Trade Analysis: Xmas Week May Bring Some Gifts

David Dixon gives a technical analysis of FX trends going into 2016.

This article was written by David Dixon of Viper Wealth Creation. 

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This week and the next will be very thin in terms of market liquidity. So there could be some interesting longer term trades to be had if you are able to hold into 2016.

EUR/USD looks to have held an important line near 1.1100 (1.1089 by my calculations) and I expect this pair to continue lower in 2016. I am targeting 1.0470 at least in the Q1. That said I would not be surprised to see a bounce up to 1.0950/1.1000 which I am keeping an eye out for as a great place to go short.

Cable is due a small bounce in my humble opinion and I would like to see a move to 1.5100/50 as a great place to short with a target of 1.4750 at first and thereafter 1.4500/50.

USD/JPY is likely to be supported quite strongly at 121.00 and capped at 123.00 until the New Year unless we see much weaker equity markets (see later).

AUD/USD looks to have shaken off the confusing bid tone that saw a move to 0.7385 early in December and I expect this pair to be headed steadily lower in 2016 with 0.6300 or lower, with some quite violent swings along the way.

USD/CHF the Swissy is not a beast to trifle with normally but I believe in 2016 the SNB will go some way to weakening the franc. I am targeting 1.20 in this pair with a “safer” play being against the JPY currently at or close to 122.35, heading to 100 in 2016.

The equity market gave an initial thumbs up to the Fed’s 25 b.p. hike last Wednesday and rallied to just above 2100 only to be sucker punched by confusion over Bank of Japan plans and an ever lower oil price. I think the S&P 500 is in a consolidation range of 2000-2100 give or take the odd 20 points, which means at the current level of 2010 it looks like reasonable value as we head into 2016.

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I will be keeping a close eye on the above with a view to my expectations for 2016 which I still expect to be trending in favour of the Greenback albeit at a slower pace and probably with a good dose of volatility thrown in. The question on the minds of FX market players is how quickly the Fed raises rates and currently expects 2 or 3 further hikes while the Federal Open Market Committee dot plot suggested that 4 could be on the cards. No doubt on economic news flow, the almighty USD will ebb and flow and give some opportunities for trading. It will not be one way traffic.

 

 

Clive Arneil, Viper Wealth Creation

Clive ArneilWorked for major brokers for over 20 years trading most instruments in the foreign exchange and derivatives markets.
Brokered deals on behalf of some of the world’s largest banks including Barclays, Citibank, UBS, NatWest and the Bank of England.
Worked mainly in the UK but also in Switzerland, Germany and the U.S.
Retired from the money market at the age of 40 and then worked as a financial data feed specialist supplying market data to banks, brokers and spread-betting companies.
From there he went on to teaching people the skills required to master today’s volatile markets not just in the U.K but also in Singapore, Dubai, South Africa, Germany and Italy.

David DixonDavid Dixon, Viper Wealth Creation

1980 – 2000, NatWest spot, forward and derivatives trader.
Responsibilities included taking on proprietary positions on behalf of the bank in the ‘interbank market’ with trades in multiples of millions of dollars, and on occasion billions.
2000 – 2006 he advised corporate and private clients on various financial matters.
2006 – present, David has been working with Clive.

 

 

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