Last week: Coronavirus concern kept markets in risk-off mode last week with flight to safety flows continuing into the Yen, Gold and Bonds and out of the commodity currencies, stocks and Oil. It was somewhat surprising to see the US$ end lower for the week and this divergence, whilst it might not amount to anything, should be noted with an element of caution. This global health emergency has the potential to further erode market confidence, but, any easing of concern could see markets swing right back so traders need to remain vigilant and nimble. President Trump's Tuesday State of the Union address should be monitored as well for any impact on market sentiment. It is important to keep in mind that this analysis is Technical and chart-based but that any major Fundamental news items, as recently seen with the Coronavirus, have the potential to quickly undermine identified chart patterns. This is why it is critical that traders appropriately manage their trade exposure and risk per trade.
Trend line breakouts and TC signals: There were a few risk-off based trend line breakouts at the start of the week but many were impossible to catch given the gap at market open and the moves continued throughout the week. They are included below as a matter of completeness though. Articles published during the week can be found here, here, here and here:
- AUD/JPY: a TL b/o for 140 pips.
- AUD/USD: a TL b/o for 100 pips.
- GBP/JPY: a TL b/o for 120 pips.
- ASX-200: a TL b/o for 80 points (during US Futures market hours on Friday):
- EUR/USD: a TL b/o for 70 pips by Friday:
- TLT: a TL b/o for $5.
- Gold: a TL b/o for $10.
- USD/JPY: a TL b/o for 35 pips.
- GBP/USD: a TL b/o on Friday for 80 pips:
- GBP/JPY: this was a very choppy move but note how the 143 S/R level was reached on Friday for a TL b/o that gave around 120 pips:
This Week: (click on images to enlarge):
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- DXY: US$ Index: The US$ index closed with a bearish weekly candle and the Bull Flag has been revised due to the lack of momentum. Note the declining and converging momentum on the DXY weekly chart below. It is worth remembering that the recent bearish-reversal Death Cross remains open.
DXY weekly: Bull Flag revised:
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- ASX-200 / XJO: The ASX-200 index has finally made a monthly close above it's pre-GFC High. This is a significant achievement for the XJO and my recent article can be found through this link. Any worsening of the Coronavirus situation could result in a pullback on this index though, especially given its very lengthy, 13-month bull run.
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- Central Banks: there is one Central Bank update next week: RBA (AUD).
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- State of the Union: President Trump's State of the Union address is this Tuesday February 4th. There are reports he will use this address to extol America's come-back so watch for any potential flow-over into market sentiment.
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- NFP: It is NFP week again this week!
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- Monthly Shooting Star reversal candles: have been printed on the S&P500 and DJIA indices so watch for any pause or pullback following their lengthy Bull rallies.
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- DAX: The DAX continues to struggle under the previous High, circa 13,600 level, and printed a fairly large and bearish weekly candle. Watch this resistance level for any make or break but note the revised trend lines on this weekly chart. There is a three candle bearish Evening Star pattern on the weekly chart so watch to see if this forecasts the next directional move here.
DAX weekly:
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- Russell-2000: The Russell-2000 is often viewed as the 'Canary in the Coal Mine' for US stocks. Price action has struggled to break above the previous High, near 1,750. The index closed with a relatively large bearish weekly candle; being another victim of Coronavirus concern. Note the revised trend lines.
RUT weekly:
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- Emerging Markets: The Emerging markets are often the first to suffer in any economic downturn. The ETF gapped lower to start the week on Coronavirus concern. Price action is now just above the 61.8% fib of the recent swing High move so watch this region for any new make or break:
EEM weekly:
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- Copper weekly: Copper is often a metric used to gauge the health of the economy and this commodity has been hit hard with Coronavirus concern. The metal closed with a bearish weekly candle and, whilst still trading within a weekly triangle, note the uptick with bearish momentum!
Copper weekly:
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- VIX weekly: the Fear index closed with a bullish weekly candle and above the 14 threshold. This is usually quite a dull chart to post but not this week. Some things worth noting: the break of a recent bear trend line, the 50% Fibonacci retracement is near the 30 previous S/R level and the 61.8% is near the 2019 High. Note also the small breakout with bullish momentum.
VIX weekly:
Calendar: Courtesy of Forex Factory:
Earnings: Courtesy of Earnings Whispers: It is another big week for Earnings so watch for any impact on market sentiment.
Markets:
S&P500: SPX: Global stocks have been rocked by the Coronavirus scare and the US S&P500 has been hit hard too. The index closed with a bearish weekly candle and well off the weekly High, hence the long upper shadow.
The 4hr and daily charts show that a recent, 4-month, support trend line has been broken but watch for any Bull Flag activity here as price hovers above the 3,200 S/R level. However, any bearish follow-through would bring the 13-month support trend line into focus.
Another bearish signal is the print of a bearish-reversal Shooting Star style monthly candle that formed up under the 3,300 level so watch for any bearish follow-through. Note, on the monthly chart, how the 61.8% Fibonacci retracement is down near the 1,600 breakout level from 2013. I had always pondered what kind of event could trigger such a deep pullback on the index and now wonder if Coronavirus could be that trigger!
Bullish targets: any bullish hold above 3,200 and Bull Flag breakout would bring the 3,300 back into focus.
Bearish targets: any bearish break below 3,200 would bring the 13-month support trend line and 3,100 levels into focus.
- Watch 3,200 and the 4hr chart Bull Flag trend lines for any new make or break:
ASX-200 / XJO: The ASX-200 index made a monthly close above it's pre-GFC High on Friday but note, on the MT4 ASX-200 chart below, how the Futures were hit hard with the later sell-off through the overnight trading session. Note, also, how this has price action back down near the pre-2020 High level of 6,893.70 and this will be the level to monitor for any new make or break. My analysis for the ASX-200 / XJO can be found through this link.
Gold: Gold enjoyed risk-off flows with flight to safety activity last week. Price action is edging back up to the $1,600 level, near the weekly chart's 61.8% Fibonacci, making this the one to monitor for any new make or break.
Daily chart Bull Flag details: Recall that the length of the Daily chart’s Bull Flag pole is about $300 and, according to technical theory, this could be the expected move on any bullish Flag breakout (see daily chart). This Bull Flag breakout remains in progress and brings the $1,790 region into focus; this being the target of the $300 Flag pole above the $1,490 breakout level, and this target is up near previous S/R at $1,800 for added confluence.
Bullish targets: any hold above current levels would bring $1,600 back into focus on the way to the daily chart’s Bull Flag target, circa $1,790 and, then $1,800.
Bearish targets: any breakdown from current levels would bring the recent support trend line followed by $1,550 into focus.
- Watch current levels for any new make or break:
Oil: Oil continued to suffer with risk-off flows and closed the week with a bearish weekly candle. There was a gap lower at market open, below a 13-month support trend line, and price tested but could not close back above this region.
Price action continues shaping up in a potential bullish-reversal descending wedge on the 4hr chart though so watch for any possible relief-rally here; even if only short-lived.
Bullish targets: any bullish wedge breakout would bring the recently broken, 13-month trend line followed by $58, and then, $60 S/R back into focus. The $60 level is near the 61.8% Fibonacci retracement of the recent swing Low move.
Bearish targets: any bearish wedge breakdown would bring the $50 whole-number region into focus followed by the 4-yr support trend line.
- Watch for any 4hr chart wedge breakout: up or down!
Bonds: TLT Bond ETF: Coronavirus has helped flight to safety activity flows into Bonds with a gap-up at market open to close with a bullish weekly candle above the 144 S/R level.
There was a bullish triangle breakout in the previous week, that has continued, so watch for any push up to the 150 S/R level.
My charting software's bullish Wave 5 move looks to be playing out here!
Bullish targets: any continued bullish triangle breakout would bring the whole-number 150 into focus.
Bearish targets: any bearish break back below 144 would bring the support trend line followed by 135 S/R level back into focus.
- Watch for any continued triangle trend line breakout to the 150 S/R level:
EUR/USD: Well who'd have thought the EUR/UDSD would close with a bullish weekly candle, given the serious risk-off shift last week, and an engulfing candle at that, and this forms part of that 'divergence' I am warning about.
The EUR/USD is now back up near 1.11 S/R making this the one to watch for any new make or break.
Price action had been shaping up in a descending wedge, prior to Thursday, and this bullish-reversal chart pattern delivered a breakout that is currently up about 75 pips. Any continuation above 1.11 would bring the revised, 24-month upper wedge trend line into focus as this is also near the 4hr chart's 61.8% Fibonacci and daily 200 EMA.
Bullish targets: any continued bullish wedge breakout above 1.11 would bring the 4hr chart's 61.8% fib and daily 200 EMA into focus.
Bearish targets: any bearish hold below 1.11 would bring 1.10 back into focus.
- Watch 1.11 for any new make or break.
AUD/USD: This is the 5th consecutive bearish weekly candle for the Aussie and the largest of the lot! Price action has been hit hard with the Coronavirus situation due to broad-based economic growth concern but, also, because of the fact that China is Australia's largest trading partner and the impact on Tourism, Education and Trade could be considerable.
The AUD/USD closed just below the 0.67 level making this the one to watch for any new make or break. There are revised 4hr chart trend lines that have a bit of a descending wedge look to them so keep an open mind here. Some relief rally could evolve, even if only temporary, given this recent bear run.
NB: I have revised the upper wedge trend line of the, now, 25-month bullish-reversal descending wedge.
It is a busy week for the Aussie with the RBA rate update, Retail Sales and Trade Balance data all being released so monitor these events for any impact on market sentiment.
Bullish targets: Any bullish 4hr chart wedge breakout above 0.67 would bring 0.68 followed by whole number levels on the way up to the 4hr chart's 61.8% fib, near 0.69, into focus.
Bearish targets: Any bearish 4hr chart wedge breakout would bring 0.66 into focus.
- Watch 0.67 and for any 4hr chart wedge breakout:
AUD/JPY: It's been another bad week for the AUD/JPY. The AUD and JPY flows have diverged significantly on Coronavirus fear and this currency pair closed with a large bearish weekly candle. The closing price was 72.52 but, if this level of fear continues, then a test of the whole-number 70 looks possible; check out the monthly chart to see the significance of the 70 S/R level.
Price action is trading within a descending channel (could this also be a wedge?) so watch trend line for any new breakout.
NB: as per previous weeks, AUD/JPY traders should keep an eye on the broader stock market as this currency pairs often trades in tandem with stock market sentiment. A stock market pullback might take the AUD/JPY along for the ride.
Bullish targets: Any bullish channel (wedge?) breakout would bring 73 and, then, whole numbers on the way to the 4hr chart’s 61.8% fib, near 75 S/R and the daily 200 EMA, into focus.
Bearish targets: Any bearish channel (wedge?) breakout would bring 70 S/R back into focus.
- Watch for any 4hr chart channel (wedge) breakout:
NZD/USD: The Kiwi has been hit hard with Coronavirus fear, for much the same reason as the AUD/USD, and this resulted in the print of a large bearish weekly candle.
Price action is down near a recent S/R level, circa 0.645, making this the one to watch for any new make or break and shaping up within a descending trading channel (wedge?).
Bullish targets: any bullish 4hr chart channel breakout would bring 0.65 into focus followed by the daily 200 EMA. After that, the 50% Fibonacci retracement of this whole swing Low move is near 0.66 S/R.
Bearish targets: Any bearish 4hr chart channel breakout below 0.645 would bring 0.625 S/R into focus.
- Watch 0.645 and for any 4hr hr chart channel breakout:
GBP/USD: The Cable was a surprise for the week shrugging of the risk-off flows seen across many other currency pairs and Brexit jitters to close with a bullish weekly candle and above the 1.32 S/R level.
Price action broke out, late last week, from a 4hr chart triangle and this move is currently up around 85 pips. Traders should watch 1.32 for any new make or break from here.
Bullish targets: Any continued bullish 4hr chart triangle breakout would bring 1.33, near the 4hr chart’s 61.8 % fib, into focus followed by the weekly 200 EMA.
Bearish targets: Any bearish retreat back below 1.32 would bring 1.31 and, then, the long-term support trend line into focus.
- Watch for any continued 4hr chart triangle breakout:
USD/JPY: The USD/JPY closed with a bearish weekly candle and back below 108.50 S/R. There were risk-off flows into the Yen, but not so much to the US$, hence the divergence and slide here.
Price action is trading within a bit of a broad descending channel so watch the trend lines for any new breakout.
Bullish targets: Any recovery above 108.50 would bring the 4hr chart's channel trend line followed by the daily 200 EMA and 109 levels into focus followed by 110 S/R.
Bearish targets: Any bearish channel break would bring 108 into focus followed by 107 and, then, the 8-year support trend line.
- Watch for any 4hr chart channel breakout:
GBP/JPY: The GBP/JPY closed with a bullish-coloured Spinning Top weekly candle and just above the 143 S/R level keeping this as the one to watch for any new make or break. This week has been a bit of a weird one for this pair with both the GBP and JPY enjoying bullish flow.
There was a fair bit of ugly spike action on this pair last week and so traders should remain cautious as price action, once again, navigates the 143 S/R level. There are revised trend lines to monitor as well.
NB: The GBP/JPY is still holding above the recently broken 50-month bear trend line but, as I’ve mentioned over recent weeks, the 140 is strong S/R and a test of this region may still evolve.
Bullish targets: any bullish 4hr chart triangle breakout would bring 146 S/R into focus as this is up near the 4hr chart’s 61.8% fib.
Bearish targets: any bearish 4hr chart triangle breakout would bring 141.50 and, then, 140 into focus.
- Watch for any new 4hr chart triangle and 143 breakout:
