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OrderFlowTrading: Foreign Exchange Sentiment & Orderflow Analysis
Planning the week ahead
by JupaFX
OrderFlowTrading.com
In this weekly report, we will try to direct our attention to the currency pairs and assets that are most likely to offer trading opportunities during the coming week, based on a combination of sentiment, orderflow, and price action analysis.
On the docket for this week
Taking a glance at our calendar, we can notice the more important news events for the week. The main events this week are:Monday: Nothing significant – could be a day to spend away from screens!
Tuesday: CNY Retail Sales + Industrial Prod., GER ZEW, EU ZEW, AUD Budget Release, US Retail Sales (bullish expectations), CAD BoC review, NZD retail sales
Wednesday: GER Retail Sales, UK Unemployment (bullish expectations), EUR Industrial Prod. (bearish expectations), UK BoE Inflation Report, US PPI, NZD Business PMI, JPY GDP (bullish expectations)
Thursday: European Council Meeting, GER GDP, EUR CPI + GDP (bearish expectations), US Empire State Manuf. + CPI + Jobless Claims + TIC Flows + Industrial Prod. + Philly Fed + Housing Market Index + Yellen's Speech
Friday: EUR Trade Balance, US Housing Starts + Building Permits + UofM Sentiment (bearish expectations)
Strong vs. Weak
Looking at the CME FX futures market, we can see that:
- DXY has a long bias, bouncing the 79.00 support and approaching 80.00
- EUR has a short bias, bouncing recent highs at 1.40
- CHF has a short bias, bouncing recent highs
- AUD has a long bias
So if we combine and filter the most evident FX pairs to analyze, we come up with:
- EURUSD short bias
- USDCHF long bias
- EURAUD short bias
To understand more about strong vs. weak, keep an eye on heat maps posted to the news feed here.
Sentiment Analysis on Relevant Assets
Going into the week, the main longer-term sentiment themes seem to be risks of a hard landing from lending and real estate excesses in China, the continuous tensions in Ukraine which threaten Europe’s energy imports from Russia, the massive fiscal imbalances in the Eurozone (despite what Italy's non-elected PM Renzi says), and Japan. The Loonie has been on the move recently, so looking at Canada, some speak of risks to the housing sector and construction sector. Beyond these background themes, we have quite an exciting week ahead of us (except for Monday) with important macro data.
USD: sentiment is positive. Regardless of the pressure that Janet Yellen receives by Government officials during her speeches, Taper is still under way and the market has recently been supportive of the greenback. The move in the DXY this week is surely caused also by the Euro (due to it's weight in the basket) but the widespread move of the USD vs. Euro, CHF, GBP shows some USD bids doing the rounds. Will it continue? Retail Sales might provide an excuse.
EUR: sentiment is negative. Will 1.40 be a significant top? Who cares. For now the market is speculating that Super Mario Draghi will be more accommodative in June, and this is almost an opposite stance to the FED's taper program. Also, the higher Euro was finally showing it's effects on the strongest economy of the Eurozone (Germany), showing a 1.8% drop in exports. Watch this week's CPI and GDP reports to confirm or lighten the negative sentiment in play.
AUD: sentiment is positive. The Aussie was the most resilient currency last week despite the clear statement by the RBA regarding the impact of a high currency. This is probably due to the strong labor market conditions and the household sector.
To Sum Up: Best Looking Charts & Comments
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EURUSD 4H chart – a rebound could very well be in the cards, but momentum is to the downside.
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USDCHF 4H chart – rebounding from .8700s
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EURAUD Daily chart – stops sub-.4650 are coming into focus
More order flow levels on the feed: http://www.orderflowtrading.com/ForexNews.aspx
It’s a tough challenge to combine sentiment, price action, technical analysis, and fundamental analysis all together to turn these thoughts in to actionable order flow trade ideas. If you still find yourself struggling in that regard, our mindset lessons can help relieve that stress.
As always, good luck out there!
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