FX: a pause for the US$ downtrend?: By Mary McNamara

Last week: There were quite a few trend line breakout trades last week and there are more patterns to monitor in the coming week. The US$ found technical support at the end of last week from the weekly 200 EMA, helped by the decent NFP result, so watch for any bounce to trigger some reversal moves across FX pairs. Remember, the US$ index has been in a downtrend, essentially, since the start of the year so some pause or even relief rally would not surprise. The key point to keep in mind this week is that ‘trends don’t travel in straight lines forever’.

Trend line breakout tally: these trades gave the following maximum pip movement and were profiled mid-week herehere and here:

  • EUR/USD: 90 pips and 120 pips on Friday.
  • AUD/USD: 40 pips.
  • EURJPY: 80 pips.
  • NZD/USD: 80 pips.
  • GBP/AUD: 220 pips.
  • GBP/NZD: 360 pips.
  • EUR/AUD: 220 pips.
  • EUR/NZD: 240 pips.

This week:

  • US$: the US$ index found support at the weekly 200 EMA but has been bearish since the start of the year so some pause, or even a relief rally, would not be out of order here as trends don’t travel in straight lines forever. A review of the FX Indices can be found through this link.
  • AUD/USD, NZD/USD & EUR/USD: these three pairs have enjoyed gains this year with the help of US$ weakness. Any pause or relief rally with the US$ at its current support could trigger an inverse move on these pairs. The weekly charts of these there are profiled for potential targets IF such a US$ move develops.
  • Data: there is one Central Bank update next week from the RBNZ.
  • Triangle breakouts: keep in mind that there are quite a few weekly chart triangle breakouts still in progress with each being worth around:
    • EUR/JPY: 2,000 pips with almost 1,000 pips yielded already.
    • AUD/JPY: 2,000 pips.
    • AUD/USD: 1,700 pips.
    • CAD/JPY: 1,600 pips.
    • NZD/USD: 2,000 pips.
  • TC Trial Results: I have written up the results of the TC Trial and this can be found through the following link.  There was a great trend line breakout trade on the EUR/USD on Friday that also triggered with a TC signal to SHORT for a trade worth over 8 R and 130 pips!

Calendar:

  • Mon 7th: AUD & CAD Bank Holiday. NZD Inflation Expectations.
  • Tue 8th: CNY Trade Balance.
  • Wed 9th: CNY CPI & PPI. USD Crude Inventories.
  • Thurs 10th: NZD RBNZ Rate update. GBP Manufacturing Production. USD PPI & Weekly Unemployment Claims.
  • Fri 11th:  JPY Bank Holiday. AUD RBA Gov Lowe speaks. USD CPI.

Forex:

EUR/USD: This was a HUGE week for the EUR/USD as it reached up to the key 1.18 level which was the target of the earlier daily-chart triangle 800 pip breakout. As such, this daily chart triangle has now completed successfully for the full quota of 800 pips! However, the weekly candle closed just below this major S/R region albeit with a green candle.

Just as the US$ index has been in a downtrend since the start of the year, the EUR/USD has rallied. Trends do not travel in straight lines forever though and, even if this pair is set to continue higher, a pause or pullback could occur before that ultimate move. Given this pair has peaked at the major S/R level of 1.18, a level it hasn’t traded above since January 2015, this could be the resistance to help bring about a pause or pullback. I note, on one of the weekly charts below, that the 61.8% fib of this 2017 swing high move is down near 1.10 so that would be a target for any sustained pause here.

Watch the 1.18 level for any make or break in coming sessions:

  • Upper targets: any bullish breakout above 1.18 will bring the S/R level of 1.20 and then the longer-term weekly chart’s 61.8% fib, up near 1.25, into focus.
  • Lower targets: any bearish retreat from 1.18 would have me looking for a test of 1.15 and then the 4hr chart’s 61.8% fib near 1.25. Any sustained pullback will have me looking down to the 61.8% fib of this 2017 swing high move, shown on one of the weekly charts below, and this is down near 1.10.

EUR/JPY: This pair has closed again above the key 130 S/R level, albeit only just! Take a look at the monthly chart and you will see how often monthly price has reacted at this level. This remains the level to watch in coming sessions for any new make or break.

There is a weekly chart triangle breakout in progress here worth about 2,000 pips and has given just over 1,000 pips already.

Watch the 4hr chart’s revised Flag trend lines, the 130 level and monthly 200 EMA, for any new breakout:

  • Upper targets: any bullish continuation would have me looking for a test of the weekly chart’s 61.8% Fib, near 135.
  • Lower targets: any bearish pullback would have me looking for a test of the 4hr chart’s 61.8% Fib near 126 S/R.

AUD/USD:  The Aussie has held near the key 0.80 S/R level but has chopped sideways in a wedge for the last few weeks and the weekly candle closed as a bearish coloured ‘Inside’ candle reflecting the indecision here. Keep an eye on the US$ index though as any bounce there could put pressure on this pair. I note that the 61.8% fib of the recent swing high move is down near previous S/R at 0.73.

Recall that the Aussie is currently in a weekly chart triangle breakout worth up to 1,700 pips and has given around 400 pips thus far.

Watch the Flag trend lines and 0.80 level for any new make or break:

  • Upper targets: any bullish continuation above 0.80 would bring the weekly chart’s 50% fib, near 0.90, then the monthly chart’s bear trend line, near 0.90, and then the weekly chart’s 61.8% fib, near 0.95, into focus.
  • Lower targets: any pullback would have me looking for a test of 0.78, then the 4hr chart’s 61.8% fib near 0.775, and then the 0.76 and 0.755 levels. I note that the 61.8% fib of the recent swing high move is down near previous S/R at 0.73 so that would be in mind too.

AUD/JPY: The AUD/JPY is stuck under the key 89 level but is still shaping up in a longer-term bullish-reversal Inverse H&S as it does so.

Watch to see how stocks continue to trade as bullish momentum there could drag this pair higher. However, the weekly candle was a bearish coloured ‘Spinning Top’ reflecting some indecision.

Note that there is a weekly chart triangle breakout in progress here after the recent break of a 2 ½ year bear trend line and this could be worth up to 2,000 pips and has given over 350 pips already.

Watch the 89 level for any new make or break:

  • Upper targets: any bullish continuation would bring the 90 S/R level into focus followed by the weekly chart’s 61.8% fib near 91.
  • Lower targets: any bearish pullback would have me looking for a test of 88, 87, 86 and 85 S/R levels, the latter being the 4hr chart’s 61.8% Fib.

NZD/USD: The Kiwi continues holding near the 0.74 level for the time being despite printing a large bearish weekly candle.

Take a look at the monthly chart and you will see how significant this level is for the NZD/USD. Lots of folk are bearish here but a hold above 0.74 would be a rather bullish achievement and support continuation. The Kiwi has not been in rally mode as long as the EUR/USD and AUD/USD but has been bullish since May and I note that the 61.8% fib of this swing high move is down near 0.71 and that would be in focus if the US$ index carves out a decent bounce from its current support.

Note that there is a weekly chart triangle breakout in progress here after the recent break of a 3 year bear trend line and this could be worth up to 2,000 pips.

Watch the 4hr chart triangle and the 0.74 level for any new make or break:

  • Upper targets: the longer-term weekly chart’s 50% fib, up near 0.75, and then the 61.8% fib, up near 0.79.
  • Lower targets: 0.73, 0.72 and, then, 0.71 being the 61.8% fib of the recent swing high move.

There is the NZD RBNZ rate update to monitor next week. 

GBP/USD: The Cable is still holding above the key 1.30 level and this remains the S/R region to watch. Keep an eye on the triangle brewing on the weekly chart too.

Watch the 4hr chart’s triangle trend lines and 1.30 level for any new make or break effort.

  • Upper targets: any sustained hold above 1.30 will bring 1.35, as previous S/R, followed by 1.40, which is near the 3-year bear trend line into focus.
  • Lower targets: any bearish pullback below 1.30 will bring the 4hr chart’s 61.8% Fib near 1.285 into focus. 

USD/JPY: The USD/JPY looks to be in a bullish descending wedge on the 4hr chart although the weekly chart reveals an indecision-style Doji candle. This bullish wedge could unfold though if the US$ index bounces from its current support zone. Keep in mind the longer-term bullish pattern on the monthly chart below.

Watch the 4hr chart’s wedge trend lines for any new breakout move:

  • Upper targets: any bullish breakout will bring the 112 followed by the weekly chart’s upper triangle trend line and then 114.50 level into focus.
  • Lower targets: any bearish retreat will bring the weekly chart’s triangle support trend lines into focus.

GBP/JPY:  The GBP/JPY has chopped sideways under the 147 S/R level for most of the last three weeks. Note the bearish coloured ‘Inside’ weekly candle reflecting indecision here.

Watch the revised 4hr chart’s triangle trend line and 147 level for any new make or break:

  • Upper targets: any bullish breakout above 147 would bring the weekly chart’s 61.8% Fib, which is up near 168, into focus.
  • Lower targets: any continued pullback would have me looking for a test of the 4hr chart’s 61.8% fib, near 142. 

GBP/AUD: The GBP/AUD is bouncing within a daily chart triangle pattern but note the indecision Doji on the weekly chart!

Watch the 4hr chart’s triangle trend lines for any new breakout:

  • Upper targets: The daily chart’s triangle bear trend line, then 1.75 level followed by 1.80, as previous S/R, and then the 20-month bear trend line.
  • Lower targets: the recent low near 1.625.

GBP/NZD:  The GBP/NZD is trading in a 4hr chart triangle and near the key 1.77 level.

Note the bullish-reversal ‘Inverted Hammer’ weekly candle though!

Watch the 4hr chart’s triangle trend lines and 1.77 level for any new breakout:

  • Upper targets: The 1.80 level followed by the monthly charts bear trend line, that intersects near the 4hr chart’s 61.8% fib, and then 1.90 as previous S/R and, after that, the weekly chart’s 61.8% Fib near 2.20 S/R.
  • Lower targets: any pullback would have me looking for a test of the daily chart’s support trend line followed by the 1.67 S/R level.

EUR/AUD: This pair rallied last week but stalled at the 1.50 level.

Watch the revised 4hr chart’s triangle trend lines and 1.50 level for any new breakout:

  • Upper targets: any bullish breakout will bring the previous high, near 1.52, followed by the 9-year bear trend line and, then, the previous S/R level of 1.55 into focus.
  • Lower targets: any bearish pullback would bring the 4hr chart’s 61.8% fib, near 1.46, followed by the 1.40 S/R level into focus. 

EUR/NZD: The EUR/NZD rallied last week but stalled at the 1.60 level.

Watch the 4hr chart’s revised triangle trend lines and 1.60 level for any new breakout:

  • Upper targets: any bullish breakout will bring the 1.675 S/R regions, followed by the 9-year bear trend line into focus.
  • Lower targets: any bearish breakout will bring the daily support trend line and then the recent low, near 1.55, followed by 1.50 into focus.

Some FX pairs in brief:

USD/CAD: this looks to have broken up and out from a 4hr channel and has printed a large bullish weekly candle, almost an ‘engulfing’ candle following five substantial bearish weeks. The 4hr chart shows that a 50% fib pullback of the most recent swing low move is up near the major S/R zone of 1.30. The weekly chart shows that a 61.8% fib pullback would take price past this major 1.30 S/R level though. It is 350 pips up to this zone and I suspect 1.30 could be a bit of a target.

CAD/JPY: Keep an eye on the 4hr chart channel trend lines and the key 89 level for any new breakout.

USD/CNH: watch the 4hr chart trend lines for any new breakout:

USD/TRY: The weekly candle was an indecision style Doji making three weeks of indecision weekly candles here. Keep an eye on the 4hr chart’s triangle trend lines though for any new breakout move:

Commodities:

Gold:  Gold had been consolidating in a triangle under the 6-year bear trend line, that now intersects just below the $1,280 level. The metal weakened on Friday though as the US$ bounced and it pushed down through the 4-week support trend line and I’ll be watching for any bearish follow-through here.

Note the bearish coloured ‘Inside’ candle that was also a ‘Spinning Top’ candle. There is a fair bit of indecision here as Gold flirts under the 6-year bear trend line. Watch to see how the US$ moves next week as any bounce with the index could put pressure on the precious metal.

Watch for any continuation with this triangle breakout:

  • Upper targets: any bullish recovery will bring the the weekly chart’s 61.8% fib near $1,600 into focus.
  • Lower targets: any bearish retreat will bring the $1,250 then the 4hr chart’s 61.8% fib level, near $1,230 S/R, into focus.

Oil:  Oil stalled right at the 61.8% fib of the recent swing low move and also at the key $50 level.

Oil is setting up within a 4hr chart triangle, just above the daily chart’s triangle, so watch these trend lines for any new breakout. Note how the weekly candle closed as a bullish-reversal ‘Hanging Man’ candle right under this key $50 level.

Watch for any breakout from the 4hr chart triangle and $50 region:

  • Upper targets:  the daily/weekly/monthly chart’s upper trend line.
  • Lower targets: any bearish retreat will bring the 4hr chart’s swing high 61.8% fib, near $45, then the recent low, near $42, and then the $40 S/R level followed by the weekly chart’s 61.8% Fib, near $37, into focus.

Note: There is 2-year bear trend line above current price and this also forms the monthly chart’s ‘Neck Line’ for a potential ‘Inverse H&S’ pattern. This pattern has a height of approximately $30 or 3,000 pips and this puts the target for any breakout move up near the $85 level which ties in with the 50% Fibonacci of the 2008-2016 swing low move.

Stock Index:

XJO: the monthly chart’s Cup ‘n’ Handle pattern is developing here and the ‘Handle’ can be seen on the 4hr chart:

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