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Weekly Analysis 22-28 June 2015

Posted Sunday, June 28, 2015 by
Skerdian Meta • 5 min read

FED member Powell turned into a hawk all of a sudden.

The market this week

Hello, normality. Forex traders finally had some peace this week from the chaos, as the market seemed to trade quite calmly. For a large part of the week, most of the major pairs traded in the 50-60 pips range, respecting the support and resistance levels and presenting us with some nice trading opportunities. Apart from the calm, the market has also exhibited its common sense and logic: the Euro went up when there were rumors of a Greek deal, all Yen pairs went south when these rumors were denied and the US Dollar found bids after the positive economic news.
So, it´s been very relaxing to trade the market this week.

It wasn´t this calm the entire time though. Like the week prior, this week began with some substantial moves from the USD pairs on Monday, especially in EUR/USD and GBP/USD. Then on Tuesday afternoon, core FED member Powell delivered some hawkish comments during his interview for the Wall Street Journal, giving the USD bulls a good enough reason to jump on board. His views and voting in the FED are usually neutral – but his comments about two possible rate hikes this year, one in September, and one in December, we're definitely not. In the last 3-4 month's the market has been wondering whether we would even see one rate hike this year, let alone two, so these remarks came as a surprise and as a result the USD gained about 200 pips across the board.

EUR/USD traded in a tight range for the biggest part of the week.

Again, the Greek melodrama created some disturbance in the Forex market this week. Everyone was hoping for a solution, or perhaps a short-medium term deal, to be made at the Euro-group meeting on Monday. But as we have seen time after time, it was a non-starter and this initiated the Euro decline on Monday afternoon, after a brief peak from EUR/USD above 1.14. The European leaders’ requests were for military spending cuts, increasing the corporation tax and pension cuts. It´s not easy negotiating your country´s interests and no one wishes to be in the Greek Prime minister Tsipra's boots right now.

Economic Data

The economic data didn´t have much impact on the market this week, as everyone was focused on the EU/Greek talks. On Monday, the US existing home sales beat expectations by 0.8 million and last month this was revised higher as well, indicating that the housing sector remains one of the strongest in the US economy. The European manufacturing and service sectors on Tuesday came out above expectations, but it didn´t shift the market, much the same as the disappointing US retail sales. The comments from FED member Powell took all the attention that day.

We opened a buy signal when the price reached the 20 MA.

The German IFO business climate numbers were disappointing on Wednesday morning and the US Q1 GDP final read, showed that the US economy contracted by 0.2%; at least it is much better than the -0.7% that the second estimate presented. On Thursday, the US unemployment claims came out as expected, but personal spending increased by 0.9% from the previous month, which suggests that the US consumer is getting more confident as the employment increases.
This was confirmed on Friday by a pickup in the consumer sentiment figures.

Signals

The Euro started the week on the wrong foot as it declined around 300 pips in the first two days. The Grexit fears and the hawkish comments from the core FED member Powell made Euro bulls close their long positions. We took advantage of this and opened four sell signals – two for EUR/USD and two EUR/GBP. All of them closed in profit and gave us 83 green pips. We opened most of them in the first part of the week during the 300 pip downtrend (see on the hourly chart). There was also some profit from the NZD/USD and GBP/USD signals this week.

USD/JPY made a retrace at the beginning of the month after the last move up of 600 pips.

After the first two days of the one-way direction, the market became numb, trading in a tight range for the next three days. The traders didn´t know which side to take so they remained on the sidelines. That worked well for us as we picked two extremes of the range, having eight winning signals in the last three days of the week. But low market activity has forced us to cut the number of signals and we issued just 15 Forex signals in total, with one losing signal. We opened that signal after GBP/USD retraced to the 20 MA in the H4 time-frame, as you can see in the chart above. The price made 3 doji's and the stochastic had reached the oversold area, so it looked like a good idea to buy at that point. However, the retrace was deeper than I thought and the stop loss was hit. All in all, one losing signal out of 15 and a win/loss ratio of 93:7 is still quite good. Besides that, we made a nice 193 pip profit this week, bringing our monthly profit to 640 pips – and we still have two trading days to go!

The 50 smooth MA provided support several times.

Pair analysis

USD/JPY made a retrace at the beginning of the month after the last move up of 600 pips. It declined to 122.50s with several attempts to break it, but this week it decided to move up again after failing to crack that support level. If you see the daily chart, it looks more like a double bottom right now with the neckline at 124.30-40. If that level gets broken, then according to the double bottom/top pattern we expect this pair to climb for another 200 pips. But first comes the 125.80 level, which is the top of this month. The 100 smooth MA in the H4 chart did a good job in providing support at the end of last week and at the first trading session of this week, so we´re counting on it if this pair decides to move down again.

The resistance at the top line between 1.14 and 1.1450 looks to be holding at the moment.

From the daily chart, it looks like EUR/USD has made a top at 1.1400-1.1450. It tried to break that resistance last week, but it fell back down after failing. Tuesday, in particular, formed a very big bearish candle. But both the bottom line and the yellow 50 daily MA have been holding the price above it in the last three days. The stochastic is nearly oversold so the technical analysis points up, although the fundamentals like the Greece situation will be the decisive factor for this pair´s near term direction. On the H4 chart, it´s the 100 and 200 MAs that are holding the price up for now.

The 100 and 200 MAs are providing resistance on the downside.

In conclusion

This week the Forex market was relatively quiet, mainly because of the Grexit fears. Nothing was agreed on and there are still too many unknown pieces in this puzzle, leaving traders uncertain. Therefore everyone has been playing it safe this week. The traders have been waiting on the sidelines – after all, better safe than sorry. But we don´t expect this to last too long; once the Greek situation is decided on, the fundamentals, the ECB, QE and the interest rate outlook differences will come into play again, and the volatility will increase. The last EU summit is on Saturday and if anything is decided there, we will see the chaos start as soon as Monday.
So have a restful weekend in order to save up energy for next week.