Will FX join in on any Santa Rally?

Last week: The upbeat ‘risk’ sentiment seen across US stock indices has not exactly been matched by Forex. The USD/JPY has been on a bullish run but the likes of the Aussie, Kiwi, Cable and EUR/USD have basically been weak or choppy or both! The Aussie has managed to climb back above 0.74 again though and, with commodities like Copper and Coal on a tear, this pair might join in on any sustained Santa Rally but I suspect the EUR/USD might not be so cheerful though ahead of next weekend’s Italian Referendum; this is bringing the EUR/AUD into greater focus though.

This week:

US$: The US$ has now had two consecutive weekly candles close above the key 100 level for the first time since April 2003. This is a major achievement and any November close above this level would help to underpin a monthly-chart Bull Flag breakout move. A review of the FX Indices can be found through the following link.

Data: there is a fair bit of data this week and this culminates with NFP on Friday.

Monthly close: November concludes on Wednesday so watch how monthly candles close and for new monthly pivots.

EUR/JPY and GBP/JPY: these two Yen pairs are testing multi-month bear trend lines as November draws to a close. The AUD/JPY is ahead of the pack here but also looking to try and print a monthly candle above a multi-month bear trend line.

Consolidation patterns: a few trading instruments continue to trade within longer-term consolidation patterns such as triangles or wedge patterns. These include: the EUR/USD, AUD/USD, Oil, XJO, QQQ, FTSE and Gold. Watch, too, for the USD/JPY as it forms up in a bullish ‘Inverse H&S’ as the neck line of this is still well away at 124!

USD/JPY & 124!

Recent technical breakouts:

The NZD/USD has recently broken down from a weekly chart wedge pattern BUT the weekly candle was a bullish-reversal ‘Inverted Hammer’ suggesting caution is needed here.
Copper is attempting a monthly triangle breakout.

EUR/AUD: Is this pair setting up within a perfect storm? It recently broke down from a triangle pattern but any new break and hold below 1.40 could signal a much larger move:

NASDAQ and QQQ: keep an eye on the NASDAQ index for any monthly hold above 5,200 to underpin an ascending triangle breakout. If so, then also watch the related ETF, QQQ, for any new breakout above 120:

NASDAQ:

QQQ: Nasdaq 100 ETF:

ASX-200 / XJO: This index gets its own dot point because I am an Aussie! This top 200 stock index is up testing a major 18-month bear trend line so watch for any make or break from this level. The recovering commodity landscape could help to underpin a bullish breakout move here:

Updates: I am busy over the next few weeks and w/e in the lead up to and over Christmas so updates may be less frequent and more brief during this period. Also, I’m still trying to determine which charts to focus on, 4 hr vs 30 min, following on from my recent October trial.

Stocks and broader market sentiment:

The S&P500, NASDAQ, DJIA and Russell 2000 have printed new all-time high weekly candles and the ASX-200 is pressing up against a bear trend line and threatening a bullish breakout. The FTSE and TSX closed higher too with only the DAX closing lower for the week. I do think the FTSE is worth keeping an eye on as November draws to a close as any monthly close above 7,000 would be VERY significant:

FTSE-100 monthly:

TSX monthly:

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: New highs for the index and the recent Bull Flag pattern still looks valid.

S&P500 weekly: The index closed with a bullish weekly candle and this larger Bull Flag looks to be getting going. If so, the target is a lofty 3,100!

S&P500 monthly: The monthly candle is still bullish and ‘Engulfing’ but there are a few trading days to go until this candle closes. Keep in mind that the recent bearish divergence has faded.

S&P500 yearly: I do believe that the 1,600 level is the bottom of the new trading range for the index but wonder whether this might be tested at some stage in the near future; before any potential bullish continuation. The big question is though when, if at all?

Russell 2000 Index: this small caps index is considered a US market ‘bellwether’ and continues to hold above the Flag supporting a bullish breakout. It has just printed another new weekly all-time high above the psychological 1,300 level.

VIX Index: The ‘Fear’ index printed a bearish weekly candle and is still below the 14 threshold level.

Copper Weekly: Copper has printed a bullish candle and, as well, looks set to make a monthly triangle breakout. I still expect a test of this breakout trend line before any potential continuation but the bullish target is up near $3.50.

Oil: Oil continues holding above the 2009 low of $33.50 but printed a bearish weekly candle and is still below the key $50 threshold. Watch for any continuation with the bullish-reversal Inverse H&S pattern though as the target for this move is up near $70.

Trading Calendar ‘High Impact’ data Items to watch out for:

Mon 28^th: EUR ECB President Draghi speaks.
Tue 29^th: CAD BoC Gov Poloz speaks. USD Prelim GDP & CB Consumer Confidence.
Wed 30^th: NZD Financial Stability Report & RBNZ Gov Wheeler speaks. GBP Bank stress test results. OPEC meetings. EUR ECB President Draghi speaks. USD ADP NFP & Crude Oil Inventories. CAD GDP.
Thurs 1^st: AUD Private Capital Expenditure. CNY Manufacturing PMI, Non- Manufacturing PMI & CAIXIN Manufacturing PMI. GBP Manufacturing PMI. USD Weekly Unemployment Claims & ISM Manufacturing PMI.
Fri 2^nd: AUD Retail Sales. CAD Employment data. USD NFP.
Sun 4^th: EUR Italian Referendum.

FOREX:

EUR/USD: The E/U held below 1.07 last week and I continue to think we might see a test of the 1.045 lows before any potential bounce. Next week’s Italian Referendum might weigh on this pair in the coming trading week though.

The weekly chart shows that the EUR/USD has been consolidating in a horizontal range bound by the 1.15 and 1.045 levels for the last 20 months and thus a test of this lower range would not surprise.

Price is trading below the 4hr and daily Cloud.

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

There is an ECB Draghi speech on both Monday and Wednesday to consider but watch for impact from USD data as well, especially, Friday’s NFP. There is also the Italian Referendum next w/e that will likely weigh on this pair.

I’m watching for any new TC signal on this pair and the 1.07 and 1.045 levels.

EUR/JPY: This pair has finally made a weekly chart based bullish breakout above a 23-month bear trend line but watch to see if the monthly candle closes above this bear trend line.

Price is trading above the Cloud on the 4hr and daily chart.

The weekly candle closed as a bullish candle.

I’m watching for any new TC signal on this pair and the 23-month bear trend line.

AUD/USD: Price action held above the daily chart’s 50% fib at the 0.735 area for most of last week and even managed a weekly close above the psychological 0.74 level. The recovering commodity space could help to underpin this pair despite the RBA’s best effort to keep pressure on here.

However, I am still open to a test of at least the 0.72 level as this is 61.8% fib of the daily chart’s recent swing high move.

Price is trading in the 4hr Cloud but below the Cloud on the daily chart.

The weekly candle closed as a bullish coloured ‘Inside’ candle reflecting indecision.

There is AUD Private Capital Expenditure and Retail Sales data next week and also CNY PMI data to take note of but watch for impact from USD data as well, especially, Friday’s NFP.

I’m watching for any new TC signal on this pair and the 0.74 region.

AUD/JPY: This pair has continued on with its bullish breakout above a 2-year bear trend line and I’m on the lookout for any continuation up to test the previous S/R region of 89; an area between the weekly chart’s 50% and 61.8% fib levels.

Price is trading above the Cloud on the 4hr and daily charts.

The weekly candle closed as a large bullish candle.

There is AUD Private Capital Expenditure and Retail Sales data next week and also CNY PMI data to take note of but watch for impact from USD data as well, especially, Friday’s NFP.

I’m watching for any new TC signal on this pair, the broken bear trend line and the 80 and 89 levels.

GBP/USD: The Cable spent last week consolidating within a symmetrical triangle on the daily /4hr chart time frames and moved towards the apex of this pattern. These trend lines remain in focus for next week.

The monthly chart still shows a bullish-reversal ‘Inverted Hammer’ forming up but this could also be viewed as a bit of an indecision style ‘Inside’ candle. Regardless though, it looks like it will be the first bullish candle in 6 months and that, in itself, is something.

Remember: The Cable has been trading under a bearish trend line for the last 8 years, since peaking at 2.1161 in Nov of 2007 (see monthly chart below). Price plunged during the following 2008 year with the Global Financial Crisis and bottomed near the whole-number region of 1.35. Price action chopped higher after that though and made another peak at 1.7191 in July 2014 but has traded lower since then. In fact, the recent Brexit vote result triggered further lows for the Cable down to the 1.28 whole-number region. This price action has resulted in another bear trend line, of 2 year duration, forming up since that 2014 peak.

Price is now in the 4hr and daily Cloud but below the weekly and monthly Clouds.

The weekly candle closed as a bullish coloured ‘Inside’ candle.

There is GBP Bank Stress result and Manufacturing data next week but watch for impact from USD data as well, especially, Friday’s NFP.

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

GBP/JPY: This pair, like the EUR/JPY, has made a bullish weekly chart breakout above a 12-month bear trend line and is looking rather bullish. Watch to see if the monthly candle closes above this bear trend line though.

Price is trading above the Cloud on the 4hr and daily charts.

The weekly candle closed as a bullish candle. The monthly candle is shaping up as a large bullish ‘engulfing’ candle.

There is GBP Bank Stress result and Manufacturing data next week but watch for impact from USD data as well, especially, Friday’s NFP.

I’m watching for any new TC signal on this pair and the bear trend line.

Kiwi: NZD/USD: The Kiwi spent all of last week hovering near the 0.70 level and this remains the one to watch in coming sessions for any make or break activity. There are also trend lines on the 4hr chart to watch for guidance here.

There had been a rather bearish wedge breakdown recently but, until 0.70 is broken, I’m remaining cautious, especially given the bullish-reversal weekly candle that has just printed! I also note a bullish-reversal ‘Morning Cloud’ style pattern formed up on the daily chart after Friday’s close:

Morning Cloud pattern on the Kiwi daily:

The NZD/USD is trading below the Cloud on the 4hr (just) and daily chart.

The weekly candle closed as a bullish-reversal ‘Inverted Hammer’ candle.

There is RBNZ Financial Stability Report and a speech from the RBNZ Gov Wheeler next week but watch for impact from USD data as well, especially, Friday’s NFP.

I’m watching for any new TC signal on this pair, the 4hr chart’s trend lines and the 0.70 level.

The Yen: USD/JPY: The USD/JPY has continued its bounce up from the key 101.50 level and passed previous S/R near the 50% fib of the weekly chart’s swing low move at circa 111. This pair now looks set to move up to test the 61.8% fib region near 115.

Price is trading above the 4hr and daily Cloud.

The weekly candle closed as a large bullish candle.

There is no JPY data next week but watch for impact from USD data, especially, Friday’s NFP.

I’m watching for any new TC signal on this pair and the 115 region.

USD/CAD: The USD/CAD printed another indecision-style candle for the week; this time a bullish coloured ‘Spinning Top’.

I see that a bullish US$ could help take this pair up to at least 1.40 but the lack of weekly momentum is still concerning. The weekly chart shows that the 1.40 region is near the 61.8% fib of the last swing low move. I’m beginning to think it might be safer to watch the monthly chart’s triangle pattern and watch for any momentum-based breakout from there.

Price is trading above the Cloud on the 4hr and daily charts.

The weekly candle closed as a bullish coloured ‘Spinning Top’ candle.

There is a BoC Gov Poloz speech, GDP and Employment data to monitor next week but watch for impact from USD data as well, especially, Friday’s NFP.

NB: USD/CAD traders need to keep an eye on Oil though as it has now broken the key $50 level and any hold above this level would help to support the CAD$ and keep pressure on the USD/CAD. Just FYI: I’m stalking a bullish-reversal ‘Inverse H&S on Oil with the ‘neck-line’ at $50 and the target at $70.

I’m watching for any new TC signal on this pair and how the monthly candle closes with respect to the triangle trend lines.

EUR/AUD: The EUR/AUD remains below the broken monthly chart support trend line and broke back below the 1.44 S/R level last week.

The daily chart shows that 1.44 had been recent support below this broken trend line but price is back below below this key level. I noted last week that the next major horizontal support layer was down at 1.40, a 400 pip move, and we’ve covered almost half of that now. However, whilst the move to 1.40 was worth stalking, the monthly chart Elliott Wave pattern suggests there could be even more on offer if 1.40 gives way. The political landscape ahead for Europe and recovering commodity space in Australia could be setting up as the ‘prefect storm’ for this pair!

Price is trading below the Cloud on the 4hr and daily charts.

The weekly candle closed as a bearish engulfing candle.

There is an ECB Draghi speech on both Monday and Wednesday to consider for the EUR as well as the looming Italian Referendum next w/e. There is AUD Private Capital Expenditure and Retail Sales data next week and also CNY PMI data to take note of but watch for impact from USD data as well, especially, Friday’s NFP.

I’m watching for any new TC signal here and the 1.44 and 1.40 levels.

EUR/GBP weekly: The bearish target is on track here:

AUD/NZD monthly: keeping an eye on these trend lines. I have to admit to having a bullish bias on this pair as I suspect the recovering commodity space will favour Australia, with a wealth of hard and soft comms, to a greater extent than NZ, with primarily soft comms:

GBP/NZD monthly: this is another one to keep in mind as it trades near major S/R heading to the November close. The current ‘Railway Track’ formation, if it holds, could spell out a bullish-reversal period and is something that sits within my realm of possibility here.

EUR/NZD monthly: this is another one to keep in mind as it hover near major S/R of 1.50 as November draws to a close:

Silver: Silver slipped below the daily chart’s 61.8% fib of the last swing high move last week but edged back to close just below this and the $16.50 level.

Silver is trading below the 4hr and daily Cloud yet it remains above the weekly Cloud.

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

I’m watching for any new TC signal and the $16.50 level.

Gold: Gold moved down from the daily chart’s 50% fib of the last swing high move; just above $1,200, last week to test the 61.8% fib near $1,170 but closed the week off the lows and near $1,180.

The monthly chart still shows a rather Bull Flag type of pattern so keep an eye on these trend lines if they are approached.

Gold is trading below the Cloud on the 4hr and daily charts.

The weekly candle closed as a bearish candle.