FX ahead of a huge week of data

Last week: In my Friday update I noted how the daily-based currency charts reveal that many FX pairs are simply ranging sideways, albeit some with large swings, and those that have been trending have now stalled at key resistance or support levels. Thus, it’s of no surprise to me that I only noted two 4hr-based TC trend signals last week: one on the GBP/NZD that came with a triangle breakdown and gave up to 150 pips before closing off and one on the USD/JPY that eventually closed off flat. The month of August heralds Summer holidays for many in the northern hemisphere and so with reduced liquidity these market conditions might just continue.

This week:

The US$ index and EURX are back to consolidating within triangle patterns ahead of a big week for data and with the big kahuna item of US NFP culminating on Friday. The Federal Reserve highlighted in the FOMC statement last week their focus on jobs growth as a key metric to monitor in the pacing of any US interest rate hike and, thus, Friday’s NFP might just prove to be trigger event for potential triangle breakouts on these indices. An update on the FX Indices can be found through this link.

Chinese Manufacturing PMI: this data was released on Saturday and was slightly below expectation but still held to the key 50 handle whereas the Non-Manufacturing PMI actually expanded slightly. Some will read the Manufacturing PMI dip as negative for the AUD, NZD etc but the hold of the 50 handle and the uptick with Non-Manufacturing PMI continue to support the Chinese transition from a focus on Manufacturing to that of Services and, thus, could just as easily be read as positive for these currencies.

There is a huge amount of high impact data this week so keep an eye on your trading calendar. The GBP is especially blessed with Manufacturing PMI data on Monday, Construction PMI on Tuesday, Services PMI on Wednesday and with the raft of Manufacturing Production, BoE Inflation Report, Bank Rate, Bank Rate Votes, Bank Rate Statement and a BoE Gov Carney speech all on Thursday! Friday then brings BoJ Interest Rates and USD NFP before Chinese Trade Balance data on Saturday.

GBP/USD: this pair is trading within a large triangle pattern and the trend lines will be worth watching against all the GBP sensitive data due for release this week.

NZD/USD: this has been punished over recent months but has now printed a second bullish weekly candle. Watch out for any upside surprise here given the market bias appears overly SHORT.

AUD/USD: this bias here for many is SHORT as well but watch for any technical support from a major trend line and two key monthly-based Fibonacci levels. It is worth noting that the Aussie just printed its first bullish candle in five weeks.

Friday was the last day of the trading month so watch for new monthly pivots.

Stocks and broader market sentiment:

Despite the continued fall with commodity prices, mixed company earnings results and mixed economic data most stock indices closed higher for the week and for the month: S&P500, DJIA, NASDAQ, FTSE and DAX. The Russell 2000 printed a bullish weekly candle but a bearish monthly candle.

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 psychological 2,100 level and is still above daily trend line support. The possible bearish ascending wedge is still in play and so I’ll keep watching these trend lines:

Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. There was a bullish Tenkan/Kijun cross here recently but this evolved below the Cloud and so was deemed a ‘WEAK’ signal. Price is back above the Cloud now:

S&P500 monthly chart: a break of the monthly support trend line. The monthly trend line remains intact but a break of this support level would suggest to me of a more severe pull back or correction. I am still seeing divergence on the monthly chart for now though.

Russell 2000 Index: this small caps index is considered a US market ‘bellwether’ and is still trading above the key 1,220 level with a bullish weekly candle.

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

Oil: closed with bearish candles for the week and the month. Might a ‘Triple Bottom’ be building on the weekly chart?

Trading Calendar Items to watch out for:

Sat 1^st: CNY Manufacturing PMI: slightly lower but still held the key 50 handle.
Mon 3^rd: AUD & CAD Bank Holiday. CNY CAIXIN (the old HSBC) Final Manufacturing PMI. GBP Manufacturing PMI. USD ISM Manufacturing PMI.
Tue 4^th: AUD Retail Sales, Trade Balance, RBA Cash Rate & Statement. GBP Construction PMI.
Wed 5^th: NZD GDT index and Employment data. GBP Services PMI. CAD Trade Balance. USD ADP NFP, Trade Balance & ISM Non- Manufacturing PMI.
Thurs 6^th: AUD Employment data. GBP Manufacturing Production, BoE Inflation Report, Bank Rate, Bank Rate Votes, Rate Statement & BoE Gov Carney speaks. USD Unemployment Claims.
Fri 7^th: AUD RBA Monetary Policy Statement. BoJ Monetary Policy Statement & Press Conference. CAD Building Permits, Employment data and Ivey PMI. USD NFP.
Sat 8^th: CNY Trade Balance.

Forex:

E/U: The E/U chopped up and down last week and had edged down to trade near key trend line support. We’ve had one false Flag break here already but any new trend line breakdown and continuation could signal the start of a weekly-chart Bear Flag worth up to 3,500 pips. Keep an eye on the lower Flag trend line, and also the recent low down near 1.045, in case they offer up any support.

It is interesting to note that the target for the Bear Flag is similar to the target for the larger, monthly-chart, descending triangle breakdown….confluence!

Descending triangle on the monthly chart: Despite some recent activity there is still an overall bearish pattern in play on the E/U monthly chart: a 4,000 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 4,000 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 still trading in the Ichimoku Cloud on the 4hr chart but below the Cloud on the daily, weekly and monthly charts.

The weekly candle closed as a bullish coloured Doji candle reflecting some indecision here. The monthly candle closed as a bearish candle.

I’m watching for any new TC signal on this pair and the weekly chart’s Bear Flag trend lines.

E/J: The E/J chopped a bit lower but with declining momentum. It is still shaping up with a potential H&S pattern on the daily chart with 134 as the ‘neck line’.

Price is trading above the Cloud on the 4hr chart, in the Cloud on the daily chart, below the Cloud on the weekly chart and above on the monthly chart.

The weekly candle closed as bullish coloured Doji and monthly candle closed as bearish coloured Doji.

I’m watching for any new TC signal on this pair and the 143 level.

A/U: The A/U remains below the 0.755 level and this is keeping the prospect of a major 1,700 pip Bear Flag in focus. Price chopped sideways under the 0.735 all week but managed to close the week and month above the psychological 0.73 level. There is a monthly support trend line just below current price as well.

The 0.72 and 0.71 levels are the next main levels to watch if 0.73 and the trend line give way though:

72 is near the 61.8% fib of the major swing high move from 2001 to 2011.
71 is near the 78.6% fib of the 2008-2011 swing high move.

Price is still trading below the Ichimoku Cloud on the 4hr, daily, weekly and monthly charts.

The weekly candle closed as a small, bullish-coloured, almost ‘Inverted Hamer’ candle but the monthly candle closed as a large bearish, almost ‘engulfing’ candle.

Chinese PMI was released over the w/e and, whilst slightly lower than expected, it held the key 50 level so could be read as ‘positive’ by AUD traders at market open.

I’m watching for any new TC signal on this pair.

AUD/NZD monthly: June gave a bullish trend line breakout and July gave the pullback to test this broken trend line. Thus, will we see bullish continuation, as per technical breakout theory, from here?

G/U: The Cable remains range bound between 1.55 and 1.60 and consolidating within a symmetrical triangle pattern ahead of a huge week of data for the GBP.

Weekly chart H&S: There is still a possible bearish H&S pattern forming on the weekly chart but the failure to break below the ‘neck line’ is holding this pattern off the time being. The height of the pattern is about 2,400 pips and suggests a similar move lower with any break and hold below the ‘neck line’. Recall that the GBP/USD printed a monthly close in March below 1.50, the first since June 2010. This bearish development supports the H&S pattern BUT we will need to see a close and hold below the ‘neck line’ to confirm any such bearish breakdown. I would consider that any close and hold back above 1.60 would void this pattern.

Price is trading above the Cloud on the 4hr chart, in the Cloud on the daily chart, below the Cloud on the weekly chart and in the Cloud on the monthly chart.

The weekly candle closed as a bullish, almost ‘engulfing’, candle. The monthly candle closed as a small bearish candle with a long lower shadow.

There is a huge amount of GBP-sensitive High Impact data this week and the combined impact of these items may trigger a triangle breakout. Thus, watch for any trend line breaks with increasing momentum.

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

Kiwi: NZD/USD: The Kiwi chopped higher to start the week and broke up and out from the four month duration descending trading channel. Price tested the key 0.67 level but couldn’t hold above this S/R region and promptly fell back down. Any continued sideways action could help to from up a new weekly-chart Bear Flag on the Kiwi.

I’m still on the lookout for any support from the 61.8% fib of the 2008-2011 swing high move but this level is down near 0.64.

‘Double Top’ breakdown on Monthly chart? The monthly chart still reveals a possible ‘Double Top’ pattern with a neck line at 0.735. The monthly candle close below this level for January suggested a possible 2,000 pip bearish follow through move as this is the height of the ‘Double Top’. This bearish move has yielded over 800 pips so far.

Price is trading below the Cloud on the 4hr, daily and weekly charts and monthly charts.

The weekly candle closed as another bullish-reversal ‘Inverted Hammer’ candle so watch out for any bullish follow through, however, the monthly candle closed as a bearish candle.

There is NZD GDT & Employment data to monitor this week apart from the impact of Chinese and US$ data.

I’m watching for any new TC signal on this pair, the 0.67 level and the 61.8% fib level near 0.64.

The Yen: U/J: The U/J chopped down from the 124 level to start the week but then recovered to trade either side of this key S/R level to see out the week, all the while, still conforming the daily triangle pattern. Remember that 124 represents highs not seen since April 2002 yet price closed just below this level for the week and for the month of July.

Price is now trading above the Cloud on the 4hr, daily, weekly and monthly charts.

The weekly candle closed as a bullish coloured ‘Spinning Top’, still reflecting some indecision here, but the monthly candle closed as a bullish coloured, almost ‘Inside’ candle.

Monthly Chart Bullish Cup’ n’ Handle pattern: There looks to be a new 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.

I’m watching for any new TC signal on this pair, the triangle trend lines and the 124 level.

USD/CAD: The USD/CAD chopped sideways along the key 1.30 level again all week but managed to close above this key region for the week and the month. The significance of this region can be seen on the monthly chart. The bullish close above 1.30 suggests continuation here but I’m still seeing a ‘Cup’ pattern on the monthly chart and this then brings thoughts of potential choppiness to create the ‘Handle’. I do expect many traders will be putting in orders to LONG from a re-test of 1.30 though.

Triangle breakout target: The Loonie had previously broken up and out from a major monthly chart triangle pattern that could deliver up to 2,500 pips. This 2,500 pip figure is evaluated from the height of the triangle. I have used the triangle height from the beginning of the bull trend line, as shown in the monthly chart below. The height of the triangle is around 2,500 pips and, thus, this would be the expected move from any breakout action. Extrapolating a bullish move from this triangle places price up at the 61.8% fib level. These fibs levels are popular targets in retracement moves and so this adds some confluence to this as a possible target. The bullish move has given over 2,000 pips so far.

Monthly Chart Cup ‘n’ Handle? The monthly chart now also 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 with long lower shadow but the monthly candle closed as a large bullish candle.

There is CAD Trade Balance, Building Permit, Employment and Ivey PMI data to monitor this week as well as impact form US$ sensitive data and Oil pricing.

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

GBP/AUD: This pair remains on its significant bullish run and just printed its 13^th consecutive bullish candle.

Now that the monthly candle has closed I’ll be looking for any signs of a pullback here to test either the monthly 200 EMA or even the 2.07 major S/R level. Any break below the 2.07 level would have me looking for a test of the 2.0 level.

Price is still trading above the Ichimoku Cloud on the 4hr, daily, weekly and monthly charts.

The weekly candle closed as a bullish coloured ‘Spinning Top’ candle and the monthly candle closed as a large bullish candle.

Watch for any impact from the huge batch of GBP and AUD sensitive data this week.

I’m watching for any new TC signal on this pair.

GBP/NZD: The GBP/NZD continued consolidating under the major monthly-chart bear trend line for much of the week but gave a bullish triangle breakout on Thursday.

I do note that a 61.8% fib pull back here would bring price to down near the previous breakout region of 2.10.

The GBP/NZD is still trading above the Cloud on the 4hr, daily, weekly and monthly charts.

The weekly candle closed as a small bullish candle with a long lower shadow but the monthly candle closed as a bullish candle.

Watch for any impact from the huge batch of GBP and NZD sensitive data this week.

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

Silver and Gold: both metals have closed the week and the month below key support and this seems very bearish for both of them. I am still cautious though given that any bullish breakout and continuation with the US$ has yet to be confirmed. Also, there are rumblings that the Greek debt deal may face some complications and, thus, the lack of clarity surrounding the US$ and Greece might just help to keep Silver and Gold supported.

Silver: Silver chopped sideways last week under the key $15 level and the monthly close below $15 does seem rather bearish. I would expect many traders might be looking to SHORT Silver with any test of $15.

Silver 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 bullish coloured ‘Spinning Top’ candle but the monthly candle closed as a bearish candle.

The second weekly close below $15 is bearish though and keeps the $11 and $9 levels in focus. $11 is previous S/R and the $9 area is the 100% fib level.

I’m watching for any new TC signal and the $15, $11 and $9 levels.

Gold: Gold chopped sideways under the $1,100 level for much of the week but drifted lower on Friday. The monthly close below $1,100 is bearish and is the first since January 2010. I expect many traders might be looking to SHORT Gold with any test back up at the key $1,145 though as this is the first monthly break of that region since March 2010.

The monthly close below $1,145 suggests that a deeper pull back could be in store for Gold. Bearish targets below $1,145 and $1,100 include the $1,000 psychological level and, then, the 78.6% fib near $950.

Gold is trading in the bottom of the Cloud on the 4hr chart but below the Cloud on the daily, weekly and monthly charts.

The weekly candle closed as a small bearish ‘Spinning Top’ candle but the monthly candle closed as a large bearish candle.