Last week: It was a good week for my trend trading system and I noted mid-week how the increased frequency and success rate of my TC signals has me encouraged that trending markets might be making a comeback after a lengthy period of fairly range-bound activity. Signals from the previous week continued to deliver pips last week on the EUR/AUD= 300 (now closed) and GBP/AUD = 520 (also now closed). There were new TC signals last week on the E/J= 100 (closed), GBP/USD = 100 (closed), A/U flat (closed) and Kiwi = flat (closed).
This week:
The US$ index has finally cracked the key 100 level but now it will have to prove it can hold above this key S/R region. This week’s NFP will be closely watched as jobs and wages data are important considerations for the US Federal Reserve in their decision making about the timing and pace of any US rate increase. A review of the FX indices can be found through this link.
It is a huge week of data for most currencies: The AUD$ has an Interest Rate announcement, Trade Balance, GDP and Retail Sales as well as a batch of Chinese PMI data to navigate. The NZD$ has Business Confidence and GDT Price Index data as well as the Chinese data. The GBP has Bank Stress Test results, a BoE Gov Carney speech and Manufacturing PMI. The CAD has GDP, an Interest Rate announcement, Employment and Trade Balance data. The EUR has an Interest Rate announcement with possible further easing being announced and, added to this, all of these will be impacted by USD data that includes a few Fed-Chair Yellen speeches, ISM Non-Manufacturing PMI and the ‘big kahuna’ of them all with NFP on Friday.
New TC signals: were triggered late on Friday on the GBP/USD (SHORT) and USD/CAD (LONG) BUT there is a major SR level ahead of price action on each chart and so caution is required. There is also a lot of high impact data for both GBP, US$ and CAD this week to potentially impact here.
EUR/USD: the EUR/USD is poised above major 1.045 / 1.040 support ahead of this week’s ECB meeting and the Dec 16th FOMC meeting. The big question remains whether it will Rock (bounce) or Roll (over) from this major S/R zone? Policy divergence between the ECB and US Federal Reserve suggests the latter BUT caution is always required whenever a trade outcome seems such a certainty!
Gold and Silver: many have the nails out for the coffins on these two BUT I’m still seeing potential support from wedge trend lines on the weekly charts for both metals. A sustained US$ hold above 100 would put further pressure on these two though.
Monthly candles will close after Monday so watch for these and new monthly pivots.
NB: I am away for a few days this w/e and so this is only a brief update.
Trading Calendar Items to watch out for:
- Mon 30th: NZD ANZ Business Confidence.
- Tue 1st: CNY Manufacturing & Non- Manufacturing PMI, Caixin Manufacturing & Services PMI. AUD RBA Cash Rate and Statement. GBP Bank Stress Test Results, BoE Financial Stability Report BoE Gov Carney speaks and Manufacturing PMI. CAD GDP. NZD GDT Price Index. USD ISM Manufacturing PMI.
- Wed 2nd: AUD RBA Gov Stevens speaks & GDP. USD Private NFP, Fed Chair Yellen speaks (x2). CAD BoC Cash Rate & Statement.
- Thurs 3rd: AUD Trade Balance. GBP Services PMI. EUR Min Bid Rate & ECB Conference. USD Weekly Unemployment Claims. USD Fed Chair Yellen testifies & ISM Non-Manufacturing PMI.
- Fri 4th: AUD Retail Sales. CAD Trade Balance & Employment data. USD Trade Balance and NFP.
E/U: The E/U essentially chopped sideways all week above the key 1.045 recent low but still under the revised 6-week bear trend line. It seems that this pair is waiting for the outcome of next week’s ECB meeting before breaking either up or down from this developing triangle.
Traders would be well advised to monitor this bear trend line as any 61.8% retrace of this six-week swing low move would bring price back up to the previously broken Bear Flag trend line, the monthly pivot and the monthly chart’s major 61.8% fib level near 1.12. This is a most congested zone and would be an obvious target for any bullish bounce effort here.
The US$ has finally cracked the 100 level though so and this breakout, plus any further ECB easing, may prove too much for this pair and I’d then expect this recent 1.045 support to come under greater pressure. If so, the monthly chart below shows 1.04 as a major S/R region and that would be the next level to watch with any break and hold below 1.04 though supporting the continuing Bear Flag.
As per recent weeks: The potential weekly-chart based 3,500 pip EUR/USD Bear Flag has not really got going although it has delivered up to 450 pips thus far. A break and hold below 1.045 / 1.040 would be very bearish but the potential for a possible ‘Double Bottom’ at this region remains open as well. I continue to wonder whether any small and gradual US rate rise will be enough to sustain continued bearish divergence between the EUR and USD.
Descending triangle on the monthly chart: There is still an overall bearish pattern in play on the E/U monthly chart: a 4,300 pip bearish descending triangle breakdown on the monthly chart. The descending triangle pattern is a bearish continuation pattern and has a base at around the 1.18 level. The height of this triangle is about 4,300 pips. Technical theory would suggest that the bearish breakdown of this triangle below 1.18 might see a similar move. It is worth noting that this would bring the E/U down near 0.80 and to levels not seen since 2000/2001!
Price is trading below the Cloud on the 4hr, daily, weekly and monthly charts.
The weekly candle closed as a bearish coloured ‘Spinning Top’ candle.
Watch out for impact from the ECB meeting and the batch of US$-sensitive data, especially Friday’s NFP.
- I’m watching for any new TC signal on this pair, the Bear Flag trend lines and the key 1.045 / 1.040 levels.
E/J: The E/J continued chopping lower and under the key 132 level last week. The TC signal gave 100 pips but has now closed off and price seems reluctant to fall. I’ve revised the recent trend lines to show a trading channel here. Next week’s ECB meeting might dictate whether this pair continues to fall.
I’m still seeing the monthly Cloud’s bearish Tenkan/Kijun cross and note that these crosses have been few and far between so they are worth noting!
Price is trading below the Cloud on the 4hr, daily & weekly charts but above the Cloud on the monthly chart.
The weekly candle closed as bearish coloured ‘Spinning Top’ candle suggesting some indecision.
- I’m watching for any new TC signal on this pair and the 4h chart’s trading channel.
A/U: The A/U chopped up and down last week but was hurt by some weak AUD Capex data. However, it managed to hold up near the congested zone of the broken monthly support trend line and the 61.8% fib of the major 2000-2011 swing high move. There is a lot of data to impact here next week though, AUD, CNY and US$ related data, and the combination of these might determine which way the A/U heads from here.
The A/U had broken up and out from a 14 month bear trend line at the end of the previous week. It is not uncommon to see major trend lines tested following a breakout and this may be what the A/U was doing last week:
Price is trading above the 4hr Cloud, in the daily Cloud but below the Cloud on the weekly and monthly charts.
The weekly candle closed as a bearish coloured ‘Spinning Top’ and ‘Inside’ candle with both formations reflecting ‘indecision’. Note the monthly candle though and how, for now at least, it is bullish coloured following on from last month’s bullish-reversal ‘Inverted Hammer’ candle!
- I’m watching for any new TC signal on this pair.
A/J: The A/J tried to break above the key 89 level last week but couldn’t manage this task. It weakened on Friday to drift down to test the ascending triangle’s support trend line.
The 89 level is the one to keep in focus though as this is a major demarcation zone on the weekly and monthly charts. Any close and hold above 89 would suggest bullish continuation and would be a strong vote of confidence for stocks as well!
Price is trading in the Cloud on the 4hr, above on the daily charts, below the Cloud on the weekly and in the bottom edge of the Cloud on the monthly chart.
As with the A/U, the weekly candle closed as a bearish coloured ‘Spinning Top’ and ‘Inside’ candle with both structures reflecting indecision.
- I’m watching for any new TC signal on this pair, the ascending triangle and the 89 level.
G/U: The Cable drifted lower last week and fell early to test the support of the daily chart’s triangle support trend line. In doing so this move gave 100 pips in a new TC signal. Price stalled after that though and chopped around this trend line in the lead up to Friday’s Second Estimate GDP. This data came in within expectation but the Cable still fell through the support of the trend line to close the week just above the psychological 1.50 level. This move triggered another TC SHORT signal BUT I would prefer to see a close and hold below 1.50 before getting too excited about this triangle breakout move.
The daily chart’s triangle is worth about 1,600+ pips and any continued breakdown and follow through move would bring price down to the 2008 low near 1.35.
Whilst I have removed the weekly chart’s bearish H&S from this analysis I am still seeing this potential pattern on the charts.
Price is trading below the Cloud on the 4hr, daily, weekly and monthly charts.
The weekly candle closed as a bearish candle.
- There is a new TC SHORT signal here but I’m waiting for a close and hold below 1.50.
Kiwi: NZD/USD: The NZD/USD essentially chopped sideways last week as the 4hr 200 EMA kept pressure on price action.
Any close and hold above this resistance would support a move up to test the 0.67 S/R region as this is also near the monthly pivot and 61.8% fib of the recent swing low move and so may act as a magnet for price action.
I’m still seeing either a potential Bear Flag or basing-style bullish ‘Inverse H&S’ forming up on the weekly chart with no clear winner just yet.
Price is trading in the Cloud on the 4hr chart but below the Cloud on the daily, weekly and monthly charts.
The weekly candle closed as a bearish coloured ‘Spinning Top’ candle reflecting some indecision.
- I’m watching for any new TC signal on this pair, the 4hr chart’s wedge trend lines and the daily chart’s Flag trend lines.
The Yen: U/J: The U/J chopped up and down below the key 124 level last week and this remains the level to watch on this pair.
Monthly Chart Bullish Cup’ n’ Handle pattern: There looks to be a 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 a 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 but above the Cloud on the daily, weekly and monthly charts.
The weekly candle closed as a bearish coloured ‘Doji’ candle suggesting indecision.
- I’m watching for any new TC signal on this pair and the 124 level.
GBP/JPY: The GBP/JPY chopped lower within the daily chart’s 1,600 pip evolving triangle pattern and price only stalled though once it hit the 61.8% fib from the recent swing high move. This also happened to be just above the monthly pivot and key 184 S/R level for added support.
Price is trading below the Ichimoku Cloud on the 4hr chart, in the Cloud on the daily chart but below on the weekly and monthly charts.
The weekly candle closed as a bearish candle.
- I’m watching for any new TC signal on this pair, the 184 level and the daily-chart’s triangle pattern.
USD/CAD: The USD/CAD chopped sideways for much of the week whilst under the monthly chart’s 61.8% fib resistance level. Price action rallied along with US$ strength on Friday though and a new TC LONG signal was triggered. Caution is required here however this week given there is a BoC rate announcement, CAD Unemployment & Trade Balance data as well as key US$-sensitive data to potentially impact here.
The S/R region on the monthly chart’s 61.8% fib is worth watching in coming sessions as any close and hold above this region would support the bullish ‘Cup and Handle’ pattern.
Monthly Chart Cup ‘n’ Handle? The monthly chart shows a possible bullish Cup ‘n’ Handle pattern forming up under the 1.30 level. This is worth keeping an eye on as the pattern would be worth up to 3,500 pips if it was to evolve 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 above the Cloud on the 4hr, daily, weekly and monthly charts.
The weekly candle closed as a small bullish candle.
- There is a new TC signal LONG on this pair.
GBP/AUD: This TC SHORT signal here went on to give 520 pips. I’d mentioned that I’d expected the 2.07 to possibly prove to be a stumbling block here and this was the case. Price bounced back up from this region and the signal then closed off.
This choppy daily chart Flag action continues to support the pattern I’m seeing on the monthly chart, that of a ‘Cup’ pattern with a neck line near 2.07. However, any resumption of bullish momentum could bring an alternative monthly chart pattern into focus though; a continued push up to the 2.40 region near the 61.8% fib would help to form up a possible bullish ‘Inverse H&S’ pattern. I would then be looking for any pullback back down to the ‘Shoulder’ region of 2.07.
Price is trading below the Cloud on the 4hr and daily charts but above the Cloud on the weekly and monthly charts.
The weekly candle closed as a bearish coloured ‘Spinning Top’ candle reflecting some indecision.
- I’m watching for any new TC signal on this pair and the 2.07 level.
Silver: Silver closed a bit lower last week and it remains below $15 support.
I’m still seeing a bullish-reversal descending wedge here but this will probably depend on whether the US$ index holds above the 100 level.
The sustained hold below $15 is bearish though and bringing the wedge’s bottom trend line into focus. Any break and hold below this support would then bring the $11 and $9 levels into focus as well: $11 is previous S/R and the $9 area is the 100% fib level.
Silver is trading below the Cloud on the 4hr, daily, weekly and monthly charts.
The weekly candle closed as a bearish coloured ‘Doji’ candle reflecting some continuing indecision.
- I’m watching for any new TC signal, the $15 level and the weekly chart’s descending wedge trend lines.
Gold: Gold also closed a bit lower for the week and remains below the $1,100 support level.
I’m still seeing a bullish-reversal descending wedge here as well though and this will also probably depend on whether the US$ index holds above the 100 level.
The weekly hold below $1,100 is certainly bearish and is bringing the wedge’s bottom trend line into focus. Bearish targets below this wedge trend line include the $1,050 level, the $1,000 psychological level and, then, the monthly chart’s 78.6% fib near $950.
Gold is trading below the Cloud on the 4hr, daily, weekly and monthly charts.
The weekly candle closed as a bearish coloured candle.
- I’m watching for any new TC signal, the wedge trend lines and the $1,100 level.
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