GroundStone Holdings Morning Newsletter

Morning Technical Newsletter

All Eyes on Midterm Elections


The midterm elections that are slated to be held in the United States today will have dramatic ramifications on the country’s politics, as well as on the global markets. Four hundred and thirty-five seats in the House of Representatives will be available and thirty-five slots in the Senate will also be voted upon. The outcome will determine if President Trump’s Republican party will maintain a majority, which would make it easier for him to implement his proposed legislation (especially about healthcare, trade, taxes, and immigration issues), or whether the Democrats will take control of Congress, giving the president substantial opposition.

The markets have already reacted to pre-election predictions, with polls showing a strong turnout for democrats which will alter the current government makeup. U.S. stock markets endured a rocky October, but analysts expect a strong rebound if the Republicans manage to maintain control in the midterm elections. According to a report published by CNBC, the odds of the Republicans losing control of both the House and the Senate are just 10 percent. According to Reuters, the Democrats are expected to take control of the House while the Republicans are expected to maintain control of the Senate.

Asian shares were mixed on Tuesday, with the Nikkei 225 gaining 1.14 percent as of 4:03 p.m. HK/SIN and Hong Kong’s Hang Seng Index gaining 0.56 percent. Both the Shanghai Composite and the Shenzhen Composite were down, trading 0.23 percent and 0.49 percent lower respectively.

On the oil markets, U.S. WTI futures were down 0.33 percent to $62.89 per barrel and Brent crude futures were down 0.59 percent per barrel, sliding further away from the four-year highs hit in early October, despite the implementation of new sanctions against Iran that went into effect yesterday.

More on: https://www.groundstoneholdings.com/2018/11/06/morning-technical-newsletter-28/

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Morning Technical Newsletter


Dollar Broadly Lower on Policy Outlook

The US Dollar was broadly lower after the US mid-term elections which suggested that FX players expect the Trump administration to face some strong headwinds attempting to push through some of its fiscal policies given the Democratic party’s control of the House of Representatives. Currency strategists say that the greenback had rallied under Trump’s fiscal stimulus plan and the economic data which accompanied it, and that that may have forced the hand of the Federal Reserve which signaled its willingness to move to a higher interest rate environment. Now, all bets are off, they say.

As reported at 11:15 am (GMT) in London, the EUR/USD was trading at $1.15, a gain of 0.62% and just off the session peak of $1.152. The USD/JPY was trading lower at 113.06 Yen, down 0.31%; the pair has ranged from 112.948 Yen to 113.818 Yen. The GBP/USD was trading at $1.3163, up 0.55%, off the session high of $1.3175.

Trump Efforts Could be Hampered

What is also worrying Dollar bulls is that, with control of the House, the Democrats now have the ability to scrutinize the administration’s current policies. Looking ahead, analysts say that there is greater uncertainty as to the Fed’s policies relative to higher rates, and the ability for the President to move ahead with certain stimulus policies.

More on: https://www.groundstoneholdings.com/2018/11/07/morning-technical-newsletter-29/
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Morning Technical Newsletter


U.S. Oil Output Hits Record Highs

The United States assumed the position of the world’s top crude producer when its production hit 11.6 million barrels per day, which it did last week, according to a report released by the Energy Information Administration (EIA) yesterday. The report showed that the U.S. has increased its crude production by 22.2 percent this year alone, increasing production by 2 million barrels per day from the same period last year, and has tripled its production in the past decade. The U.S. government has set its target to produce 12.1 million barrels per day on average in the coming year. Russia is currently producing around 11.4 million barrels per day and Saudi Arabia is currently producing 10.7 million barrels per day.

OPEC members are expected to meet this weekend and it is largely expected that they will focus on how to react to America’s increasing production. Analysts have noted that there is a real possibility that OPEC will implement production cuts as it has in the past, to prevent prices from dropping further. Oil prices have tanked recently due to worries about a global supply glut and the increase in U.S. production. In addition to production increases in the U.S., Russia, Saudi Arabia, Iraq and Brazil have all increased production in recent years, contributing to oversupply.

On Thursday, oil prices were modestly higher, with U.S. WTI futures up 11 cents per barrel to $61.78 per barrel as of 2:37 p.m HK/SIN. Brent crude futures were up 0.07 percent to $72.12 per barrel.

More on: https://www.groundstoneholdings.com/2018/11/08/morning-technical-newsletter-30/

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Morning Technical Newsletter


Hawkish Fed Lifts Dollar

The US Dollar earlier saw positive momentum against its rivals during Asian trade on Friday. That came on the heels of the the Federal Reserve Bank’s reaffirmation of its commitment to raise interest rates in the near term. Though the Fed did leave rates at their current levels, the language suggested that a rate hike could come as soon as next month. With the mid-term elections now out of the way and with an outcome largely predicted, analysts say that demand for safe haven currencies is likely to continue to fade.

As reported at 10:37 am (JST) in Tokyo, the EUR/USD was trading at $1.1356, down 0.08%; the pair has ranged from a low of $1.13537 to a high of $1.13690. The GBP/USD was trading lower at $1,3056, down 0.07% and just off the session low of $1.3052 while the high was recorded at $1.3070.

USD/JPY Helped by Policy Divergence

Against the Japanese Yen, the greenback has appreciated 2.4% within the last two weeks, largely a result of the monetary policy divergence between the Bank of Japan and the Federal Reserve. According to the BOJ, the economic situation in Japan does not yet warrant their reining in of the Quantitative Easing policy it began several years ago.
Presently, Japan’s inflation rate remains stubbornly below the central bank’s 2% target while economic growth and productive have been relatively stagnant. The USD/JPY pair was trading lower at 113.884 Yen, down 0.135%.

More on: https://www.groundstoneholdings.com/2018/11/09/morning-technical-newsletter-31/

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Education post 13/100 – How to trade doji candlestick pattern?

– A Doji is a small bodied Japanese candlestick pattern whose opening and closing are at the same or nearly the same price.

– A Doji is usually part of common Japanese candlestick reversal patterns like the bullish Morning Star and bearish Evening star patterns

– Because Dojis are found in a large number of reversal patterns, traders automatically think that the single doji is a reversal candlestick. But in fact, the doji by itself represents indecision in the marketplace.

– A Doji breakout setup provides an excellent risk to reward opportunity for forex traders.

The lowly doji is very unassuming in appearance. Typically, it looks like a plus sign but can appear as a capital “T” in the Dragonfly doji pattern or the shape of a nail in the Gravestone Doji. We are going to be discussing the first two types of dojis found in the “cheat sheet” above. These small candles can lead to large breakouts that either continue trends or reverses them. We are going to look at the way to trade these power packed price patterns with limited risk for maximum potential gain

Typical candlesticks consist of a body that may be one of two colors; blue or red. A candle is blue if buyers were able to push prices above the opening price and were able to hold it until the close of the candle. A candle is red or bearish is sellers were able to push prices below the opening price and hold it there until the close.
On the other hand, the doji candles have no color. The doji and long-legged doji illustrate the battle between buyers and sellers that ended in a tie. The opening price and closing price are in the same place as bulls were unable to close prices higher and bears were unable to close prices lower.

How to Trade the Doji Breakout

Ideally, you want to find a doji that has formed near a level of support like a trend line. You want to identify the doji high and the doji low as this will determine the support and resistance levels of a potential breakout.

More on: https://www.groundstoneholdings.com/2018/11/10/education-post-13-100-how-to-trade-doji-candlestick-pattern/

How to trade hammer candlestick formation?

More on: https://www.groundstoneholdings.com/2018/11/11/education-post-14-100-how-to-trade-hammer-candlestick-formation/

What Is a Hammer?

1. Considered a reversal formation and forms when price moves well below open, but then rallies to close near open if not higher. (inverted hammer is the mirror opposite)
   1. Forms a candlestick with a long lower shadow (tail), and a small body with little or no wick–looks like a hammer, or mallet. (inverted hammer is the mirror opposite)

   
   

2. Depending on the previous trend, a hammer may be referred to as a hanging man or shooting start, but the same concept applies. Bullish or bearish bias depends on previous price swing, or trend.
   1. A hammer after an uptrend is called a hanging man.
   2. An inverted hammer after an uptrend is called a shooting star.

   
   

Why are Hammers important?

1. May act as a leading indicator suggesting a shift in bullish/bearish momentum
2. Completed hammers may help to either confirm, or negate, a potential significant high or low has occurred. –price drives higher or lower “hammering” out a top or bottom before closing back towards open
3. Significance increases with length of shadow (ideally 2-3 times the size of the body) as well as timeframe
4. Hammers may also help confirm, or strengthen, other reversal indicators (i.e. may occur as part of tweezer formation, or next to doji, etc.)
5. A hammer “fails” when new high is achieved immediately after completion (candle), and a hammer bottom “fails” if next candle achieves new low.
   1. A hammer “fails” when new high is achieved immediately after completion (candle), and a hammer bottom “fails” if next candle achieves new low.

   
   

Example:

Morning Technical Newsletter


Oil Higher on OPEC Fears

OPEC and its allies have expressed serious concerns about global oversupply, prompting Saudi Arabia to announce a supply cut next month. The announcement sent prices over one percent higher during Monday’s Asian trading session. Brent crude futures were up 1.42 percent to $71.16 per barrel, and U.S. WTI Futures were trading up 0.85 percent to $60.70 per barrel as of 1:53 p.m. HK/SIN.

In a statement following its weekend meeting, OPEC and its allies hinted that several OPEC and non-OPEC oil producing countries may have to curb production in order to keep the oil markets balanced. In a separate announcement, Saudi Arabian Energy Minister Khalid al-Falih told reporters that the country will cut its supply by 0.5 million barrels per day. Taking the opposite position, Russian Energy Minister Alexander Novak said that he remains unconvinced that the oil market will remain oversupplied in 2019.

The announcements came only a few days after the Energy Information Administration (EIA) reported that U.S. production hit record highs of 11.6 million barrels per day earlier this month. On Friday, Baker Hughes reported that U.S. energy firms added 12 oil rigs last week, for a total count of 886 rigs, the highest number since March 2015.

This wouldn’t be the first production cut for OPEC in recent years. In January 2017 the group implemented production cuts to curtail a global surplus that caused prices to tank. The last production cut was partially canceled in June after oil prices returned to 3 ½ year highs.
A formal meeting of OPEC will be held next month, when the strategy will be formally unveiled.

More on: https://www.groundstoneholdings.com/2018/11/12/morning-technical-newsletter-32/

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Morning Technical Newsletter-Brexit Noise Pressures Sterling


Until the Brexit is a “done deal in March 2019,” FX traders will have little choice but to ride a wave of uncertainty. Such is the case for trade in London today, with the Pound Sterling under pressure as worries mount that a soft Brexit might not be on the table. The UK Prime Minister’s own party is in disagreement over her proposals as they relate to trade across the Irish borders. The latest news is that that four British ministers from Theresa May’s party, all of whom had supported staying in the Eu, are considering resigning.

As reported at 11:08 am (GMT) in London, the GBP/USD was trading lower at $1.2849, down 0.93% and near to the session trough of $1.2827. The EUR/GBP is trading higher at 0.8757 Pence, a gain of 0.21%; the pair has ranged from 0.87370 Pence to 0.87738 Pence.

Dollar Benefiting from Fed

In the US, the Dollar continues to strengthen as FX traders position themselves for a very probable December interest rate hike from the Federal Reserve Bank. Last week, the Fed reaffirmed its outlook of a tighter monetary policy, and the concerns over a possible failed Brexit strategy are helping to prop up the Dollar as a safe haven currency.
Though FX traders perceive the Japanese Yen as a “safer bet,” the monetary policy divergence between the Fed and the Bank of Japan has provided a benefit to Dollar bulls. The USD/JPY is currently trading at 113.923 Yen, up 0.090%; the pair has ranged from 113.750 Yen to 114.214 Yen in today’s session.

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