GROWTHACES.COM Forex Trading Strategies:
Taken Positions:
GBP/USD trading strategy: long at 1.5080, target 1.5440, stop-loss 1.5130
EUR/GBP trading strategy: short at 0.7850, target 0.7700, stop-loss 0.7780
EUR/CHF trading strategy: long at 1.2025, target 1.2090, stop-loss 1.1995
NZD/USD trading strategy: long at 0.7690, target 0.8000, stop-loss 0.7595
Pending Orders:
USD/JPY trading strategy: sell at 118.20, if filled target 115.50, stop-loss 120.20
USD/CAD trading strategy: buy at 1.1880, if filled target 1.2200, stop-loss 1.1790
AUD/NZD trading strategy: buy at 1.0680, if filled target 1.0350, stop-loss 1.0760
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EUR/USD: Wide Open Door To Quantitative Easing
(looking to get short on upticks)
- European Central Bank President Mario Draghi said a loose monetary policy is needed to achieve price stability in the eurozone and the Governing Council is determined to deliver this. In his opinion there is a higher risk of deflation in the eurozone now than a year ago. He added that lower oil prices were good, although not so good in the sense that they influence inflation expectations. The danger was that consumers start to doubt whether inflation will go back up to 2% soon, or even in five years. He added that there were differences on the Council about how to achieve the bank's mandate, but he said: “It is not like we have endless possibilities."
- The European Court of Justice advocate general has blessed the principle of ECB government bond-buying, with few conditions attached. Pedro Cruz Villalon advised judges to approve the European Central Bank's so-called OMT programme, a stimulus measure initially launched in 2012, on condition the ECB was not directly involved in an assistance programme for countries that benefit.
- The ECB is on the verge of announcing quantitative easing as soon as next week. The EUR/USD hit a nine-year low of 1.1728 today. Our EUR/USD long reached its stop-loss level at 1.1740. The reaction to today’s court decision shows that there is still potential for the EUR/USD to fall to 2005 lows at 1.1640. We will wait for U.S. CPI data (that may be slightly weaker than forecast) on Friday to sell EUR/USD on possible uptick. The target of our short position would be near 1.1640 in anticipation for ECB’s QE decision next week. Although the very short-term outlook is still bearish, the downward trend on the EUR/USD is likely to reverse in the medium term. In our opinion a rise of EUR/USD is likely on profit taking and possible delay in Fed’s hikes.
- On the other hand, Fed’s hikes in the second half of this year are under threat. Minneapolis Fed President Narayana Kocherlakota (a dove) repeated his argument that the U.S. central bank is planning a too-hasty retreat this year from near-zero interest rates. Kocherlakota is one of only two Fed officials who favor delaying raising interest rates until 2016. His views are ignored by the markets, as he is one of the most dovish Fed members and his opinions differ too much from the Fed’s consensus.
- Industrial production in the eurozone rose in November by 0.2% mom and -0.4% YOY vs. median forecast of -0.8% YOY and growth of 0.8% YOY in the previous month. Investors are waiting now for U.S. retail sales data (13:30 GMT).
Significant technical analysis' levels:
Resistance: 1.1871 (high Jan 12), 1.1879 (10-dma), 1.1897 (high Jan 7)
Support: 1.1640 (monthly low Nov, 2005), 1.1376 (monthly low Nov, 2003), 1.1212 (61.8% of 0.8228-1.6040)
USD/JPY: Bears' Target At 115.50
(sell at 118.20)
- Japanese Prime Minister Shinzo Abe's cabinet approved on Wednesday a JPY 96.34 trillion budget for the coming fiscal year while cutting new borrowing for a third straight year in a bid to balance growth and fiscal reform. A projected rise in tax revenue to a 24-year high of JPY 54.53 trillion on an expected economic recovery allows the government to cut new bond issuance to a six-year low of JPY 36.86 trillion. That accounts for 38.3% of the budget, also a six-year low. Abe said Japan is on course to meet his promise of halving the primary budget deficit, excluding new bond sales and debt servicing, in the next fiscal year from levels seen in 2010/11.
- Finance Minister Taro Aso said the budget was expected to allow Japan to halve its primary budget deficit excluding new bond sales and debt servicing in the coming fiscal year, but the budget-balancing goal in 2020/21 would be extremely difficult to achieve.
- The Ministry of Finance plans to increase 30-year debt sales by JPY 1.6 trillion and 40-year JGB issuance by JPY 0.4 trillion, while reducing its offering of two- and five-year bonds. As a result, the average maturity of JGBs is expected to rise to eight years and five months by March 2016 from around eight years in March 2015, the finance ministry said. The move is aimed at taking advantage of current ultra-low yield levels to reduce the need for future debt rollovers.
- The JPY strengthened against the USD in Asian trading on Wednesday as investors are lowering their expectations for interest rates hikes in the USA. The USD/JPY fell to a day’s low at 116.54. Our USD/JPY trading strategy is to sell the JPY on upticks as we see potential for further fall, even to 115.49 (38.2% retrace of 105.20-121.86 move).
Significant technical analysis' levels:
Resistance: 117.95 (high Jan 14), 118.85 (high Jan 13), 119.32 (high Jan 12)
Support: 116.54 (low Jan 14), 116.30 (low Dec 17, 2014), 116.00 (psychological level)