Planning the week ahead

In this weekly report, we will try to direct our attention to the currency pairs and assets that are most likely to offer trading opportunities during the comming week, based on a combination of sentiment, orderflow and price action analysis.

1. On the docket for this week
Taking a glance at our calendar, we can notice the more important news events for the week. For the coming week starting July 14th 2014, the main events are:

Monday: (Sunday = NZD PSI – bullish expectations) EU Ind.Prod. (bearish expectations)

Tuesday: AUD RBA Minutes, JPN BOJ Decision, UK CPI (bearish expectations), GER & EU ZEW, US Retail Sales + Empire State (bullish expectations), NZD CPI (bearish expectations)

Wednesday: CNY Retail Sales + Ind. Prod. + GDP, UK Unemployment (bullish expectations), EU Trade Balance, US PPI + TIC Flows + Ind. Prod. + Manuf. Prod. + Beige Book, CAD BOC Decision

Thursday: EU CPI, US Housing Starts + Jobless Claims + Building Permits + Philly Fed

Friday: EU Current Account (bearish expectations), CAD CPI (bearish expectations), US UoM + Leading Index (bearish expectations)

2. Strong vs. Weak

Looking at the CME FX futures market, we can see that:

- DXY has closed last week with a neutral yet positive stance, finding bids around 80.

- There have been very few clues last week, with most pairs chopping around. Many pairs are at the top end of their trends and without some decisive bullish action it's not safe to step into these mature trends. So for the first time this year, the Game Plan is to wait and watch for further clues.

- Only fresh bias is bearish CAD, so we can look for opportunities on UsdCad and/or CadJpy.

To understand more about strong vs. weak, come over to Orderflowtrading.com and check out our HeatMaps.

3. Sentiment Analysis on relevant assets

Summer doldrums are here and if things continue in the same fashion as last week, it could be a boring summer... But what can we rationally expect for the future. In the short term, investors will take a close look at growth expectations, earnings and monetary policy (in the US most importantly), and changes on the geopolitical front. In the longer term, they will try to understand what a low-growth environment would mean for markets. Lower growth would also be more stable; a related fall in economic uncertainty would contribute to a low-volatility regime in global financial markets; ever abundant savings relative to investments would justify lower for longer rates.

USD: sentiment is neutral with a bullish accent. Save the date: on November 1st, the Fed will stop expanding its balance sheet. And the focus is now on the first rate hike. But stop traffic: the minutes clearly stated that Fed members did not discuss the possibility of upside risks on the inflation outlook. Their main concern remains the high level of slack on the labour market. Fed Chair Yellen’s semi-annual Monetary Policy Report, scheduled to be delivered to Congress, is not expected to cover new ground on the policy outlook. So this week's drivers will be in other data prints.

CAD: sentiment is negative. Friday's surprize employment contraction sent the Looney lower across the board. Unemployment ticked up 0.1% to 7.1%. The BOC will be meeting this week and Poloz will probably be more dovish/cautious, which could drive the Looney even lower.

Euro: sentiment is negative. Regardless of the latest easing in risk appetite, the EUR has remained remarkably stable in the past week. Expect more of the same. Ewald Nowotny reiterated last week that there is no need for additional policy action in the near future. Draghi’s speech at the quarterly hearing before the committee on economic and monetary affairs of the European Parliament will attract attention this week, but he is unlikely to provide new insights. All of the above suggests that the EUR will be driven by external factors, such as the Fed’s monetary policy expectations and global risk sentiment.

Aud: sentiment is positive. RBA minutes (Tuesday), Chinese activity, Iron Ore prices will be the main events to watch. The trend in the Aussie is strong but the extended range tells us that unless we get some surprizing new drivers, this trend could give way to profit taking.


For updates on sentiment as it progresses throughout the week, stay active in our Live Trading Floor.

4. To sum up: best looking charts & comments

Source: tradingview.com
UsdCad – fresh bullish momentum noted

Source: tradingview.com
CadJpy – an alternative worth watching to play Cad weakness
It’s a tough challenge to combine sentiment, price action, technical analysis, and fundamental analysis all together to turn these thoughts in to actionable order flow trade ideas. If you still find yourself struggling in that regard, our mindset lessons can help relieve that stress.

As always, good luck out there!