out nicely although slightly off strategy for commentary; nice breakout from our defined range and a tailing stop on lower timeframes played out well before an obviously reversal signal allowing you to close the trade for a nice profit (80 to 85 pips easily possible). Total for the week a reasonable 289 pips. Given the choppy conditions this week we found a few intra-day trades got stopped (some also played out well) out bringing our total slightly lower on strategy trades.
We carry the following into next week:
Some big data points to watch for next week, King (BoE), Draghi (ECB) and FOMC statement.
EUR/USD
The euro pulled back further on Friday. Technically we should be looking for Bullish entry signals at support levels (blue box), however a break and hold below the 200-day moving average would switch our bias down the to 1.26 handle.
GBP/USD
We had some success with intra-day signals on this pair last week; similar to the euro whilst above current support levels we are technically Bullish this pair but will wait and see if the current levels hold, if they do we will look for long entry signals otherwise we will be looking for a test of the 200-day moving average.
AUD/USD
Our signal from Thursday is currently above T1 which comes in before the first support level. We like a test of this level then would look to see if it can break this to the key support around the 1.015 mark. If the 1.015 mark breaks then we would expect to see a test of parity and the key psychological level of parity. Chances are we might chop sideways on this pair for some time however our bias is Bearish on the lower high patterns set.
USD/JPY
Pair seems to have been a little more interesting in the past couple of days, we are long from the pin but need to see this pair break the 200 day moving average; if it does we will look to add to the position on additional signals; we could however see a retracement to test previous resistance now turned support.