This week: There are two economic news events in the next two weeks that have the potential to trigger large market moves; this week’s FOMC and the following week’s Brexit vote. The latter has the potential to trigger wild swings and I see that various Brokers are sending about warnings of such possible moves and are adjusting their required margins across this particular event. A number of instruments are trading at significant S/R levels meaning that Battle Lines have clearly drawn in the lead up to these events and so the wait begins to see which way either fear or greed will shift them from these levels. In this post I chart a range of Forex and Stock Index charts noting the particular Battle Lines that I see in play for coming sessions.
- US$: It might be a big week for the US$ with FOMC and other US data possibly determining whether the US$ can continue to bounce back up from major support near 92.50. A review of the FX Indices can be found through the following link.
- Central Banks: there are four central Banks reporting Interest rate updates this week: FOMC (USD), BoJ (JPY), SNB (CHF) and BoE (GBP).
- Brexit?: the vote isn’t until next week but I’m keen to hear how other folk see this playing out. With a Brexit LEAVE I’d expect risk-off type of flows into Gold, the Yen¥ and the US$ and out of the GBP£ and EUR€. However, EUR/GBP flows may help to keep the EUR€ supported relative to the GBP£. With a Brexit REMAIN: I’d expect risk-on flows into the GBP£ more so than the US$. However, any developing US$ weakness may still help to keep Gold supported. What are you all thinking?
Last week: There were three new TC signals last week: EUR/USD for 70 (now closed), AUD/USD for 170 (now closed) and Gold for 220 pips.
Trading Calendar ‘High Impact’ data Items to watch out for:
- Mon 13th: AUD Bank holiday. CNY Industrial Production.
- Tue 14th: GBP CPI. USD Retail Sales.
- Wed 15th: GBP Employment data. CAD Manufacturing Sales. USD PPI, Crude Oil Inventories, FOMC. NZD GDT Price Index. CAD Gov Poloz speaks. AUD Employment data.
- Thurs 16th: NZD GDP. JPY Monetary Policy Statement and Press Conference. CHF Monetary Policy Statement and Press Conference. GBP Retail Sales. GBP Monetary Policy Statement. USD CPI, Philly Fed Manufacturing Index and Weekly Unemployment Claims.
- Fri 17th: CAD CPI. USD Building Permits. EUR ECB President Draghi speaks.
FOREX:
E/U: The E/U is drifting back down to the major 1.12 level again in the lead up to next week’s FOMC. The 1.12 level is long-term S/R and a monthly chart-based 61.8% fib and, IMHO, is the Battle Line to watch in coming sessions.
The EUR$ could be expected to come under pressure with any Brexit LEAVE result however flows from the EUR/GBP could end up supporting the EUR$ so, good luck picking the extent of movement with this pair!
The key levels to monitor on the EUR/USD include:
- 1.12: this is a major S/R level from the monthly chart as it is the 61.8% fib of the 2000-2007 swing high move.
- 1.15: a recent resistance level.
- 1.18: this is major long term S/R level (seen on the weekly chart).
- 1.22: near the weekly 200 EMA, a previous monthly triangle trend line and is the 50% of the weekly chart’s 2014-2015 swing low move.
- 1.045 /1.040: the recent & longer term support levels marking the lower boundary of a potential Bear Flag.
Price is now trading above the 4hr Cloud but IN the daily and weekly Cloud suggesting further choppiness.
The weekly candle closed as a bearish coloured ‘inside’ candle suggesting indecision.
- I’m watching for any new TC signal on this pair and the 1.12 level.
E/J: The E/J continues to test a major support wedge trend line and next week’s BoJ meeting may help to determine whether this level can continue to support price action, either that, or FOMC might help decide its fate.
The weekly chart shows a potential bullish descending wedge but he bottom trend line is under pressure and is the level I’m watching into next week. I consider the bottom wedge trend line to be the battle Line to watch here this week. Any hold below the bottom wedge trend line would bring the weekly chart’s 61.8% fib ,near 115, into greater focus.
I’ve been posting this monthly Cloud chart on and off over recent months and the bearish Kijun /Tenkan cross did prove to be a bearish signal indeed! Watch for any close below the monthly Cloud:
Price is trading below the Cloud on the 4hr, daily and weekly charts which is bearish.
The weekly candle closed as a bearish candle.
- I’m watching for any new TC signal and the descending wedge trend lines.
A/U: The A/U bounced and rallied above 0.74 last week with the RBA rate hold but US$ strength towards the end of the week resulted in this pair closing back below the key 0.74 S/R level. The 0.74 level remains in focus for me and is the Battle Line for this pair in coming sessions.
The 4hr chart has a bit of a Bull Flag look to it so keep an eye on the Flag trend lines with Monday’s CNY Industrial Production data and Wednesday’s FOMC.
Price is trading above the Cloud on the 4hr but below on the daily chart which suggests choppiness.
The weekly candle closed as a bullish coloured Doji candle suggesting indecision.
- I’m watching for any new TC signal on this pair and the 0.74 level.
A/J: The A/J has bounced along either side of the key 80 level for the last 6 weeks and this is the Battle line for me with this pair. Next week’s FOMC and or BoJ meetings may help to provide news that will get this pair moving though. The A/J is closely correlated to the risk appetite seen across stock markets and so keep an eye on the S&P500 as well.
Price is trading below the Cloud on the 4hr and daily chart which is bearish. However, the weekly candle closed as a bullish-reversal ‘Inverted Hammer’ candle.
- I’m watching for any new TC signal on this pair and the key 80 level.
GBP/USD: The GBP/USD continues to be vulnerable to the ups and downs associated with the various Brexit Poll results.
The weekly chart shows a rising wedge set within a larger descending wedge but the rising wedge was broken at the end of last week. This break is bringing the horizontal S/R level of 1.40 into focus this week.
Bullish targets:
- the 1.46 level.
- the rising wedge and, then, the descending wedge trend lines.
- the 1.50 S/R level.
- the 50% fib near the weekly 200 EMA and 1.55 S/R level.
- the 61.8% fib near the 1.60 S/R level and also near the monthly chart’s bear triangle trend line.
Bearish targets:
- the 1.40 S/R level.
- The 1.35 S/R level and GFC low region.
- The 1.30 level which is near the monthly chart’s 78.6% fib.
- The 1.05 region which is near the monthly chart’s 100% fib.
Price is trading below the 4hr, daily, weekly and monthly Clouds which is bearish.
The weekly candle closed as a bearish candle.
- I’m watching for any new TC signal on this pair and the 1.40 level.
Kiwi: NZD/USD: The NZD/USD rallied above the key 0.70 S/R level following last week’s RBNZ’s rate hold and it even made it up as far as the 0.71 region. US$ strength towards the end of the week resulted in this pair pulling back though but it still managed to hold the week above the key 0.70 level.
The 0.70 level is a long term S/R region on this pair, best seen on the monthly chart, and is the Battle Line level for me with this pair.
Price is trading above the Cloud on the 4hr, daily and now weekly charts supporting LONG NZD/USD.
The weekly candle closed as a bullish candle.
- I’m watching for any new TC signal on this pair and the 0.70 level.
The Yen: USD/JPY: The U/J chopped up and down last week above the recent low of 105.5. This 105.50 is the bearish Battle line level I’ll be watching in coming sessions.
Monthly Chart Bullish Cup’ n’ Handle pattern: There still looks to be a longer-term 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 big 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 further down though. Any pullback down to this level, apart from helping to form up the huge Handle for the Cup ‘n’ Handle, would also help to develop a bullish ‘Inverse H&S’ pattern.
Price is trading below the Cloud on the 4hr & daily charts which suggests bearish U/J.
The weekly candle closed as a bullish-reversal ‘Inverted Hammer’ candle though so watch for any recovery here in future sessions.
- I’m watching for any new TC signal on this pair and the 105.50 level.
USD/CAD: The USD/CAD continued lower last week following an earlier triangle breakout and the pip haul of this triangle breakout move peaked at 420 pips.
The 1.30 remains a key level on this pair and I note on the 4hr chart that a 61.8% pullback from the recent swing low move would bring price right back to this 1.30 region. Thus, 1.30 is the Battle Line for me with this pair.
Price is trading below the Cloud on the 4hr and and in the bottom of the Cloud on the daily chart suggesting choppiness.
The weekly candle closed as a bearish candle near the bottom of the weekly Cloud.
- I’m watching for any new TC signal on this pair and the 1.30 level.
EUR/AUD: For the last six weeks this pair has chopped sideways either side of the key 1.55 level. Thus, 1.55 is the Battle Line for me with this pair.
Price is trading below the Cloud on the 4hr but above on the daily chart suggesting further choppiness.
The weekly candle closed as a bearish candle.
- I’m watching for any new TC signal on this pair and the 1.55 level.
GBP/NZD: The GBP/NZD is down near major trend line support and this is the level to watch in coming sessions for any make or break activity. Price has fallen around 1,800 pips in the last two weeks though so some pullback would not surprise. I note on the 4hr chart that a 61.8% pullback would bring price back above the key S/R region of 2.10 and so this is worth watching in coming sessions too. The 2.10 level is the Battle Line for me with this pair.
The GBP/NZD is trading below the Cloud on the 4hr, daily and weekly charts suggesting a bearish bias.
The weekly candle closed as bearish candle.
- I’m watching for any new TC signal on this pair, the bottom triangle trend line and the 2.10 level.
EUR/NZD: the EUR/NZD broke down from the daily chart triangle and this move alone gave over 300 pips. Price action is now back down near a recent low at 1.58 and this is the level to watch in coming sessions for any make or break activity. The 1.58 level is the Battle Line for me with this pair.
The EUR/NZD is trading below the Cloud on the 4hr, daily and weekly charts which is bearish.
The weekly candle closed as a bearish candle.
- I’m watching for any new TC signal on this pair and the 1.58 level.
EUR/GBP monthly: This monthly triangle is worth watching in the lead up to the Brexit vote. Whilst both currencies might suffer with any LEAVE vote I’d expect the GBP$ to be impacted more severely in the first instance. This could bring the upper trend line on this EUR/GBP chart back into focus.
AUD/NZD monthly: watch for any monthly candle close below 1.045 to void the bullish-reversal pattern in play here:
Gold: Gold continues to range between the $1,200 and $1,300 levels as it has done since February but it has been bullish for the last two weeks. The first week was due to US$ weakness but last week was more due to ‘flight to safety’ amid FOMC and Brexit inspired fear. Gold could well remain bid with the looming uncertainty around these two economic announcements.
Potential Bullish targets include:
- The weekly chart’s swing low 50% retracement fib near $1,415. This is also near the monthly chart’s bear trend line.
- The weekly chart’s swing low 61.8% fib near $1,500.
Bearish targets include:
- The bottom of the trading channel at $1,200.
- The monthly chart’s 61.8% fib level near $1,150.
Gold is now trading above the Cloud on the 4hr, daily and weekly charts which is a bullish shift.
The weekly candle closed as a bullish candle.
- There is an open TC signal here.
Stocks:
A number of global stock indices have closed with bearish weekly candles but the DJIA is one exception here. However, the DJIA and S&P500 have both closed back below key S/R levels: the S&P500 below 2,100 and the DJIA below 18,000. The interesting feature to note though is the lack of momentum on many of these weekly charts and with the VIX, too, despite its bullish weekly candle:
S&P500 weekly: a bearish reversal weekly candle and close below 2,100 BUT little momentum.
S&P500 daily: trading in a highly contested zone:
S&P500 daily: these are the battle lines for this index; the 2,135, 2,100 and 2,070:
DJIA weekly: closed the week with a slightly bullish coloured candle BUT back below 18,000. Note the lack of momentum here too though:
NASDAQ weekly: not much momentum here either:
Russell 2000 weekly: nor here:
FTSE weekly: little momentum here either:
DAX weekly: a trend line break BUT very little momentum yet:
Oil weekly: closed with a pin bar candle but this was bullish. Note the close above $50 though. Any hold above $50 will bring the $60, $70 and $80 whole number and fib levels into greater focus:
VIX weekly: a bullish candle for the week but not much momentum just yet:
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