Trade Week Analysis for 10/06/13

Last week: There were a few 4hr TS signals last week but, again, these were rather choppy: Kiwi= -100, EUR/AUD= -100, A/U = -100, AUD/NZD= 70 and GBP/AUD = 600.
This week: The Ichimoku Charts have just tipped into an alignment for SHORT USD or ‘risk on’. I’m watching to see if this alignment holds and if so, then, I’ll be looking for TS signals in line with this momentum. It is important to note here though that both indices, USDX and EURX, are trading close to their daily and 4hr Clouds. Thus, it wouldn’t take too much of a momentum shift to switch these into a ‘risk off’ alignment. 
Stocks and broader market sentiment:
Stocks sold off again quite heavily during some sessions last week and I had yet more e-mails saying that the ‘Henny Penny’ of the stock markets was upon us. I wrote during the week though that I would have expected the S&P500 to, at the very least, pull back to test the 1,600 level. This happened on Thursday and price then rallied on Friday. I am not into predicting which way momentum will move from here but, rather, looking for signs or signals about any possible future sentiment. At best, the current set up on the S&P500 looks to be one of some consolidation before the next major move. I am still on the lookout for charting signals to warn me of any possible stock correction and/or new market direction and trading sentiment. I don’t have any CLEAR CUT signals of this AS YET. The signals I am watching for include:
  • S&P500 daily chart: a break of the daily trend line. Price action is still consolidating here and I actually see here what looks like, to me at least, a possible ‘Bull Flag’. Trend line breaks will give the clue here though.
  • Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. The current chart shows these lines as fused and they may well end up giving a bearish cross BUT this isn’t clear cut just yet. 
  • Ichimoku S&P500 chart: price to dip below the Ichimoku Cloud.
  • EURX monthly chart: a break of the monthly support trend line (see monthly chart).
  • S&P500 monthly chart: a break of the monthly support trend line (see monthly chart below). A break of this support level would suggest to me of a more severe pull back or correction. The look of this ‘market top’ appears quite different to that of the previous two market tops from back in 200 and 2007. Elliott wave suggests a bigger correction here though. The May monthly candle looked bearish BUT it is not technically a bearish ‘shooting star’ pattern as the upper shadow is not more than 2x the length of the body.

Some key events to watch out for include:

  • See what impact the slightly weaker than expected Chinese Trade Balance data has on pairs at market open on Monday. There is more data scheduled for release on Sunday too.
  • Mon 10th : CNY and AUD Bank holiday. JPY current account.
  • Tue 11th : CNY Bank holiday. JPY BoJ Press conference and Monetary policy. GBP manufacturing data.
  • Wed 12th : CNY Bank holiday. GBP employment data.
  • Thurs 13th : NZD Cash rate. AUD employment data. USD retails sales and employment data.
  • Fri 14th : USD PPI and consumer sentiment data.
  • Sat 15th : G8 meetings.

Currencies:

    E/U: Price chopped upwards all week until Thursday’s ECB and then rallied on upbeat sentiment to reach the 1.33 and weekly 200 EMA level. The weekly bull trend line is still supporting price. Price is trading above the Cloud on the daily and above on the 4 hr Ichimoku chart which supports a bullish bias and ‘risk on’. The weekly candle closed as a large bullish candle. There is still the suggestion of a bearish ‘Head and Shoulder’ pattern building on the weekly chart but this has not developed fully as yet. The 1.33 and weekly 200 EMA level seem to be the right hand shoulder of this pattern and a clear break of this level might void this developing pattern. I do find all this strange though as there is a bullish ‘inverse Head and Shoulder’ pattern building on the Euro index weekly chart! Also, most of you will know that I have had a bullish ‘inverse H & S’ pattern stamped on my monthly charts for many months. This is actually starting to look like it might be forming up. This would most likely trump any weekly pattern chart set up and this ties in with current action on the EURX. All very interesting indeed and counter to what most would ‘expect’ to see forming here on the Euro! 
    • I’m watching the 1.32 and 1.33 levels.

    E/J: Price chopped around in a triangle pattern this week that later evolved into a descending channel pattern. This channel pattern actually has a bit of a ‘Bull Flag’ look to it on the daily chart. Price is trading above the Cloud on the daily but is still below on the 4hr time frame which suggests further choppiness might be ahead. The weekly candle closed as bearish candle but with a bit of a reversal style, ‘hammer candle’ look to it. Friday’s candle also was a bullish, reversal style ‘hammer’ candle.
    • I’m watching the channel at the moment. I still see 140 as a possible bullish target.

    A/U: The Aussie bounced off the 0.96 level early in the week on the back of some positive Chinese data. Some weaker AUD data though sent it tumbling shortly after though, through the support of the 0.96 level and down to just above the 0.94 level. Price rallied a bit on Thursday as the USD weakened but it still hovered around and just under the 0.96 level leading into NFP. Price closed out the week just under the 0.95 level. A weekly break of the 0.95 level now seems quite bearish for the poor Aussie and, apart from whole numbers, I don’t see much support until down at the 0.83 level! The 0.83 is the monthly 200 EMA. After that there is the 80 level that is near the 61.8% fib retrace from the last swing low to high level so this isn’t too ridiculous a notion! Any continued pause or pull back with the stock market might see price visit these low levels. Price is still trading below the Cloud on the daily and on the 4hr chart which is bearish. The weekly candle closed as a bearish candle.

    Chinese Data: There was some slightly weaker than expected Chinese Trade Balance data released on Saturday and it will be interesting to see how this impacts the Aussie. One might naturally expect this data to push the A/U down but there could be another possible outcome. The weak Chinese data might help to keep the USD down with thoughts of continued easing being necessary. A lower USD could then possibly lift the AUD, relatively speaking. This would then allow for some retracement of this pair after its recent free fall action. Any continued bullish action with stocks could also possibly drag the Aussie up along too, that is, if previous correlation patterns are to be considered here at all. 

    • I’m watching the 0.96 level.

    A/J: The A/J continued its slide after breaking down through the 100 level some weeks ago. Price found some temporary support at the daily 200 EMA on Thursday but seemed to be dragged lower by the plunging USD/JPY. Price has now fallen down to finish the week just above the 50% fib retrace level from the recent swing high to the last swing low and triangle breakout. The next fib level down is an interesting one too. This is the 61.8% fib level and this is at the 89 area. The 89 level is a major S/R level for the A/J and I’ll be watching this area closely for any reaction if, indeed, price gets down that far. Price is now trading below the Cloud on the daily and on the 4hr time frame which is bearish. The weekly candle closed as a large bearish candle BUT Friday’s candle closed a bullish reversal style ‘hammer candle’. The Chinese data may impact here as for the A/U.
    • I’m watching for a new TS signal near whole numbers. I’m especially watching the 89 area.

    G/U: Price rallied all week again after bouncing off the major support level of 1.500. The 1.500 level is a hugely significant S/R level as the monthly chart (below) reveals. Price certainly seems to have formed a bullish double bottom pattern now. It is trading above the Cloud on the daily and above the Cloud on the 4hr chart which suggests bullishness. The weekly candle closed as a large bullish candle so some retracement might be in store even if the bullish momentum is maintained.

    NB: Go Market charts have an error for my weekly 200 EMA with the G/U. I have advised them about this.
    • I’m watching for a new TS signal and the 1.55 level.

    Kiwi: NZD/USD: Price bounced up above the 0.80 level last Monday following the w/e Chinese data.  It too, like the Aussie, then fell through this support mid week after some poor data. USD weakness on Thursday boosted this pair but it is still traded under the 0.80 leading into NFP. The weekly chart shows how significant this 0.80 S/R level is. Price is still trading below the Cloud on the daily chart and on the 4hr charts which is bearish. The weekly candle closed as a bearish candle BUT with a long upper shadow suggesting some possible indecision. As with the A/U, any recovery with risk sentiment might help to boost the Kiwi but a fall in stocks would most likely see the Kiwi fall heavily. The 0.78 level would seem to be the next port of call now that the 0.80 level has been breached. This is the region of the weekly 200 EMA. The monthly 200 EMA, at around 0.68, would seem to be the next level of support. Traders need to see how this pair reacts to the slightly weaker than expected Chinese Trade Balance data that was released on Saturday.
    • I’m still watching the 0.80 level.

    EUR/AUD: Price continued to grind higher again this week after a short dip on Monday. It paused as it hit the major S/R level of 1.40. The monthly chart shows how significant this 1.4 level is. It is still trading above the Cloud on the daily and on the 4hr time frame which is bullish. The weekly candle closed as a large bullish candle. Price has now moved 1000 pips from the channel and 1.30 break out and I wish I had simply taken the trade back then! Any close and hold above the 1.40 level might offer a new entry here.
    • I’m watching the 1.40 level.

    The Yen: U/J: Price chopped downwards this week within a descending trading channel. Price broke down through this channel on Thursday. It has still failed to close and hold above the monthly 200 EMA and 103 level. Price is trading in the Cloud on the daily but below the Cloud on the 4hr time frame which suggests further choppiness. The weekly candle closed as a large bearish candle BUT with a long, lower shadow suggesting some indecision. Friday’s candle closed as a reversal style ‘hammer candle’ though.
    • I’m watching for any reversal and the 100 level.

    AUD/NZD: This pair has come to my attention recently. The daily chart reveals how a descending trading channel has recently been broken. Price fell this week back to test the recently broken channel upper trend line. It is trading below the Cloud on the daily chart but above the Cloud on the 4hr chart. The weekly candle closed as an indecision style long legged Doji candle.

    • I’m just watching this pair at the moment.

    GBP/AUD:I dredged this chart up earlier in the week after considering the bullish bias on the GBP and the bearish bias on the AUD. Price, then, was trading just under the upper trend line of a monthly chart, descending trading channel. Price broke out shortly after and gave a new TS signal on the 4hr chart. This pair has now moved almost 600 pips since the TS signal! Price stalled as it reached the strong S/R level of 1.65 and the monthly chart shows just how significant this S/R level has been. It is trading above the Cloud on the daily and 4hr chart suggesting further bullishness. The weekly candle closed as a large bullish candle. The 1.65 level might offer a possible new trade entry position if the bullish momentum is maintained.

    • I’m watching the 1.65 level.

    Silver: Silver has broken below the long term monthly support triangle trend line. Silver traded sideways for most of the week until NFP. The 30 min chart shows how silver reacted to the employment data. The weekly candle closed as a bearish candle. Price has so far managed to hold above the S/R $20 level. The next major support after $20 seems to be down at $15, near the monthly 200 EMA.

    Gold: Gold has also broken down through major monthly triangle support that dates back to early 2008. That was a major break down for the metal. Gold formed up into a symmetrical triangle pattern this week and made a bullish break up out of this on Thursday as the USD weakened. Price fell heavily after NFP though as the 30 min chart shows. It has held above the $1,300 level all week. The $1,300 level is the 50% fib pullback from the last swing low to swing high. The next major support after $1,300 seems to be down at the whole number, $1,000 level and, after that, at $850 in the monthly 200 EMA. The weekly candle closed as a bit of a bullish styled, ‘inverted hammer’ candle though.

    Oil: Oil is still trading within a symmetrical triangle pattern. There are many fundamental factors that impact Oil though so one would not trade it on this bias alone. The weekly candle closed as a large bullish engulfing candle. The soft USD seems to have helped Oil this week.