Aussie Q1 GDP
The Australian economy contracted 1.2% from Q4 2010, however it expanded by 1.0% from a year ago. Although the reading was slightly softer than expected, the market loves the Aussie as it jumps above the 1.07 handle with a slightly firmer revision from the prior quarter.
- GDP (QoQ) – Survey:-1.1% Actual:-1.2% Prior:0.7%
- GDP (YoY) – Survey:1.0% Actual:1.0% Prior:2.7%
China’s PMI Manufacturing
China’s May PMI Manufacturing reading expected at 51.6 came in stronger at 52, but weaker than the prior reading of 52.9. Global slowdown seems to be taking root, however China’s numbers remain strong, but as always we will view their data with a grain of salt. The market has had no reaction to this reading as the EUR/USD continues to hover above the 1.44 handle.
AIG Performance of Mfg Index
The AIG Performance of Manufacturing Index for May came in again at a reading indicating contraction at 47.7 (48.4 prior.) Higher rates in Australia and rising commodity prices could be to blame for the low reading.
NZD Terms of Trade Index
The 1st quarter reading for the New Zealand Terms of Trade Index improved quarter over quarter by a surprising 0.9%, despite weather related disasters in NZ and the region (0.6% prior). The kiwi bounced toward yesterday’s highs heading into the release but has done little following the improved number. The Kiwi bid seems to be driven by the risk bid on Euro that has pushed EUR/USD pair to 1.4435 (highest since 5/9.)
The Traders Course Lesson 08 – May 31 2011 Rebroadcast
What is the EURUSD saying to me right now?
I often get questions like:
“Greg,
Is the EURUSD in a bull trend or a bear trend? If you look at the EURUSD from January 2011 low to the high, the pair is in a bull trend. If you look at the move from the high in May on the daily chart we are below the midpoint of that move, so the market is still in a bearish trend”.
I don’t look at the market that way, and think that you will go crazy trying to define the bias from a single chart this way – especially when you are focused on a daily chart where a correction of 800 pips (from Jan) just comes down to the 38.2% retracement. No matter who you are, that move down/correction hurts and quite frankly we don’t know if it is over or not.
Instead I break it down into it’s component pieces. The pieces consist of a daily, an hourly and a 5 minute segment. Each help define what I feel and they also define risk and targets of where we may be going. There is no guarantee it goes there but if you break it down by using simple tools, you can make sense of a simple picture. You then apply rules like “non-trending markets transition to trending markets” as a way to anticipate a potential trend. It is then up to the market to do it. If it does not trend the way you think, get out when the bias turns around.
This is what the EURUSD is saying to me RIGHT NOW. See if it makes sense to you?
1. What is the Daily Chart saying to me right now?
2. What is the HOURLY CHART saying to me right now?
3. What is the 5 MINUTE CHART saying to me right now?
So what is the trade bias? What is the risk? What do I do?
The daily chart is bullish. The price is above channel trendline and the 38.2% retracement. The next target is the 1.4454 level or the 50% retracement looking solely at this chart. This is what it is saying to me.
The hourly chart is also bullish. The price is above the trendline from May 26th low. It held the 38.2% retracement of the weeks (Monday and Tuesday) trading range. Both things kept the bullish bias for the pair today. A move below the trendline and then the 1.4359 would change the bias. I would expect that traders would feel concerned from a break below the strong trendline and the 38.2%. At least a little. They would look for 1.4339 and 1.4320 as the next targets.
Finally, the 5 minute chart is showing that the move higher today was in the first 12 hours of the day and most in the Far East session. London had a modest 64 pip range. NY had a even more modest 48 pip range. The 100 and 200 bar MA (blue and green lines are going sideways) are converged. The price is confined by triangle trend lines. The market is consolidating.
Given the daily and the hourly, the bias is bullish. A move below the trendline on the 5 minute would target the 38.2% retracement at 1.4359 and should lead to further selling pressure. That is the risk.
The upside needs to gather itself and start a new leg higher. The first step is on the 5 minute chart to get above the trendline. Then the high for the day at 1.4423 and from there, the door opens for further gains toward the 1.4454 level which is the 50% on the daily chart. A move above that level looks toward 1.4500, etc.
The trade should follow one of these paths given the consolidation in the 5 minute chart for 12 hours today. The market is likely to look to move away. As each level is breached -either up or down – look for the next target. Look to use the prior level area as the support (or resistance). Ultimately, I want to catch a trend, but to me catching a trend is about taking steps. Steps that start somewhere and go somewhere specific. Those “somewheres” have a technical meaning that has it’s roots in a moving average, a trendline, a fibonacci retracement.
That is how I see the market…..without worrying about what wave the daily chart is under. To me it is all about what I see now and what are the tools saying about where we are going. As long as the next destinations are reached, the trend continues.
BOE Sentance (outgoing member of MPC) says credibility risk in UK
- Inflation squeezing out some growth in economy
- Need rate rise now to avoid sharper increases
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