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Articles by Mark De La Paz

January 19th, 2015 @ 12:01 pm by Mark De La Paz

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Today’s releases from Australia has had a minimal impact for the market with price action seeing only 49 pips so far going into the middle of the European trading day despite an average daily range of 112. Among the figures we saw were the MI Inflation Gauge reading flat against a prior 0.1% while New Motor Vehicle Sales came out better than before at 3.0% against a previous contraction. From a technical perspective we appear to have a higher low and higher high turn-around in the making for daily charts as Thursday’s swissy carnage gave us a boost from the crosses to 0.8294 continuing the bounce off the psychological 0.8000 area. For now Friday’s failure to give us a new high suggest a search for the next higher low providing us an entry for fresh longs with 0.8154 the 61.8 Fib retracement of the previous weeks up leg as our candidate.

AUDUSDDaily

 

Note we are hearing talk of the Aussy as the next haven currency as the SNB broke the unspoken rule of monetary policy regarding “policy stability”. Glenn Stevens may have been calling for the Aussy at 0.75 but he hasn’t been leading the markets with the impression that the RBA was doing something about it. Just a reminder “haven equals strength” in times of uncertainty.

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January 15th, 2015 @ 9:41 am by Mark De La Paz

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In what could be seen as a sign of no confidence on the single currency, the Swiss National Bank has decided to remove its long standing floor of 1.2000 counting on a further cut into negative rates from -0.25% to -0.75% to prevent the Swiss Franc from appreciating. This is having little impact though and few banks are taking the other side of the trade for EURCHF at the moment. Of interest here is what this all implies going forward, its not actually hard to keep a currency week as in the case of SNB’s floor but it does say something about their confidence of the currency that they are no longer willing to keep an unlimited amount in the balance sheet.

MetaTrader - FX Clearing

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January 14th, 2015 @ 1:45 pm by Mark De La Paz

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Half a day later following the release of the European Court of Justice’s ruling on the legality of the ECB’s Outright Monetary Transactions program we find the Euro back to where it started with the knee-jerk sell-off to lows of 1.1727 unable to get a follow through in the subsequent periods. More broadly we appear to be seeing higher lows developing the daily charts of other dollar pairs underscoring our thesis of an extended greenback.

MetaTrader - FX Clearing

As of this writing we appear to have traders latching on to an excuse for pushing this theory as December Retail Sales surprisingly saw a sharp contraction to read -0.9% against consensus forecast of an 0.2% read in the headline figure even as prior results were also revised lower to 0.4% from 0.7%. Core figures too cameout poorly at -1.0% with a revision in the prior to 0.1% from 0.5%.

 

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January 14th, 2015 @ 9:51 am by Mark De La Paz

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The European Central Bank has just won one of its key hurdle for implementing an outright quantitative easing program with the European Court of Justice deciding that the banks OMT Program (Outright Monetary Transactions) was legal. OMT which sees the ECB buying sovereign bonds issued by EU member states from the secondary market allows for the ECB in theory to support a faltering EU member state without directly intervening which would require greater consensus among European leaders.

The program was initially challenged in the German Federal Constitutional Court by members of the Bundestag with the former referring the issue to the ECJ. In its decision the ECJ’s Attorney General  Cruz Villalon has indicated that the OMT is legitimate provided:

  • that there is no direct involvement of financial assistance to a member state in question
  • the bank must outline its reason for adopting unconventional measures

While the conditions provided seems to be a counter check for the ECB’s ability to just handover money to a member state it would not be difficult to imagine using other ECB tools something as simple as Draghi’s moral suasion to get the private sector to first buy the bonds at reasonable rates of a faltering member state then have the ECB providing a backstop guaranteeing a buyer of last resort in the secondary market.

For traders this means we once again have an excuse togo ahead and test the 1.1753 region on our way to 1.1640.

EURUSDMonthly

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January 12th, 2015 @ 5:50 am by Mark De La Paz

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After all the whippy price action following the release of the US Employment Situation report we found ourselves facing a weaker dollar at the close with the daily candles all suggesting that a pull-back if not a turn-around is in the works. What is surprising here is that the US report while not perfect was mostly a plus for the greenback with another 252,000 jobs added against the consensus forecast of merely 241,000 and prior figures, which were already a blowout adjusted even further up to 353,000 from 321,000 originally. This even as the unemployment rate eased unexpectedly to 5.6% from 5.8%. So what can be concluded out of this? Perhaps the dollar has gotten way ahead of itself during the thing trading conditions of the holidays.

MetaTrader - FX Clearing

Going over our charts for now we have some good candidates to go look for further dollar weakness with AUDUSD triggering a double bottom following Friday’s close above 0.8157 and USDJPY now forming a second lower top in the weekly charts suggesting the 155.57 trigger for the weekly double top pattern could soon be in-play. For Euro and Cable though things are a bit more murky daily candles in the single currency merely have a piercing pattern while Friday appears to have been the follow though for a hammer in GBPUSD’s case.

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January 9th, 2015 @ 11:59 am by Mark De La Paz

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After a week of pushing the dollar higher one can’t help but note how the markets have seen the greenback on the defensive from the start of the European session.  Despite a retreat in the expectations against previous numbers with consensus at 240K from the prior 321K a prudent course of action would still be for dollar bulls to put money in the bank. We actually face the risk of falling short from consensus though unless we are talking below 200K we will not be looking for any extreme dollar dumping. Note that the 321K from the previous months has been mostly attributed to one of hiring in preparation for the holidays. Should we of course get a number well above 240K that will have us an excuse to reinstate dollar longs.

 

calendar 010915

From the charts we are keeping our eyes mostly on two pairs, AUDUSD with a daily double bottom and Cable that has flirted and is now bouncing off its psychological 1.5000.

MetaTrader - FX Clearing

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January 9th, 2015 @ 5:52 am by Mark De La Paz

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Unlike the financial currencies which has just gone down and down through out the first full week of trade for 2015 Aussy has formed a double bottom off its psychological support of 0.8000. Monday saw us with a low of 0.8035 and a spinning top for the daily candle while Wednesday saw the lows drop a little bit lower to 0.8032 only to end up with a hammer. By themselves these candles suggests a loss of bearish momentum and the potential for a correction. Yet when combined with the fact that just beneath it is a big figure psychological support the idea of triggering our double bottom by pushing past 0.8157, Tuesdays highs is getting more attractive. All of these of course is with the backdrop of today’s NFP release and yet things can actually be a win win solution for the Aussy. Heads, we get a strong read and people will argue that good for global consumption and your commodity producing countries. Tails and we say bad US data will trigger a correction following the huge gains for the dollar during the Christmas holidays. So lets give it for the Aussy. Hep-hep hurray!!!

AUDUSDDaily

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January 7th, 2015 @ 2:37 pm by Mark De La Paz

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I have been reading through out the day about falling oil prices, its new correlation with the Euro, and increasing prospects of a deflation in the Euro area. What I find interesting with all these reports is how this ties up with our charts right now even as the single currency is looking more and more set to see a monthly close under the 50 Fib retracement area of its full historical range. Simply put the fear of deflation presents an even greater argument for monetary officials to weaken the currency further, not through any sort of active intervention but through benign neglect, i.e. allowing politics and history to take its course. For the trader what is important to remember is this, if a strong currency helps alleviate inflation pressures the opposite of this then is also true. When you see demand destruction and prices dropping forcing an economic region as a whole to pay more because of currency weakness is the least politically sensitive solution to the problem.

EURUSDMonthly

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