Traders Insight - Edition 1

TRADERS INSIGHT MARKET ANALYSIS FROM TRADERS ON THE TRADING FLOOR

GAVIN PANNU SENIOR TRADER

Alphachain Capital is a Proprietary Trading Firm specializing in forex and cryptocurrency markets.

MARKET OVERVIEW Last week was the worse week in the financial markets since the 2008 crash. The threat of the Coronavirus known as Covid-19 reach into global economy’s such as Europe largely Italy and Middle East with Iran had fuelled a sell off into correction levels. The rate of contagion and the increasing statistics are now a major concern for global economies.

Over the weekend there have been reports of this infection spreading in the US with two fatalities reported at the time of writing.There was some reprieve in Chinese stocks and hints the selloff could have been overly done as markets begin the week in a more optimistic mood despite the continued growth in coronavirus cases and questions over Chinese growth.

PMI surveys will come into focus this week but mostly the focus was on the weekend release of Chinese manufacturing (35.7) and services (29.6) PMI showing sharp declines.Nevertheless, despite the concerns are an optimistic outlook as markets expect Central Banks to step in with a coordinated round of easing.

The Fed’s March rate decision has been viewed as a 90% probability of a rate cut along with this week’s rate decision from the Reserve Bank of Australia and Bank of Canada all seem likely to show a dovish view.Commodity based currencies showed the most weakness last week, due to its oil correlation.

If we continue to see weakness in oil, we could expect further downside in these currencies but if OPEC step in, there may be a rebound. The AUD, NZD, CAD and NOK all sold off between 1% and 2%.

Cryptocurrencies and precious metals did not act as a safe haven asset, contrary to many people’s belief that both asset classes would do well in a panic. At the time of writing, Bitcoin is down 12% and had tested support at $8500 and Ethereum is down 16% at $220 support level. Gold fell by 3.5% to lows of $1586 and Silver is down 9.8% at $16.67 support level. The reasoning behind this could be that many had to liquidate their positions in order to meet margin calls and other short term obligations.The effectiveness of monetary easing is uncertain if this virus continues to spread and force quarantine across major cities. In the short term, markets want to see such action as progress to the current health scare but its total impact is very much uncertain.

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DESMOND ADEOSUN JUNIOR TRADER Junior FX Trader at Alphachain Capital with a Mathematics and Economics (BSc) degree. Possesses a strong focus in technical analysis and prefers totrade in line with the fundamental theme.

ASSET: AUD/CHF Brief

The AUDCHF has experienced extreme selling pressure over the past week as investors fears over the Coronavirus refuse to abate. The sudden surge in cases outside of mainland China has seen investors seek safe havens as they worry about the future of the Global economy. The Swiss Franc has been a beneficiary of this and has made large gains against the Australian dollar. Let’s dive into the charts and take a look further: Fundamental outlook

Whilst markets will continue to analyse the effect of the Coronavirus, thereare a few key data releases this week that will be in focus potentially giving forward guidance for the currency pairs as the year progresses.

The Australian Rate statement is likely to remain a key event this weekand though rates are expected to remain unchanged the RBA mayhighlight the risk that the Coronavirus poses to their global economy andoutline any monetary policy measures that they will be looking to takemoving forward.

In addition to this quarterly GDP is likely to remain one towatch as investors and traders will seek to analyse the effects that thevirus has had on the economic health on thenation.

Whilst figures are expected to come in line with the previous, a figure lower than this could spell further bearish sentiment for the Aussie. Other key events and data will include the Australian Retail sales and Trade balance. In addition to this the OPEC Meeting; which will offer further guidance as to how OPEC wish to act and protect the price of Oil.

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ASSET: AUD/CHF

TECHNICAL OVERVIEW 4HR Chart

AUDCHF has dropped well below the 100 SMA and 50SMA indicating thatthe bears are in the lead and there is still potentially more downwardpressure to come. The next key level to watch will be the psychologicalround number at 0.6200. Should price break below this key level then itmay not be long till we potentially see 0.6000 being test on AUDCHF.Resistance lies above around 0.6400 and whilst the RSI lies in the oversoldregion, it may be a while till the bulls regain control and push prices backup.

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TECHNICAL OVERVIEW Daily Chart

AUDCHF illustrating a strong bearish trend with price currently below the 100 and 50 SMA. Price has broken and close below the round number of 0.6300

Weekly Chart

The bears have been in control as AUDCHF trends lower with price now at new lows.

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ASSET: EUR/CAD Brief

EURCAD made some large gains over the past week; some of which can still be associated with the threat that the Coronavirus poses to global markets and the economy.

Given the nature of the relationship between Oil and the Canadian dollar, the recent slump in Oil prices seems to have taken its toll on the currency as it lost over 3.5% against the Euro. Taking a closer look at the charts we will be able to analyse the most recent movement and outline some key levels for the week ahead.

Fundamental outlook

The BoC on Wednesday may be the second major central bank followingAustralia to face the risks of a global slowdown due to the Coronavirus.

The central bank will be looking to analyse the effect of the virus on economy and decide whether action needs to be taken in order to maintain the status quo.

In addition to this the employment report is setto be released on Friday.

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TECHNICAL OVERVIEW 4HR Chart

Taking a closer look at the price action, price has broken above a priorlevel of resistance and is now holding at the level. A potential correction of61.8% of the bullish move would tie in the psychological round number of1.4500. This could be a level at which bulls may look to renter the marketshould bearish pressure push down the pair. A cross and increase in spacebetween the moving averages could signal further bullish sentiment forthe pair.

Daily Chart

The rise in EURCAD this week took price all the way up to resistance at1.4875 after which it retreated back as selling pressure stepped in. Keypsychological numbers namely 1.4900 and 1.5000 lie up above forEURCAD as bulls will attempt to continue to push higher. Should theselevels hold then we may see some bearish pressure step into the market.Given that the fundamental backdrop for this pair, overall the bulls are incontrol and a breakout of the falling wedge could lead to significant bullishpressure up to the next level of resistance at 1.5125

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TECHNICAL OVERVIEW Weekly Chart

Looking at the weekly chart, we can see EURCAD has formed a falling wedge pattern with its most recent move coming to test the upper Trendline. Price has rejected from the 200SMA and is now currently sitting below a strong level of support and resistance

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ASSET: EUR/GBP Brief

GBP has come under pressure this week as investors begin to price in therisk of a no deal between the EU and the UK. A continuous hard post-Brexit stance by Johnson and his cabinet is likely to see GBP continue tolose ground against the EUR. The past week saw German IFO business climate and German Prelim m/m CPI come out better than expected. The UK have until June to decide if they would like an extension to thedeadline made for a deal to be agreed by December of this year.

Fundamental outlook

This week sees releases in the form of PMI’s for sterling in addition to aspeech from BoE Gov Carney, whilst the EUR will post CPI data which isexpected to come out in line with the previous figure at 1.4%.

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TECHNICAL OVERVIEW Weekly Chart

The past few years has seen EURGBP illustrate quite choppy price actionthough price has continuously found support at 0.8300 and most recentlyrebounded strongly off this key level. In addition to this price action hascompleted a double bottom formation. The MPO for this pattern is pricedat around 0.8900.

Daily Chart

Price currently sits at around the round number of 0.8600 after breakingabove 0.8500. With resistance up above at 0.8660, we could see sometemporary selling pressure stepping to the market as some investors mayconisder this a good level to take some profits. Though I do not envisagethis lasting long; a break and close above this level could signal furtherbullish pressure for this pair.

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TECHNICAL OVERVIEW 4HR Chart

Price has most recently broken through a minor level of resistance andheld above this level. Moving forward with this pair, I expect to see someselling pressure step into the market as price nears key levels ofresistance after which I predict that price will continually push higher asinvestors and financiers begin to price in the possibility of a no deal withthe EU

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