A risk-off week – Weekly Analysis 11 – 17 January 2015
The ‘risk-off’ sentiment that started in the second half of last week deteriorated even further this week, triggering a sell-off of major stocks around the globe – with the Chinese stocks leading the way during this decline. This has put pressure on USD/JPY. It hasn´t been an easy week for us but we managed to make 98 pips this week. The disappointing US retail sales and produce inflation data didn´t make things any better and sent the risk currencies tumbling. The British Pound broke below 1.43 on Friday against the USD, and the Canadian Dollar has lost more than 5 cents against most of the major currencies.
The Japanese Yen is the winner during these turbulent times
Forex Signals
So, another week has gone by and a little more profit in our account, bringing our profit for January to 369 pips so far. Although we couldn´t match last week´s profit, we continued this week in a similar way with our forex signals, particularly in the first couple days, making 98 pips in total. It hasn´t been an easy week by all means, as fear was constant in the market… one little negative event such as a slight in the economic data or a disappointing news from China and everyone got jumpy with their stocks. This translates into bringing the US Dollar and all the commodity dollars down with them while the Japanese Yen rallied.
The price reached our SL at 0.6996 on Thursday evening and fell 140 pips overnight.
We issued 17 forex signals this week, 12 of which closed in profit and the other 5 hitting stop loss. Looking at these numbers, the win/loss ratio for this week is 71:29, which isn´t as good as last week but still alright. On Monday, we issued three forex signals which closed in profit, and we made 91 pips that day. Tuesday was another good day for us with three winning signals and 76 pips in our account. On Wednesday, we opened four forex signals but closed the day 41 pips down. On Thursday, we were well in profit until late evening when our AUD/USD sell forex signal hit the stop loss. It reversed and fell more than 100 pips downward, so we only made 2 pips that day. On Thursday, we were caught out by the disappointing US data and had to give back 30 pips that day, bringing our weekly total down to 98 pips.
The market this week
During the first three days of last week, the investors had an appetite for risk assets and the US Dollar enjoyed some bids, but on Wednesday
Now, it is understandable that the JPY gets bid during turbulent times since the Japanese Yen is considered a ‘safe haven’ currency… but what I just don´t get is how the Euro rallies when the risk is off. The Euro used to be a ‘risk’ currency when considered alongside the commodity dollars and the British Pound, until very recently. Anyway, on Thursday the BOE and the ECB entered the scene once again. The Pound has been declining relentlessly. It jumped about 60-70 pips when the Bank of England meeting and the statement wasn´t as dovish as the market expected but it returned back down again, finally breaking below 1.43 on Friday. Half an hour later, the ECB released their meeting minutes from December. At first, the statement looked calm because it said that they could cut the rates further if the situation deteriorates, but the market took it as a hawkish warning since the things are not really deteriorating in Europe. The European economy is not in great shape, but
Economic data
Monday was a holiday for Japan, so the only important data was the Eurozone
Pairs analysis
The Canadian Dollar continues to be totally ruined across the board. With the price of oil breaking several times below $30 per barrel this week and the stock markets declining around the globe there´s no end in sight for USD/CAD, even with the weakness in the USD this week. As we can see on the hourly chart, the 100 MA in green has kept the uptrend going and occasionally the 20 MA and the 50 MA have joined forces. At the beginning of the week, the price was held up by the previous trend line, and since then the 20 MA has been the leaning line for the price and pushing it ever higher. The 20 MA is a ‘small period’ MA, showing us the strength of the
The 100 and 50 MAs have provided support this week
The 20 MA in the H4 chart has pushed the price higher
As with all other risk currencies, such as the NZD or the CAD, the Australian Dollar suffers during periods of uncertainties in the forex market. After a long-term downtrend, the AUD went through a period of consolidation, holding up well during the last few months of 2015. But the price failed to break the line at 0.7380, as we can see on the daily chart, and since day one of 2016, it has resumed. The price formed a support level at around 0.69 previously, but as we can see on the weekly chart that level is broken now, with the break taking place on Friday. As with the CAD, no one knows where the next level of support for this pair will be seen.
The resistance at 0.7380 has held
The support at 0.69 is now history
The week in conclusion
Ok… here we are on Friday evening, and seeing a close to the second week of January. The market has been rough this week, so trading hasn´t been that easy. Still, we continued last week´s positive performance and even though we are short of last week´s profit in terms of pips, we still closed the week with a healthy 98 pips. We have seen a lack of risk appetite this week, as the Chinese stock market kept declining and dragging down all the other stock markets around the world. The Yen has obviously been the prime beneficiary and other risk currencies have been hit hard. In particular, the Canadian Dollar and the British Pound. We hope that next week the risk appetite improves and our profits increase.
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