November Market Update (Week 2)

This week, after the Inflation report on the 12th, we were able to see the reaction of the GBP and respective crosses after the dovish comments that confirmed the indecisive price action seen on both the GBP:USD and the EUR:GBP. After what seemed like the return to the overall short trend at the end of last week, the currency market is now moving a bit sideways maybe because of the news ahead regarding Gold and the Swiss referendum… (see below – effect of the news looking forward).

JPY crosses are still showing the Yen weakness supported by the Bank of Japan quantative easing – no ‘fundamental’ end in sight although there is a significant horizontal resistance seen at 115.
On the Indices’ side, S&P, Nasdaq and the Dow are still breaking new records for almost every consecutive day since the 4th November.

Gold and Silver are still tanking although price action is now showing some mixed signals. Oil price is still going down and around the very clear 77 level so extra attention and maybe some profit taking are highly recommended.

Best Trades This Week

1. EURJPY (4h Chart) –Trend Continuation Long – 10.11.2014 – Still the obvious choice as the BoJ is still behind it, this time the EUR:JPY one bar on the Daily chart and the 4h chart presented us with a beautiful support level plus a Low Test bar also around the 20 eMA. That was the perfect excuse to get in that trade early on the 11th. This trade is now at +2,5% after reaching 4% yesterday.

2. AUDNZD (Daily Chart) – Range Short Trade – 03.11.2014 – another range based trade between 1.1280 and 1.10 levels. After the previous reaction of that upper level on the trade on the 8th of October, a new rejection of the price happened on the 3rd showing an Inside Doji Bar that was finally the signal for the bearish move. Now over +2% profit after some hesitation around the moving averages, it is recommended to move the stop so we can relax and watch lower prices until the support level – just as a range should be.

3. S&P (Daily Chart) – Long  – 16.10.2014 – A follow up on this long trade as all the American Indices keep going to the upside. Now at a +3% profit, we should expect some sort of correction at any time although this seems to have become just another good run to new all time highs. As trend following rules would say, “wait for the pull back and then scale in again”.

EFFECT OF THE NEWS LOOKING FORWARD

This week the major concern is the Swiss referendum on the 13th regarding the “Save our Swiss Gold initiative”. If approved, this would require that the Swiss National Bank would have to hold 20% of its 550 billion assets in Gold. This means that the SNB would have to buy about 1500 tons of gold over a period of five years. It also means that they wouldn’t be able to sell it in order to hold that 20% margin. Obviously, no matter what the result is, we should be expecting some major reactions. Remember to be extra cautious.

Gold – as there are no technical levels on the way down until 1030, trend following should still dictate the rules… On the other hand, considering that the weekly chart is presenting a convincing long opportunity, one must think that it will all come down to the announcement in Switzerland. As usual, we will wait for the charts to lead the way.

Also next week there will be the Monetary Policy Statement from the BoJ which should be an important event affecting the latest rise in all the Yen crosses.