Forex trader: What’s coming this week

Nick McDonald

New Zealand dollar
My longer-term prediction is that NZD/USD will rally strongly and test 90c in the next 12-18 months. There is strong opposition to this in New Zealand from people who do not want that to happen but, unfortunately, the forces of supply and demand are stronger than the opinions of the public and the recent short-term Kiwi dollar strength just reinforces the longer-term outlook. In the very short term I am neutral on NZD/USD but a break up to 83.60 is all we need to move back into short and long term trend agreement and from there we will be on our way to 85c and beyond. There is very significant strength in the support at 81.00 on the kiwi and it would take a something like a rate cut in New Zealand or a sudden and unexpected rally in US dollars to push the kiwi lower. Even a RBNZ rate cut would only slow the kiwi down in the short term.

Strongest trends today: Short-term predictions this week

The strongest trends today provide us the best short-term trading opportunities and the key theme for the week ahead is Japanese yen weakness. My top pick is based on the best alignment of short- and long-term trends, combined with minimal support/resistance levels stopping prices from moving much further:

• AUDJPY – The strongest trend in the currency markets easily with lots of short-term trading opportunities over the last fortnight. With nothing stopping it before 88.00, expect more of the same in the week ahead.

Most potential: Mid-term predictions (weeks to months)
• Gold has moved back into a short-term uptrend with the bullishness of the monthly chart never been in doubt. Next stop for gold is $1800 and there is literally nothing stopping price getting there. I expect to see gold prices trade at or above this level within a month or two. Beyond that in the longer term, expect headlines in 2013 when gold trades at $2000.

• Silver – very strong in the short term but we need to see silver test and break $35 before confirming its long-term trend and then moving on to $40 and beyond. I expect $35 to be broken this week and if so, will look to maximise exposure to silver, buying above $35 with short- to mid-term targets around $40.

World stock markets
We are in the midst of a long-term bull run on stocks and every little breather we have, like the pull-back that has just occurred, has the bears claiming their predictions are coming true.

In reality, a short-term down-trend for a few months on a daily chart does not change the longer-term bull trend on weekly and monthly charts.

We technical traders just bide our time waiting for the three major trends – daily, weekly and monthly – to come back into agreement, that is all moving the same way.

Right now, daily stock trends are still down with weekly and monthly trending up. The daily showed some signs of strength on US stocks markets last week in a short week for Thanksgiving.

Watch this space. When the daily swings back into favour, some of the best opportunities will come knocking.

Nick McDonald teaches everyday people how to become a trader using technical analysis and charting techniques to trade in forex markets, stock indices and commodities. For training on the forex markets or to learn more, visit www.tradewithprecision.com

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1 Comment & Question

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What about the likelihood of a sovereign credit downgrade? NZ is on negative watch right now with a stagnant economy. There is a good chance of a depreciation against the dollar in 18 months, all things remaining equal.

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NZ Market Snapshot

Forex

Sym Price Change
USD 0.7850 0.0000 0.00%
AUD 0.8924 0.0000 0.00%
EUR 0.6196 0.0000 0.00%
GBP 0.4880 0.0000 0.00%
HKD 6.0917 0.0000 0.00%
JPY 84.8970 0.0000 0.00%

Commods

Commodity Price Change Time
Gold Index 1231.3 2.700 2014-10-24T00:
Oil Brent 86.1 -0.700 2014-10-24T00:
Oil Nymex 81.0 -1.020 2014-10-24T00:
Silver Index 17.1 0.020 2014-10-24T00:

Indices

Symbol Open High Last %
NZX 50 5292.8 5344.4 5292.8 0.77%
NASDAQ 4459.5 4486.3 4452.8 0.69%
DAX 9008.6 9044.9 9047.3 -0.66%
DJI 16677.0 16811.7 16677.9 0.76%
FTSE 6419.1 6419.1 6419.1 -0.47%
HKSE 23311.9 23352.6 23333.2 -0.13%
NI225 15354.4 15377.0 15139.0 1.01%