Buy MXNGBP Gartely - great Risk/Reward and good fundamentalsTechnicals
We have a Gartely pattern set up here. I am looking to go long at 0.03697, which falls between the 0.786 retracement and 1.272 extension along with 1:1 ratio between the AB and CD legs.
There is also a divergence on the Relative Strength Index from a heavily oversold condition, supporting a spike from around the current price.
Fundamentals
Slumping oil prices damage the prospect for investment in Mexico’s energy industry, while slowing growth in the US is hurting Mexico more, since the US is Mexico's main export market. However, Mexico has the best economic fundamentals in the emerging market, and is heavily undervalued right now, suggesting either a continued consolidation around the current low, or a rebound from this low. Fundamentally, this is a risky trade and could overshoot into the stop loss, but it could also be potentially very rewarding.
Profit target
I have set an initial profit target based on Fibonacci levels. I expect the second target to be met, and based on the fundamentals above and how they evolve in the coming weeks I will either move the stop loss up to the first profit target if the second is met, or I will close the trade there.
Emergingmarkets
Copper: Republishing my old forecast and new trade setupHi, I'd like to repost a private idea I had (I did post it in related ideas in my last retracement long idea for copper -which actually worked for the 1st entry before a massive turn south-).
We have a clear short opportunity as outlined by my friend Tom Killick (he does great coverage of copper and USDCLP, check in related ideas).
If we're offered with a retracement we can take these two entries for a low risk trade:
If not, I'll be forced to operate off the 4h or daily chart and jump on the trend in some other way...There's always a good excuse to join a trend, and if you don't have many, you will miss out on the best trades (many times they never come back to you once they leave the station).
Cheers,
Ivan Labrie.
New Zealand Dollar Sets Up for Bullish MoveThe kiwi had a solid move against the dollar on Friday, gaining 1.14 percent. The move came as commodities rebounded, thus pushing up their respected commodity FX.
This was a response to the weaker dollar, but commodities saw their sixth week of capital inflows as traders deem a more risk-on approach in the medium-term. The move into commodities has been the longest in eight months.
The daily chart has formed a “cup and handle” pattern. Typically more consistent on the weekly chart, but price action has been able to form a rounded bottom which coincides with weekly price support.
The handle is formed as price begins to fade upward momentum and can resemble a bull flag or pennant.
If NZDUSD can close above .6770, the pair will likely break out of the downward consolidation (shaded box). Traders’ risk sentiment will fuel either the run up to the 200-day EMA near .7000, or cause the kiwi to trend lower to price support of .6638 – at this point the subjective pattern could show signs of breaking down.
If the pair does close below the 50-day EMA, price support would be sought out as downward targets.
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India Could Be the Most Resilient of the BRICSThe BRICS (Brazil, Russia, India, China and South Africa) are highly watched emerging markets because they represented roughly 22 percent of global GDP in 2014. However, the global economic slowdown and increased geopolitical tension has weighed heavy on these markets. Although, India may be the most resilient economy out of the BRICS.
India has felt its share of the slower economic climate, as the Markit manufacturing PMI fell to a seven-month low in September, falling to 51.2 from 52.3. According to Markit, there are signs of sustainable growth but input costs decreased for two months consecutively, which has not happen since the financial crisis. Both manufacturing and industrial output have remained stable. Services PMI has seen improvement since late 2014.
In relation, the Chinese manufacturing PMI clocked in at 47.2 and has been contracting since March while near the worst levels since March 2009.
Due to the slack in the economy and less than expected inflation, the Reserve Bank of India cut the benchmark rate by 50 bps to 6.75 percent. This strengthened the rupee has investors look for it to hinder capital outflow. It also comes as the People's Bank of China (PBoC) devalues the yuan.
USDINR is likely to fall further as I expect the dollar to remain weak following the onslaught of poor economic data. Friday's non-farm payroll print of 146,000 was well below the 201,000 general consensus. To add insult to injury, August's jobs number was revised lower by 50,000 which left mouthpiece economists in bewilderment.
The Fed's inability to act, in regards to an interest rate boost, will leave the dollar on shaky ground. Fed fund futures traders are not pricing in a potential for Fed action until June/July of 2016 - although, I am forecasting a recession by then.
The USDINR is trending within a descending channel with support at 65.28, but the pair will travel to the 50 percent Fib. retracement at 65.15 (with the 72-daily EMA as further support). Secondary target is 64.83.
Resistance can be found at 65.6060, 65.8337 and 66.1374
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U.S. Dollar Awaits FOMC DecisionSome say this week's FOMC decision will be of historical proportions and be the first time the Federal Reserve will increase the Fed funds rate in almost a decade.
The U.S. dollar index is in a descending trend. Price action is floating above the minor trend created by the top on April 13.
The dollar has not been able to see any significant support higher, likely due to the uncertainty about the Fed's policy. The economy is clearly slowing down, and the Fed has never hiked rates into a slowing economy.
Furthermore, financial conditions are already tightening in the wake of a potential boost - if we can call it that -in interested rates.
According to Goldman Sachs' financial conditions index, which incorporates equity prices, exchange rates, credit spreads and a slew of other factors, hit the highest level in five years.
In regards to what is already occurring with a stronger dollar, increase in borrowing costs and declining asset prices, the market is already undergoing what feels like a 75 bps increase; a 25 bps hike from the Fed would only add insult to injury.
Technically, rallies in the dollar have been sold. Price action did see significant pressure in late August and broke key technical support. There was support near 92.50, but the mere close below signals the potential for further weakness.
If the Fed remains dovish this weak, and the FOMC minutes continue to be vague and confusing, the dollar could very well retest this year's lows.
Momentum on the longer-dated charts are suggesting that upward movement is challenged, and the trend could be changing.
Of course, if the Fed did come out and increased rates, the dollar would significantly strengthen. The idea that the Fed would allow that is flaw because they are begging for any sign of inflation in a deflationary world.
Multinational corporations have been greatly hurt with the dollar rising against nearly all currencies, and emerging market currencies collapsing. A $3 trillion debt crisis could also occur if the Fed embarks on a path towards monetary tightening.
The idea that the Fed can just tighten once and be done with it is foolish. That's not monetary normalcy, and the Fed would only prolong the inevitable.
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Hang in there holders of Turkish LiraAs you can see by my chart, every time the price has hit the top of the linear regression, and 0.04 on the MACD, the price has reversed back down again with the CCI, DeMarker and Stoch RSI gradually falling back into their respective channels. Without consideration of any further shocks to the market, I think that political instability, the conflict in the south and east, I believe these factors have already been built into the price. I dont' believe the price will fall back down in the next few days, but probably drift lower over the coming weeks with the price potentially hitting 3.20.
The overnight will hopefully make baring this loss a little more bearable and a small short at the top of the resistance line should be considered to mitigate open losing positions.