Technical Analytics Report

If now you are saving up initial capital and complaining about fate:  why do I have to make my way in life with such difficulty… Think: is the situation really so bad? Most likely, you have much better starting opportunities than the heroes of this collection had these names.⠀

Jesse Livermore

The future “great bear” was born into the family of a poor farmer, who worked a piece of barren land by the sweat of his brow.⠀

Jesse was a boy in fragile health, but he constantly helped his father in the field.⠀

The son’s mathematical talents seemed to the harsh farmer nonsense, and he believed that Jesse should work in the field.⠀

Livermore Jr. found this prospect unattractive. The teen fled to Boston. He had $5 for the trip, which his mother secretly gave him.⠀

As an errand boy in a brokerage, Livermore made $6 a week. With this money, he saved up start-up capital for trading.⠀

William Delbert Gunn

The famous trader, who laid the foundations of technical analysis, started life in about the same conditions as Livermore. In the family of Texas farmer and teacher Samuel Houston Gunn there were, according to some sources, eight, and according to others – ten children. And everyone was hungry.⠀

Billy went to school for three years. He learned a little – and that’s enough: need to help father grow cotton.⠀

When Gann was sixteen, he went to seek his fortune in the local business center – the city of Texarkana. He delivered newspapers, peddled food, got a job in a brokerage office… New York was waiting for him, but that’s another story 😉

John Templeton

The future billionaire was born into the family of shoemaker farmer, where five children grew up. Clever John really wanted to study, and his father somehow saved up for this. But then the Great Depression hit the USA. It became problematic not only to teach children, but also to feed them. “Sorry, son,” Templeton Sr. threw up his hands.⠀

Subsequently, the billionaire said that it was a real gift of fate. The best thing that happened to him in life. Because I had to move, borrow money, plow several jobs and seek scholarships in the fiercest competition. After that, making a billion is a piece of cake!

Currency pair of the week: USD/CAD

Joe Biden will be sworn in as President of the United States in Wednesday, however this is more likely to be a ceremonious event than a market moving event for traders.  There are other events this week that are more likely to influence the US Dollar, one of which is former Fed Chairman Janet Yellen’s confirmation as Treasury Secretary on Tuesday.  Senate members are expected to ask her about the administration’s stance on the US Dollar.  Although Yellen is expected to not be as aggressive as Trump on supporting a weak US Dollar, she is most likely not going return to the days of a strong dollar policy.  Instead, Yellen is likely to consider the G-7 stance, which is that markets will decide the value of exchange rates.  In addition, this week, global manufacturing and services PMIs will be released for January.  As many of countries in the UK and European Union were in lockdown, the initial PMI data is expected to be worse than in December.  However, given that the US was not in national lockdown, the US PMI data may be better relative to other county’s data.  This may give a boost to the US Dollar.

The Bank of Canada (BOC) will meet this week to discuss monetary policy.  Canadian rates currently sit as 0.25% and the current pace of the QE program is at least CAD 4 billion per week.  Although Canada has recently gone through its own bout of lockdowns, housing and manufacturing data have continued to be strong.  However, employment data has been weaker.  Expectations are for the BOC to leave policy unchanged, however there is the outside chance they may lower rates below 0.25%.  In addition, over the weekend, Joe Biden’s Day 1 initiatives showed that one of these initiatives is to rescind the Keystone XL pipeline permit, which carries oil from Canada’s Alberta region to several US states.  The Obama administration had opposed the pipeline and Biden opposed Trump in 2017 when he issued the permits in 2017.  Canada has yet to respond, however given that the price to the Canadian Dollar is strongly correlated to the price of Crude Oil, this could cause some volatility ahead for the pair.

On a weekly timeframe, USD/CAD has traded from a high in March of 1.4667 to recent lows near 1.2713.  In doing so, price has been in a descending wedge since early fall 2020.  USD/CAD traded down to the 161.8% extension of the move from the lows during the week of August 31st to the highs during the week of September 21st.   This level, near 1.2743, confluences with the apex of the descending wedge.  The pair is currently testing the top downward sloping trendline of the descending wedge near 1.2770.  In addition, the weekly correlation coefficient between USD/CAD and crude oil is -0.90.  For reference, a correlation coefficient of -1.00 means that the 2 assets are perfectly negatively correlated and move in opposite directions 100% of the time.  A reading of -0.90 indicates that the negative correlation between the 2 assets is very strong on the weekly timeframe.  If crude oil begins to weaken, that could help push USD/CAD higher above the trendline near 1.2800.  Next resistance is a downward sloping trendline and a series of previous lows near 1.2990.

On a shorter 240-minute timeframe, price broke above the top trendline of a downward sloping channel the pair has been in since late November.  If price breaks above recent highs at 1.2840, it would set up a double bottom formation, with a target of 1.3040.  Short-term support is at the downward sloping trendline near 1.2750, horizontal support near 1.2624, and then the double bottom low near 1.2624

With Janet Yellen’s confirmation, PMIs, the BOC meeting, and Joes Biden expected to rescind the Keystone XL pipeline permit, there could be some opportunities for volatility in USD/CAD this week. 1.2840 will be key for the pair this week

Two trades to watch: FTSE, EUR/USD

FTSE covid concerns battle with upbeat Chinese GDP data EUR/USD in focus ahead of Italian confidence vote & Eurogroup meeting.

FTSE Forecast on Blue Tuesday

  • Risk aversion is dominating amid concerns over the economic impact of rising covid cases.
  • Upbeat Chinese GDP data +6.5% YoY is helping to offset some of the gloom,
  • UK &US are ramping up their vaccination programmes, although covid number remain elevated.
  • US stock markets are closed for Martin Luther King Day.

FTSE technical analysis

The FTSE continue to trade within the ascending channel dating back to early November. The index failed to break the upper band of the channel in early January and has been extending he move lower.

Whilst the longer term outlook remains bullish for now near term the picture ios turning bearish. The FTSE trades below its 20 and 50 sma and the 20 sma has crossed below the 50 sma in a bearish crossover. The RSI is in bearish territory but not yet oversold suggesting more downside could be on the cards.

Immediate support can be seen at 6700, the overnight low, prior to horizontal support at 6645. A move below 6645 and then 6615 the lower band of the ascending channel is needed to negate the medium-term bullish trend.

On the upside, a break above the 20 sma at 6764 could open the door to 6800 50 sma and round number ahead of horizontal support at 6875.

EUR/USD below 1.21 with Italian politics, covid in focus

  • The Euro is trading a few pips lower intraday as it heads towards the European open
  • Italian PM Conte faces a confidence vote in the lower house today, which he is expected to win, although he could struggle in the Senate vote tomorrow.
  • Covid numbers continue surging in Europe & US and risk off dominates supporting USD
  • Eurogroup & Italian CPI in focus today & the ECB later in the week

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