Historic Contraction in Q2 Sends UK into Recession

A recession is a macroeconomic term that refers to a significant decline in economic activity when compared to the previously recorded data. This morning, the pound released their quarterly GDP which was down 20.4% compared to the first three months of the year. This was the biggest contraction recorded in the history of the pound.


To put the data into perspective, during the 2008 recession, the UK’s GDP shrunk no more 2.1% in a single quarter. Every sector contracted, with the majority of the drop in activity led by private consumption which shrank by 23.1% on the quarter and accounted for two-thirds of the fall in quarterly GDP. Household spending also recorded a 23.1% decline with business investment plummeting by 31.4%.


Looking at the more recent data provided, we can see that the reopening of the UK economy that was implemented at the beginning of June has had the desired effect with their Manufacturing Production as well as Industrial Production data both coming out with positive numbers as well as an increase on the previous months data. With more businesses set to reopen as lock down measures ease further, we can also expect an increase in consumer services spending. With this in mind, a rebound in GDP for the UK in the third quarter is highly likely. Monitor the CPI, Consumer Price Index, as well as the Retail Sales data which will be released next week to see any major changes in consumer spending.


Fundamentals play an extremely important part when trading and gives excellent insight into overall market direction. Be sure to always check the for the necessary fundamentals before entering any set-ups. Hit the subscribe button to receive blog posts send directly to your e-mail.

NZD/USD – Zones To Look Out For

There have been some attractive zones offering support and resistance on this pair recently which will be looked at below but first let’s start on the daily time frame to get a general idea of how this pair has been trending.

DAILY TIME FRAME


On the daily time frame, we can see that the overall trend here is bearish which can be spotted when looking at the descending trend line plotted which we’ve had 3 touches off of already. We had that huge spike to the downside when the dollar was treated as a safe haven at the beginning of the pandemic. Since then, price has made higher highs and higher lows but the third rejection off of the trend line could indicate further downside movement.

4 HOUR TIME FRAME


Looking on the 4 hour time frame, we can see how the previous resistance turned to support after higher highs were made by looking at the highlighted rectangle. After the third touch of the trend line shown by the elipse, structure was broken to the downside where a lower low was created shown by the upward pointing arrow and then price then went on to print a lower high shown by the downward pointing arrow. Dropping down to the 1 hour time frame below we can see the price action more clearly.

1 HOUR TIME FRAME


We can see that the lower high created actually formed a head and shoulder pattern shown by the zone drawn at 0.66900. With the neck line shown by the zone drawn at 0.66250, we have rejected that area twice already but currently trending in a tight range between the neck line and the next level of support.


From a fundamental perspective, the Reserve Bank of New Zealand will be releasing a Monetary Policy Statement as well as a Rate Statement tomorrow, with their interest rate decision being released as well. Their outlook is likely to remain dovish which means they are willing to reduce interest rates and even consider negative rates which will be something to look out for in the near future. On Friday, their Business PMI’s will be released which will give us more insight in to how well the manufacturing sector performed recently. From the US dollar perspective, their PPI’s will be released later today as well as their Weekly Crude Oil Stock. On Wednesday, the most noteable data releases to look out for will be the CPI’s, Crude Oil Inventories as well as the WASDE Report which gives estimates of the supply and demand within the agricultural sector. There have been talks of new stimulus packages to be implemented by Trump but without the approval of Congress, no agreement has been made yet.


As always stick to your trading plan and remember to hit the subscribe button to receive notifications sent directly to your e-mail.

EUR/GBP – Updated Analysis

Since the blog earlier in the week, we saw the pound’s Composite as well as Services PMI’s both came out 0.1 points less than expected which is usually seen as a negative for a currency but when looking at the bigger picture it was the fastest expansion of the UK service sector in five years which rose up sharply from 47.1 in June. Keeping this data in mind, let’s look below at the 4 hour chart to see how this pair reacted.

4 HOUR TIME FRAME

Not much price action has taken place since the last post but it’s important to note that we are still trading between the ascending and descending trend lines shown on this time frame which can be seen as a rising wedge.

1 HOUR TIME FRAME

On the 1 hour time frame above, we can see that the trend line provided some resistance shown by the downward pointing arrow as well as the highlighted ellipse. We can also see that price started making higher highs and higher lows. Once price broke and closed above the 1 hour time frame trend line, we can see that we had a perfect retest of the trend line shown by the upward pointing arrow and ellipse. However, we just had a break of structure to the downside and we are currently retesting the bottom end of the rising wedge as well as the descending trend line. If price breaks and closes below the rising wedge we will see further downside movement on this pair.

We have seen a positive fundamental shift for the pound since the staggered reopening of their economy which is evident when considering the release of their impressive services sector data as well as the most recent release of their Construction PMI which surpassed expectations and is up 3 points from the previous month.

Remember to always consider fundamentals before entering any trade set up and try to use news events as an extra confluence. If you find yourself entering a trade without the backing of fundamental analysis ensure that you are following the correct risk management. Hit the subscribe button below to receive blog updates sent directly to your email.

EUR/GBP – Euro British Pound Technical Outlook

Welcome to another blog by AspireFX, today we’ll be running over some technical analysis on EURGBP.

DAILY TIME FRAME

Looking at the daily time frame we can see that price is ranging between an ascending trend line as well as a descending trend line. We’ve also seen a reversal off of the 78.6 bullish Fib level with a bullish engulfing forming at the moment. Seeing as though we are in a bullish market, let us drop down to the lower time frames to look for potential long set ups.

4 HOUR TIME FRAME

On the 4 hour time frame, we can see that we are currently sitting on the 61.8 on the bearish Fib but with 3 hours left until the close of the current candle, I wouldn’t consider it to be a valid rejection of that level yet.

1 HOUR TIME FRAME

Drawing a descending trend line on the 1 hour time frame we can see we’ve already had 3 touches. If this trend line provides further resistance, we could look for potential buys around the ascending trend line drawn on the daily time frame. The other possible scenario would be to wait for a break and retest of the descending trend line drawn on the 1 hour time frame.


When you’ve found a pair that is working for you, it’s helpful to look at a few potential scenarios that could play out so that if one of your set-ups are invalidated, you have more analysis to back it up. Hit the subscribe button below to receive updates sent directly to your email.

Key News Events

For the week ahead, there are a few stand out fundamentals that will be coming into play.


In terms of the dollar, be on the look out for Manufacturing as well as Non-Manufacturing PMI’s being released today and Thursday respectively. The Markit Composite PMI as well as the Initial Jobless Claims will also be important to consider. The ADP Non-farm Employment Change which measures the change in non-farm, private employment, is being released on Wednesday, gives a good indication of what to be expect for this week Friday’s NFP report.

The Euro-zone’s Manufacturing PMI was released this morning which came out positive. They will also be releasing their Markit Composite and Services PMI’s this week Wednesday along with their retail sales which could follow the same tone as this morning’s data release.

Australia will be releasing their Trade Balance and Retail Sales on Tuesday with their Home Loans data being released on Friday. There will also be a Monetary Policy Statement this week Friday which could provide some insight in to what kind of economic stimulus their government’s considering. The premier of Victoria, the second largest state in Australia, declared the region into a “state of disaster” on Sunday which proves the coronavirus is an ongoing struggle in the country.

The New Zealand Employment Change as well as their Unemployment Rate will be released on Wednesday, with their Quarter over Quarter Inflation Expectations coming out on Thursday.

The UK will be releasing their Composite and Services PMI’s this Wednesday, with their Interest Rate Decision being made on Thursday which is expected to remain at 0.10%.

USOIL is trading around the $40 mark with OPEC+ members beginning to unwind output cuts which could end up in over-supply in the low demand market. Gold is nearing the historic $2000 mark, currently trading at $1970.

For the best trading set-ups, make sure your technical and fundamental analysis correlate and as always stick to your trading plan! Hit the subscribe button to receive blog updates sent directly to your e-mail.

USD/CHF – Can the Franc Gain Further on the Dollar?

With the Switzerland KOF Leading Indicator coming out significantly positive compared to what was foretasted as well as the weak dollar we’ve been seeing recently, we could see this pair push lower.

WEEKLY TIME FRAME


Looking on the weekly time frame we can see that we are in a bearish trend. We recently had the break below the key level at 0.92000 we support turned into resistance shown by the downward pointing arrows.

4 HOUR TIME FRAME


On the 4 hour time frame, we can see we’ve had two touches off of the descending trend line as well as creating a new lower low.

1 HOUR TIME FRAME


On the 1 hour chart, we can see we’ve rejected the 50% Fib level which lines up with the double bodies to the left. A more attractive risk to reward would be to wait for the third touch of the trend line which coincides with the 61.8% Fib level as well as another set of double bodies to the left which offers more resistance.

The KOF Leading Indicator is designed to predict the direction of the economy over the following six months. The index is made up of various economic indicators such as banking confidence, for example. It is looking highly likely that the Swiss Franc will gain further against the dollar, especially with the amount of money we can see being pumped into safe havens by looking at the price of gold.

Remember to always stick to your trading plan and try to build as many confluences as possible before entering any set-up.

EUR/NZD – Pivotal Resistance Broken

Welcome to another blog by AspireFX. Looking at EURNZD, on the higher time frames we can see that there’s been a shift in momentum to the upside.

DAILY TIME FRAME


On the daily time frame we can see that although we’ve created a lower low between the 3-10 July, following that price action we printed a higher low shown by the upward pointing arrow, proving the shift in momentum to the upside. Plotting the fib, we can see that we had a reversal off of the 61.8 and could see this pair push to 1.77000.

4 HOUR TIME FRAME


On the 4 hour time frame above, we can see by looking at the highlighted region that an important point of resistance has now turned into support. Looking left at the dashed line that has been plotted we rejected the previous high of 1.76500.

1 HOUR TIME FRAME


On the hourly chart, we can look for potential intra-day trade setup because we’ve just had a break out above the previous resistance which could now turn into support for price to go higher. Plotting the Fib, the 61.8 lines up nicely with the psychological round number 1.76000. The last point of call for this setup would be the 78.6, if we see candle closures below that level it would invalidate this setup.


Remember to always wait for candle stick confirmation before executing any trades and always use the correct risk management.

Key Fundamentals This Week

This will be a news heavy week for the dollar with Core Durable Goods Orders being released today, the Conference Board Consumer Confidence which can predict consumer spending will be released tomorrow, on Wednesday the most notable release will be the oil inventories as well as the Goods Trade Balance. The most important news release for the dollar this week will be the GDP Quarter over Quarter which will be released on Thursday. There is an expectation that the GDP will shrink by over 30%.

In terms of the rand this week, their monthly CPI and Core CPI will be released on Wednesday. The president of South Africa has stated that the Unemployment Rate in the country is likely to worsen.


There was a spike in corona virus cases reported in Victoria, Australia today with the over 500 new cases expected to be reported. There will also be a CPI and PPI release, monthly and yearly for the Australian dollar which comes out on Wednesday and Friday respectively.


In terms of the pound the only thing to look out for this week in terms of news releases would be the Nationwide HPI which measures the change in selling price of homes with mortgages.


The euro zone will also be releasing their GDP on friday along with their CPI and Core CPI. Canada too will also be releasing their monthly GDP on Friday.

Always check for upcoming news releases when executing trades and remember to stick to your trading plan. Hit the subscribe button below to receive e-mail notifications sent directly to your e-mail.

GBP/AUD – New Lows Created

This week we saw the Aussie Dollar gain strength against the pound. With Australia being one of the worlds biggest gold miners and with gold reaching 9 year highs this week, it’s easy to understand why we are seeing Aussie Dollar strength despite negative data releases.

4 HOUR TIME FRAME

Looking at the 4 hour chart above, we can see that we broke the ascending trend line, found support around 1.77000 thereafter we had a bullish engulfing and looking at current price action we could form another bullish engulfing depending on how this 4 hour candle closes. Plotting a reverse Fibonacci tool, we can see that there was a rejection just short of the 61.8 with the take profit levels lining up almost perfectly with the previous support as well as the ascending trend line.

1 HOUR TIME FRAME

On the 1 hour chart, we can see that we are printing spinning tops indicating that upside momentum has slowed down but if price can continue to the upside, we can see that the 61.8 lines up nicely with the previous support as well as the ascending trend line. If the ascending trend line is broken through, this trade setup would be invalidated.

The Australian Bank Quarterly Business Confidence came out negative which is why we are seeing price pull back up. From a pound perspective, their CBI Industrial Trends Orders came out negative as well and with the latest Brexit statements released today stating that no new progress has been made with regards to negotiations. There are significant data releases for the pound tomorrow with their retail sales as well as manufacturing and services PMI coming out.

Be on the lookout for any sudden price movements in the gold market when analyzing this pair. Remember to always stick to your personal trading plan and ensure that you wait for candlestick confirmation before entering any trades.

GBP/USD – Technical Analysis

Welcome to another blog by AspireFX, today we’ll be looking at which confluences we could’ve identified in order to catch the huge move to the upside seen this week.

4 HOUR TIME FRAME


Looking on the 4 hour time frame we can see how how resistance turned support by looking at the highlighted region. We can also see by looking at the ascending trend line that we were creating higher lows as well as having 3 touches off of the trend line.

1 HOUR TIME FRAME

Looking at the 1 hour time frame, we can see more clearly how this pair has bounced off of the trend line. Looking at the Fibonacci tool, we formed a doji followed by a bullish engulfing off of the 88.6 level. Looking at current price action, we broke through the major key level of 1.27000, there was an attempt to break back below seen by the massive wick indicated by the upward arrow but ultimately closing back above. All signs are pointing to further upside movement.


Always try to keep your charts as clean as possible in order to see exactly what the markets are doing. Hit the follow button below to get notifications sent directly to your email!