Last week: Four important words shaped last week’s FOMC statement: ‘at its next meeting‘ and, with this, Janet Yellen has effectively issued a ‘Save the Date’ card for the December FOMC.
Last Wednesday’s FOMC statement indicated that December could be when the Federal Reserve might start to increase US rates, thereby ending the era of ZIRP, however subsequent weak US data has shed some doubt on this. Thus, the Fed may have issued a ‘Save the Date’ card but many are starting to doubt that US interest rates will ever be hitched, aka hiked! For now the US$ remains range-bound within a Flag pattern, despite the hawkish FOMC, and a review of the FX Indices can be found through this link.
There were quite a few new TC signals last week fueled by FOMC and the Aussie CPI data miss but I had a disrupted week with hospital visits and missed catching most of these in time: A/U = 120, A/J = 100, Kiwi = 100, GBP/AUD = 200 (still open), EUR/AUD= -100 and USD/CAD = -100.
It is another week filled with a huge amount of High Impact data. A few of the ‘stand out’ items include Chinese Manufacturing PMI data on Sunday and Monday, Central Bank Interest Rate updates from the RBA (AUD) and BoE (GBP) on Tuesday and Thursday respectively, a raft of Manufacturing data, ECB and US Fed speeches as well as US NFP on Friday.
Monthly candles: The October monthly candles have now closed and there were some noteworthy patterns that formed on a number of instruments:
- Bullish ‘engulfing’-style candles on the S&P500, NASDAQ, DJIA, Russell 2000, GBP/USD, Silver and Gold.
- Bullish reversal ‘Inverted Hammer’ candle on the A/U.
- Bullish Reversal ‘Railway Track’ pattern on the A/J.
- Indecision-style candles on the U/J (Inside), Copper (Spinning Top), GBP/AUD (Doji).
- Bearish Reversal ‘Hanging Man’ style candle on the USD/CAD.
AUD/USD: it is a big week for the AUD with lots of CNY, AUD and US$ data to impact here. The A/U has printed a bullish-reversal monthly candle off a major support zone and this may be a portent of more to come. Data will no doubt dictate here, but, I think one would be well advised to keep an open mind here.
NZD/USD: as with the A/U traders would be advised to keep an open mind here following the bullish monthly candle and the, essentially, ‘Morning Star‘ formation this has generated.
USD/JPY: this still remains in a 10-week duration trading channel and printed indecision-style candles on the weekly (Inside) and monthly (Inside / Spinning Top) close.
Gold: is weaker following FOMC but has pulled back to test the broken wedge trend line. Much will depend on US interest rates but any continuing doubt on that front may keep the metal supported.
Monday is the first day of the new trading month so watch for new pivots.
Stocks and broader market sentiment:
US stocks closed lower on Friday but did well for the week and for the month of October; the NASDAQ , DJIA, Russell 2000 and S&P500 all printed (essentially) bullish engulfing monthly candles!
I continue to watch out for further clues as to any new momentum move, long or short though! In particular I’m looking out for:
S&P500 daily chart: The index has closed above the psychological 2,000 level but just below the 2,100 barrier. It is back up near the daily support trend line and so I may have to give up on my hope for a test of 1,600.
S&P500 weekly: this still has a bit of a Bull Flag look to it although the weekly candle was only small and of an indecision-style ‘Spinning Top’ formation. Traders now need to watch the 2,135 level for any breakout or respect. Respect may signal a bearish ‘Double Top’:
Ichimoku S&P500 daily chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. There has been a recent bullish Tenkan/Kijun cross and price is above the Cloud and key 2,000 level:
Ichimoku S&P500 weekly chart: the weekly candle closed as a small bullish ‘Spinning Top’ candle but still above the weekly Cloud. I would want to see a sustained bearish move below the Cloud to support bearish sentiment. Note how the weekly Cloud remains aligned along the key 2,000 level:
S&P500 monthly chart: a break of the monthly support trend line. The monthly trend line remains intact for now but a break of this support level would suggest to me of a more severe pull back. Bearish divergence on the monthly chart had warned of recent weakness and I, like the Elliott Wave indicator, had been looking for a test of the 1,600 region but this might not evolve. Note the bullish engulfing style candle:
Russell 2000 Index: this small caps index is considered a US market ‘bellwether’ and does have a bit of a potential bearish H&S brewing but any new close and hold back above $1,220 would void this. The weekly candle closed as a bearish coloured Doji reflecting indecision but the monthly candle was bullish and, basically, engulfing.
VIX Index: The ‘Fear’ index is down near the 14 level but has printed a bullish coloured ‘Spinning Top’ weekly candle.
Copper: closed the month with a bearish coloured ‘Spinning Top’ candle suggesting indecision. I’m still seeing a bullish descending wedge set within the larger triangle pattern though.
Oil: The ‘Triple Bottom’ continues to take shape with the $45 level holding as decent support. The weekly candle closed as a bullish coloured ‘Inside’ candle reflecting some indecision here.
Trading Calendar Items to watch out for:
- Sun 1st: CNY Manufacturing & Non-Manufacturing PMI.
- Mon 2nd: AUD Building Approvals. CNY Caixin Manufacturing PMI. GBP Manufacturing PMI. USD ISM Manufacturing PMI.
- Tue 3rd: JPY Bank Holiday. AUD Melbourne Cup & RBA Interest rate announcement. GBP Construction PMI. NZD GDT Price Index. EUR ECB president Draghi speaks.
- Wed 4th: NZD Employment Data. AUD Retail Sales & Trade Balance. GBP Services PMI. USD ADP NFP, Trade Balance, Fed Chair Yellen testifies & ISM Non-Manufacturing PMI. CAD Trade Balance.
- Thurs 5th: AUD RBA Gov Stevens speaks. GBP BoE Inflation Report, Monetary Policy Statement & BoE Gov Carney speaks. USD Weekly Unemployment Claims.
- Fri 6th: AUD RBA Monetary Policy Statement. GBP Manufacturing Production. CAD Building Permits & Employment data. USD NFP & Average Hourly Earnings.
E/U: Last week’s FOMC helped to develop the Bear Flag breakdown on the E/U that had started the previous week with dovish ECB comments. Price action remains below the broken Flag trend line and key 1.12 level. However, the monthly chart below shows the importance of this 1.12 region and how price is really rather range-bound for now:
The potential 3,500 pip Bear Flag has not really got going just yet but remains the pattern in focus at the moment. This pattern probably depends on a US interest rate hike and that is not a certainty just yet although the Federal Reserve have issues their Save the Date notice for this potential at their December meeting. There is a fair bit of US$-sensitive data this week that could impact here and, if upbeat, could help to develop the Bear Flag here.
Descending triangle on the monthly chart: There is still an overall bearish pattern in play on the E/U monthly chart: a 4,300 pip bearish descending triangle breakdown on the monthly chart. The descending triangle pattern is a bearish continuation pattern and has a base at around the 1.18 level. The height of this triangle is about 4,300 pips. Technical theory would suggest that the bearish breakdown of this triangle below 1.18 might see a similar move. It is worth noting that this would bring the E/U down near 0.80 and to levels not seen since 2000/2001!
Price is trading below the Cloud on the 4hr, daily, weekly and monthly charts.
Whilst the E/U weekly chart certainly looks bearish any loss of faith with an imminent US interest rate rise could support a recovery here. Note the 4hr chart and how any small 50% recovery on this time frame would bring price up to near the 4hr 200 EMA, the current monthly pivot and near to the key 1.12 region. Traders need to keep an eye on US-related data to watch for any US$ weakness as this would support this pair. Conversely, US$ strength would only help to develop the Bear Flag.
The weekly candle closed as a bullish coloured Doji reflecting some indecision but the monthly candle closed as a bearish candle.
- I’m watching for any new TC signal on this pair, the Bear Flag trend lines and the key 1.12 level.
E/J: The E/J continues trading below the daily chart’s broken triangle trend line and below the key 134 level but the 132 has stepped up as recent support. It is worth noting that the triangle break alone has already delivered up to 200 pips.
I’m still seeing the monthly Cloud’s bearish Tenkan/Kijun cross though and these crosses have been few and far between so they are worth noting! This is at odds with the inverse H&S I’m also seeing on this chart though!
Despite this bearish monthly chart above, I’m still open to a bounce or pull back here, even if only temporarily, and a 61.8% retrace of the recent swing low would bring price back past the key 134 level and near the 4hr 200 EMA, broken triangle trend line to test and the current monthly pivot. This triangle pattern was a large one, worth around 2,000 pips, and so a test of the broken trend line would not surprise me at all.
Price is trading below the Cloud on the 4hr, daily & weekly charts but above the Cloud on the monthly chart.
The weekly candle closed as a bearish coloured ‘Spinning Top’ candle reflecting some indecision and the monthly candle closed as a bearish candle.
- I’m watching for any new TC signal on this pair and the daily chart’s triangle trend lines.
A/U: The A/U had a bearish week following weaker than expected AUD CPI as this brought forward thoughts of a rate cut at next Tuesday’s RBA meeting. This move triggered a new TC signal that gave up to 120 pips before closing off.
I think it is worth noting just where the AUD/USD is sitting now as October has closed. Price action remains below the 0.735 ‘neck line’ level of a possible bullish-reversal ‘Double Bottom’ BUT sitting right near to three major support areas:
- the previously broken monthly-chart trend line
- The 61.8% fib of the major swing high move from 2000 to 2011 near 0.715 and
- The 78.6% fib of the 2008-2011 swing high move near 0.71.
So, the big question now is ‘where to from here’? Many will tell you ‘south’ and expect a rate cut next Tuesday to accelerate this move. However, I’m not so confident of an RBA rate hike on Tuesday. I mentioned back on October 11th that traders need to watch for general AUD support due to the Turnbull Turnaround factor from our new Prime Minister. Some second and third tier data from Friday, as well as plenty of anecdotal data from moi, support this phenomenon. Friday’s AUD PPI and Private Sector Credit both beat expectations and so, although in the minority, I’m one of few who don’t think rates will be increased next Tuesday. If so I’ll be looking for a possible bounce with this pair, off this major support zone, and the first levels to watch would be:
- the 0.735 ‘neck line’ region and, after that,
- the daily chart’s 50% fib region as this is near the daily 200 EMA and also the 0.755 level which is previous S/R (shaded on chart).
- the weekly chart’s 50% fib as this is near the weekly 200 EMA, a weekly-chart bear trend line and previous S/R (shaded on chart).
Price is trading below the Cloud on the 4hr, weekly and monthly charts but in the bottom of the Cloud on the daily chart.
The weekly candle closed as a bearish candle but the monthly candle closed as a bullish-reversal ‘Inverted Hammer’ and this candle has formed at a major support level. Any failure to cut rates at next Tuesday’s RBA meeting could help to develop this pattern!
There is a lot of data to impact the AUD this week, apart from the raft of US$-related data. Traders should be on the lookout for any impact from Sunday and Monday’s Chinese Manufacturing PMI and Tuesday’s RBA Interest Rate data as well as Wednesday’s Retail Sales and Trade Balance data, Thursday’s RBA Gov Steven’s speech and Friday’s RBA Monetary Policy Statement.
- I’m watching for any new TC signal on this pair.
A/J: The A/J remains below the key 89 level but a TC signal here gave up to 100 pips last week before closing off. I wrote an article about the A/J during last week and this can be found through the following link.
I have revised the daily chart’s triangle trend lines.
Price is trading below the Cloud on the 4hr, weekly and monthly charts but in the bottom of the Cloud on the daily chart.
The weekly candle closed as a bearish engulfing candle although the monthly candle closed as an, almost, bullish-reversal ‘Railway Track’ pattern off major fib support. This could also be viewed though as the A/J simply testing Cloud resistance before bearish continuation but….IMHO…..keep an open mind. NB: note how the bottom of the monthly Cloud aligns with the key 89 level….confluence!
As for the A/U: There is a lot of data to impact the AUD this week, apart from the raft of US$-related data. Traders should be on the lookout for any impact from Sunday and Monday’s Chinese Manufacturing PMI and Tuesday’s RBA Interest Rate data as well as Wednesday’s Retail Sales and Trade Balance data, Thursday’s RBA Gov Steven’s speech and Friday’s RBA Monetary Policy Statement.
- I’m watching for any new TC signal on this pair, the revised triangle trend lines and the 89 level.
G/U: The Cable bounced off trend line support last week and rallied up to the 1.55 region but continues consolidating within a daily chart triangle pattern. This pair gave great trading opportunities, off this major support trend line,during the US session on Thursday and Friday though as the following 30 min chart reveals:
Weekly chart H&S: There is still a possible bearish H&S pattern forming on the weekly chart but the failure to break below the ‘neck line’ is holding this pattern off the time being. The height of the pattern is about 2,400 pips and suggests a similar move lower with any break and hold below the ‘neck line’. I would consider that any close and hold back above 1.60 would void this pattern.
Price is trading above the Cloud on the 4hr chart, below the Cloud on the daily, in the Cloud on the weekly but below the Cloud on the monthly chart.
The weekly candle closed as a bullish coloured ‘Inside’ candle reflecting some indecision here but the monthly candle closed as a bullish engulfing candle.
Traders need to watch for the data that impacts the US$ and also GBP Construction PMI on Tuesday and the BoE Interest Rate decision on Thursday.
- I’m watching for any new TC signal on this pair, the daily chart’s triangle pattern and the 1.55 level.
GBP/JPY: The GBP/JPY continues to chop around either side of the key 184 level and price bounced up off this region again last week. This is a significant level as it is near the 50% fib of the major 2007-2011 swing low move.
Price is trading below the Ichimoku Cloud on the daily chart but above the Cloud on the 4hr, weekly and monthly charts.
The weekly candle closed as a bullish coloured Doji candle, reflecting indecision, but the monthly candle closed as a bullish candle.
As for the Cable, traders need to watch for the data that impacts the US$ and also GBP Construction PMI on Tuesday and the BoE Interest Rate decision on Thursday. There is no Yen-specific high impact data set down for next week.
- I’m watching for any new TC signal on this pair, the 184 level and the revised daily-chart wedge pattern.
Kiwi: NZD/USD: The NZD/USD broke down from a 4hr triangle and FOMC and a dovish RBNZ helped to develop this and deliver a TC signal worth 100 pips before it closed off. Price action recovered with Thursday and Friday’s US$ weakness though to close back above the 0.67 support level.
This pair is in a similar category to the AUD/USD though in that it has formed a bullish monthly candle off major Fib support. This has also set up a pattern very similar to a bullish-reversal ‘Morning Star‘ as the images below reveal. Thus, while many are bearish here, and perhaps rightly so, I think an open mind is required especially with doubt surrounding US interest rates:
Kiwi Monthly: a ‘Morning Star’ style formation?
Thus, I’m keeping in mind the potential bullish targets on the following time frames:
Daily Chart: The daily chart shows a possible short term target for any bullish continuation to be near 0.70 as this is near the 50% fib of the recent swing low and also near the daily 200 EMA.
Weekly chart: The weekly chart reveals potential bullish targets if price action continues higher than the daily chart’s 0.70 region though. Placing Fibs on the longer-term swing low move shows the 61.8% fib to be up near 0.78 and the weekly 200 EMA and so this might be a target for any bullish continuation move.
Monthly chart: this shows that any bullish recovery from this level would tie in with a bounce off the 61.8% fib from the 2009-2011 swing high move and so is worth considering or, at least, keeping an open mind to!
Price is trading in the Cloud on the 4hr chart, above the Cloud on the daily Clouds but below the Cloud on the weekly charts and monthly charts.
The weekly candle closed as a small bullish candle but the monthly candle closed as large and bullish.
Traders need to watch for impact from Chinese data on Sunday and Monday and from NZD GDT Price Index data on Tuesday as well as data that impacts the US$.
I have revised this 4hr triangle now to help guide for any potential breakout movement from next week’s Chinese and US$ sensitive data.
- I’m watching for any new TC signal on this pair, the 4hr chart’s Flag trend lines and the 0.68 level.
The Yen: U/J: The U/J remains chopping sideways as it has for the last ten weeks. FOMC failed to trigger any breakout and nor did the BoJ so there it remains until, possibly, next week’s raft of US data with the key NFP on Friday.
Price is trading in the top edge of the Cloud on the 4hr and daily charts but above the Cloud on the weekly and monthly charts.
Monthly Chart Bullish Cup’ n’ Handle pattern: There looks to be a new bullish Cup ‘n’ Handle forming up on the monthly chart. The theory behind these patterns is that the height of the ‘Cup’ pattern is equivalent to the expected bullish move from the ‘handle’ breakout. The height of the Cup for the U/J weekly chart is around 4,800 ~ 4,900 pips. This may seem like a massive move but the longer term chart below shows this move to be reasonable as it would take the U/J up near the 50% fib of the 1985-2012 swing low move:
Note the 101.5 level on the other monthly MT4 chart though. Any pullback down to this level, apart from helping to form up a huge Handle for the Cup ‘n’ Handle, would also help to develop a bullish ‘inverse H&S’ pattern.
The weekly candle closed as a bearish coloured ‘Inside’ candle and the monthly candle closed as a bullish coloured, almost, ‘Inside’ candle, both reflecting some indecision.
- I’m watching for any new TC signal on this pair, the daily chart’s trading channel trend lines and the 124 level.
USD/CAD: USD/CAD price action continues to choppy around the key 1.30 level. I have revised a triangle pattern on the daily chart ahead of this week’s raft of US$ and CAD-sensitive data.
I’m still seeing a ‘Cup’ pattern forming up on the monthly chart and this could explain the extended choppiness around this 1.30 region as price action creates the ‘Handle’.
Monthly Chart Cup ‘n’ Handle? The monthly chart shows a possible bullish Cup ‘n’ Handle pattern forming up under the 1.30 level. This is worth keeping an eye on as the pattern would be worth up to 3,500 pips if it was to evolve as this is the height of the ‘Cup’. The interesting point is that the target for this pattern would put price up at the highs reached back in 2002 and this is equal to a 100% Fib retracement of the 2002-2007 bear move.
Price is trading in the Cloud on the 4hr chart, in the bottom edge of the Cloud on the daily chart but above the Cloud on the weekly and monthly charts.
The weekly candle closed as a bearish coloured ‘Inside’ candle reflecting some indecision. The monthly candle was also bearish, the first after five bullish months, and has a bit of bearish-reversal ‘Hanging Man’ look to it.
Note the weekly chart and how any 61.8% retrace here would bring price down near the weekly 200 EMA and this is just above the key 1.10 level.
There is a lot of high impact data to consider here this week: CAD Trade Balance on Wednesday and Employment data on Friday as well as USD ISD Manufacturing PMI on Monday, Private NFP, Trade Balance, a Yellen testimony and ISM Non Manufacturing PMI on Wednesday, Weekly Unemployment Claims on Thursday and NFP on Friday.
- I’m watching for any new TC signal on this pair, the revised daily triangle trend lines and the 1.30 level.
GBP/AUD: This pair had been looking like it was forming a daily chart Bull Flag and price broke up and out of this pattern last week. This move also triggered a new TC signal that is still open and up 200 pips.
There is still the look of a ‘Cup’ pattern on the monthly chart which could support continued choppiness around the 2.07 region as a potential ‘Handle’ forms up. Any continued bullish momentum may bring an alternative monthly chart pattern into focus though. A continued push up to the 2.40 region near the 61.8% fib would help to form up a possible bullish ‘Inverse H&S’ pattern. I would then be looking for any pullback back down to the ‘Shoulder’ region of 2.07.
Price is trading near the bottom of thin Cloud on the daily chart but above the Cloud on the 4hr, weekly and monthly charts.
The weekly candle closed as a bullish, almost, engulfing candle but the monthly candle closed as a bullish coloured Doji reflecting some indecision.
Traders need to watch for the data that impacts the AUD, of which there is a lot (see A/U notes) and the GBP.
- There is an open TC signal on this pair.
EUR/NZD: Price has closed the week below the 50% fib and this now brings the 61.8% fib into focus:
GBP/NZD: The GBP/NZD remains range-bound under the key 2.30 level but above recent support from 2.24. Moves within this range have been profitable especially for those who can trade the US session.
Price action continues to consolidate under the monthly chart’s major bear trend line and, more recently, below the 2.30 support level. Any further bearish continuation might target the 61.8% fib and, after that, the previous breakout and S/R region of 2.10 which happens to be near the weekly 200 EMA.
The GBP/NZD is trading below the Cloud on the daily chart but above the Cloud on the 4hr (just), weekly and monthly charts.
The weekly candle closed as a bullish coloured ‘Spinning Top’ candle reflecting some indecision and the monthly candle closed as a bearish candle following last month’s bearish-reversal ‘Railway Track’ pattern.
- I’m watching for any new TC signal on this pair and the 2.30 and 2.24 levels.
Silver: Silver did not like the hawkish FOMC and closed lower for the week and back below the $16 level but still within the weekly chart’s wedge pattern. Note how there has been a bullish hold above the monthly chart’s triangle trend line though.
Silver is trading above the Cloud on the daily chart but below the 4hr, weekly and monthly Clouds.
The weekly candle closed as a bearish candle but the monthly candle is the one to note here as it closed as a bullish engulfing candle.
Any new and sustained hold back below $15 would be bearish though and would bring the $11 and $9 levels back into focus. $11 is previous S/R and the $9 area is the 100% fib level.
- I’m watching for any new TC signal, the $16 level and the weekly chart’s descending wedge trend lines.
Gold: Gold also did not like FOMC and pulled back to close the week below the $1,145 level. However, I did point out recently, following this bullish wedge breakout, that this region might be tested before any bullish continuation and I’m wondering now if this is that pullback? I do note that price came to rest last week just above this previously broken wedge trend line. Any failure to increase US interest rates will help to support both Gold and Silver and, thus, price is rather vulnerable until that situation is made clear.
Gold is trading above the Cloud on the daily chart but below the Cloud on the 4hr, weekly and monthly charts.
The weekly candle closed as a bearish candle but, like with Silver, the monthly candle closed as an essentially bullish engulfing candle.
- I’m watching for any new TC signal, the wedge trend lines and the $1,145/50 level.
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