The FTSE made an about turn yesterday, becoming the star performer of the European equity markets, up 1.3% on the day. The reversal was due to buying interest in resources firms, thanks to a brief morning recovery in the price of a barrel of oil. The move in oil was short lived, though share prices managed to stay the course.
Today’s video is the Japanese version of yesterday’s video!
UK Autumn Statement
UK construction data put a dampener on the Pound’s recent rally. Output in this sector is at a 13 month low according to the PMI data that was released yesterday, though is still well clear of any risk of contraction. House building is still the leading component of the construction sector and isn’t likely to change as the government embarks on their Garden City project.
Staying with the UK, the big news this morning was the autumn statement. British finance minister Mr. George Osborne said he would miss his short-term targets for cutting the budget deficit but he stuck to his promise to fix the public finances by the end of the decade, hoping that voters will back his tough approach.
So the improvement pace remains kinda slow, and this largely reflects how Britain’s strong economic recovery has not yet turned into significant rises in pay for workers or income tax for the government. The Pound market was hopeful and bullish before the statement and is now continuing strong… Do you thing this a reversal can happen soon in GBP/USD?
Mr. Euro under Pressure
In Europe, the single currency is trading towards the lows last seen when Mario Draghi was forced to deliver the “we will do whatever it takes” speech back in summer 2012. There are a couple of very key support levels to be taken out versus the Dollar before we get there, but the market won’t be too eager to bet that those levels won’t be broken eventually. The move lower comes as ECB members and politicians continue to contradict each other on delivering the best way forward for Europe.
Government Shutdown in the US?!
Over in the US, the words ‘government shutdown; have been used in the same sentence quite a lot over the last couple of days. The Republican party leader John Boehner is confident he can avoid a repeat performance of those weeks in October last year where political infighting led to millions of Americans being unpaid/not working for three weeks, but plans to do so by agreeing a budget to fund government through to next September. The big exception to the rule is that Mr Boehner won’t allow funding of government departments that are enforcing President Obama’s actions on immigration, as he is adamant the President overstepped the line by using executive orders to get these through. We’re all hoping that common sense will prevail.
Mr. Aussie is Doing Good
Overnight we’ve seen Australian GDP come in at its lowest for 18 months. With an expansion of just 0.3% in the last quarter it missed the expected 0.7% forecast by a significant margin, sending the currency to a four and a half year low against the US Dollar. The data highlights the challenges Australia face in rebalancing the economy away from the resources sector, which has been hit hard by falling demand and falling prices.
Coming Up
Looking to today, we get the last of the PMI readings from the UK and Europe, this time it’s the services sector. Expectations for the number are high, with forecasts that the sector has expanded at a faster pace than it did last month. In Europe the story will be more along the lines of if the reading can stay above the 50 (breakeven) level.
Later on we’ve got the first of the week’s employment numbers from the US, which will start to set the tone for Friday’s non-farms. The Bank of Canada rate decision follows that, with the expectation to hold at 1%.
Intraday Forex Technical Levels
EUR/USD 4-hour: Broke below the pivot point
Invest Diva positioning: Short positions below 1.2356 with targets at 1.2299 and 1.2222 in extension.
Technical reasons why: The pair broke below the key support level at 1.2356 and is forming a spinning top candlestick pattern below the Ichimoku’s cloud. The RSI reached the oversold zone.
Alternative Scenario: Above 1.2356 look for further upside towards 1.2481 and 1.2559.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.2299 | 1.2356 | 1.2559 |
| 1.2222 | 1.2481 |
AUD/USD 4-hour: Rebounding from the 23% Fibonacci level.
Invest Diva positioning: Long positions above 0.8507 with targets at 0.8581 and 0.8640 in extension.
Technical reasons why: The pair is on an overall downtrend but is now rebounding after failing to break below the previous bottom at 0.83875 below the Ichimoku’s cloud. The RSI is moving up below the neutrality area.
Alternative Scenario: Below 0.8387 look for further downside towards 0.8318 and 0.8102.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.8318 | 0.8507 | 0.8640 |
| 0.8102 | 0.8415 | 0.8581 |
USD/CHF 4-hour: Broke above the key resistance level.
Invest Diva positioning: Long positions above 0.9770 with targets at 0.9726 and 0.9649 in extension.
Technical reasons why: The pair broke above the key resistance level at 0.9726 and teasing our bullish target above the Ichimoku’s cloud. The RSI reached and starts to flatten right above the overbought zone.
Alternative Scenario: Above 0.9770 look for further upside towards 0.9815 and 0.9856.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.9726 | 0.9770 | 0.9856 |
| 0.9648 | 0.9815 |
USD/JPY 4-hour: Moving up.
Invest Diva positioning: Long positions above 118.86 with targets at 119.78 and 120.88 in extension.
Technical reasons why: The pair continues move above the Ichimoku’s cloud after forming a spinning top candlestick pattern. The RSI moves slightly below the neutrality area.
Alternative Scenario: Below 118.86 look for further downside towards 117.50 and 116.56.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 117.50 | 118.86 | 120.88 |
| 116.56 | 119.78 |
NZD/USD 4-hour: Teasing 23% Fibonacci level.
Invest Diva positioning: Short positions below 0.7746 with targets at 0.7667 and 0.7630 in extension.
Technical reasons why: The pair reached our bearish targets as the 23% Fibonacci level at 0.7746 below the Ichimoku’s cloud, and moving in a downward channel. A break below this level would give us further down move signal. The RSI is moving below the neutrality area.
Alternative Scenario: Above 0.7746 look for further upside towards 0.7795 and 0.7835.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.7667 | 0.7746 | 0.7835 |
| 0.760 | 0.7795 |
USD/CAD 4-hour: Teasing 23% Fibonacci level.
Invest Diva positioning: Long positions above 1.1372 with targets at 1.1463 and 1.1570 in extension.
Technical reasons why: The pair is teasing the 23% Fibonacci level at 1.1372 after reaching our bearish target above the Ichimoku’s cloud. The RSI is around the neutrality area.
Alternative Scenario: Below 1.1372 look for further downside towards 1.1317 and 1.1272.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.1317 | 1.372 | 1.1570 |
| 1.1272 | 1.1463 |
