Zero: the New Black?

Last week: The disappointing NFP data has not only raised questions about the ‘when’ for any potential US interest rate hike but, now, also about the ‘if’!  ‘Zero’, in terms of ZIRP ( Zero Interest Rate Policy), might be the ‘New Black‘ as it appears to be a popular global initiative with many Central Banks looking at further easing rather than the raising of interest rates and the US might remain leader of the pack here. The US$ has yet to break free from its recent range-bound ‘Flag’ pattern but the odds of a break to the lower side must certainly have increased after Friday’s NFP data.

NFP: I had noted on Twitter last week how the US Fed Chair, Janet Yellen, seems to be in much the same situation as this poor lady below and this is even more relevant after last week’s NFP. It has been just one set of bad NFP data and, whilst ‘One Swallow does not a Summer Maketh’, jobs data has been a key focus for the Fed in their discussions about interest rates. I, like everyone else, will be watching to see how Fed policy unfolds from here:

Yellen

It was a tough week for 4hr-based TC as the flurry of new signals based on AUD weakness and JPY strength all failed.

NB: this is brief update due to the long weekend here and for personal reasons.

Next week: things to watch out for:

Following last week’s NFP traders will be looking for clues about the US$ and the first major US data comes on Monday with Non-Manufacturing PMI. The result with this print might determine which way the US$ trades for the rest of the week. There is US Trade Balance data on Tuesday and FOMC Minutes on Thursday as well to monitor.

Three Central Banks report this week: RBA, BoJ and BoE.

Silver and Gold: any developing US$ weakness would help to support these two as they trade within bullish charting patterns.

High Impact news items to watch out for:

  • Mon 5th: AUD & CNY Bank Holiday. GBP Services PMI. USD ISM Non-Manufacturing PMI.
  • Tue 6th: CNY Bank Holiday. NZD NZIER Business Confidnece. AUD Trade Balance & RBA Interest Rate Announcement. CAD & USD Trade Balance. NZD GDT Price Index. EUR ECB President Draghi speaks.
  • Wed 7th: CNY Bank Holiday. JPY BoJ Monetary Policy Statement & Press Conference. GBP Manufacturing Production. CAD Building Permits.
  • Thurs 8th: GBP BoE Interest Rate announcement. USD Unemployment Claims. GBP BoE Carney speaks. USD FOMC Meeting Minutes.
  • Fri 9th: CAD Employment data.

Stocks & Commodities: US stocks recovered after the weaker than expected NFP and I’m wondering if this rally was triggered by thoughts of continued ZIRP? It could well be a Bull Trap though and I’ll be looking for a bullish close and hold above 2,000 before getting too excited with this move.

S&P500 daily chart: The index continues trading below the psychological 2,000 level and below daily trend line support but is still holding above monthly support and the 1,900 level. However, I am still looking for a deeper pullback to possibly test 1,600.

S&Pdaily

S&P500 daily Cloud: note the new bearish Tenkan/Kijun cross:

S&PdailyCloud

Ichimoku S&P500 weekly chart: the weekly candle closed as a bullish-reversal ‘Hammer’ candle although still below 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&P500weeklyCloud

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 this recent weakness and I, like the Elliott Wave indicator, am looking for a test of the 1,600 region.

S&Pmonthly

Bonds:Note the consolidation on the Treasury Bond ETF and, also, the bounce up off the 61.8% fib!

TLTweekly

Oil: has printed another bullish coloured ‘Spinning Top’. That makes three in a row!

CLweekly

Russell 2000 Index: this small caps index is considered a US market ‘bellwether’ and has again closed the week above the key 1,080 level but with a bearish candle.

RUTweekly

VIX weekly: the ‘Fear index’ closed with a bearish weekly candle and is still below 30I

VIXweekly

Forex:

EUR/USD: It is worth noting that price action is back, yet again, sitting on the proverbial ‘fence’ near 1.12 which is the major 61.8% fib from the 2000-2008 swing high move. 

The weekly chart remains the bigger picture story here though STILL and, like with the EUR index, the E/U has been trading in what looks like a Bear Flag for many months now. The top region of this Bear Flag is the 1.18 level and this is also the baseline of the previously broken monthly-chart based triangle pattern and a key S/R region so any move and hold back above this trend line may prove significant and indicate a polarity shift here.

As I have been noting over recent weeks, traders need to keep an eye on the weekly chart’s Flag trend lines for any breakout, bullish or bearish:

  • Any new trend line breakdown and continuation could signal the start of a weekly-chart Bear Flag breakdown worth up to 3,500 pips. Keep an eye on the lower flag trend line, and also the recent low down near 1.045, in case they offer up any support.
  • Any break and hold back above the 1.18 region could signal reversal here.

Monday and Tuesday will be important days for this pair with key US data on both days and an ECB Draghi speech on Tuesday. It might be worth waiting until after these items to try and gauge which way the E/U might move from this key 1.12 region. Any bearish reversal with the US$ could just trump all of the current issues plaguing Europe and, to this end, traders need to keep an eye on the FX indices here.

E/U monthly: note how price is sitting at the key 61.8% fib near 1.12:

EUmonthlyCloud

E/U weekly: a Bear Flag still in play?

EUweekly

E/U daily: note the daily bear trend line here though:

EUdaily

EUR/JPY: still watching for any daily-chart triangle breakout.

Watch for any reaction to Tuesday’s ECB Draghi speech and Wednesday’s BoJ Interest Rate announcement:

E/U daily:

EJdaily

E/U 4hr:

EJ4

E/J monthly Cloud: I’ve still got this image tucked away in the back of my mind. There has been a recent bearish Tenkan/Kijun cross and, whilst the angles are not looking supportive, these crosses are few and far between and usually count for some potential action. As they say…be alert not alarmed!

EJmonthlyCloud

AUD/USD: when you look at the monthly chart here, and the break of the monthly support trend line, you kind of think this must be headed to 0.65. However, price has held above 0.70 cents and it is clinging on to this region of major fib support from:

  • The 61.8% fib of the major swing high move from 2000 to 2011 near 0.715.
  • The 78.6% fib of the 2008-2011 swing high move near 0.71.

The other things niggling at the back of my mind is whether the US$ will remains bullish should rate-hike fever wane and, then, the situation with Gold & Commodities, which are also linked to the US$ of course. If the US$ eases and Commodities bounce then I think even the RBA would have trouble keeping a lid on the AUD. There is still relief down here with the new style of government and if that starts to translate into substance then I’d say….. watch out.

Tuesday is a big day for the AUD with Trade Balance and RBA Interest Rate data released.

I mentioned the Boyer Lecture series last week and this is the link to the second lecture in the four-part series. I haven’t listened to it yet give the week I’ve had but I will get to it soon.

A/U monthly: note the two sets of Fib support nearby:

AUmonthlyCloud

A/U daily: still in a trading channel:

AUdaily

A/U 4hr: the same trend lines apply here as before NFP:

AU4

AUD/JPY: This is in the same triangle as pre-NFP too. The A/J is considered a bit of a risk barometer so if risk appetite improves then look for this to follow suit. A bearish break though might see the 0.80 region tested as this is the next major Fib below current price and a previous S/R zone.

There is AUD and JPY Interest rate news to impact here this week, apart from any US$ flows. Watch for any trend line breakout with these data items:

A/J 4hr:

AJ4

A/J monthly:

AJmonthly

GBP/USD: this looks like it might be trying to bounce up off a daily support trend line. As for so may other pairs, if the US$ weakens then this will help to support the Cable.

There is the BoE interest rate announcement on Thursday but any decent print with Services PMI on Monday might give this pair an early boost.

GUweekly GUdaily GU4

NZD/USD: The 4hr triangle is much the same here as per Pre-NFP too. Like with the A/U any developing US$ weakness should support commodities and this commodity currency too.

Watch on Tuesday for NZD Business Confidence and GDT price index data. Dairy auction values have increased for the last three auctions and a continuation of that trend could boost this pair:

Dairy Kiwi 4hr: watch for any trend line breakout:

Kiwi4

Kiwi daily: is this turning into a basing pattern? The New Zealand economy, whilst relatively small, seems to be doing quite well in spite of the recent commodity slump and the so-called China slowdown:

KiwiDaily

Kiwi weekly: due some mean-reversion here? If so, 0.78 is near the 61.8% fib and the weekly 200 EMA for some confluence:

KiwiWeekly

Kiwi monthly:

KiwiMonthly

USD/JPY: this pair is still range-bound but this choppy action is helping to develop the ‘Handle’ for the monthly chart ‘Cup’. I do note the close below 120 though and that may niggle here.

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.

Watch the trend lines here especially on Wednesday with the BoJ Interest Rate announcement. The commentary with this news might trigger a breakout:

U/J 4hr:

UJ4

U/J daily:

UJdaily

U/J weekly:

UJweekly

U/J monthly:

UJmonthly

GBP/JPY: this is still trading within the same triangle pattern as per last week.

Watch next week for any breakout though as there is GBP (BoE) and JPY (BoJ) Interest Rate news to impact here:

G/J 4hr:

GJ4hr

G/J daily:

GJdaily

G/J weekly:

GJweekly

G/J monthly:

GJmonthly

EUR/NZD: still range bound here too.

Watch for any boost with the NZD to help trigger a pull back here though. When you look at the weekly chart then the thought of some ‘mean reversion’ doesn’t seem so crazy!

E/N 4hr:

EN4hr

E/N daily:

ENdaily

E/N weekly:

ENweekly

E/N monthly:

ENmonthly

USD/CAD: this pair has pulled back from the major 61.8% fib like clock work and has given over 250 pips!

The 1.30 is a major level here and I would expect this to be tested…..again. Any such move from here would be worth over 120 pips. However, if we start to see any US$ weakness and a bounce in commodities and Oil price, then, price could keep heading south here past 1.30.  Thus, I’d be cautious setting any automatic LONG off 1.30….I’d want to see signs of rejection and bounce first.

USD/CAD 4hr:

Loonie4hr

USD/CAD daily:

LoonieDaily

USD/CAD weekly:

LoonieWeekly

USD/CAD monthly:

LoonieMonthly

GBP/AUD daily: watch trend lines here for any breakout given there is GBP (BoE) and AUD (RBA) interest rate news to impact here this week:

GAdaily

GBP/NZD daily: I still would not be surprised to see this pair at least test 2.30. Any upbeat NZD GDT data result might help here:

GNdaily

EUR/AUD: watch for any wedge breakout here too.

E/A 4hr:

EA4

E/A daily:

EAdaily

E/A weekly:

EAweekly

E/A monthly: any bullish breakout though might target the 61.8% fib:

EAmonthly

Silver and Gold: both continue in their bullish-reversal descending wedge patterns but Silver just might have started to breakout! They both got a boost on Friday after NFP with thoughts of a weakening US$.

Silver: back above the key $15 and looks to have triggered a bullish breakout so watch for any test of $15 and continuation higher:

Silver 4hr: a wedge breakout started?

Silver4hr

Silver daily:

SilverWeekly

Gold: closed just under $1,145 but this might be the level to watch next week. That and the wedge trend line of course:

Gold 4hr: keep an eye on $1,145 and the descending trend line:

Gold4hr

Gold weekly: watch for any 2 1/2 year wedge breakout:

GoldWeekly

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