Last week: The mood has been very much ‘risk off’ across global stock markets but FX has been fairly quiet by comparison. There has been ‘flight to safety’ activity with moves into the Yen and Bonds and with the latter giving a bullish technical triangle breakout on the weekly chart. Friday saw some FX movement though with a few pairs breaking through key S/R levels that had held for much of the week.
Sentiment has been swayed bearish by the fall with Oil price, the volatile activity with Chinese stocks as well as perceived concern about a China slow-down. I say ‘perceived’ as I’m a China Slow-Down skeptic. I see China adjusting from a production to a service based economy but, IMHO, no dire slow down. This article chimes along the same lines and I do chuckle when I read about growth in China ‘slowing to 6.9%’. In a global context, where most economies would love even just half this number, this phrase does seem like an oxymoron! However, next week brings Chinese GDP and market watchers will no doubt hang off this result meaning this data print has the potential to either ease or accelerate the current ‘risk off’ momentum.
There were three new TC signals last week with mixed results: The EUR/GP gave just 60 pips before closing off, however, that’s a fairly decent move for that pair. The EUR/AUD gave 140 before closing but the AUD/NZD was a shocker with a full loss of 100 pips.
NB: this is a brief update as I’m still on holidays for the next two weeks. Also, my MT4 platform has not fully updated and this limits my charting on this template.
Next week:
- Monday is a public holiday in the US.
- Watch for Chinese GDP and Industrial Production data on Tuesday. A good result with these items could help to arrest the ‘risk off’ panic that is gripping stocks and starting to trickle through to FX. Conversely, a weak result could accelerate this current momentum.
- Two Central Banks report interest rates this week: BoC on Wednesday and the ECB on Thursday.
Stocks and the broader market:
The mood is definitely ‘risk off’ at the moment and this week’s Chinese data has the potential to either develop or limit this current momentum:
S&P500 monthly: Dail and weekly support has been broken but the monthly support trend line is intact for now. Traders need to wait and see where the monthly candle eventually closes as any close below this trend line will have me looking for a test of the previous breakout region of 1,600.
S&P500 70 year: Note the previous 13-year period of consolidation, noted by the green box on the chart below, and observe how price tested the breakout region before the bullish follow-through. The recent consolidation period is shown in the blue box and this corresponds to the period shown on my S&P500 monthly chart above. I’ve long been on the lookout for a test of this 1,600 region and thought it might never evolve but I’m back to wondering if we might see this yet. I’m keeping an open mind here for now; until the monthly candle closes that is:
S&P500 weekly: the monthly support trend line can be seen here:
S&P500 daily: daily and weekly support has been broken but, for now, the index is still above lows from Oct 2014.
Bonds: TLT weekly: some obvious ‘flight to safety’ activity and a bullish triangle breakout:
Gold: Gold finished the week a bit higher than this chart reflects but still below the key $1,100 level. The higher US$ and general commodity crush is keeping this in check for now despite some ‘flight to safety’ activity evident with the Yen and Bonds.
Gold weekly: the metal actually closed closer to $1,088. Keep an eye on the the wedge trend lines. This is a bullish descending wedge pattern that continues to develop:
VIX weekly: printed a bullish weekly candle but, surprisingly, is still below the 30 threshold. Watch to see if this threshold is broken in the coming weeks:
Oil: CL monthly: traders need to see where this closes for the month. A monthly close below the $33.50 level would suggest a test of the psychological $20 and or $10 levels:
Copper: HG monthly: Again, traders need to see where this closes for January. A close below 2.0 and the monthly triangle trend line would suggest a move down to test the 1.25 region. Watch for any reaction to this week’s Chinese GDP data:
Forex:
EUR/USD: The monthly chart reveals a triangle pattern and there is a smaller triangle on the daily chart as well. I’m watching the daily chart for any momentum based triangle breakout. There is a lot of data for the EUR this week: Tuesday brings German ZEW Economic Sentiment, Thursday brings Interest Rate news with an ECB Press Conference and Friday brings French and German Flash Manufacturing PMI data:
E/U monthly: price has bounced up off the monthly triangle trend line. Note how the Elliott Wave indicator is suggesting a bigger bounce here:
E/U weekly: the ‘Double Bottom’ looks possible here still:
E/U daily: price actually closed a bit higher than this chart suggests but is still range bound within the daily chart triangle pattern. Watch for reaction to this week’s ECB Interest Rate update:
EUR/GBP: this pair gave a new TC signal last week which has since closed off but it is making a bullish hold above 0.75. This represents the neck line of the potential 500 pip ‘Inverse H&S’ pattern. The move is already 150 pips along the way to the 0.80 target.
E/G monthly:
E/G weekly:
EUR/JPY: the 126.50 level had been watched here all week and this support managed to hold up through Friday. This remains the level to watch in coming sessions for any momentum based make or break activity:
E/J monthly: watch for any continued monthly candle hold below this triangle trend line:
E/J monthly Cloud: don’t forget this bearish chart:
E/J weekly: price actually closed a bit lower than what this chart suggests BUT it is still above the 126.50 support level:
E/J daily: 126.50 remains the level to watch:
E/J 4hr: price is lower than this chart reflects but still above 126.50 for now. Note the current absence of any momentum:
AUD/USD: the weekly close below 0.69 is bearish BUT watch for Chinese GDP data this week. A positive result there could lift this pair but a negative one would simply add more pressure:
A/U monthly: any hold below 0.69 suggests a test of 0.60.
A/U weekly: the weekly close below 0.69 is bearish:
A/U daily: the sentiment on Friday was too bearish for the 0.69 level:
A/U 4hr: watch for any test of 0.69 before possible bearish continuation:
AUD/JPY: Price finished the week just above the whole number level of 80. Note how this is a major S/R level and so watch for any bounce up off this level:
A/J monthly: 80 is the level to watch in coming sessions for any make or break activity:
GBP/USD: price has held below the recent S/R, and potential ‘Double Bottom’, level of 1.46 which is bearish and this now suggests a test of the next major S/R level down near 1.40. The bearish triangle breakdown move has now delivered around 700 pips of a potential 1,600 pip move though and is worth keeping an eye on as this pattern would have the Cable falling below 1.40 and down to near 1.35! There is a lot of data for the Cable this week with CPI on Tuesday, Employment data on Wednesday and Retail Sales on Friday. If price is going to try to dig in and recover then this would be the data-week to attempt to do so. Failure though would suggest the trip down to 1.40. Brexit news continues to make headlines and this alone seems enough to keep this pair under pressure for the time being.
Cable monthly: a monthly close below the triangle trend line would suggest a test of 1.40:
Price is lower than this MT4 chart reflects but the triangle breakdown target can be identified as near previous S/R at the 1.35 region:
Cable daily: price is actually lower than this chart reflects. The triangle breakout move has given up to 700 pips of a potential 1,600:
NZD/USD: watch for any test of the Bear trend line of the monthly triangle pattern. There is a bit of NZD sensitive data to impact this week too. Apart from the Chinese data there is NZIER Business Confidence and GDT Price Index data on Tuesday and CPI data on Wednesday.
USD/JPY: I’d been stalking the 117 level all week and price dipped below this on Friday.
U/J monthly:
Price closed lower than this MT4 monthly chart reflects but the potential for a move down to near 101.50 is quite clear. This is the 50% fib of the 2011 – 2015 swing high move and would also help to develop a bullish ‘Inverse H&S’ pattern I’ve been stalking. This pullback, if it were to evolve, would also help to shape the ‘handle’ for a Cup ‘n’ Handle pattern:
U/J weekly: the weekly close on this chart isn’t accurate. It closed below 117 and so the highlighted areas will be monitored for any follow-through bearish action:
U/J 4hr: price closed the week below the key 117 level.
GBP/JPY: the monthly chart shows that a triangle breakout may be starting. The 167 level has been previous strong S/R and was the level in focus all last week. This has been broken now and I’ll be watching for any hold below this level.
G/J monthly: a bearish triangle breakout may be underway:
G/J weekly: any hold below 167 will have me watching these Fib levels as potential targets.
G/J daily: the 167 level was broken on Friday:
G/J 4hr: a new TC SHORT signal is trying to form here:
USD/CAD: the slump with Oil price is helping to keep this pair supported. There is a lot of CAD data though this week with Wednesday being a big day offering Manufacturing Sales data, CAD Interest Rates with a BoC Press Conference to follow and Crude Oil Inventories. Friday wraps the week up with Core CPI and Core Retail Sales. I had thought that the 1.40 major S/R level might be tested here before continuation and any pull back to this region would be worth watching for either make or break activity. Any US$ index rejection of the 100 level would help to weaken this pair, however, a bullish break of the 100 would help the USD/CAD continue up on its way developing the two developing Cup patterns.
USD/CAD monthly: There looks like there could be two separate bullish Cup ‘n’ Handles patterns in progress here!
Price actually finished a bit higher than this MT4 chart reflects but note the congested band around 1.30 – 1.40:
GBP/AUD: the 2.07 level keeps attracting price action here:
GBP/NZD: as does the 2.24 level here:
EUR/AUD: This pair gave a new TC signal last week but this has now closed off. I had felt certain the 1.55 would reject price here but this hasn’t evolved yet:
E/A monthly:The Elliott Wave indicator is suggesting a fall but we shall have to wait and see:
E/A weekly: price closed higher than this MT$ chart suggests and there has been a recent triangle breakout. The target for this move is around 2,000 pips and, if this evolves, it would take price action up to the other boundary of this congested zone which is at 1.75:
E/A daily: watching this triangle possibly develop:
E/A 4hr: I suspect there would also be a new TC signal but will need to see how the chart updates on Monday:
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