A ‘risk-on’ start to April

Last week: The FX Indices kicked into ‘risk-on‘ alignment during last week but I suspect NFP caution helped to keep momentum down thereby reducing the probability of many new TC signals. There was a great triangle breakout trade on the GBP/NZD though, warned about well in advance of the trend line break, and this has already given 450 pips of a potential 1,200 pips. US stock indices have made a good start to April so far and some research suggests April tends to generally be good for equities so we shall see. The fact that the AUD/JPY printed a bullish-reversal Railway Track candle off major support augers well here though.

Recent market conditions have not been conducive to my style of trend trading though but nor has it been ideal for swing trading for that matter. I did not receive any TC signals last week and March only offered half of the average number of TC signals that I would usually receive. Patience is certainly the long game here! My TC algorithm isn’t perfect but it has been fairly good at keeping me out of much of this recent market chop where to not trade is often the best trade of all! These have been markets where FX has better traded off shorter time-frame charts during the European or US sessions BUT I am hoping this may change soon. Especially if the FX indices remain aligned and, also, if they can each break free form their lengthy 12 month+ trading range.

This week:

The US$ has weakened further despite some upbeat US economic data so watch for any follow through activity, especially with this week’s FOMC Meeting Minutes. A review of the FX Indices can be found through the following link.

GBP/NZD: this pair has already given 450 pips from a possible 1,200 pip triangle breakout move. Is this the ‘Go To’ pair for any Brexit related GBP£ weakness? Recent press reveals the LEAVE option is still polling competitively which surely won’t help the GBP£.

EUR/GBP: the 500 pip bullish ‘Inverse H&S’ move that I was stalking for many weeks has now finally completed. This trade idea was posted back on Jan 13th of this year:

Oil vs S&P500: Oil and the S&P500 have traded in tandem over recent months but this nexus now seems to have broken as the chart below reveals. To underscore this point Oil closed the week with a bearish candle and the S&P500 closed with a bullish candle:

Oil vs S&P500:

Oil: Oil closed for March above the Feb ’09 $33.55 S/R level but I Tweeted on Friday prior to NFP about how it was holding above a support trend line. Oil subsequently broke down through this support TL but I note a 61.8% fib retracement of the recent swing high move would bring price down to this very $33.55 region. How’s that for confluence? I’m looking for a test of this major S/R level:

Oil 4hr: before NFP:

Oil 4hr: after NFP:

Stocks and broader market sentiment:

Most of the major stock indices closed higher for the week; S&P500, DJIA, NASDAQ, Russell 2000, FTSE and Canada’s TSX but the German DAX and the Aussie XJO were the exception.

I do suspect the Aussie markets might remain bogged down for a while due to the looming Federal election. You often here talk of the ‘crane count’ in Singapore and the like as a measure of economic health. You only need to look around Sydney, and even my own haunt of Bondi Junction, to make up your mind how we are faring though. We headed into the city for our walk this morning and this is just one screen shot from the outing:

In the US markets the S&P500 and Russell 2000 look to be shaping up with potential Bull Flag patterns; and this was after both were previously looking a bit bearish with H&S patterns! Whilst these two indices have yet to make any breakout, up or down, the DJIA index has made what looks to be a Bull Flag breakout, something I had warned previously to watch out for!

DJIA weekly: a Bull Flag breakout starting?

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: The index closed above the key psychological 2,000 level and is just below the Flag’s upper trend line so watch for any make or break of this trend line.

S&P500 weekly: this still has a bit of a Bull Flag appearance and traders need to keep note of the Flag trend line just above current price. The 2,100 and the 2,135 are the bullish levels above current price and this trend line to watch in coming sessions.

S&P500 weekly Cloud: the index is above the weekly Cloud but watch for any new bullish Tenkan/Kijun cross. Well worth watching!

S&P500 monthly chart: The March candle closed as a large bullish candle and the monthly trend line remains intact. Any break of this support level though would suggest to me of a more severe pull back.

Russell 2000 Index: this small caps index is considered a US market ‘bellwether’ and the Bull Flag may now trump the alternative bearish H&S! The weekly candle was bullish and closed just below this Flag trend line. Another one to keep watch of!

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

Copper: closed March with a bullish monthly candle and above the key 2.0 level.

Oil: Continues holding above the 2009 low of $33.50 and printed a bullish monthly candle but a bearish weekly candle. I am looking for a possible test of this $33.55 S/R level though given the trend line break on the 4hr chart. Note how a 61.8% retracement on the 4hr chart would test this $33.55 region:

Trading Calendar Items to watch out for:

Mon 4^th: CNY Bank Holiday. AUD Building Approval and Retail Sales. GBP Construction PMI.
Tue 5^th: AUD Trade Balance & RBA Cash Rate/Statement. GBP Services PMI. CAD Trade Balance. USD ISM Non-Manufacturing PMI. NZD GDT Price Index data.
Wed 6^th: CNY Caixin Services PMI. USD Crude Oil Inventories & FOMC Meeting Minutes.
Thurs 7^th: USD Weekly Unemployment Claims. EUR ECB President Draghi speaks. USD Fed Chair Yellen speaks.
Fri 8^th: GBP Manufacturing Production. CAD Employment data.

Forex:

EUR/USD: The E/U continued chopping along the upper region of a fairly lengthy daily chart triangle but eventually broke up through this resistance in the lead up to NFP. Despite a decent NFP result the US$ failed to catch a bid which kept this pair supported and trading out from the triangle.

Any bullish continuation from this triangle breakout would have me looking at the 1.18 S/R level in the first instance, as this is previous S/R and is just above the most recent HIGH. After that I’d be looking at the 1.22 level as this is a congested zone featuring the weekly 200 EMA, a previous monthly triangle trend line and the 50% of the weekly chart’s 2014-2015 swing low move (see the weekly chart for these levels).

In summary, the key levels to keep monitoring on the EUR/USD include:

1.12: this is a major S/R level from the monthly chart as it is the 61.8% fib of the 2000-2007 swing high move. Price is currently trading above this level.
1.18: this is major long term S/R level (seen on the monthly chart).
1.22: weekly 200 EMA, a previous monthly triangle trend line and the 50% of the weekly chart’s 2014-2015 swing low move.
1.045 /1.040: the recent & longer term support levels marking the lower boundary of a potential Bear Flag.

Price is trading above the 4hr and daily Cloud which supports LONG EUR$.

The weekly candle closed as a bullish, almost engulfing, candle and the March candle closed as a large bullish candle.

I’m watching for any new TC signal on this pair and the daily chart triangle.

EUR/JPY: The E/J continues to hold above 126 support but trades under a 17+ month bear trend line.

Price is trading above the Cloud on the 4hr chart but in the Cloud on the daily charts which suggests choppiness.

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

I’m watching for any new TC signal and the daily chart’s bear trend line.

AUD/USD: The A/U has continued its charmed run on the back of decent AUD data and a weaker US$ and it is holding above a 4hr chart support trend line that has been in play for five weeks.

The next main bullish region to focus on, IMHO that is, is the 0.80 cent region. This is a psychological whole number level, previous S/R and the rough location for the junction of the bear trend line that has been in force since the decline that started back in late 2012 (see weekly chart).

Price is trading above the Cloud on the 4hr and daily charts which supports LONG AUD$.

The weekly candle closed as a bullish, essentially engulfing, candle. The March candle closed as a large bullish engulfing candle.

I’m watching for any new TC signal on this pair and the bear trend line / 0.80 cent region.

AUD/JPY: The A/J has struggled to make gains as it has been capped by an 18+ month bear trend line and, more recently, the daily 200 EMA.

The earlier 4hr chart triangle breakout is worth up to 650 pips and has given 500 pips thus far but a completed move would take price right up to this bear trend line.

Price is trading above the Cloud on the 4hr and daily chart which supports LONG AUD/JPY.

I would be expecting this pair to remain supported IF stocks are kept bid as the two often trade in tandem as this 15 year chart shows:

AUD/JPY vs S&P500:

The weekly candle closed as a bullish candle. The March candle closed a bullish engulfing candle but, more importantly perhaps, as a bullish-reversal Railway Track pattern off major 80 support:

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

GBP/USD: I’m still watching a potential bullish ‘inverse H&S’ play out on the daily chart here. The ‘neck line’ for me would be at the 1.46 level and this is previous S/R for added confluence. I am conscious of the ongoing Brexit debate though and do wonder if this bullish technical pattern can play out against the back drop of such bearish fundamentals.

Price is trading in the Cloud on the 4hr chart and just below the Cloud on the daily chart suggesting more choppiness here.

The weekly candle closed as a bullish coloured ‘Inside’ candle, suggesting ‘indecision’, but this also has a bullish-reversal ‘Inverted Hammer’ look to it just to confuse matters further! However, the March candle closed a large bullish, almost engulfing, candle.

I’m watching for any new TC signal on this pair, the inverse H&S and the 1.40 and 1.46 levels.

GBP/JPY: The GBP/JPY weakened on Friday and triggered a new TC SHORT signal. There is potential support below from the weekly chart’s 50% fib of the 2011-2015 swing high move down at 156.50 and, then again, below that with a possible ‘Double Bottom’ region near 154.50. The first of these support levels is still 200 pips below current price though and so this TC signal could have room to play out to this potential support. These are the two bearish levels to watch for make reaction to the make or break activity in the coming sessions.

Any failure of this longer term 50% fib level near 156.50 might see price fall to test the 61.8% fib down near 147 but this, too, is previous S/R giving it added significance. (see monthly chart)

Price is trading below the Cloud on the 4hr and daily chart which is bearish.

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

There is a new TC SHORT signal on this pair BUT I’m watching the 156.50 and 154.50 levels.

Kiwi: NZD/USD: The NZD/USD has now made a bullish monthly close up and out from a bear trend line that had been in play since the decline started back in mid-2014. This bullish breakout suggests a change in polarity here, that is, a potential reversal of trend that bears watching. This is reinforced by the weekly chart’s bullish wedge breakout.

I note that any bullish continuation might target the 50% of the 2014-2015 swing low move as this is also near a strong level of previous S/R at 0.75 and the weekly 200 EMA (see weekly chart).

Price is trading above the Cloud on the 4hr and daily charts which suggests LONG NZD/USD.

The weekly candle closed as a bullish engulfing candle. The March candle closed as a large bullish candle.

I’m watching for any new TC signal on this pair, the wedge trend lines and the 0.75 level.

USD/JPY: The U/J weakened on Friday with NFP but still remains range-bound between the 115 and 111 levels.

Monthly Chart Bullish Cup’ n’ Handle pattern: There still looks to be a longer-term bullish Cup ‘n’ Handle forming up on the monthly chart. The theory behind these patterns is that the height of the ‘Cup’ pattern is equivalent to the expected bullish move from the ‘handle’ breakout. The height of the Cup for the U/J weekly chart is around 4,800 ~ 4,900 pips. This may seem like a massive move but the longer term chart below shows this move to be reasonable as it would take the U/J up near the 50% fib of the 1985-2012 swing low move. Note the 101.5 level on the other monthly MT4 chart though. Any pullback down to this level, apart from helping to form up the huge Handle for the Cup ‘n’ Handle, would also help to develop a bullish ‘Inverse H&S’ pattern.

Price is trading below the Cloud on the 4hr chart and daily chart which is bearish for the U/J.

The weekly candle closed as a bearish candle. The March candle closed as a bearish coloured Doji reflecting ‘indecision’ though.

I’m watching for any new TC signal on this pair and the 111 and 115 levels.

USD/CAD: The USD/CAD remains trading in a descending channel and just above the 1.30 major S/R level. Price action looks heavy though and any weekly close and hold below 1.30 support would have me looking at the 61.8% fib retrace level down near 1.155 as this is also near the weekly 200 EMA for added confluence.

Monthly Chart Cup ‘n’ Handle? The monthly chart shows a developing bullish Cup ‘n’ Handle pattern with a neck line at 1.30. This is worth keeping an eye on as the pattern would be worth up to 3,500 pips as this is the height of the ‘Cup’. The interesting point is that the target for this pattern would put price up at the highs reached back in 2002 and this is equal to a 100% Fib retracement of the 2002-2007 bear move.

Price is trading below the Cloud on the 4hr and daily chart which is bearish.

The weekly candle closed as a bearish candle. The March candle closed as a large bearish candle just above 1.30.

I’m watching for any new TC signal on this pair and the 1.30 level.

EUR/AUD: This pair has been ranging within a wedge for the last four weeks. There was a brief breakout on Friday but this was short lived and so the trend lines have been adjusted.

The 1.55 – 1.75 remains a congested trading zone over the longer term and monthly time frame keeping me focussed on the impact of price action at the boundaries. However, the hold below 1.55 looks rather bearish for the longer term.

Price is trading just above thin Cloud on the 4hr chart but below the Cloud on the daily chart suggesting further choppiness.

The weekly candle closed as a bearish coloured Doji candle. The March candle closed as a bearish candle.

I’m watching for any new TC signal on this pair, the 4hr chart’s wedge trend lines and the 1.55 level.

GBP/NZD: The GBP/NZD broke down from a triangle during last week and this may have signaled the start a potential 1,200 pip decline. An interesting point of confluence is that a move of this magnitude would take price action down to the weekly/monthly chart’s triangle support trend line.

The GBP/NZD even broke down through 2.10 support last week but stalled at a recent ‘Double Bottom’ near 2.065 in the lead up to NFP. I had thought price might bounce back up from here to test the major 2.10 level but it gave way on Friday and the triangle pip count is now up to 450 pips

I wrote a couple of articles about this pair during the week and these can be found through this link and this link.

I keep wondering if this pair is going to be the ‘Go to’ pair to trade any Brexit related GBP£ weakness. The weekly and monthly charts show how important the 2.10 level has been and I still think it might be possible that this major level is tested again before any bearish continuation so I’ll be on the lookout for that.

The GBP/NZD is trading below the Cloud on the 4hr chart and the daily suggesting a bearish bias.

The weekly candle closed as a large bearish candle. The March candle closed as a bearish candle.

I’m watching for any new TC signal on this pair, the triangle breakdown move and the 2.10 level.

EUR/GBP: The 500 pip bullish ‘inverse H&S’ move has finally completed! I wrote about this trade idea back on January 13th of this year and this is how the weekly chart appeared back then:

This is how the weekly chart appears now with the 500 pip move completed :-):

Any bullish continuation might see price action test the monthly chart’s triangle bear trend line which is about 150 pips above the current level and would be the region to watch in coming sessions (see monthly chart below).

The EUR/GBP is trading above the Cloud on the 4hr and daily charts which is bullish.

The weekly candle closed as a bullish candle. The March candle closed as a bullish candle.

I’m watching for any new TC signal here and the monthly/weekly chart’s bear triangle trend line.

Silver: Silver has chopped around either side of the key $15 support for many weeks now but it closed this week sitting right on top of this major S/R level. US$ weakness has not helped to lift this commodity thus far as stocks seem to be more in favour.

Price action is shaping up within a triangle on the 4hr chart with an apex right near $15 and so there are some trend lines worth watching here.

Silver is trading below the Cloud on the 4hr chart and in the Cloud on the daily chart and so choppy price action may continue for a bit longer.

The weekly candle closed as a bearish coloured ‘Spinning Top’ candle reflecting the huge amount of indecision here. The March candle closed as a bullish coloured ‘Spinning Top’ also reflecting indecision.

I’m watching for any new TC signal, the 4hr chart’s triangle pattern and the $15 level.

Gold: Gold has spent last the four weeks consolidating within a Flag pattern that is giving the daily chart a Bull Flag appearance. It is still below the $1,250 level but has held above the $1,200 level. US$ weakness on Friday with NFP did not offer much support to Gold though and it may continue to struggle if yield-bearing stocks continue to remain bid.

However, the daily chart reveals a Bull Flag and the weekly candle printed as a bullish-reversal ‘Inverted Hammer’ style candle so I’m keeping an open mind here and will watch the Flag trend lines for clues about the next major move. The ADX on the daily chart is below 20 and so any new momentum move should be easier to spot.

Bullish targets include:

The weekly chart’s swing low 50% fib near 1,415. This is also near the intersection of the monthly chart’s major bear trend line.
The weekly chart’s swing low 61.8% fib near 1,500.

Bearish targets include:

The daily chart’s 50% fib near $1,165 and the daily 200 EMA.
The monthly chart’s 61.8% fib level near $1,150.
The daily chart’s 61.8% fib which is just under the long term S/R level of $1,145.

Gold is trading below the Cloud on the 4hr but above the Cloud on the daily chart suggesting further choppiness might be in store here.

The weekly candle closed as a bearish-reversal ‘Inverted Hammer’ candle. The March candle closed as a bearish coloured Doji suggesting indecision.