FX: Battle of the Flags.

Both FX indices remain trapped in Flag patterns and they’ve been like this for around three months now. So, if you’ve been struggling to find some decent trends with your FX pairs then that is probably why. FWIW: I don’t see the return of any decent trending FX markets until one or both indices breakout from their Flags.

The consequence of this Flag action on the FX indices is that there are similar consolidation-style patterns on a number of the USD-based FX majors. There are weekly chart triangle patterns in play on the USD/JPY, AUD/USD, GBP/USD and EUR/USD with the latter also displaying a Bull Flag within the triangle. These weekly chart triangles have been developing over many weeks and, in the case of the Cable and USD/JPY, over many months. Technical theory suggests that the longer the consolidation period then the greater the breakout so these patterns are well worth monitoring for any breakout, should they eventually trigger!

NB: this is just a brief update as we’ve had a big family gathering over the w/e.

FX Indices:

USDX weekly: closed with a large bearish candle and still within the potential Bear Flag. Watch trend lines for any new breakout; up or down! There is US CPI, PPI & Retail Sales next week as well as ongoing Tax Reform news to impact here though:

EURX weekly: closed with a smallish bearish candle but still within the potential Bull Flag. Watch trend lines for any new breakout; up or down!

Calendar: there are a few speeches on the Calendar to navigate next week and US CPI, PPI & Retail Sales might be important for the US$. However, keep in mind all of the non-calendar items such as ongoing Brexit negotiations, recent UK political unrest, the new Government in New Zealand and tax reform negotiation for the USA as just a few:

XJO: there hasn’t been too much happening across many FX pairs but the same can’t be said about the ASX-200. This Aussie top 200 stock index has made its first weekly close above 6,000 in 9 years and that is some huge feat! Any hold above this key level would have me looking to a test of 6,800 as this is the previous High and also the target for the Cup ‘n’ Handle pattern that I’ve had in my sights for many weeks and has finally triggered a break-out:

NASDAQ: Whilst bullish on all stocks over the longer-term I’m always on the lookout for a healthy pullback. The NASDAQ has been in an uptrend since 2009 and some pullback would not be out of order here as trends do not travel in straight lines ad infinitum. This index is currently trading at a level such that a 61.8% pullback of the most recent swing high move, since Jan 2016, would bring price down to the 5,200 region which just happens to be:

  • a previous long-term High.
  • the top of the previous trading range.
  • the monthly chart’s ascending triangle breakout level.

This 5,200 is obviously a region of major confluence and so I will be watching for any signs of developing weakness. How any weakness in US stocks would play out here though, with our Aussie market just getting going, is a conundrum I continue to ponder!

NASDAQ daily: showing the recent swing high and how a 61.8% fib pullback would tie in with the monthly chart’s 5,200 breakout level:

NASDAQ monthly: showing the monthly chart’s 5,200 ascending triangle breakout:

Forex:

EUR/USD: The weekly chart still has a Bull Flag look to it, similar to the EURX chart. Price is consolidating in this Flag within the larger weekly chart triangle. Watch the Flag trend lines, visible on the 4hr chart, for any new breakout.

There is EUR CPI & Trade Balance data and two ECB President Draghi speeches to monitor as well as all of the US data:

EUR/JPY: Price action continues to struggle under the weekly chart’s 61.8% fib level, near 135. Watch the 4hr chart’s triangle trend lines for any continuation from the recent breakout as this would bring 133 and 134 into focus:

AUD/USD: the weekly triangle remains the bigger picture pattern to watch here and, for now, the daily chart’s 61.8% fib continues to offer support. Watch this 61.8% fib and the 4hr chart’s trend lines for any new make or break. There is AUD Employment and CNY Industrial Production data to impact here next week as well as all of the USD data:

AUD/JPY: The 89 level continues to be formidable resistance over the longer term. Watch the 87 level and the 4hr chart’s trend lines over the shorter term though for any new make or break:

NZD/USD: There hasn’t been much of a retreat here yet following the break of the long-term support trend line and the 0.68 level continues to offer support. Watch the 4hr chart’s new triangle trend lines for any breakout. FWIW: I’ve revised my longer-term trend lines on the monthly chart (see below). 

Friday brings NZD Manufacturing Index and PPI data and there is plenty of US data to monitor too:

 

GBP/USD: The Cable has been consolidating in a weekly triangle for 14 months and so it is well worth watching for any breakout, when it does eventually trigger. Thus, watch the 4hr chart’s smaller triangle trend lines for any new breakout here as a heads up for the larger triangle pattern.

It could be a big week for the Cable given the amount of high impact GBP data. There is GBP CPI, Employment & Retail Sales data along with speeches from BoE Gov Carney and Fed Chair Yellen. The 4hr chart’s triangle has itself been brewing for 12 weeks so watch for any breakout!

USD/JPY: The 114.50 remains the level to watch here for any new make or break. Watch the 4hr chart’s triangle trend lines for any new breakout as well though. There are two BoJ Gov Kuroda speeches and GDP data to monitor as well as all of the US data:

GBP/JPY: The 150 level is the big one to watch here as this is long term S/R and has pegged price somewhat following the weekly triangle breakout. Keep this level, and the 4hr chart’s trend lines in sight with the batch of GBP, JPY and USD data this week:

GBP/AUD: There has been a recent monthly chart triangle breakout but the long-term 1.75 S/R level remains as upper resistance level to watch. There are 4hr chart trend lines to monitor as well for any new make or break: 

GBP/NZD: The 1.90 level is the big one to watch here but watch the 4hr chart’s triangle trend lines for any new breakout:

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

EUR/NZD: Watch the 4hr chart’s channel trend lines for any new breakout. The 1.675 level is a HUGE S/R level to keep tabs on here:

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

Oil: Watch the weekly 200 EMA for any new make or break:

One thought on “FX: Battle of the Flags.

  1. I don’t think you will have to wait much longer ?. I can count the retrace in gbpusd as complete and have a look at the 5 or 15. 5 waves down means, it should become the first wave of a larger 5 wave decline.

    Great work ?

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