Weekly Outlook 7/10/2013


A month ago I predicted a short term bull rally of the $AUDUSD and downfall of $XAUUSD and it worked just like that. So whats gonna happen from now onwards. Well, the entire news spectacle is on the US Government who is acting no different than governments in emerging markets like India & South Africa to name a few. The probability of either of the parties reaching a deal by the end of next week is quite high as if they don’t the losses can be quite catastrophic for the US economy. Not only its the monetary losses and backlog of functioning from the government side that will hurt the economy but it will be the distrust issue in the mind of investors that will hurt them the most. For the world’s largest debtor nation not being able to display strong governance in Washington is just another blow for there economy after there regulatory framework took a hit in the showdown of 2007.

So, lets get into the currency outlook for the week without any further ado:

EUR/USD

EUR/USD had a correction of sorts from its bull rally on Friday as its RSI reached 70 on Thursday. RSI suggests that it might start going down but I would not get into any short trades until it breaches below the 1.3400 mark. I’m currently in the money for a Long EUR/USD trade that I opened at 1.3500 and looking to t/p at 1.3710 with a s/l of 1.3395.

GBP/USD

GBP/USD took a big hit on Friday after showing amazing strength among all its major peers. On RSI it seems like it is time to sell but I would only play this currency on a scalping basis. It may find support at the 1.5950 trend line level which developed since the 2008-2013 ascending triangle formation that it breached in Feb 2013 that saw the GBP/USD to reach multi year lows at 1.4850 levels. I would stay away from this currency as I think that the market is undecided on this pair and scalping is not my way of trading.

AUD/USD

AUD/USD has still more upside in it before we see any bear run on this currency. The RBA statement that came out last week was bullish for the currency but as the house prices in the country went up by double digits, the RBA has a big headache on how to contain it without increasing interest rates. As for its neighbor, the Kiwi central bank made it clear of its intentions to increase the interest rate after seeing a sudden increase in their nation’s house prices as well.

XAU/USD

Gold is one of my favorite assets unlike what the haters would think. Gold has been part of mankind since time and it has been the means of currency throughout history. Even though the Gold is having a hard time for the first time in more than a decade I would never think about shorting without a hedge bet on. I bought Gold futures when it fell down to $1235 an ounce and I would not close until it breaches the $1270 level. I would always look at opportunity to buy Gold as with high inflation in the coming decades Gold prices will eventually rise whatever the critics of this asset say. Gold has and always will be a perfect hedge for inflation. It had to have a correction after its monstrous bull run from 2005 till 2011. Its a long term asset to invest in and I  would need to make a book one day on the advantages of owning gold.

In other news I have finished with my mid semester exams with credits in Macroeconomic Theory & Principles of Econometrics! :)

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What new government in Australia may mean for the Aussie Dollar

220px-Tony_Abbott_-_2010

Expected landslide victory in Australia and a change of government in Canberra makes it clear that the country does not support carbon tax and mining tax on the nation. Tony Abbott made it clear that he will abolish carbon tax and reduce company tax by 1.5 percent which he believes will turn the current account deficit of Australia into a surplus within a decade.

Screen Shot 2013-09-07 at 8.15.37 PMAUD/USD

From the market point of view, this may signal a bullish sign for Aussie dollar from a short term perspective. Although, Tony Abbott signaled in his many speeches that he will make sure that the interest rate are at their lowest to support the economy. This may further signal that their might be more cuts in the future interest rates even though Abbott has no say in it as it is decided by the members of RBA.

From technical point of view, the AUD/USD has to breach 0.9200 in order to extend its gain to 0.9700. Traders can look at opening a long AUD/USD trade at current levels with a stop loss of 0.8950 and a TP of 0.9700 for 2x risk to reward ratio.

All in all, judging by the clear estimated victory of the Liberal-National coalition it seems like the Australians have spoken that they need a change of government in Canberra big time and it seems that the time has come.

 

 

 

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Weekly Outlook 2nd September 2013

So what should we expect this week. Well, Monday will be a slow trading day particularly during the US session as the country’s banks will be observing labor day. But it is expected to be a beater of a week as lot of news from central banks start pouring in from Tuesday starting with:

(1) RBA cash rate in Australia that is expected to be on hold at record lows of 2.50 %.

(2) US ISM Manufacturing PMI numbers with an expectation of a pretty solid number there as well of 54.2

(3) On Wednesday Bank of Canada will announce their cash rate as well. No surprises there we expect, but the policy statement will get us a clear idea of what the bankers think of the Canadian Economy at its present state.

(4) On Thursday, eyes and ears would be on Great Britain as they announce their cash rate as well their asset purchase facility numbers which is expected to be unchanged but you never know.

(5) Finally, Friday bringing in the big guns with the all important unemployment numbers from US making this week after monday to be a sure shot volatile gutted week for major and cross currency pairs.

 

So what is the outlook for some of the major currencies then, well:

EUR/USD

EUR/USD

The market is still undecided on the Eur/Usd trade but at the end of this week, we are expecting for the market to make up their mind on a clear direction as the currency pair may breach one of the two handles within which its trading in order to signal a direction for the short term future.

What about the precious Gold commodity? Where is it heading to?

Gold Outlook

XAU/USD

While Gold saw a major correction from its low of $1180 an ounce it might still see more downfall if you believe the market technicians. As per the technical picture above Gold touched the 70 level RSI which suggests it might have some shortfall from its 3 month high of $1435 an ounce. If somebody wants to play the day trading game in the Gold contracts, shorting the commodity at current levels for a TP of $1373 or TP2 of $1350 wouldn’t be a bad option.

Well, next week seems to be a much exciting week ahead of us as we see what happens in Syria and what the central bankers and economic numbers mean to the world.

As far as I am concerned I’ll be busy doing work, following the news and studying for my mid term exam on Macroeconomic Theory and Principles of Econometrics. Till then have a pipping week ahead…!

 

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Welcome to College Econometrist.net

Hi, My name is Shiv Mehta. I am currently a student of Economics at University of Sydney. Collegeconometrist.net is my way of expressing my opinions and comments on geopolitics, world economics and global financial markets. Hope some of you find this blog useful as you enter into the ever evolving field of economics & finance.

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