The Week Ahead

Welcome everybody! So this is my first blog and I am very excited. This will also be the first of the “The Week Ahead” blogs which will be posted regularly on Sunday evenings whenever I get the chance. The purpose of these blogs will be to help other traders to plan their weeks better so that they are more prepared to deal with events as they unfold, to share potential set ups that will be grabbing my attention in the week ahead or simply to provide an entertaining analysis on the markets. 

Investor Focus

Focus this week will inevitably remain firmly in the direction of the Middle East and crude oil. There is now a high chance of sustained violence and unrest in Libya the 11th largest oil exporter which should support the price of crude oil for some time. Sources say exports from the country are down by 1.6 million barrels per day. However, if unrest spreads to either Algeria, Saudi Arabia or Iran the price of crude oil really could spike a lot higher. Therefore announcements concerning these countries need to be watched very closely over the next couple of weeks. 

Currency Majors Round-up

US Dollar: The US dollar has been under pressure for a long time now due to market pressures. The fundamentals speak for themselves with negligible interest rates that don’t look to be increasing anytime soon, a large deficit which will get bigger and the prospect of the FED pouring more dollars into the market via quantitative easing. The US dollar index measures the strength of the dollar against a basket of other currencies weighted on their size. Let’s take a look:-

As we can see from the chart the US dollar is in a down trend and is very likely to test the major support line around 75.75 in the next few days. 

EURO: The Euro had a terrific week last week as ECB President Mr Trichet announced an almost certain interest rate increase in April. I expect further but limited gains this week for the Euro against it’s major rivals as the up trends continue. Peripheral countries will feel yet more pain if the Euro appreciates much more from here due to the decrease in competitiveness that will bring. The Euro, therefore, still faces many questions on it’s sustainability that are yet to be resolved and so should enjoy in time in the sun whilst it can. 

POUND: It’s a big week for the pound this week after the ECB has indicated an interest rate in April to cool inflation. Investors will be listening closely to the Bank of England rhetoric for hints as to when an interest rate hike might come given that inflation in the UK is currently much higher than in the Eurozone. The pound could strengthen in anticipation of Thursdays event but has resistance to overcome at 1.6330, 1.6500 and finally 1.7 against the dollar. The BOE is stuck in a tight spot as inflation is well above the 3% target yet any interest rate increase could hurt the fragile recovery and the housing market especially in light of the government cuts on the way in April. They therefore may like to talk down the likelihood of interest rate increases until the government cuts have been implemented which could provide an opportunity to sell pounds against the dollar late in the week. 

I shall cover some of the other currencies during the week. 

Watch list

Markets that are looking interesting are put onto a watch list and are then given particular attention. This could be if there is a major economic release that is likely to provide a trading opportunity or if the price is entering into an interesting area like a major support/resistance line or pulling back to the moving average during a trend. Here are the markets on the watch list at the moment:-

• GBP/USD- Thursdays interest rate decision may provide an opportunity to sell this pair if the Bank of England indicates it is not ready to start raising interest rates anytime soon. 
• USD/CAD- Reaching historical lows near major resistance. This pair doesn’t tend to stay below 1 for very long. Look to buy on strength. 
• CHF/JPY- Look to sell this pair on a reversal set up due to resistance level and overbought pattern. 

Thank you for reading my first blog I hope you have enjoyed. I will try to include more charts next week.