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Australian Dollar Outlook after RBA cut

Reserve Bank of Australia (RBA) made a surprise cut of 25 bps earlier today, taking the interest rate to a record low of 1.75%. Before the meeting, analysts have put the probability of a rate cut as much as 50-50 after the dismal figure of CPI last Tuesday April 26. The CPI report last week showed that for the first time since 2008, consumer prices fell by 0.2% qoq, suggesting a deflation. Excluding volatile items such as fuel and food, the core inflation rate comes at 0.15% qoq. This is equivalent to an annualized 1.55% rate, which is still well below RBA’s target of 2 – 3%. RBA Governor Glenn Stevens specifically pointed the weak inflation data as the reason for the rate cut. He also mentions while global economy continues to grow, the growth was at slower pace than expected and forecasts have been revised down further.

Immediate reaction of the move by RBA is a selloff in the Australian Dollar today. So has the currency turned lower now? What’s the medium term outlook? Although most economists expect RBA to cut another 25 bps before the end of the year, the bank likely would want to wait for the quarterly inflation figure due in August before deciding the next move.

Technical Analysis

4 Hour $AUDJPY



4 Hour chart of $AUDJPY above suggests that pair made a 3 swing move from 3.31.2016. Although short term, pair can still make another marginal low, cycle from 3.31.2016 is expected to end soon and pair can start correcting 3.31 cycle at least in 3 waves, suggesting that AUD may find at least a temporary low soon.

Weekly $AUDNZD



AUDNZD Weekly chart above shows a 5 waves move from 3.14.2011 peak. So far the rebound looks to be in 2 swing and another swing higher is possible. The pair is also showing what looks to be a weekly inverse Head and Shoulder. Overall this suggests AUD may not be as weak as it looks, or another interpreation suggests that NZD will be even weaker than AUD in the medium / long term

Weekly $AUDCHF



Weekly $AUDCHF chart above shows the pair breaks above the trend line resistance coming from 9.1.2014 peak. It sold off today, retesting the same trend line that turns into support. In addition, it also has another trend line support coming from 1.12.2015 low. As far as pair does not close below the broken trend line again in weekly basis and as far as pivot at 0.6742 (2.11.2016) is intact, pair can resume higher towards 0.7756 – 0.80

Conclusion

Despite the strong selloff in Australian Dollar after the RBA news event, when looking at several AUD charts, in particular $AUDJPY, $AUDNZD, and $AUDCHF, the currency may not be as weak as it looks. We would like to try playing this pullback in the Australian Dollar with $AUDCHF and favor more upside to 0.7756 as far as the pair does not close below the broken weekly trend line from 9.1.2014, and as far as the pivot at 0.6742 stays intact.

If you enjoy this article, feel free to read other technical articles at our Technical Blogs and also check Chart of The Day. For further information on how to find levels to trade $AUDUSD, $AUDJPY, $AUDNZD or other forex pairs, indices, and commodities using Elliottwave, take our FREE 14 Day Trial. We provide Elliott Wave chart in 4 different time frames, up to 4 times a day update in 1 hour chart, two live sessions by our expert analysts, 24 hour chat room moderated by our expert analysts, market overview, and much more! With our expert team at your side to provide you with all the timely and accurate analysis, you will never be left in the dark and you can concentrate more on the actual trading and making profits.

Short term Elliottwave structure suggests that decline to 13.99 ended wave X. Rally from there is unfolding as a zigzag where wave (a) ended at 15.71, and wave (b) ended at 15.01. Wave (c) of ((w)) is expected to complete at 16.72 – 17.12 area, then it should pullback in wave ((x)) to correct the rally from 13.99 before turning higher again. We don’t like selling the proposed pullback, and expect continuation higher once wave ((x)) pullback is complete in 3, 7, or 11 swing as far as 13.99 pivot stays intact.

Attached Image (click to enlarge)

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New Zealand Dollar Outlook in Q2 2016

In the last Monetary Policy Statement (MPS) in March, Reserve Bank of New Zealand (RBNZ) is not happy with the currency’s continued appreciation. They cited the New Zealand Dollar trade-weighted exchange rate is more than 4% higher than projected in December. In subsequent meeting in April 28, RBNZ decided to stay put with the OCR (Official Cash Rate) but RBNZ Governor Graeme Wheeler said in the statement that New Zealand Dollar’s exchange rate is higher than appropriate and a lower rate is desirable. RBNZ continues to say that a further policy easing may be required. Indeed, with current OCR at 2.25%, RBNZ remains to be one of few central banks today who can still use conventional tool (i.e. rate cut) to ease monetary policy further.

Latest CPI reading accelerated to 0.4% yoy in the first quarter of 2016, mainly due to the rise in housing cost. This latest number rebounded from the 15 year low reading in the previous quarter (Q4 2015) at 0.1%. Despite the improvement in CPI reading, it’s still below the long-run inflation expectation of 2%. With the outlook of global growth still sluggish, low inflation, and high trade-weighted exchange rate, RBNZ may have no option other than to ease the monetary policy again in the coming months.

Technical Analysis
Let’s take a look at several New Zealand dollar charts below

NZDUSD Daily Chart



NZDUSD is showing 3 swings move from 8.24.2015 low and it has reached equality. Further upside and extension higher can’t be ruled out, but cycle from 8.24.2015 low is expected to come to an end this quarter, and pullback should then be expected to correct 8.24.2015 cycle. Overall this suggests the outlook for New Zealand Dollar in the Q2 might be weaker when it starts the pullback.

GBPNZD Weekly Chart



GBPNZD Weekly chart above shows that the decline from 8.24.2015 peak looks like it’s taking the form of a wedge. There’s also a trend line support from April 2013. The pair has since broken above the wedge. Overall this suggests that the pair may have ended the cycle from 8.24.2015 peak and may start doing a correction to this 8.24 cycle in Q2. A higher GBPNZD suggests relative weakness in New Zealand Dollar.

AUDNZD Weekly Chart



AUDNZD Weekly chart above shows a 5 waves move from 3.14.2011 peak. So far the rebound looks to be in 2 swing and another swing higher is possible. The pair is also showing what looks to be a weekly inverse Head and Shoulder. Overall this suggests a relative weakness in New Zealand Dollar as the pair continues to correct the decline from 3.14.2011 peak.

NZDJPY Weekly Chart



NZDJPY weekly chart above showing a promise a few weeks ago by breaking below the weekly trend line. Unfortunately, there was no follow through and the pair closed back above trend line. However, the pair is still showing a five swing sequence from 12.15.2014 and thus further extension to the downside is still ideal to finish a 7 swing sequence. If the anticipated 7 swing sequence happens, this suggests a relative weakness in New Zealand Dollar.

NZDCAD Weekly Chart



NZDCAD weekly chart above suggests the pair is still correcting the weekly cycle from 2.2.2009 low and can reach 0.748 – 0.789 area before the rally resumes. This view is valid as far as price stays below ((W)) high at 0.952. If this forecast plays through, then this suggests a relative New Zealand Dollar weakness.

Conclusion

Fundamentally, RBNZ is one of the only few central banks who can still ease more with conventional tool (i.e. rate cut), and they have indicated that further easing is maybe required. Technically, looking at various New Zealand Dollar charts, we can come into a conclusion that New Zealand Dollar outlook in the Q2 might be getting weaker.

If you enjoy this article, feel free to read other technical articles at our Technical Blogs and also check Chart of The Day. For further information on how to find levels to trade $USDJPY, or other forex pairs, indices, and commodities using Elliottwave, take our FREE 14 Day Trial. We provide Elliott Wave chart in 4 different time frames, up to 4 times a day update in 1 hour chart, two live sessions by our expert analysts, 24 hour chat room moderated by our expert analysts, market overview, and much more! With our expert team at your side to provide you with all the timely and accurate analysis, you will never be left in the dark and you can concentrate more on the actual trading and making profits.

Dow Jones $INDU Short-term Elliott Wave Analysis 5.10.2016

Short term Elliottwave structure suggests wave “b” is proposed over at 18173.54. Decline from there is unfolding in a zigzag where wave (A) ended at 17580.38 as 5 waves diagonal. Near term, while wave B pullback stays above 17580.38, Index has scope to do another leg higher in wave C of (B) towards 17872.98 – 18028.26 area before the Index resumes the decline lower again. We don’t like buying the proposed bounce and expect wave (B) bounce to fail below 18173.54 for another extension lower.

Attached Image (click to enlarge)

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Dow Jones $INDU Short-term Elliott Wave Analysis 5.12.2016

Short term Elliottwave structure suggests wave “b” is proposed over at 18173.54. Decline from there is unfolding as a double three structure where wave (W) ended at 17580.38 and wave (X) bounce ended at 17934.61. Near term, while wave (x) bounce stays below 17934.61, and more importantly as far as pivot at 18173.54 stays intact, expect the Index to resume the decline lower. We don’t like buying the proposed bounce and expect wave (x) correction to fail below 17934.61 in the first degree for another extension lower.

Attached Image (click to enlarge)

At EWF we offer 24 hour coverage of 50 instruments from Monday – Friday using Elliott Wave Theory as primary tools of analysis. We provide Elliott Wave chart in 4 different time frames, up to 4 times a day update in 1 hour chart, two live sessions by our expert analysts, 24 hour chat room moderated by our expert analysts, market overview, and much more! With our expert team at your side to provide you with all the timely and accurate analysis, you will never be left in the dark and you can concentrate more on the actual trading and making profits. Check out our 14 day Free Trial to sample everything EWF has to offer

Short term Elliottwave structure suggests wave “b” is proposed over at 18173.54. Decline from there is unfolding as a double three structure where wave (W) ended at 17580.38 and wave (X) bounce ended at 17934.61. Near term, while wave ((x)) bounce stays below 17934.61, and more importantly as far as pivot at 18173.54 stays intact, expect the Index to resume the decline lower. We don’t like buying the proposed bounce and expect wave ((x)) correction to fail below 17934.61 in the first degree for another extension lower. If pivot at 17934.61 high gives up during the bounce, then Index would do a double correction in wave (X) and could retest 18173.54 high before making a turn lower.



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In this article, we are going to analyze the fundamental and technical background of $USD/PLN (U.S. Dollar against Polish Zloty) to determine the short term and medium term path of the pair.

From the U.S side, U.S. economy has slowed down in 2016. Most of the recent economic data coming out from U.S. has missed out the expectation. Q1 GDP came out only at 0.5%. Non Farm Payroll surprised to the downside in April, printing only 160K. Labor force participation dips after several months of increase. Retail sales, durable goods order, and consumer confidence all have also missed the expectation. Inflation expectation has continued to fall despite a 77% rally in oil’s price this year.

Despite the soft U.S. data, the labor market is sufficiently firm to keep the Fed on track towards the gradual rate rise. However, the weakness in other parts of the U.S economy may compel the Fed to wait a little bit. From seasonality perspective, U.S. Dollar has performed well in the month of May. According to FBN Securities, May has been the best month for the Dollar over the last 10 years with average gains of +1.28% and max of +5.77%. Thus, the same thing may be expected this month.

From the Poland side, NBP (Narodowy Bank Polski), the central bank in Poland, recently kept the interest rate at 1.5% at the last April 6 meeting, and this is despite persistently weak inflation in the economy. Although NBP suggests that the present rate is adequate, several members have expressed concern about the low policy rate. With a relatively strong growth in Polish economy (GDP growth hits 8 year high at 1.5% in Q4 2015) and oil price recovery, it’s likely to put a floor on the rate policy. Therefore, as the economy growth picks up speed, NBP can move to a tightening cycle in the second half of the year.

Technical Analysis

Weekly Chart $USDPLN

Attached Image (click to enlarge)

Weekly chart $USDPLN shows that cycle from 5.3.2011 low ended with wave ((W)) at 4.158. The break below the weekly trend line from 6.9.2014 low further supports the idea that at minimum cycle from 6.9.2014 is over. Weekly outlook is thus looking for more downside in wave ((X)) at least for 1 more leg lower to correct the rally from 6.9.2014. Pair also likely not only correct 6.9.2014 cycle, but also correct cycle from 5.3.2011 low as well, which implies a deeper pullback.

Daily Chart $USDPLN

Attached Image (click to enlarge)

Daily Chart of $USDPLN above suggests at minimum cycle from ((X)) low or from 6.9.2014 low is over, as evidenced with the break below the trend line. From ((W)) peak at 4.158, pair has declined lower in 3 swings, ending wave W at 3.7056. Wave X bounce is now in progress to correct the decline from 4.158, and another swing wave ((y)) of X higher is expected towards 3.985 – 4.036 area and can retest the broken trend line before the decline resumes.

Conclusion

May seasonality may favor the U.S Dollar this month and can see $USDPLN bouncing higher to 3.985 – 4.036 area. However, a robust economy in Poland, coupled with oil price recovery and high capacity utilization may see Polish Central Bank (NBP) moving to a tightening bias in the second half of the year, which is supportive to the Polish Zloty.

If you enjoy this article, feel free to read other technical articles at our Technical Blogs and also check Chart of The Day. For further information on how to find levels to trade $DXY or other forex pairs, indices, and commodities using Elliottwave, take our FREE 14 Day Trial. We provide Elliott Wave chart in 4 different time frames, up to 4 times a day update in 1 hour chart, two live sessions by our expert analysts, 24 hour chat room moderated by our expert analysts, market overview, and much more! With our expert team at your side to provide you with all the timely and accurate analysis, you will never be left in the dark and you can concentrate more on the actual trading and making profits.

Russell 2000 $RUT Short-term Elliott Wave Analysis 5.17.2016

Short term Elliottwave structure suggests wave “b” is proposed over at 1156.07. Decline from there is unfolding as a double three structure where wave (W) ended at 1101.57 and wave (X) bounce ended at 1129.08. Secondary high wave ((x)) is also proposed complete at 1119.68. While pair stays below below 1129.08, expect the Index to resume the decline either to new lows or at least pullback in 3 waves to correct rally from 5/14 low. We don’t like buying the Index.

Attached Image (click to enlarge)

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Russell 2000 $RUT Short-term Elliott Wave Analysis 5.18.2016

Short term Elliottwave structure suggests wave “b” is proposed over at 1156.07. Decline from there is unfolding as a double three structure where wave (W) ended at 1101.57 and wave (X) bounce ended at 1129.08. Secondary high wave ((x)) is also proposed complete at 1119.68. Decline from there is proposed to be unfolding in a zigzag where wave (a) is expected to finish with 1 more leg lower in wave v of (a), then the Index should bounce in wave (b) to correct the decline from 1119.68 before Index then resumes lower again. We don’t like buying the proposed bounce in the Index.

Attached Image (click to enlarge)

At EWF we offer 24 hour coverage of 50 instruments from Monday – Friday using Elliott Wave Theory as primary tools of analysis. We provide Elliott Wave chart in 4 different time frames, up to 4 times a day update in 1 hour chart, two live sessions by our expert analysts, 24 hour chat room moderated by our expert analysts, market overview, and much more! With our expert team at your side to provide you with all the timely and accurate analysis, you will never be left in the dark and you can concentrate more on the actual trading and making profits. Check out our 14 day Free Trial to sample everything EWF has to offer

A Lesson from the Maze



Have you ever played a maze when you were a kid? In Hong Kong Disneyland, there’s a maze located at the garden outside the hotel which has a shape of a Mickey Mouse head if seen from a distance above. The height of the bushes is designed so that little children’s sight would be blocked when they go inside the maze. For a small child, this maze is a daunting yet at the same time fun experience. They need to find a way out through the maze and there are many dead ends inside. Even for adults who already know the exit direction, they may still take the wrong turns along the way. This is clearly a simple maze for an adult’s standard, although it can be quite challenging for a 5 year old kid.

Now imagine a complex maze that not only has many dead ends, deadly traps, and wrong turns, but the maze is actually alive and keeps changing the formation so you can never figure it out completely; a maze similar to the one depicted in the movie and book called “The Maze Runner.” This is the sort of maze that more closely resembles “the Market.” The Market, whether it be forex, stock, or commodity, is a perpetually changing maze. It’s able to surprise traders many times and when traders thing they have figured it out, the market changes the formation and humbles them. Just like the movie and book “The Maze Runner”, many people got hurt playing the maze and some could never recover. So how can traders navigate this deadly and complex maze called the Market?

First, it’s very important to have a map and a compass on hand, so you don’t get lost inside the maze. The map and the compass is what we call Elliottwave charts. The map may not be perfect in all the little details; it may miss some turns here and there, and it may not have all the labels for dangerous areas and deadly traps. This is especially true when we are talking about charts in the lower time frame such as 1 hour Elliottwave charts. Despite the imperfection, without the maps, traders will certainly get lost inside the maze.

Second, it’s important to make sure you have enough food and water to sustain you inside the maze until you reach the exit. Knowing and expecting that you may make wrong turns, reach dead ends, and spend some time inside the maze, how would you manage your supply wisely? Traders who risk a lot in a single trade is akin to someone who consumes all the food and water before they reach the maze exit. Soon, all their capital is gone when they take the wrong turns, and they have nothing left to keep playing in the maze. Traders with open mind who understand the short term shifting nature of the maze should control their risk and change the course when they reach a dead end. This is the process of adjustment in Elliottwave, and there should not be any ego involved. When traders don’t adjust, the Market is going to take away their money.

The mistake of a beginner trader is to focus too much only on the short term time frame chart and expect it to be perfect. They also do not manage their supply properly, and thus have poor risk management. They get disillusioned thinking that short term map only has 1 perfect path that is always right. They don’t understand the idea that maze formation (Elliottwave structure) can change especially in the short term as the Market is like a living organism that perpetually shifts, but the overall direction in higher time frame still can remain the same and reliable.

An example of a short term shift (adjustment) can be seen in 1 hour chart of Russell 2000 below:



1 hour weekend chart of Russell 2000 on 5/15 above is showing that Index should continue lower after a bounce in wave (x). As the Index shows a sequence of lower low, wave (x) bounce is expected to fail below wave ((x)) at 1112.96 for continuation lower. In the next few days, the Index instead rallied and broke above wave ((x)) in a flat structure. Let’s take a look at 1 hour chart of Russell 2000 on 5/17 below:

Attached Image (click to enlarge)

As the 5/17 chart above shows, Russell broke above 1112.96 and the structure shifts to a flat. The main bias however is still to the downside and the invalidation level at 1129.08 does not change. In this example, we see a short term adjustment of the structure while the main bias to the downside doesn’t change. The next short term move in Russell may shift again, so it’s important to understand the third point below.

Finally, it’s important to always keep the location of the final destination in mind and keeps moving towards that direction, even though you may need to change short term route periodically. The usefulness of the map increases when traders use it to provide the overall direction. Elliottwave Charts in the weekly and daily time frame provide this overall direction and bias, while the lower time frames in 1 hour and 4 hour attempt to provide more details.

When the map says the exit is located at the South of the maze, then you should try to keep moving to the South until you reach the target. You should not try to move to the East, West, or North because there could be deadly traps in there. Taking this principle to trading, if the daily and weekly Elliottwave charts show the location of the exit is lower, then traders want to keep trading towards the main direction lower (trend trading) by selling rallies instead of doing any counter-trend trade. Using the Russell 2000 example above, you should not try to buy the Index as the higher time frame is showing the bias to the downside.

Concluding Words:
Before you click the next buy/sell order, remember the lesson from the Maze and ask yourself the following questions:
1) Do you know the exit location of the maze and do you understand that the maze is perpetually shifting, more so than ever in the lower level (lower time frame)?
2) Do you manage your supply well and have proper risk management so you can keep playing in the maze?
3) Do you keep moving towards the exit location or do you move to every direction?

If you enjoy this article, feel free to read other technical articles at our Technical Blogs and also check Chart of The Day. For further information on how to find levels to trade forex pairs, indices, and commodities using Elliottwave, take our FREE 14 Day Trial. We provide Elliott Wave chart in 4 different time frames, up to 4 times a day update in 1 hour chart, two live sessions by our expert analysts, 24 hour chat room moderated by our expert analysts, market overview, and much more! With our expert team at your side to provide you with all the timely and accurate analysis, you will never be left in the dark and you can concentrate more on the actual trading and making profits.

Russell 2000 $RUT Short-term Elliott Wave Analysis 5.19.2016

Short term Elliottwave structure suggests wave “b” is proposed over at 1156.07. Decline from there is unfolding as a double three structure where wave (W) ended at 1101.57 and wave (X) bounce ended at 1129. Secondary high wave ((x)) is also proposed complete at 1119.68. While the index stays below 1119.68, and more importantly as far as pivot at 1129 stays intact, expect the Index to resume the decline lower. We don’t like buying the proposed bounce in the Index.

Attached Image (click to enlarge)

At EWF we offer 24 hour coverage of 50 instruments from Monday – Friday using Elliott Wave Theory as primary tools of analysis. We provide Elliott Wave chart in 4 different time frames, up to 4 times a day update in 1 hour chart, two live sessions by our expert analysts, 24 hour chat room moderated by our expert analysts, market overview, and much more! With our expert team at your side to provide you with all the timely and accurate analysis, you will never be left in the dark and you can concentrate more on the actual trading and making profits. Check out our 14 day Free Trial to sample everything EWF has to offer

Apple $AAPL Short-term Elliott Wave Analysis 5.24.2016

Short term Elliottwave structure suggests wave (W) dips to $89.47 ended cycle from 4/15 peak. From there, Apple is in wave (X) bounce to correct the decline from 4/15 peak. Internal structure of wave (X) bounce is unfolding as a double three where wave W ended at $95.21, and wave X ended at $93.54. While wave ((x)) dips stay above $93.54, and more importantly above $89.47, Apple has scope to make another push higher towards $99.32 – $100.68 area to complete wave (X) bounce before the decline resumes. We don’t like buying the proposed push higher in wave (X) and expect Apple to find sellers from $99.32 – $100.68 area to new lows or at least in 3 waves pullback as far as 4/15 pivot at 112.39 remains intact.

Attached Image (click to enlarge)

At EWF we offer 24 hour coverage of 50 instruments from Monday – Friday using Elliott Wave Theory as primary tools of analysis. We provide Elliott Wave chart in 4 different time frames, up to 4 times a day update in 1 hour chart, two live sessions by our expert analysts, 24 hour chat room moderated by our expert analysts, market overview, and much more! With our expert team at your side to provide you with all the timely and accurate analysis, you will never be left in the dark and you can concentrate more on the actual trading and making profits. Check out our 14 day Free Trial to sample everything EWF has to offer

Apple $AAPL Short-term Elliott Wave Analysis 5.25.2016

Short term Elliottwave structure suggests wave (W) dips to $89.47 ended cycle from 4/15 peak. From there, Apple is in wave (X) bounce to correct the decline from 4/15 peak. Internal structure of wave (X) bounce is unfolding as a double three where wave W ended at $95.21, and wave X ended at $93.54. While wave (x) dips stay above $93.54, Apple has scope to make another push higher towards $99.32 – $100.68 area to complete wave (X) bounce before the decline resumes. We don’t like buying the proposed push higher in wave (X). As far as 4/15 pivot at 112.39 remains intact in the bounce, we expect Apple to find sellers from $99.32 – $100.68 area and turn lower either to new lows or at least pullback in 3 waves.

Attached Image (click to enlarge)

At EWF we offer 24 hour coverage of 50 instruments from Monday – Friday using Elliott Wave Theory as primary tools of analysis. We provide Elliott Wave chart in 4 different time frames, up to 4 times a day update in 1 hour chart, two live sessions by our expert analysts, 24 hour chat room moderated by our expert analysts, market overview, and much more! With our expert team at your side to provide you with all the timely and accurate analysis, you will never be left in the dark and you can concentrate more on the actual trading and making profits. Check out our 14 day Free Trial to sample everything EWF has to offer

Apple $AAPL Short-term Elliott Wave Analysis 5.26.2016

Short term Elliottwave structure suggests wave (W) dips to $89.47 ended cycle from 4/15 peak. From there, Apple is in wave (X) bounce to correct the decline from 4/15 peak. Internal structure of wave (X) bounce is unfolding as a double three where wave W ended at $95.21, and wave X ended at $93.54. While wave x dips stay above $93.54, Apple has scope to make another push higher towards $101.36 – $102.38 area to complete wave (X) bounce before the decline resumes. We don’t like buying the proposed push higher in wave (X). As far as 4/15 pivot at 112.39 remains intact in the bounce, we expect Apple to find sellers from $101.36 – $102.38 area and turn lower either to new lows or at least pullback in 3 waves.

Attached Image (click to enlarge)

At EWF we offer 24 hour coverage of 50 instruments from Monday – Friday using Elliott Wave Theory as primary tools of analysis. We provide Elliott Wave chart in 4 different time frames, up to 4 times a day update in 1 hour chart, two live sessions by our expert analysts, 24 hour chat room moderated by our expert analysts, market overview, and much more! With our expert team at your side to provide you with all the timely and accurate analysis, you will never be left in the dark and you can concentrate more on the actual trading and making profits. Check out our 14 day Free Trial to sample everything EWF has to offer

Hawkish Fed may trigger equities correction

The May 18th FOMC Meeting Minutes contains direct references to a potential rate hike at the next June 14 – 15 FOMC meeting. Recall in March meeting, the Fed Dot Plot chart (see below) suggests that Fed believes two rate hikes this year is the likeliest outcome, albeit with the usual data dependent clause.

Attached Image (click to enlarge)

Since the beginning of the year, market participants are trying to assess if U.S. data justifies more rate hikes and if so, which month. U.S. data this year has been rather mixed. Labor market conditions have continued to improve although growth in GDP appeared to have slowed. U.S CPI in April increased to 3 year high of 0.4%, up from 0.1% increase in March, due to the rise in gasoline and food prices. Overall, with market stabilizing since the beginning of the year, and economic data continues to paint a consistent slow recovery, the Fed is still on the path to tighten the monetary policy.

In regards to timing, there’s another potential big market moving event in June 23rd. The UK Referendum is going to decide whether the British people want to stay in or outside of the European Union. Initially, it was believed that the Fed likely would not make a rate hike move this June before getting clarity on the outcome of the U.K referendum. Thus, the month of July is more favorable for a rate hike.

However, the May 18th FOMC minutes suggests that rate hike as early as June is not off the table. Further interviews with several Fed members since last week also suggest that June rate hike is possible. St. Louis Fed President James Bullard specifically says that the UK referendum will not affect the Fed’s upcoming decision on rates. Fed Funds future has since snapped higher to 36% from just 12%, indicating increased rate hike expectation for the upcoming June meeting. With a hawkish Fed and US rate hike expectations rose sharply, global equities may continue lower in the next 1 or 2 months.

Technical Analysis



VIX Index is looking to form a low. The Index has broken the trend line from 8/24/2015 peak and showing a possible inverse head and shoulder pattern. A break and close above 17 may suggest a significant rise in volatility, and it’s likely accompanied with S&P 500 breaking below 2030 .

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Apple $AAPL Short-term Elliott Wave Analysis 5.27.2016

Short term Elliottwave structure suggests wave (W) dips to $89.47 ended cycle from 4/15 peak. From there, Apple is in wave (X) bounce to correct the decline from 4/15 peak. Internal structure of wave (X) bounce is unfolding as a zigzag where wave A ended at $95.21, and wave B ended at $93.54. There’s enough number of swing to call wave ((v)) of C of (X) to finish, even though a marginal high is still expected towards 101.33 – 103.72 area to complete wave (X) bounce before Apple turns lower. We don’t like buying the proposed push higher. As far as 4/15 pivot at 112.39 remains intact in the bounce, we expect Apple to find sellers from $101.33 – $103.72 area and turn lower either to new lows or at least pullback in 3 waves.

Attached Image (click to enlarge)

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$CADJPY Short-term Elliott Wave Analysis 5.31.2016

Short term Elliottwave structure suggests that dip to 82.88 on 5/24 ended wave X. Rally from there is unfolding as a double three where wave ((w)) ended at 85.17, wave ((x)) ended at 83.88, and wave ((y)) is in progress. Internal of wave ((y)) is also taking the form of a double three where wave (w) is expected to complete at 85.3 – 85.6 area, then it should pullback in wave (x) before pair resumes higher again. We don’t like selling the proposed wave (x) pullback and expect pair to extend higher again towards 86.17 – 86.71 area once wave (x) pullback is complete in 3, 7, or 11 swing as far as 83.88 pivot stays intact.



At EWF we offer 24 hour coverage of 50 instruments from Monday – Friday using Elliott Wave Theory as primary tools of analysis. We provide Elliott Wave chart in 4 different time frames, up to 4 times a day update in 1 hour chart, two live sessions by our expert analysts, 24 hour chat room moderated by our expert analysts, market overview, and much more! With our expert team at your side to provide you with all the timely and accurate analysis, you will never be left in the dark and you can concentrate more on the actual trading and making profits. Check out our 14 day Free Trial to sample everything EWF has to offer

Australian Dollar may stabilize gradually

US Dollar Outlook
A string of interview with Federal Reserve members in the past two weeks suggest that interest rate hike is imminent. Last Friday, Federal Reserve Chair Janet Yellen also confirmed that the Fed should “probably” raise interest rate “in the coming months” if economic growth picks up and the labour market continues to improve. The U.S. Dollar surged higher after Ms. Yellen’s speech. Interest rate futures currently shows the probability of a rate hike in June is 28%, July is 61%, and 80% before the end of the year. Short term, U.S. Dollar may be relatively supported and if this Friday’s job data beats expectation, U.S. Dollar may rally further as rate hike expectation may increase further with improved labor data.

However, Yellen’s remark about raising rate “in the coming months” instead of “soon” may in fact suggest a higher likelihood of a rate hike in July or August. Since the Fed’s June meeting is only 1 week ahead of U.K.’s referendum and given how cautious the Fed has been, a June rate hike remains less likely than later months.

Australian Dollar Outlook
Australian Dollar and other major currencies retreated last week against U.S. Dollar due to the increased expectation of a rate hike. Last week, Australia’s private capital expenditure came out and the number slumped more than expected at 5.2% qoq in Q1 2016. This number however is not entirely bad as it is backward looking. Most of the Q1 capex drop came from the mining sector. Non-mining capex rose by 0.4%. More importantly however, future investment plans by businesses increase for 2016-17 by 6.3 per cent. Today, building approvals data is released showing a rise of 3%, beating expectation of -3.1% by a wide margin. This piece of data is a good gauge for future construction activity and thus also future hiring and employment.

This Wednesday, another important piece of economic data, Australia’s Q1 GDP, will be released. Expectation is for the data to remain relatively robust at 0.6% qoq and may grow 2.6% yoy. If the data meets the expectation, this growth rate is still higher than most developed markets as the chart below shows:



With Australia’s data continue to stabilize and improve, RBA is unlikely to cut rates again in June, although the central bank may cut rates further later in the year. Australia Dollar’s interest rate future now is pricing in only a 10% chance of a rate cut in June.

Technical Analysis
AUD cross pairs analysis suggest that Australian Dollar may be in the stabilization process in the short term.



From the chart above, $AUDCAD moved lower in 3 swing from 12.31.2015 peak and the pair has reached extreme area and is expected to end 12.31 cycle soon and bounce at least in 3 waves. This suggests that $AUD can be stabilizing

Attached Image (click to enlarge)

From the chart above, $AUDNZD bounced off a channel support from 10.30.2015 low. The pair looks to have broken out of what looks to be a wedge. The short term structure suggests that the pair may have ended the cycle from 3.23.2016 peak and can at least bounce in 3 waves to correct this cycle.

Conclusion

A hawkish Fed increases rate hike expectation in the coming months and may support U.S. Dollar in the short term. If the U.S. job data this Friday is coming out good, more U.S. Dollar strength may be in store. However, the prospect of a rate hike in June remains smaller compared to later months due to U.K. referendum 1 week before the Fed’s meeting.

Recent economic data from Australia has stabilized and with Australian Dollar recently has already dropped 8%, the pair may start to gradually stabilize. The RBA also is unlikely to cut anytime soon, although they may still cut again later this year. Technical analysis on the Australian Dollar crosses also suggest that the pair may find a temporary low soon.

If you enjoy this article, feel free to read other technical articles at our Technical Blogs and also check Chart of The Day. For further information on how to find levels to trade $AUDUSD, $AUDNZD, $AUDCAD, or other forex, indices, and commodities using Elliottwave, take our FREE 14 Day Trial. We provide Elliott Wave chart in 4 different time frames, up to 4 times a day update in 1 hour chart, two live sessions by our expert analysts, 24 hour chat room moderated by our expert analysts, market overview, and much more! With our expert team at your side to provide you with all the timely and accurate analysis, you will never be left in the dark and you can concentrate more on the actual trading and making profits.

$CADJPY Short-term Elliott Wave Analysis 6.1.2016

Short term Elliottwave structure suggests that dip to 82.88 on 5/24 ended wave X. Rally from there is unfolding as a double three where wave ((w)) ended at 85.17, wave ((x)) ended at 83.88, and wave ((y)) is in progress. Internal of wave ((y)) is also taking the form of a double three where wave (w) ended at 85.51, and wave (x) is proposed complete at 84.13. While pullback stays above 84.13, and more importantly above 83.88, pair has scope to extend higher 1 more leg towards 86.17 – 86.71 area to end cycle from 5/6 low. Afterwards, expect pair to do at least 3 waves pullback to correct the rally from 5/6 low.

Attached Image (click to enlarge)

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$CADJPY Short-term Elliott Wave Analysis 6.2.2016

Short term Elliottwave structure suggests that the cycle from 5/6 low has ended with wave (X) at 85.5. Decline from there is taking the form of a zigzag. Wave ((a)) of the zigzag is currently in progress as 5 waves diagonal where wave (i) ended at 84.13, wave (ii) ended at 84.85, wave (iii) ended at 83.28 and wave (iv) ended at 83.87. While pair remains below wave (iv) at 83.87, pair has scope to extend lower in wave (v) of ((a)) to as low as 82.17 – 82.5 area where wave (v) = wave (i). Afterwards, a larger 3 waves bounce in wave ((b)) is expected to correct the decline from 5/31 wave (X) peak before pair turns lower again. We don’t like buying the proposed wave ((b)) bounce.

Attached Image (click to enlarge)

At EWF we offer 24 hour coverage of 50 instruments from Monday – Friday using Elliott Wave Theory as primary tools of analysis. We provide Elliott Wave chart in 4 different time frames, up to 4 times a day update in 1 hour chart, two live sessions by our expert analysts, 24 hour chat room moderated by our expert analysts, market overview, and much more! With our expert team at your side to provide you with all the timely and accurate analysis, you will never be left in the dark and you can concentrate more on the actual trading and making profits. Check out our 14 day Free Trial to sample everything EWF has to offer