FX: a chart check-up following Brexit

Last week: There were large moves across currency pairs on Friday but I think it might take a bit longer for the first wave of dust to settle following the Brexit result. This is just a brief update and look at some of the FX majors.

As I mentioned in my Saturday post on the FX indices, I’m reading some reports suggesting this latest risk-off shift will be short lived and others suggesting that Brexit, and contagion effect, will trigger the start of a major Bear market. I am not an Economist but a mere technical analyst looking for technical clues about market moves. Whilst I do note this shift to ‘risk-off’ I am somewhat surprised, under the circumstances, that the AUD/USD closed above 0.74 support, the NZD/USD closed above 0.70 support and both printed bullish coloured weekly candles! Also, there has been a lack of momentum across a number of pairs on their 4hr charts. This bit of FX divergence might only be temporary but it is keeping me cautious and open minded about the direction of the next major market move. I continue to watch the FX pairs for any new trend based TC signals and for movement away from key S/R levels.

Next week:

US$: the US$ index closed with a bullish weekly candle but still failed to close back above the key 95.50 level. A review of the FX Indices can be found through the following link.

Stocks: Stocks were punished on Friday but many of the major indices have held above key support levels at this early stage of processing the full consequence of the Brexit result. A review of the major stock indices can be found through the following link.

Monthly candles: The June candles will close after Thursday.

EUR/AUD: this is now one very interesting currency pair and worth watching in coming sessions as it trades down near a major monthly chart support trend line. Watch for any make or break from this region.

EUR/GBP: this is another interesting pair that is trading up near a monthly chart resistance trend line.

Trading Calendar: these are the main red flag items I’m watching out for this week: set to Sydney time zone.

FOREX:

GBP/USD: This pair experienced huge moves on Friday with the Brexit result and it covered a 1,700+ pip range. I note with some interest that it closed the week still within the weekly chart’s bullish-reversal descending wedge and above the major support of 1.35 from the GFC lows.

Where to next for this pair? I have no idea but I’ll be watching the 1.35 level for any make or break from there. I’ll also be keen to see where this closes on Thursday and whether the monthly chart’s triangle pattern is broken.

Bullish and bearish targets either side of 1.35 include:

Bullish targets:

1.40 level.
1.46 level.
The descending wedge trend lines.
1.50 S/R level.
50% fib near the weekly 200 EMA and 1.55 S/R level.
61.8% fib near the 1.60 S/R level and also near the monthly chart’s bear triangle trend line.

Bearish targets:

1.35 S/R level and GFC low region.
1.30 level which is near the monthly chart’s 78.6% fib.
1.05 region which is near the monthly chart’s 100% fib.

Gold: The precious metal rallied on Friday with ‘Flight to Safety’ activity and closed the week above the $1,300 level for the first time in almost two years.

This move above $1,300 wasn’t before taking a dip down to the $1,250 region though and I had warned about this possibility last week. Last week I noted:

I did place fibs on the 4hr chart’s recent swing high move and note that a 61.8% fib pullback would bring price back down near the $1,250 level and this depth of retreat could be considered as reasonable, even if there is to be ultimate bullish continuation. We didn’t get a dip down this far on Friday but, with the weekly close below $1,300, I’m still watching this level into next week.

Price action pulled back to within 18 cents of the $1,250 region before then rallying up over the $1,300 S/R level. A hold above $1,300 would have me looking at the following bullish targets:

The monthly chart’s bear trend line.
The weekly chart’s 2012-2015 swing low 50% fib near $1,415.
The weekly chart’s 2012-2015 swing low 61.8% fib near $1,500.
The monthly chart’s 2011-2015 swing low 61.8% fib near $1,600.

Gold is trading above the Cloud on the 4hr, daily and weekly Cloud which is bullish.

I’m watching for any new TC signal and the $1,300 level.

EUR/USD: this pair was punished with US$ strength following the Brexit result. A recent support trend line was broken and I’m looking for any move back down to the 1.045 S/R level.

The key levels to monitor 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.
1.15: a recent resistance level.
1.18: this is major long term S/R level (seen on the weekly chart).
1.22: near the 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.

It is worth noting the lack of momentum on this pair with the ADX trending downwards on both the 4hr and daily charts.

I’m watching for any new TC signal and the 1.045 S/R level.

EUR/JPY: the monthly candle will close on Thursday and I’ll be watching to see if the E/J closes above or below the 115 level. The 115 level is a major S/R level as it is the 61.8% fib of the 2012-2014 swing high move. Any monthly close below this 61.8% fib near 115 would have me looking towards the 78.6% fib near 106/105.

I’ll also be keen to see if price closes below the Cloud as it looks likely to do. That bearish Kijun/Tenkan cross noted back in September 2015 has sure delivered here!

Note the lack of convincing momentum on the 4hr chart though!

I’m watching for any new TC signal and the 61.8% fib near 115.

AUD/USD: this pair experienced wild swings on Friday as well but I note with much interest that it closed the week above the 0.74 S/R level and with a bullish coloured weekly candle, albeit an indecision-style Doji. The 0.74 level is a major S/R zone and a look at the monthly chart will confirm this.

The A/U is trading above the 4hr Cloud but in the daily Cloud so may remain choppy.

I’m watching for any new TC signal, the monthly chart’s triangle trend lines and the 0.74 S/R level.

AUD/JPY: the A/J experienced wild swings on Friday but closed the week back above the key 75 level. This is a key S/R level for this pair as it is the 61.8% fib of the 2008-2013 swing high move.

Despite these wild swings I’m noting the ADX is trending down on the 4hr and daily charts reflecting low momentum.

The A/J is below the 4hr, daily and weekly Clouds which is bearish.

I’m watching for any new TC signal and the 75 level.

NZD/USD: The NZD/USD came under pressure on Friday as well but recovered to close the week with a bullish coloured candle and above the key 0.70 S/R level. It also closed back within a recent trading channel and the trend lines remain as levels to watch here.

The Kiwi is trading above the 4hr, daily and weekly Cloud which is bullish.

I’m watching for any new TC signal, the trading channel trend lines and the 0.70 level

USD/JPY: the U/J fell on Friday with ‘Flight to Safety’ movement into the Yen. Price action is now at a critical level near the 101.5 region as this is the 50% fib of the 2011-2015 swing high move but this is also the ‘Shoulder’ region of the monthly chart’s bullish-reversal ‘Inverse H&S’.

The U/J is below the 4hr, daily and weekly Clouds which is bearish.

I note with interest the lack of momentum on the 4hr chart.

I’m watching for any new TC signal and the 100/101.50 level.

GBP/JPY: I don’t have any clear handle on this pair but do note the bounce up from the 78.6% fib and this ‘134’ region may be the one to watch in coming sessions.

EUR/GBP: This is another pair to keep an eye on after the monthly candle closes on Thursday. Price action rallied last week up to the bear trend line of this monthly chart triangle and I’m watching to see how price trades from this point on. I’ll be watching for any make or break from this region.

I’m watching for any new TC signal and the monthly chart’s triangle trend line for any make or break reaction.

EUR/AUD: This is now one very interesting pair and well worth watching as it trades down near a major support trend line.

Until last week price action here had been pretty range bound in a channel formed up by the 1.565 and 1.52 levels. The EUR/AUD drifted down from this region last Monday though and continued on this tangent for the whole week. Price is now only about 180 pips away from a major support trend line that has been in play for the last four years, since 2012.

The EUR/AUD is now below the 4hr, daily and weekly Ichimoku Cloud which is bearish. It also remains below the long-term horizontal S/R level of 1.55.

Note how the Elliott Wave indicator on my monthly chart is still predicting a big fall here. I’d often looked at this chart and thought about what possible event could trigger such divergence between the AUD$ and EUR$. I’m now wondering if this Brexit situation may have just dished up the right ingredients for such a move! I’m keeping an open mind though and will watch for how this pair reacts IF it does get down to this support as price could well bounce back up from there.

I’m watching for any new TC signal and the monthly chart’s triangle trend line here for any make or break reaction.

USD/CAD: I mentioned last week how the long term S/R levels act like magnets during periods of high volatility and this pair is a perfect example of just such a phenomenon. The Loonie has closed the week sitting right on top of the key 1.30 level and this remains the level to watch for any make or break activity.

EUR/NZD: I’m watching for any test of the 1.40 level following this attempt on the triangle trend line BUT the monthly candle doesn’t close off until next Thursday.