Planning the week ahead

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In this weekly report, we will try to direct our attention to the currency pairs and assets that are most likely to offer trading opportunities during the comming week, based on a combination of sentiment, orderflow and price action analysis.

1. On the docket for this week
Taking a glance at our calendar, we can notice the more important news events for the week. For the coming week starting July 28th 2014, the main events are:

Monday: US Markit PMIs + Pending Home Sales

Tuesday: UK Mortgage approvals + US Consumer Confidence (bearish expectations)

Wednesday: EU Economic/Industrial/Consumer/Services Confidence + Business Climate Indicator (bearish expectations), GER CPI (bullish expecations), US ADP + GDP (bearish expectations) + FOMC Decision

Thursday: GER Retail Sales + Unemployment Rate, EU CPI + Unemployment rate, CAD GDP, US Chicago PMI

Friday: AUD AiG Manuf.Index, CNY PMI, AUD PPI, GER Markit Manuf. PMI, EU Markit Manuf. PMI, UK Markit Manuf. PMI, US NFP + PCE Deflator + Personal Income + Personal Spending + Markit Manuf. PMI + UoM confidence + ISM Manuf. + Construction Spending

2. Strong vs. Weak

Looking at the CME FX futures market, we can see that:
- DXY has closed last week with strong bullish intent.
- CHF has closed last week with strong bearish intent.
- EUR still remains with the short intent.

We must be extremely selective during the summer doldrums so the only interesting pairs for the coming week, combining strength vs. weakness, are:

- EurUsd short bias
- UsdChf long bias

To understand more about strong vs. weak, come over to Orderflowtrading.com and check out our HeatMaps.

3. Sentiment Analysis on relevant assets

Summer doldrums are here so we need to be more and more selective if we want to remain operational (and mentally sane) in the current environment. Going into the week, it seems safe to stay away from screens until wednesday due to the lack of important data. Wednesday things get more interesting. In the meantime, the shadow of a geopolitical crisis looms large as tensions in the Ukraine and Middle East continue to dominate news headlines. Data-wise, the focus is on the US in the coming week, with some key releases sharing the spotlight with the FOMC policy meeting and NFP. Then there was this: The Russian central bank (CBR), in an unexpected move, hiked its key policy rate by 50bp to 8.0%. The hike undoubtedly has to be seen in the light of the renewed sell-off in the rouble over the past week. The CBR is clearly concerned about the inflationary consequences of the weakening of the rouble, but is likely to be under political pressure to curb the sell-off in the rouble. But this will probably only aggravate the internal recession and have little effect on the currency, so long as the geo-political situation remains unchanged.


USD: sentiment is bullish. The greenback is looking good after last week, as risk aversion drove investors out of high beta currencies. The prospect of strong US GDP and employment data is likely to stand in stark contrast to another weak euro area inflation print this week. Beyond this, earnings will remain on the front burner, with 150 firms listed on the S&P500 scheduled to release. Berkshire Hathaway, Procter & Gamble, Kellogg, Time Warner, Colgate-Palmolive, Genworth, UPS, Merck, and Pfizer are among the firms that will report. Earnings per share sit at a record high, and the ratio of positive surprises to analysts’ earnings estimates sits at about 78% so far in the Q2 earnings season which is higher than Q1 and close to the highs reached in the earlier days of the stock market’s recovery.

Euro: sentiment is negative. Pressure is ON. The latest sell-off was driven by a big disappointment in German business confidence. So beyond the focus on Ukraine and Israel, the most important European development to watch this week will be Eurozone inflation. German CPI in particular is expected to dip back below 1% again, thus joining the EU-party with frustratingly weak inflation readings. Against the USD, the euro is at its weakest since early February, and against other crosses, the currency is up to 5% weaker.

Chf: sentiment is negative. But the price action we're seeing has little to do with Swiss fundamentals. As everyone and their dog knows, the SNB keeps the EurChf more or less fixed around the 1.20 mark. So the moves in the CHF are actually very limited. The moves we see are due to USD dynamics and Euro dynamics.

For updates on sentiment as it progresses throughout the week, stay active in our Live Trading Floor.


4. To sum up: best looking charts & comments


EurUsd Daily ChartSource: Tradingview.com


UsdChf Daily ChartSource: Tradingview.com
It’s a tough challenge to combine sentiment, price action, technical analysis, and fundamental analysis all together to turn these thoughts in to actionable order flow trade ideas. If you still find yourself struggling in that regard, our FREE mindset lessons can help relieve that stress.
As always, good luck out there!