Last week: It was a volatile and negative week for Trade Charting. Four signals formed at the end of the previous week and, althoughÂ three didn’t meet my requirements, they all failed. Another subsequent AUD/NZD signal gave just 50 pips before reversing.
The USDX is still hovering just below a significant trend lineÂ and the next major move on this index will define moves on a number of FX pairs. The index has yet to make its nextÂ directionalÂ move just yet though andÂ it spent last week consolidating below this major resistance. A review of this index can be found through this link.
Inverted Hammer: Quite a few USD-based pairs have printed weekly ‘Inverted Hammer’ style candles: the E/U, A/U, Cable and Kiwi. These are bullish-reversal patterns as shown in the diagram below. Traders need to keep this in mind as they approach trading these pairs next week as any further USD weakness would help to support these patterns. Some Fed comments over the w/e have been quite dovish and could helpÂ to weaken the USD. I find it ironic though that this Fed talk of keeping US interest rates low was made in responseÂ to the fragile globalÂ economy but, in keeping US rates low, this tends toÂ push up other currencies up and, thus, compounds their problems:
Bear Flags: the A/U, Kiwi and E/U could also be viewed as setting up with potential ‘Bear Flag’ patterns though! This is obviously at odds with the weekly candle ‘Inverted Hammer’ print noted above. The stock market might help FX traders here though and give them some clues about which technical pattern might trump. US Stocks markets have recently been jittery about the potential ofÂ rising US interest rates but the rout last week came from broader concernÂ with new fearÂ about stagnating global economic growth, the potential spread of Ebola and deepeningÂ Middle East problems. A continued andÂ more severeÂ stock sell off would most likely drag these three FX pairs lower and help to support their ‘Bear Flag’ potential.Â
Gold: has posted a bullish-reversal ‘Railway Track’ weekly candle off strong $1,180 support. Watch for any bullish continuation here. USD weakness, and or rising market fear, would be needed to help develop this pattern.
Oil: has made a significant bearish break below a weekly support trend line. Over supply and less reliance on Middle East reservesÂ is offsetting any upward price pressure that might have come from increasing Middle East tension. Traders need to keep an eye on the USD though as any new weakness there may help to support Oil and other commodities. This will have implications for the Loonie though:
CL : Crude Oil Futures weekly:
Events in the Ukraine and the Middle East continue to have the potential to undermine any developing â€˜riskâ€™ appetite and needs to be monitored.
Stocks and broader market sentiment:
Stocks took a beating last week as fear about stagnating global economic growth gripped the markets. The main US stock indices, the S&P500, DJIA, NASDAQ and Russell 2000, all printed large bearish weekly candles and all broke down through daily support trend lines.
I am still seeing divergence on the monthly S&P500 monthly chart and whilst this might just be warning of a pause, as the index navigates these new highs up at the 2000 region, the chance of a pullback cannot be ruled out either. There has not been any real deep pull back since the break up through the 1,577, 1,600, 1,700 and 1,800 levels and the major break of the 1,577 level was only tested once. This break of daily support may be the beginning of a deeper pull back here.
However, even though the daily support trend line on the S&P500 has been broken it is still trading above 1,900 support and forming up within a potential â€˜Bull Flagâ€™ pattern and significant consolidation under this major 2,000 resistance level would have to have been expected. Any weekly close below the 1,900 level and down belowÂ the ‘Flag’ would though have me looking for further sell-offÂ movement to the following two key levels:
- The 50% fib pull back of the recent bull run (Nov 2012-present), near 1,685, as this also the region of the monthly support trend line. Then,
- The 61.8% fib pull back of the recent bull run (Nov 2012-present), near 1,577, as this is the breakout level from the previous 2000 and 2007 highs.
Thus, with all of this, I continue to watch out for further clues as to any new momentum move, long or short though! In particular Iâ€™m looking out for:
S&P500 daily chart: The index broke below daily supportÂ last week BUT is consolidating within a potential â€˜Bull Flagâ€™ above 1,900 for the time being. A break of these two levels would support bearish continuation and a move down to 1,685.
Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. There was a recent bearish Tenkan/Kijun cross signal on the index and the index is now trading back below the Cloud.
S&P500 monthly chart: a break of the monthly support trend line (see monthly chart). The monthly trend line remains intact for the time being.Â
Russell 2000 Index: this US ‘small caps’ index is a bit of a US market â€˜bellwetherâ€™ and I see the 1,080 level as key support here .This level was broken during last week which is bearish.
TLT: there has been a bullish breakout with bonds and I assume this is due toÂ a ‘flight to safety':
VIX weekly: there has been a weekly breakout on the ‘fear’ index although this is still below the 30 level:
Trading Calendar Items to watch out for:
- Sat 11th: IMF & G20 meetings.
- Sun 12th: IMF meetings. EURÂ ECB President Draghi speaks.
- Mon 13th: IMF meetings. JPY, CAD, USD Public Holiday. CNY Trade Balance.
- Tue 14th: AUD NAB Business Confidence. GBP CPI. EUR German ZEW Economic Sentiment.
- Wed 15th: CNY CPI. EUR ECB President Draghi speaks. GBP Unemployment data. USD Retail Sales and PPI.
- Thurs 16th: NZD GDT Price Index. EUR ECB President Draghi speaks. CAD Manufacturing Sales. USD Unemployment claims & Philly Fed Manufacturing Index.
- Fri 17th: CAD Core CPI. USD Building Permits, Prelim UoM Consumer Sentiment & Fed Chair Yellen speaks.
E/U: The E/U drifted higher last week with newÂ USD weakness and broke up and out from a descending trading channel. Bullish momentum was short lived though as comments from the ECB President subsequently undermined this EUR strength and the E/U drifted back lower. This choppy action has worked against any clean TC signal forming off the 4hr time frame. Traders need to note that ECB President Draghi will be making three speeches throughout next week!
The break and hold below the 61.8% fib level of the 2012-2014 bull run supports continued bearish movement. Price pulled back during the week and tested this 61.8% fib level to the pip and, unless it can manage to break back above this resistance, then I will be expecting to see this pair head down to the 1.18 region.
The 4hr chart shows how last weekâ€™s channel breakout with subsequent pull back has given the chart a bit of a â€˜Bear Flagâ€™ appearance, much like the charts with the A/U and Kiwi. The whole number 1.26 seems to be decent support and Iâ€™ll be watching to see if this level can hold next week. A break of this 1.26 level gives a 100 pip trip down to last weekâ€™s lows near 1.25 and a break of both levels would suggest that aÂ move lower, to at least 1.18, might be underway. However, a full ‘Bear Flag’ move suggetsÂ a deeper correction than this. The ‘Flag Pole’ of this pattern is at least 1,200 pips in length and this would suggest any bearish breakdown below 1.25 might target the 1.13 region!
Price is still trading below the Ichimoku Cloud on the daily chart, weekly and monthly charts but is trading within the 4hr Cloud.
The small glimmer of hope for a reprieve on this pair lies with the print of the weekly candle. This closed as a bullish-reversal â€˜Inverted Hammerâ€™ candle. This is the first decent seized bullish candle for 14 weeks! That, in itself, is pretty significant.
- Iâ€™m watching for a new TC signal on this pair and the 1.26/1.25 levels.Â Â Â Â Â
E/J: The E/J chopped sideways to start last week but then fell towards the end of the week to close back below the key 136 level. It is still trading within a 4hr chart descending wedge that is sitting within a weekly chart triangle pattern but the break below 136 horizontal support suggests a breakdown from this weekly triangle pattern. Price bounced up off this support a few weeks ago though and so traders should watch to see whether the E/J tries to carve out any recovery from this region at the start of next week.
Price is now trading below the Cloud on the 4hr and daily charts, in the bottom edge of the Cloud on the weekly chart but above the Cloud on the monthly chart.Â The November and December candles were the first to close above the resistance of the monthly Ichimoku Cloud since 2008.
The weekly candle closed as a bearish candle.
- Iâ€™m watching for any new TC signal on this pair and the 136 level.
A/U: The 0.865 level continues to be key support for the A/U as this underpins the previous swing low printed back in June 2014 and, apart from that time, the A/U hasn’t printed this low since July 2010. A respect of this level, this time around, would form up a weekly chart bullish ‘Double Bottom’.
I had noted during the week how the A/U was forming up into a possible â€˜Bear Flagâ€™ and this now looks to have evolved. Price broke down from the â€˜Flagâ€™ here late on Friday and also printed a new TC signal to short. I missed this signal and will wait for any new close and hold below the 0.865. This pull back to weekly support could also evolve into a bullish reversal â€˜DoubleÂ Bottomâ€™ and, thus, 0.865 is a key level to watch.
Bear Flag? The Bear Flag may look to have started BUT I would prefer to wait to confirm this following any new close and hold below the 0.865 support level. The â€˜Flag Poleâ€™ for the A/U Bear Flag has a height of about 630 pips. Thus, the expected move for any bearish breakdown is expected to be of about 630 pips as well. This projects a bearish target down near the 0.80 level. This is significant as this is also the 61.8% pull back for the 2008-20111 bull run. I would expect that any break and close below the 0.865 might target this 0.80 level. There are the 50% fib and monthly 200 EMA levels above this 0.80 target that may offer some interim support.
Price is still trading below the Cloud on the 4hr, daily and weekly charts and near the bottom of the Cloud on the monthly chart.
The weekly candle closed as a bullish-reversal â€˜Inverted Hammerâ€™ candle.
- There is a new TC signal on this pair BUT I am waiting for any close and hold below 0.865.Â Â Â Â Â Â
A/J: The A/J chopped along for most of the week above the daily 200 EMA but it dipped on Thursday and fell below this support. The slide continued on Friday though and the last 4hr A/J candle of the week also broke down belowÂ the 4hr chartâ€™s descending trading channel.
Price is trading below the Cloud on the 4hr and daily charts, near the bottom of the Cloud on the weekly chart but above the Cloud on the monthly chart.
The weekly candle closed as a large bearish candle.Â
- Iâ€™m watching for any new TC signal on this pair.
G/U: The Cable chopped up and down last week but is still trading within a daily chart descending broadening wedge pattern and above 1.60 support.
Price is trading below the Cloud on the 4hr and daily charts but in the bottom of the Cloud on the weekly and monthly charts. Â
The weekly candle closed as a bearish-reversal â€˜Inverted Hammerâ€™ candle.
- Iâ€™m watching for any new TC signal on this pair.
GBP/JPY: The GBP/JPY continued chopping lower last week and has finally pulled back to the key 173 level. I had suggested this 173 level might be a target when the pair broke down from a triangle pattern last week. That was a move of over 430 pips!
Two key S/R levels on the G/J chart: The monthly chart shows a band of choppy congested activity across the chart. This band is defined by rather strong S/R levels at 179 and 167. The 179 level seems to be a key demarcation level and a close and hold above this would suggest bullish continuation. The key 173 level lies midway between these two S/R levels. Targets for any bullish break and hold above the 179 level, apart from obvious whole number levels, include the 50% fib near 184, the 61.8% fib near 200 and the 78.6% fib near 222.
Price is trading below the Ichimoku Cloud on the 4hr chart but above the Cloud on the daily, weekly and monthly charts.
The weekly candle closed as a bearish candle.
- Iâ€™m watching for any new TC signal on this pair and the 173 and 179 levels.
Kiwi: NZD/USD:Â The 0.77 remains a significant S/R level for the Kiwi. This level represents the previous swing low for the period during mid 2013 and, prior to then, it was last tested duringÂ mid 2012. The Kiwi managed to hold above this 0.77 level throughout last week but this consolidation has price action forming up into a bit of a potential â€˜Bear Flagâ€™ pattern.
Bear Flag for Kiwi? As with the A/U, the Kiwi looks like it could be forming up into a â€˜Bear Flagâ€™ as well. The Flag Pole for the Kiwi is about 1,100 pips. Thus, any bearish breakdown may be expected to extend by 1,100 pips as well. This would bring the Kiwi down to near 0.67 cents. This level is between the 61.8 and 78.6% fibs of the 2009-2014 bull run. Given that the 0.77 is strong support I would prefer to wait to confirm any possible â€˜Bear Flagâ€™ move until there is a close and hold below this 0.77 level.
Fib levels shows other possible targets for any bearish continuation as being the:
- 38.2% fib near 73.5.
- 50% fib near 70 and the weekly 200 EMA.
- 61.8% fib near 0.65.
Price is still trading below the Ichimoku Cloud on the daily and weekly charts but in the Cloud on the 4hr and monthly charts.
The weekly candle closed as a bullish-reversal â€˜Inverted Hammerâ€™ candle. Any bullish continuation from here would confirm a recent ‘Double Bottom’ pattern on the daily/weekly charts.
There is a new TC signal on this pair but Iâ€™ll wait for a close and hold below 0.77.
The Yen: U/J: The U/J had a bearish week after printing a â€˜Double Topâ€™ near the 110 resistance level. The U/J spent last week consolidating under this psychological 110 level and this price action formed up into another â€˜Flagâ€™ pattern.
I still think that the 61.8% fib level of the 2007-2012 bear move, down at 105.5, could be tested again even if there is to be ultimate bullish continuation. The 61.8% fib of any move is a major technical level and, as such, this might be tested.
Price is now trading below the Cloud on the 4hr chart but above on the daily, weekly and monthly charts. November was the first monthly candle close above the Ichimoku Cloud since mid-2007 and the bullish hold above the monthly Cloud continues to be noteworthy.
The weekly candle closed as a large bearish, almost â€˜engulfingâ€™, candle.
Weekly Chart Bullish Cupâ€™ nâ€™ Handle pattern: This pattern is still taking shape and has already given 1,000 pips of a projected 2,400 pip move. The theory behind these patterns is that the height of the â€˜Cupâ€™ pattern is equivalent to the expected bullish move from the â€˜handleâ€™ breakout. The height of the Cup for the U/J weekly chart is around 2,400 pips. The interesting point here is that a 2,400 pip bullish move up from the â€˜Handleâ€™ would put price up near the 124 level. This level is the last major swing high for the U/J from back in 2007 and represents the 100% fib pullback for the move down in 2007 to the lows of 2012. Possible targets along the way include the psychological whole number levels and the 78.6% fib that is up near the 114 region.
- Iâ€™m watching for any new TC signal and the 105.5 level.
USD/CAD: The USD/CAD chopped around last week but still managed to hold above the monthly chartâ€™s triangle trend line and also the 1.10 level.
The USD/CADÂ has broken up and out from a major monthly chart triangle pattern that could deliver up to 2,500 pips. The weekly candle was bearish though so there may still be a bit of pull back potential here.Â
Triangle breakout target:Â There is a 2,500 pip triangle breakout move evolvingÂ on the monthly chart. This 2,500 pip figureÂ is evaluated from the height of the triangle. I have used the triangle height from the beginning of the bull trend line, as shown in the monthly chart below. The height of the triangle is around 2,500 pips and, thus, this would be the expectedÂ move from any breakout action. This is where it gets interesting! Extrapolating a bullish move from this triangle places price up at the 61.8% fib level. These fibs levels are popular targetsÂ in retracement moves and so this adds some confluence to this as a possible target.
Price is still trading above the Cloud on the 4hr (just!), daily and weekly charts and is close to emerging from the Cloud on the monthly chart.
USD/CAD traders need to keep an eye on Oil prices asÂ Oil and the CAD are often positively correlated. This means then that Oil and the USD/CAD are negativelyÂ correlated. Thus, falling Oil might drag the CAD down which would boost the USD/CAD.
The weekly candle closed as a bearish-reversal â€˜Hanging Manâ€™ candle though so I’m on the lookout for a potentially deeper pull back here.
- Iâ€™m watching for any new TC signal on this pair and the 1.10 level.
Silver: Silver chopped higher last week as some USD weakness crept in and it bounced up from the bottom trend line of the monthly chartâ€™s triangle pattern. Â
Silver is trading below the Ichimoku Cloud on the daily, weekly and monthly charts but above the Cloud on the 4hr chart. This representsÂ a bullish shift here.
The weekly candle closed as bullish coloured â€˜Insideâ€™ candle.
- Iâ€™m watching for any new TC signal and the $15 level.
Gold: Gold seems to have formed a bullish reversal ‘Triple bottom’ during last week. It bounced up from aÂ $1,180 strong S/R base and also made a bullish breakout from a descending trading channel.
Gold is now trading below the Ichimoku Cloud on the daily, weekly and monthly charts but is back above the Cloud on the 4hr chart. This represents a bullish shift here.
The weekly candle closed as a large bullish candle in a bullish-reversal â€˜Railway Trackâ€™ arrangement. The fact that this candle pattern formed off strong $1,180 support makes it more significant. Note, also, the thinning Cloud resistance above current price:
Gold weekly ‘Railway Track’ pattern:
- Iâ€™m watching for any new TC signal on this pair and the $1,180 level.
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