Markets ended the week in surprisingly resilient fashion given that the new round of tariffs has now set in, with the promise of more to come if no headway is made in the US/China trade negotiations. All up, it was a mostly choppy but sideways session although US$Jpy recovered from new 3 month lows, to finish towards session highs on Friday. Technically there is little new to add at the start of the week although some rather more aggressive tweets over the weekend from Trump will not ease the concerns of further, increased trade tensions.
EurUsd: For the second session in a row, the Euro saw a brief spike up to 1.1250 in Friday’s US session but it was unable t carry on and ended the week at 1.1235. The momentum indicators are telling us little, and further choppy consolidation looks possible in the days ahead although the 4 hour charts still appear to be mildly constructive. Overall, I still prefer the downside in the medium term but it may be too early to look to buy dollars here and a cautious stance is warranted. On the topside, resistance will again be seen nearby at 1.1250/55 and again at the May 1 spike high at 1.1265. Beyond that level would then target 1.1300 and 1.1318/25 (100 DMA/61.8% of 1.1447/1.1110/17 April high) and the descending trend resistance at 1.1330. A break of this then targets 1.1400 (200 DMA). On the other hand, back below 1.1200, minor support arrives at 1.1275 ahead of 1.1150/60 and then again at last Friday’s low of 1.1135, which lies ahead of the 26 April low at 1.1110. Below 1.1100 would target 1.1060/65, where the base of the descending wedge should see decent bids. A downside break would then open the way to 1.1020 (minor) and to 1.1000. As I said, I mildly prefer to look for levels to be long US$/ short Euro although it looks as though it will be ongoing US/China trade headlines that decide the outcome and we could see some exaggerated volatility, so a nimble stance is currently required. One thing to note though, is that the Euro has made higher lows now for 3 consecutive weeks, and above 1.1265, we could see a squeeze towards 1.1300.
DXY: (97.32) was slightly lower on Friday, and the daily momentum indicators are turning slightly negative, meaning that further downside momentum appears likely in the next day or two. The weeklies are in neutral though so a nimble stance is required heading into the new week. The technical levels are pretty much unchanged, and on the downside support will again arrive at 97.25/15 (Friday spike low; 97.13), but below which there is not too much to hold it up until the 12 April low at 96.75 and then the 100 DMA/ rising trend support, seen at 96.67. On the other hand, a topside squeeze could see a return to 97.50/60, 97.80 and possibly to 98.00, ahead of a return to the 98.33 trend high. I don’t think we see too much volatility today in the absence of any economic news, but further gains would see a run towards 98.80, where the top of the rising wedge lies, and then towards 100.10 (76.4% of 103.82/88.25).A cautious stance is required at the start of the week, although I still prefer to buy dips in the dollar.
US$Jpy: again initially headed lower on Friday, to 109.46, and made a minor double bottom at the new 4 month low at 109.47 seen on Thursday. The dollar then recovered to finish just below session highs of 110.05, leaving the short term momentum indicators looking mildly positive heading into the new week. Having said that, the dailies are pointing sharply lower and the theme of selling rallies still seems to be the plan. If we do see a topside squeeze, the initial level to watch would be at 110.10 (100 HMA) ahead of 110.25 (minor) ahead of the strong resistance seen at the previous support level, at 110.60 (100 DMA) and at 110.70 (200 HMA, 100 WMA/ /61.8% of 109.75/112.40). Further, minor resistance would then be seen at 111.05, which would fill last Monday’s chart gap, ahead of 111.40 and then at 111.70, 111.80/85 and at 112.00 (200 WMA) and then, possibly, 112.40, albeit it that this is a long way off now. On the downside, minor support will be seen at 109.60, and then, below 109.45 would allow for the 38.2% Fibo support of the flash crash low, at 109.18 (38.2% of 104.01/112.40), ahead of 109.00 and 108.75 (50% pivot of 98.94/118.60) and 108.50 (31 Jan low). The pair will be headline driven so a cautious stance is required, but from the look of the dailies, selling rallies is preferred.
US$Chf: traded lower on Friday and looks heavy on Monday although it remains above the Fibo support at 1.0105 (38.2% of 0.9894/1.0236). The pair did make a bearish outside week though, so further losses may follow, and below 1.0100 would then allow for a run towards 1.0065(50% of 0.9894/1.0236) and potentially to 1.0025 (61.8%). A recovery would now find sellers at 1.0150/55 and again at 1.0175 (200 HMA) ahead of 1.0200, which currently looks out of reach. If wrong, the next leg would target the 27 month high at 1.1236 and 1.0248 (11 Jan 2017 high), beyond which opens the way to 1.0320 (Jan 2017 high).
AudUsd: The Aud jumped around within its recent range on Friday, but closed at 0.7000 and now sits in neutral at the start of the week. The daily momentum indicators still look rather heavy and the downside may be in for further tests, although the short term momentum indicators do currently look mildly more positive, so I doubt we go anywhere too far today unless a trade headline pops or the Australian Housing data springs a surprise to create some interest. On the downside, the near term support remains intact at 0.6965 below which would open the way to 0.6950 and eventually to 0.6900 and lower. Resistance now lies nearby, at 0.7020/25 ahead of the post RBA high at 0.7047. Further out, beyond there, levels to watch are at 0.7055 (38.2% of 7206/0.6965), 0.7070, 0.7100, and then 0.7112 (61.8%) and 0.7110 (100 DMA). My longer term downside objective is 0.6650/0.6700 so, as before, I prefer to sell rallies in anticipation of the inevitable rate cut but until then it looks as though we need to spend more time chopping around current levels.
NzdUsd: The Kiwi remains heavy after last week’s RBNZ decision to cut rates, but it continues to consolidate above the spike low and more of the same seems possible today. The daily momentum indicators are still pointing lower though and the downside seems set to come under further pressure at some stage. If so, the initial target is seen at 0.6560 (January flash crash low), and then at 0.6525, the post RBNZ, spike low. Below there would look to the long term rising trend support at 0.6500 – from March 2009, a break of which would look at the October 2018 spike low at 0.6465. On the topside, resistance will be seen at Friday’s high at 0.6613 (200 HMA) at 0.6610 and then at 0.6625/35 (minor gap fill). Further out, resistance would arrive at 0.6650 and, then at the 0.6880/85 resistance which capped the recent recovery.
On the crosses, the Jpy looks soft in the short term although the daily charts suggest selling all the yen crosses into strength, so being cautious here and selling rallies in AudJpy, NzdJpy and EurJpy is favoured. Elsewhere, EurChf looks heavy, as does AudCad. Otherwise, things look choppy and I prefer to remain focused on the US$ moves right now.
Gold: is doing nothing but bouncing around between 1280/90, and continues to respect the neckline of the SHS formation at 1285 and, as before, while it does so I still prefer the downside, as I suspect the US$ strength will eventually return to place downside pressure on commodities. As before, tight stops on short positions should be in place above the 100 DMA, now at 1295, but preferably above 1300. Should the SHS formation work as planned, the long term downside target is seen at 1218 but that is a long way off, and ahead of that the immediate downside target is at 1267/70, ahead of 1253 (200 DMA). As we said before, some caution is required as there could easily be some safe haven demand in the event that the US/China trade talks break down completely, potentially sending Gold higher, so keep stops in place.
Silver: as with Gold, Silver has been choppy, currently a little lower at 14.78. I prefer to remain short for now, and looking to sell into rallies towards 14.90/15.00, but stops should be placed tight above 15.00/05 (50% pivot of 13.89/16.21), above which could then see a run toward the 100 DMA at 15.32. On the downside, support will be seen at 14.75 (minor) and again at the 2 May low at 14.60. Further downside support would be seen at 14.45 (76.4% of 13.89/16.21), 14.20 (minor) and at 14.00 but with an eventual, long term target being at 13.85. While a good deal of caution is require here if short, I prefer to trade this way, as I think 14.00 – and lower – is eventually on the cards, in line with a stronger US$.
Stocks: ended up by around 0.4% on Friday, but not before the indices made new 6 week lows and the S+P actually made a bullish outside day, possible a positive sign ahead. The result was very constructive, given the conditions against the background of trade negotiations/tariffs, and the short term momentum indicators look positive heading into the new week, so I expect we should see at least some minor gains. However, the dailies still look heavy and the weeklies appear to be a little toppish, so right now I prefer to look for levels to sell into, with a tight SL placed above 2915 (S+P), or preferably above 2940 (S+P) and 26250 (DJI). If we see a breakthrough between the US/China, the S+P and Nasdaq will be in blue sky territory, closely followed by the DJI although this looks less likely right now.
WTI: was choppy on Friday (61.40-62.45), leaving the short term momentum indicators in neutral, but with the dailies pointing lower, so a return to 60.00 would not surprise at some stage. Overall though, it could be that the current consolidation continues, so we should probably be looking for a wide range trade between 60.00/63.00. Support will arrive at the 200 DMA @60.50 and again at 60.00, while sellers will be seen at 62.90/63.00, above which could see a return to 64.00/70. Keep stops on longs below 59.40 (100 WMA). Overall I prefer to sell rallies but stay nimble!
By May 13, 2019
*Trade of the day: May 13, 2019; 9:36 AM(AET)
*This is a personal opinion only, based on the look of the table below, and carries no guarantee of success.
All trades are good till 5.00pm NY time. All “in the money trades” should have the SL raised to break-even, or managed manually. All “out of the money trades” should keep original SL in place.
Sell EurUsd @1.1265. SL @ 1.1305, TP @ 1.12005
Buy EurUsd @ 1.1175. SL @ 1.1125, TP @ 1.1255
Sell AudUsd @ 0.7045. SL @ 0.7070, TP @ 0.6970
Sell WTI @ 63.00. SL @ 63.80, TP @ 61.00
Sell S+P @ 2910. SL @ 2925, TP @ 2850
Sell DJI @ 26250. SL @ 26400, TP @ 25850