About a month ago the Commerce Department announced that the economy had a 3.5% growth rate for the July-September period, or third quarter. A lot of people claimed that the number was strong enough to call it an official end of recession, or ”jobless recovery”, very peculiar name indeed. Today these numbers were revised, and not in an optimistic way. The GDP, which measures the value of all goods and services produced in the United States, grew 2.8% in the 3rd quarter. Also, much of that growth reflected federal support for spending on homes and cars, through multiple stimulus packages, something that is not sustainable for a long period of time. For the current quarter modest growth is expected, probably to be once again revised (down) after the fact. Interestingly enough, little or no growth is expected for early in next year. Not a pretty picture, guaranteed to make all financial markets jittery for the foreseeable future.
Currencies had strong Monday, mostly weaker Dollar and Yen only to reverse today. Some crosses are virtually at the same point where they had been before markets opened on Sunday. This includes most of AUD and NZD pairs, like NZD-JPY. At this time no update is really necessary, since I used daily chart when discussing that cross. However, Sunday opening and early trading created many good opportunities. Some of them were of the type previously described here, like this buy set up in GBP-JPY right before London open.
Common reversal pattern post covers it more details, but we can see how late action on Friday and early Sunday combined to create a bottom reversal. Nothing fancy, just a garden variety, short term bottom. Buy order was placed at 147.18, looking for a breakout, which happened when London opened for business. Target was set according to principles described couple of posts ago. It was a modest 50 pips objective, which was met in less than hour. Nice, simple trade.
Just like New Zealand Dollar, its Australian cousin is also coming under pressure, just not as much. This chart shows it on AUD-CAD pair. Price is bouncing off of 0.9700 level, trying to make it through. Chances are, that when (if) it eventually happens, breakout will be swift and directional, falling to maybe as low as 0.9600, or few pips below, for this swing. Given that this is an intermediate term chart with holiday before us, trade could take some time to complete. Perhaps as long as a week, though hopefully sooner.
Pound has been loosing ground recently, shedding hundreds of pips, against just about all major currencies. Hourly charts are in a congestion zone at this time, with GBP-CHF as an example. Short term reversal is very possible. I am waiting for a minor high to form, followed by price retracement. Once that happens, any subsequent breakout to the upside is a buy, probably around 1.6790. Exact point will be determined when previous conditions are met. Should price move down to 1.6720 or lower, it could be a very good buy opportunity, given good risk/reward ratio. With Thanksgiving holiday just couple of days ahead, not much real trading time is left this week. European session tomorrow could last chance for good size moves, since historically volume during US trading time is very light the day before Thanksgiving. Unless unexpected fundamentals come into play, tomorrow should be no different.
Mike K.
Is Japan artificially moving the yen buy buying its notes? How does it’s relationship to the pound and Euro effect its strength, say vs the dollar? This gets back to that very basic premise I still haven’t grasped dealing with a currency’s stand-alone value — Oanda acted like there wasn’t one — and how relevant that is in Forex.
I asked that poorly. If the yen is only up because the Nikkei is down and it’s on the right side of two currencies that are tanking, does that have anything to do with its fundamental strength? And does that even matter when you look at buying or selling the USD/JPY?
There is always some relation between all financial markets. But these are shifting, non lasting connections, or the chicken and egg type question. Useless. How do you know that “yen is only up because the Nikkei is down “? This sounds like a newspaper headline, something reported after the fact. Bottom line is, market moves up because there are more buyers than sellers, each one of them having their own reasons for getting into market. I trade charts, not broad fundamentals, not even sure what it is you are trying to grasp.
I just went over your post at this time a year ago. Do you think there is a chance for a trade after Thanksgiving, just like last year?
I’ll go over it in next post.
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