Press review - page 75

[Sergey Golubev]

2014-01-16 15:00 GMT (or 16:00 MQ MT5 time) | [USD - Philly Fed Manufacturing Index]

• past data is 7.0
• forecast data is 8.6
• actual data is 9.4 according to the latest press release

if actual > forecast = good for currency (for USD in our case)

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Philly Fed Index Rises In January But Details Are Mixed

Manufacturing growth in the Philadelphia-area continued in January, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday, with the index of regional manufacturing activity rising by more than expected.

The Philly Fed said its diffusion index of current activity rose to 9.4 in January from a revised 6.4 in December, with a positive reading indicating an increase in regional manufacturing activity. Economists had expected the index to climb to 8.7.

While the index rose more than expected, Amna Asaf, an economist at Capital Economics, said the details of the survey suggest that manufacturing activity is a little bit softer than indicated by the headline index.

[Sergey Golubev]

Technical Analysis for GOLD (based on this article)

• XAU/USD closed over the 1247 2nd square root relationship of the 2013 low on Monday
• Our near-term trend bias is higher in the metal while above 1213
  
• The 88.6% retracement of the December range at 1257 is immediate resistance and traction above is needed to further confirm the importance of Monday’s break and set up further upside
  
• A minor cycle turn window is seen early next week
  
• Only aggressive weakness below the 1st square root relationship of the 2013 low at 1213 would turn us negative on Gold

XAU/USD Strategy: Like buying into weakness over the next day or so.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
XAU/USD	1213	1224	1244	1257	1270

[Sergey Golubev]

How Forex News Traders Use ISM Numbers (adapted from dailyfx article)

• The Institute for Supply Management (ISM) was founded in 1915 and is the first supply management institute in the world.
• Servicing 40,000 business professionals in more than 90 countries, ISM focuses on supply chain management.
• Forex traders rely heavily on ISM’s release their Purchasing Managers Index (PMI) on the first business day of each month to gauge economic growth.

NZDUSD M5 : 17 pips prrice movement by USD ISM Manufacturing PMI :

What is ISM?

A country’s economy is as strong as its supply chain. The Institute for Supply Management (ISM) measures the economic activity from both the manufacturing side as well as the service side. Formed in 1915, ISM is the first management institute in the world with over 40,000 members in 90 countries. Since it can draw from information gathered from the surveying its large membership of purchasing managers, the ISM economic news releases are carefully watched by Forex traders around the world as a reliable guide to economic activity.

ISM Surveys

ISM publishes three surveys; manufacturing, construction, and services. Published on the first business day of the month, the ISM Purchasing Managers Index (PMI) is compiled from surveys of 400 manufacturing purchasing managers. These purchasing managers from different sectors represent five different fields; inventories and employment, speed of supplier deliveries, production level, and new orders from customers.

XAUUSD M5 : 3345 pips price movement by USD - ISM Non-Manufacturing PMI news event :

In addition, ISM construction PMI is released on the second business day of the month, followed by services on the third business day. Forex traders will look to these releases to determine the risks at any given time in the market.

EURUSD M5 : 37 pips price movement by USD - ISM Non-Manufacturing PMI news event :

Forex Market Impact

The Manufacturing and Non-manufacturing PMI’s are big market movers. When these reports come out at 10:30 AM ET, currencies can become very volatile. Since these economic releases are based on the previous month’s historical data gathered directly from industry professionals, Forex traders can determine if the US economy is expanding or contracting.

Forex traders will compare the previous month’s number with the forecasted number that economists have published. If the released PMI number is better than the previous number and higher than the forecasted number, the US dollar tends to rally. This is where fundamental and technical analysis comes together to create a trade setup.

AUDUSD M5 : 21 pips price movement by USD - ISM Non-Manufacturing PMI news event :

In the example above, notice how the better than expected PMI number triggered a US dollar rally against the Euro. As seen in the chart above of the EURUSD, the ISM Non-Manufacturing was not only above 50 but at 55.4, beat the forecasts calling for a drop from 54.4 to 54.0.

When an economic release beats expectations, like in the example above, sharp fast moves can result. In this case, EURUSD dropped 22 pips in 15 minutes. Traders often choose the Euro as the “anti-dollar” to take advantage of capital flows between two of the largest economies.

The Euro zone has a large liquid capital markets which can absorb the huge waves of capital seeking refuge from the U.S. So a weak US ISM Non-Manufacturing number usually leads to a dollar sell-off and a rise in the Euro. Another scenario is when the number released is in line with forecasts and/or unchanged from the previous month, then the US dollar may not react at all to the number.

AUDUSD M5 : 32 pips price movement by USD - ISM Manufacturing PMI :

Overall, an ISM PMI number above 50 indicates that the economy is expanding and is healthy. However, a number below 50 indicates that the economy is weak and contracting. This number is so important that if the PMI is below 50 for two consecutive months, an economy is considered in recession.

PMI’s are also compiled for Euro zone countries by the Markit Group while US regional and national PMIs are compiled by ISM. As you can see, traders have good reason to pay special attention to the important releases from the Institute of Supply Management.

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Forum on trading, automated trading systems and testing trading strategies

Something Interesting in Financial Video August 2013

newdigital, 2013.08.09 17:15

66. Trading the News - Economic Numbers - ISM Manufacturing

A lesson on what this indicator is and what it tells us about the manufacturing sector of the economy as well as its status as a leading indicator of overall economic conditions.

[Sergey Golubev]

EURUSD possible double top (adapted from this article)

• On December 27th, the EURUSD failed at the line that extends off of the 2008 and 2011 highs.
• The failure also raises the possibility of a double top with the October and December highs. The pattern would trigger below 1.3294 and yield a 1.2757 objective. This level is in in line with the 2013 low.
• 1.3400 is a possible reaction area ahead of 1.3294.

[Sergey Golubev]

GBP/USD Technical Analysis (adapted from this article)

• GBPUSD broke above the line that extends off of the 2009 and 2011 highs the week that ended 11/29/13. The rally has so far failed just shy of the August 2011 high. Price is on the cusp of testing that line from above but a drop below 1.6259 would indicate a failed breakout attempt.
• Do not dismiss the January 2nd bearish outside reversal. In fact, that day’s close (1.6449) was resistance on Friday. The area around 1.6450 was resistance in December as well.

[Sergey Golubev]

Australian Dollar Large Outside Week (adapted from this article)

• The AUDUSD measured level from the latest break is .8554 but be aware of possible trendline support (downward sloping) at .8712 next week. Intramonth pivots from August and July 2010 are .8770 and .8632.
• This market has already made a massive outside week. This week actually engulfs the prior 4 weeks. Given the proximity of technical levels cited, I’m more inclined to treat this move as exhaustion (at least temporarily) than continuation. The next few days may clarify.

[Sergey Golubev]

NZD/USD Technical Analysis (adapted from this article)

• NZDUSD spiked through the November high and reversed just shy of the September high. .8450-.8550 has been an area that ‘created’ a number of important tops in recent years.
  
• Longer term trend remains sideways, possibly within the confines of a triangle (since 2011). In general, the market has entered longer term resistance (highs in March 2012, December 2012, February 2013, and October 2013).

[Sergey Golubev]

USD/JPY Technical Analysis (adapted from this article)

• USDJPY is respecting the gap from October 2008 at 105.30. This level and the outside day seen on January 2nd should at least warn of a pause in the uptrend.
• An exceptionally steep trendline that connects the lows from November 2012 and October 2013 just about intersects with the July high of 101.52 next week. Obviously, it would take an exceptional decline to reach that level. The line that connects the 1998 and 2007 highs is at about 106.70 next week.

[Sergey Golubev]

USD/CAD Technical Analysis (adapted from this article)

• After a month of trading between roughly 1.0700 and 1.0560, USDCAD has broken out. Measured objectives from the breakout above the 2011 high range from 1.1680 to 1.1910. The Jul 2009 high rests in this zone at 1.1724 and the 2007 high is near the top of the zone at 1.1875.
• From an Elliott perspective, it’s possible that the rally from the 2012 low composes a ‘3rd of a 3rd (or C)’ wave from the 2007 low. Such market swings tend to exhibit extreme rates of change (so please refrain from terms such as ‘overbought’ or ‘divergence’).

[Sergey Golubev]

USDCHF multiyear correction done? (adapted from this article)

• The USDCHF may have completed a corrective decline from the 2012 high in late December. The decline is in 3 waves, channels in a corrective manner (connect the origin of waves A and C and project a parallel from the terminus of wave A to project the terminus of wave C), and consists of 2 equal waves (would be exactly equal at .8888…the lowest weekly close was actually .8885).
• The break above the trendline that originates at the July high adds credence to a larger trend change. Do be aware of the presence of the June low at .9129 and November high at .9250 as levels that could provoke a reaction.