FX: shifting sands?

Last week: Euro strength has continued and I have been noting and warning as much since November and, then again, in December when the FX Indices slipped into alignment for ‘risk on’. This knowledge has helped when assessing the many LONG EUR$ Forex breakout trades that have triggered over recent weeks. The Flag patterns on the FX Indices look to be evolving and, if they continue, this would create a considerable shift in direction-sentiment across many FX pairs; it is looking like sink or swim time for the US$! I suggest traders try and keep an open mind!


Trend line breakout & TC signal tally: there were lots of great trend line breakouts last week and these were warned about last week and then noted on my site during the week here, here, here and here:

  • EUR/USD:  110 pips and 220 pips.
  • EUR/NZD: 230 pips
  • EUR/JPY: 230 pips and 140 pips.
  • EUR/AUD: 150 pips
  • Oil: 260 pips.
  • AUD/JPY: 120 pips.
  • Gold:  95 pips and 130 pips.
  • USD/JPY: 130 pips.
  • GBP/JPY: 180 pips.
  • AUD/USD: 70 pips.
  • NZD/USD: 70 pips.
  • ASX-200 15 min: TC signal: 90 points and 9R.
  • GBP/USD: 180 pips.

Next week:

  • FX Indices: The US$ index closed lower for the week and may be setting up for a significant Bear Flag move. Both FX indices remain aligned for ‘risk on’ and so I’ll be watching for follow-through activity to impact FX pairs and stock sectors. An update on both FX indices can be found through this link.
  • Triangles: these FX pairs remain consolidating in weekly triangle patterns so keep an eye on the bigger picture patterns here: AUD/JPY, AUD/USD, NZD/USD and USD/JPY. The EUR/USD is in a monthly triangle.
  • Oil: the monthly chart’s ‘Inverse H&S’ breakout continues with a target near $85.
  • Stocks: I’m trading lots of stocks at the moment and wrote up another article this weekend about US stocks that can found through this link. I’ll be writing up a post on Aussie stocks on Monday. Remember that we are in Earnings season so keep an eye on your Earnings calendar.

Calendar: Monday 15th is a Bank Holiday in the USA for Martin Luther King day but, aside from this, note the lack of much high impact data. However, CNY GDP data might be in high focus for stock market traders as a measure of broader market health and sentiment:

Forex:

EUR/USD: There was a bullish breakout here on Friday for 220 pips and I’ll be watching to see if this move continues at all, at least up until the monthly 200 EMA. This breakout also gave great TC signals off the 15 min and 5 min charts for 2.5 R and 10 R respectively and these charts are also reprinted below.

The weekly chart’s 61.8% fib, of the most recent weekly swing low move, is near 1.26 and this intersects with the monthly chart’s bear trend line so this remains the target for any bullish continuation move above the monthly 200 EMA. This target is now only about 400 pips so is well worth stalking; it was 600 pips away when I noted as much in my update of last weekend.

  • Watch for any continuation up to the monthly 200 EMA. Any pullback would have me looking for a test of the key 1.20 level.

EUR/JPY: I had warned late last week to watch for support from 133 level and this level did hold and, then, evolved into a new trend line breakout worth 140 pips and a new TC signal off the 15′ chart for a 4 R trade. These charts are also reprinted below.

Price has closed the week again back above the major 135 level, which is significant, and note the revised 4hr chart trend lines.

  • Watch the revised 4hr chart trend lines and 135 region for any new breakout:

AUD/USD: The Aussie is now sitting right under a major 4 1/2 year bear trend line. Any break up through resistance this would bring the key 0.80 level into focus and this is another major demarcation zone for this pair as well. Check the monthly chart to see how significant this 0.80 level is for this pair; I consider that any break and hold above 0.80 would be a very bullish signal. Such a breakout would then bring the 0.90 into greater focus as this is previous S/R, it is also the weekly chart’s 50% fib of the recent swing low move and is also near the monthly chart’s bear triangle trend line. Thus, a break and hold above 0.80 would have me looking for a move up to 0.90.

US$ weakness has fed in to a lot of the Aussie’s gain there is also the bullish run on Commodities, especially Iron Ore, Metals and Oil. The chart below shows one example of a Commodity index and this looks to be consolidating within a triangle so watch for any bullish outbreak here to underpin the AUD$.

NYBT Commodity Index:

  • Watch the 4hr chart support trend line and the 41/2 year bear trend line for any new breakout, especially with this week’s AUD Employment data and CNY GDP and Industrial Production data.

AUD/JPY: Price action continues to consolidate just below the major 89 level and the monthly chart reveals just how important this level is for this pair.

Any close and hold above this level would be rather bullish and would bring a weekly triangle breakout into contention. A breakout here would bring 90 into focus but, after that, the next major target would 95 which is another S/R zone and just under the monthly chart’s bear triangle trend line.

GBP/USD: I had warned during last week to watch this 4hr chart Bull Flag for any breakout and it delivered in spades on Friday giving 180 pips and great TC signals off the 15′ and 5′ min charts for 2.5 R and 6 R respectively! See these charts reprinted below.

This latest move with the Cable has been due to US$ weakness any the sentiment shift may well continue here if the US$ continues lower. However, Brexit remains in the news although this issue seems to have less impact on FX movement of late.

The weekly chart shows that the bullish triangle breakout is now well underway and I’ll be watching for any continuation up to 1.40, the weekly 200 EMA and, then, the weekly 50% fib near 1.4333 level.

  • Watch for any move up to the 1.40 level, especially with this week’s GBP CPI and Retail Sales data.

NZD/USD: Price action has been bullish here and continues to edge up towards a monthly chart bear trend line.

  • Watch the 4hr chart trend lines, the weekly 200 EMA and the 0.72 region for any new breakout, especially with this week’s NZD FPI, GDT and Business Confidence data and CNY GDP and Industrial Production data:

USD/JPY: This has been bearish in the last week but price found support near the recent low.

  • Watch the 4hr chart trend lines for any new breakout:

GBP/JPY:  This had a bearish week giving some great mid-week SHORT trades but price eventually found support near the 150 level, as I had warned about.

  • Watch the 4hr chart trend lines and weekly 200 EMA for any new breakout:

GBP/AUD: This looks like a bullish-reversal descending wedge breakout has started so watch for any follow-through and, if so, use the 4hr chart fib levels as a guide for targets:

GBP/NZD: This is setting up with a bearish descending wedge as well so watch for any new breakout.

  • Watch the 4hr chart trend lines for any new breakout:

EUR/AUD: This is setting up in a 4hr chart triangle around the key 1.55 level.

  • Watch the 4hr chart trend lines and 1.55 for any new breakout:

EUR/NZD: This is setting up with a bearish descending wedge to so keep an eye on the trend lines.

  • Watch the 4hr chart trend lines and key 1.675 level for any new breakout:

Gold: This looks to have started a 4hr chart Bull Flag breakout so watch for any bullish continuation.

The monthly chart continues looking very bullish here and the $1,400 remains the major level to watch for any new make or break here.

Oil: Note that the monthly chart’s Inverse H&S move is developing nicely and this has a target near $85 but the weekly chart shows the 61.8% fib near $80 so both levels would be in focus for any continuation move:

  • Watch the 4hr chart trend lines for any new breakout.

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