- British manufacturing growth climbed to a two-and-a-half-year high last month, fuelled by new orders from both home and abroad and adding to signs the economy ended 2016 strongly. British manufacturing PMI rose to 56.1, the strongest reading since June 2014, from 53.6 in November. That exceeded market forecasts, which pointed to a decline to 53.1.
- The boost to competitiveness from the weak exchange rate has undoubtedly been a key driver of the recent turnaround. But cost pressures coming from the GBP’s fall will increasingly feed into consumer prices this year.
- A separate survey of financial officers last week showed business morale has recovered completely its plunge after the Brexit vote. However, companies are reluctant to spend more because of uncertainty about the economic outlook.
- The GBP appreciated against the EUR after strong macroeconomic data from the UK. The EUR/GBP broke below 14-day exponential moving average today, which is an important bearish signal. Shooting star candle on Friday strengthens our bearish view. We are opening a short position at 0.8480 today with the target at 0.8340.
AUD/JPY: Aussie supported by Chinese data
- The Aussie got a lift from surprisingly upbeat reading on Chinese manufacturing today.
- China’s factory activity index, Caixin/Markit Manufacturing PMI, rose to 51.9 on a seasonally adjusted basis, from 50.9 in November and beat market forecast of 50.7.
- The index has been slowly building momentum thanks to a lending and construction boom, and has now been above the 50-point neutral level which separates expansion in activity from contraction for six straight months.
- Output rose at the fastest pace since January 2011, with a reading of 53.7, and new orders also increased significantly, though companies continued to cut staff and at a slightly faster rate from November.
- Order growth was fueled by stronger domestic demand as new export orders remained sluggish.
- After a rocky start to the year, China’s economy looks set to hit Beijing’s 2016 growth target of 6.5 to 7%, after expanding 6.7% for each of the first three quarters.
- Data last week showed profits at industrial companies rose at the fastest pace in three months in November, with the extra income offering some relief for the many debt-laden companies in smokestack industries.
- Technical analysis of AUD/USD charts gives no clear outlook. Long-term charts are bearish, but daily charts lean bullish though as RSI is biased up. Fundamental analysis suggests upside potential for the AUD. The Australian yield level in real terms remains one of the highest in G10. The AUD/USD should by supported by the fact that the market has now priced out any expectation of easing by the Reserve Bank of Australia. The AUD/USD is also likely to rise on the back of higher commodity prices and hence, an improvement in terms of trade.
- We stay sideways on the AUD/USD, but we are opening a long position on the AUD against the JPY at 85.15.
FOREX – MAJOR PAIRS:
FOREX – MAJOR CROSSES:
It is usually reasonable to divide your portfolio into two parts: the core investment part and the satellite speculative part. The core part is the one you would want to make profit with in the long term thanks to the long-term trend in price changes. Such an approach is a clear investment as you are bound to keep your position opened for a considerable amount of time in order to realize the profit. The speculative part is quite the contrary. You would open a speculative position with short-term gains in your mind and with the awareness that even though potentially more profitable than investments, speculation is also way more risky. In typical circumstances investments should account for 60-90% of your portfolio, the rest being speculative positions. This way, you may enjoy a possibly higher rate of return than in the case of putting all of your money into investment positions and at the same time you may not have to be afraid of severe losses in the short-term.
How to read these tables?
1. Support/Resistance – three closest important support/resistance levels
2. Position/Trading Idea:
BUY/SELL – It means we are looking to open LONG/SHORT position at the Entry Price. If the order is filled we will set the suggested Target and Stop-loss level.
LONG/SHORT – It means we have already taken this position at the Entry Price and expect the rate to go up/down to the Target level.
3. Stop-Loss/Profit Locked In – Sometimes we move the stop-loss level above (in case of LONG) or below (in case of SHORT) the Entry price. This means that we have locked in profit on this position.
4. Risk Factor – green “*” means high level of confidence (low level of uncertainty), grey “**” means medium level of confidence, red “***” means low level of confidence (high level of uncertainty)
5. Position Size (forex)– position size suggested for a USD 10,000 trading account in mini lots. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size). You should always round the result down. For example, if the result was 2.671, your position size should be 2 mini lots. This would be a great tool for your risk management!
Position size (precious metals) – position size suggested for a USD 10,000 trading account in units. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size).
6. Profit/Loss on recently closed position (forex) – is the amount of pips we have earned/lost on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.
Profit/Loss on recently closed position (precious metals) – is profit/loss we have earned/lost per unit on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.
About the Author:
By GrowthAces.com – Daily Forex Trading Strategies