Been trading EUR/AUD lately, as you can see from the picture
below there is a reversal making the EUR/AUD more bullish. Here is my stop
loss, take profit, entry
Entry - 1.17540
Take Profit - 1.20000
Stop loss - 1.1590
Strategy: Trend trading and momentum
So we shall do an analysis both fundamentally and
technically:
Fundamentally:
This is a date by date commentary of important news updates
for both the EUR and the AUD.
EUR became weak against the AUD as they had a contraction in
PMI (Purchasing Managers’ Index – measures the activity level of purchasing
managers in the manufacturing sector). The PMI of August was below 50 which in
this case is a contraction in the sector. This can be a leading indicator of
overall economic performance. As the number is below 50 this implies that we
should be still seeing a bearish trend of EUR/AUD. Booom Australia comes back with a positive
trade balance which is an important economic indicator. The trade balance is a
really important indicator to the currency, as positive trade balance means
that Australia is exporting more than importing. Traders will be looking at
this and may be purchasing AUD due to the bullish outlook, however some traders
will be reluctant to swing AUD as this looks temporary but isn’t as we shall
see later
Next we come on to consumer spending, Australia had +1.0%,
this accounts to the majority of economic activity, and this is another plus
for Australia. Euro Zone also had a positive consumer spending of+ 0.1%.
Although previously this was +0.8% so a reduction by 0.7%, this would have
reflected negative on the Euro, making it further weaker. AUD was further
strengthened by a reduction in unemployment from 5.3% to 5.2%, and of course as
follows is an increase in job creation of 14K. The GDP for Euro for August was-
0.2% which didn’t exactly help. Australia then released their wage price index
which was a positive 1.0% which is the measure of the change in the price that
business and the government pay for workers excl. Bonuses. This is a
leading indicator of CPI, however the Euro
Zone’s CPI is unchanged at 2.4%, although the next I speak on will have low
volatility in the market it’s worth taking a look, the Euro Zones trade balance
is +10.5bn and current account +12.7bn.
This is why Australia seem to have the upper hand but today
commodity prices fell, as we know Australia have a large primary sector, they
are 2nd world’s largest gold mining and holds some of the world’s
largest resources eg. bauxite, iron ore, lead, zinc, silver, uranium, diamonds etc. A
decrease in commodity prices will mean that Australia will sell the same for a
lower amount hitting their current account but leaving or increasing their
trade balance. However there has been an increase in the price of gold from
$1,570 to $1,650 this will aid the AUD by making it stronger. There is a strong
positive correlation between the commodity and the AUD. The rise in gold prices
is due to USA restarting QE which in effect inflates the economy making money
have less value and thus this result in gold prices increasing. Thus this may
have a negative effect on the EUR/AUD in the future, we will have to see, and
gold prices will be bullish for a few weeks or months.
I
do believe that Australia is a hot prospect for the future and they have not
quite realised their potential.
Technical:
Few glad I got that over with so know we move on to the
technical side of things. As you can see from the picture below there has been
a downtrend signified by the equidistant channel. In the picture there is a red
line signifying a support level, this is the lowest ever the pair has been. We
can see further by momentum that momentum is +ve for the pair. As we can see
the pair has broken the resistance of the 0.236 level and this is not the
support level for the pair. We can see that the pair will be bullish as the
shorter moving average has crossed the
longer moving average, due to the lag factor it took a few moments to show this
bullish move, I will leave you to ponder whether you think the pair is bullish or bearish.
Interesting article to supplement this: http://www.bloomberg.com/news/2012-08-23/new-zealand-dollar-rises-as-fed-s-evans-urges-easing.html
Please note this is my opinion and he/she (the reader of this post) should not place a trade with the information provided in this post as this may result in a loss for the individual. I will not be held responsible for the loss you make. The data presented may be inaccurate/incomplete and will be inaccurate due to the nature of financial markets