US$: markets still waiting for it to make a move by Mary McNamara

Last week:  US$ weakness at the start of last week enabled three TC signals that closed off with a decent pip haul before price action eventually reversed: A/U= 150, A/J= 110 and Kiwi= 120 pips. The US$ picked up strength mid-week though and this made for choppy action after that.

 This week:

The broader markets still seem to be waiting for the next big move with the US$. It has been range bound in a potential ‘Bull Flag’ pattern and under the key 100 level for two weeks now. The 100 region remains the ‘line in the sand’ level for this index where a move and hold above would support bullish continuation but a hold below 100 would support some relief from this lengthy rally and, possibly, a pullback. I am not expecting any decent trends to return to the majority of high interest FX pairs until there is decisive US$ breakout; up or down! A review of the FX indices can be found through this link.

USD index: monthly:

DXYmonthly

There is a lot of high impact data in this shortened Easter week:

  • This is especially the case for the US$ and culminates with US NFP on Good Friday.
  • Another key data print to watch will be the official Chinese Manufacturing PMI released on Wednesday. The smaller-scale HSBC print of this data caused some rumblings last week but this week’s release is the more rigorous of the two as it is based on a survey of 3,000 purchasing managers rather than just the 430 surveyed for the HSBC data.
  • Janet Yellen’s speech last Friday calmed stock jitters but added little to the understanding of when any US rate hike may occur and, thus, the US$ remains range bound. The key elements of her speech can be found through this link. Maybe the data in the coming week can trigger a US$ Flag breakout.
  • The Greek debt crisis looks likely to rear its head again this week following the Greek handover of proposed reforms to Eurozone creditors. There has been a lot of negative talk on this matter across news wires over the w/e and this may feed negative sentiment into the E/U to start the week.

AUD/JPY: is setting up in a potential 1,200 pip Bear Flag.

Cable: This may prove to be the most interesting pair to watch this week as it navigates the 1.50 level into the monthly close on Tuesday. The ‘Bear Flag’ on the Cable has faded into a bearish ‘H&S’ pattern worth keeping an eye on but the waters may be muddied here somewhat with the start of the UK general Election campaign. There may not be much clarity until after the May 7th election.

The March monthly candles will close after Tuesday and this also represents the end of Q1 for the year. Trading might be choppy as result of end-of-quarter flows.

TC updates over the Easter period will be brief and posted less frequently.

Most European countries, the UK and Switzerland undertake a Daylight Saving Time shift this w/e by moving their clocks forward by 1 hour

Events in the Ukraine and the Middle East, as well as with Greek Debt talks, continue to have the potential to undermine any developing ‘risk’ appetite and need to be monitored.

Stocks and broader market sentiment:

The weaker US$ spooked stocks to start the week and then geo-political issues with Yemen and Greece fed into this fear. This fear faded a bit by Friday but, although stocks closed in the green for the last day of the week, the main US indices all printed bearish weekly candles. However, I note that there still hasn’t been a test of the NASDAQ 4,800 level. The small-caps ‘Canary in the Coal mine’ Russell 2000 index, whilst also bearish for the week, continues to hold up reasonably well.

There has been a lot of interest in the Bio-tech sector and many of these stocks trade on the NASDAQ. This sector might be due a bit of a pause and, if so, this could help to achieve my 4,800 test on the NASDAQ:

XBI: Bio-tech ETF: the $180 and $160 look like decent pull back targets:

XBIweekly

The Easter week is often biased to the upside which is worth keeping in mind.

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 I’m looking out for:

S&P500 daily chart: The index is still trading above the psychological 2,000 level and above the daily support trend line.

S&Pdaily

Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. There has been a recent bearish Tenkan/Kijun signal here but watch for any new bullish cross:

S&PdailyCloud

S&P500 monthly chart: a break of the monthly support trend line. The monthly trend line remains intact. A break of this support level would suggest to me of a more severe pull back or correction.

S&Pmonthly

Russell 2000 Index: this small caps index is a bit of a US market ‘bellwether’ yet, despite a bearish week, it continues to hold above the key 1,220 level.

RUTweekly

VIX Index: The ‘Fear’ index printed a bullish candle but is still well below the 20 level.

VIXweekly

Bonds:  The bond ETF had a bearish week with US$ uncertainty.

TLTweekly

Oil: Oil printed another bullish weekly candle and the bullish ‘Double Bottom’ above $40 support continues to take shape. USO, the USA Oil ETF, still looks to be holding above $16 still and forming a bullish ‘Double Bottom’ as well and the ETF printed a bullish-reversal ‘Inverted Hammer’ candle for the week. Watch for continued follow through on both:

CLweekly USOweekly

Trading Calendar Items to watch out for:

  • Mon 30th: EUR German prelim CPI.
  • Tue 31st: NZD ANZ Business Confidence. GBP Current Account. EUR CPI Flash Estimates. CAD GDP. USD CB Consumer Confidence.
  • Wed 1st: AUD Building Approvals. CNY Manufacturing PMI & HSBC Final Manufacturing PMI. GBP Manufacturing PMI. USD ADP NFP & ISM Manufacturing PMI. NZD GDT Price Index.
  • Thurs 2nd: AUD Trade Balance. GBP Construction PMI. CAD Trade Balance. USD Trade Balance & Unemployment Claims.
  • Fri 3rd: Bank Holiday in many countries and Good Friday. USD NFP.

Forex:

E/U: The E/U continued higher last week but was capped again under the 1.11 region. This is a congested region with the 61.8% fib of the recent bear move and the 4hr 200 EMA nearby. Price action remains below this level but above a recent support trend line. This pair had printed a bullish-reversal ‘Railway Track’ pattern last week and, so far, is still on a bullish tangent. The continued success here though will most likely come down to which way the US$ breaks out when it eventually does. A bullish US$ breakout will be negative for this pair but any resumption of a bearish US$ move will support the E/U in a Yin and Yang kind of way. Thus, E/U traders need to keep a close eye on the US$ and the developing Bull Flag pattern.

There is now really just one major bearish pattern in play on the E/U: a 4,000 pip bearish descending triangle breakdown on the monthly chart as the daily chart’s 1,400 pip Bear Flag has waned after giving just 800 pips.

Descending triangle 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 4,000 pips. Technical theory would suggest that any 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! The monthly chart shows how critical this 1.18 level is for the E/U. The January monthly candle closed below this key level and I will be looking for a test of 1.18 before further possible bearish continuation. I’m beginning to wonder if we will see this ‘test’ though.

Price is trading above the Ichimoku Cloud on the 4hr chart but below the Cloud on the daily, weekly and monthly charts.

The weekly candle closed as small bullish candle following on from last week’s large bullish, almost bullish-reversal style ‘Railway Track’, candle.

I’ll be watching to see where the monthly candle closes after Tuesday. The 1.12 level is over 300 pips above current price but represents the 61.8% retracement fib of the major 2000-2008 bull run and, so, is significant from a pivot perspective.

EUmonthlyCloud

Key risk events for this pair include all of the high impact US$ data but there is also EUR CPI data released early in the week. Add to this the ongoing Greek debt negotiation and it could shape up to be a volatile week for this pair.

  • I’m watching for any new TC signal and the 61.8% fib near 1.2.

EUmonthly EUweekly EUdaily EU4

E/J: The E/J drifted higher to start the week but gave back most of those gains by Friday.

Price is trading in the Cloud on the 4hr chart but below the Cloud on the daily and weekly charts and above on the monthly chart.

The weekly candle closed as a bearish ‘Spinning Top’ candle.

Key risk events are much the same as for the E/U (noted above).

  • I’m watching for any new TC signal on this pair.

EJmonthly EJweekly EJdaily EJ4

A/U: The A/U drifted up to the 61.8% fib retracement of the 2008-2010 bull move last week before bullish momentum faded. This move gave 150 pips in a TC signal before closing off though.

Price is still trading above the Cloud on the 4hr chart but below on the daily, weekly and monthly charts.

The weekly candle closed as a small bearish candle with a long upper shadow.

Key risk events for this pair include all of the US$ events but also Wednesday’s Building Approvals data and Thursday’s Trade Balance news. Commodity prices will also keep weighing on this pair and any reprieve there would help to support the A/U.

  • I’m watching for any new TC signal on this pair.

AUmonthly AUweekly AUdaily AU4

A/J: The A/J also chopped higher and gave 110 pips in a new TC signal before reversing. I’m having trouble reading this pair but note a possible 1,200 pip Bear Flag on the daily chart.

Price is now trading below the Cloud on the 4hr, daily and weekly charts but above the Cloud on the monthly chart.

The weekly candle closed as a bearish candle.

  • I’m watching for any new TC signal on this pair and the Bear Flag pattern.

AJmonthly AJweekly AJdaily AJ4

G/U: This could be a big week for the Cable as the monthly candle comes to a close on Tuesday and it has to navigate which side of 1.50 it will close on!

The Cable chopped along under the 1.50 level for most of last week and failed to rally above this level despite upbeat Retail Sales data on Thursday. It got a bit of a boost on Friday, however, when BoE Governor Carney made a short comment that the next move for UK interest rates would be up, but, even that couldn’t lift price above 1.50. There is a lot of GBP data this week that may trigger a decisive move here.

Weekly chart H&S: I had been seeing a ‘Bear Flag’ on the weekly chart but this has now evolved into a possible bearish H&S pattern. The outcome is pretty similar though with the height of the pattern being about 2,400 pips suggesting a similar move lower if the pattern is confirmed. Watch for any break and hold below the ‘neck line’ to support this bearish pattern.

The monthly candle doesn’t close until after next Tuesday but any monthly close below 1.50 would be the first since June 2010:

GUmonthlyCloud

Price is back trading below the Cloud on the 4hr, daily, weekly and monthly charts which is bearish.

The weekly candle closed as a bearish candle.

Key risk events for the Cable this week include those that impact the US$ but there is also GBP based Current Account data on Tuesday, Manufacturing PMI on Wednesday and Construction PMI on Thursday. One or all of these could combine to get this pair moving away from the 1.50 region. Whether this move is up or down remains to be seen though.

  • I’m watching for any new TC signal on this pair, the 1.50 level and the H&S pattern.

GUmonthly GUweekly GUdaily GU4

GBP/JPY: The GBP/JPY chopped lower below the key 179 level last week.

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 continuation include the 61.8% fib near 200 and the 78.6% fib near 222.

Price is still trading below the Ichimoku Cloud on the 4hr and daily charts but above the Cloud on the weekly and monthly charts.

The weekly candle closed as a bearish, almost ‘engulfing’, candle.

  • I’m watching for any new TC signal on this pair and the 4hr and weekly chart’s trend lines.

GJmonthly GJweekly GJdaily GJ4hr

Kiwi: NZD/USD:  The Kiwi chopped up to the 0.77 S/R region last week giving up to 120 pips in a new TC signal before retreating from this resistance zone. This move followed on from the previous week’s bullish break above a bear trend line that had been in play since last July, a period of almost 9 months.

‘Double Top’ breakdown on Monthly chart? The monthly chart still reveals a possible ‘Double Top’ pattern with a neck line at 0.735 in the making. The monthly candle close below this level for January suggested a possible 2,000 pip bearish follow through move as this is the height of the ‘Double Top’ BUT there does not seem to be a hold below this key level JUST YET. This may still well evolve, especially if the USD index regains its bullish mojo but any reversal on the USD index could see Kiwi continue to bounce up off this major support.

‘Double Bottom’ on daily chart? The daily chart shows what looks like a potential ‘Double Bottom’ trying to form up. The ‘neck line’ here would be the 0.77 level and this will be worth watching in the coming week.

Price is still trading above the Ichimoku Cloud on the 4hr and daily charts, below on the weekly chart but in the middle of the Cloud on the monthly chart.

The weekly candle closed as a small bearish candle with a long upper shadow reflecting indecision.

  • I’m watching for any new TC signal on this pair and the 0.77 and 0.735 levels.

KiwiMonthly KiwiWeekly KiwiDaily Kiwi4

The Yen: U/J: The U/J chopped lower last week but, again, found support from the 118.5 level. The daily chart is starting to look like a ‘Double Top’ might be trying to play out. Any continued choppy action here could help to form up the ‘Handle’ of the potential new monthly chart Cup ‘n’ Handle pattern.

Price is still trading below the Cloud on the 4hr chart but above the Cloud on the daily, weekly and monthly charts. November 2013 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 bearish candle following on from last week’s bearish, almost ‘engulfing’ candle.

Weekly Chart Bullish Cup’ n’ Handle pattern: This pattern seems to have completed now just 200 pips short of the 2,400 pip target. 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 2,400 pips. The interesting point here is that a 2,400 pip bullish move up from the ‘Handle’ 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. This pattern has given up to 2,200 pips of the 2,400 pip target! Watch for another, larger Cup ‘n Handle forming up on the monthly chart worth a possible 4,800 pips though!

  • I’m watching for any new TC signal on this pair.

UJmonthly UJweekly UJdaily UJ4

USD/CAD: The USD/CAD has continued trading within a horizontal trading channel. Price fell to start the week as the CAD strengthened with Yemen related Oil supply fear but rallied towards the end of the week as this situation eased somewhat. The overall price action is helping to form up the possible ‘Handle’ of my monthly chart Cup ‘n’ Handle.

Price continues holding above the monthly 200 EMA however and it is worth remembering that the last bullish monthly candle close above this level was back in February 2009, almost 6 years ago. This period also marks the longest bullish hold by the Loonie above the monthly Cloud since 2002! Note the possible bullish Cup ‘n’ Handle forming up on the monthly chart that is in addition to the bullish triangle breakout already in play:

LoonieCloudMonthly

Triangle breakout target:  The Loonie has already broken up and out from a major monthly chart triangle pattern that could deliver up to 2,500 pips. This 2,500 pip figure 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 expected move from any breakout action. Extrapolating a bullish move from this triangle places price up at the 61.8% fib level. These fibs levels are popular targets in retracement moves and so this adds some confluence to this as a possible target. The bullish move has given up to 1,600 pips so far.

Monthly Chart Cup ‘n’ Handle? The monthly chart now also shows a possible bullish Cup ‘n’ Handle pattern forming up. Price may yet rally up to the 1.30 level before any ‘Handle’ formation but recent choppy action might be helping form a ‘Handle’. This is worth keeping an eye on as the pattern would be worth about 3,000 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. Confluence!

Price is still trading below the Cloud on the 4hr chart but above on the daily, weekly and monthly charts.

The weekly candle closed as a small bullish candle.

  • I’m watching for any new TC signal on this pair and the trading channel trend lines.

LoonieMonthly LoonieWeekly LoonieDaily Loonie4hr

Silver: Silver continued to rally at the start of last week given US$ weakness. It managed to hold on to most of these gains mid-week, despite a then rallying US$, as geo-political events in Yemen stepped in to provide support. Price pulled back a bit on Friday though as Yemen fear subsided and the US$ managed to hold on to its gains.

Silver is trading above the Ichimoku Cloud on the 4hr chart but below the Cloud on the daily (just), weekly and monthly charts.

The weekly candle closed as a small bullish candle following on from last week’s bullish engulfing candle.

  • I’m watching for any new TC signal and the $15 level.

SilverMonthly SilverWeekly SilverDaily Silver4hr

Gold: Gold followed a similar path as Silver last week and for much the same reason. Gold also continued to rally at the start of the week given US$ weakness. It managed to hold on to most of these gains mid-week, despite the rallying US$, as geo-political events in Yemen provided support. Price pulled back a bit on Friday though as Yemen fear subsided and the US$ managed to hold on to its gains. Gold close the week just below $1,200 support.

The $1,145 region continues to be a major S/R level as it near the 61.8% Fib retracement of the 2008-2011 bull run. Any new break and hold below $1,145 would suggest a deeper pull back. Bearish targets below $1,145 include the $1,000 psychological level and, then, the 78.6% fib near $950.

Gold is still trading above the Ichimoku Cloud on the 4hr chart but below the Cloud on the daily, weekly and monthly charts.

The weekly candle closed as a bullish candle following on from last week’s bullish engulfing candle.

  • I’m watching for any new TC signal and the $1,145 level.

GoldMonthly GoldWeekly GoldDaily Gold4hr

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