Stocks & FX marking time as the US$ struggles

Last week: The FX indices shifted into a ‘risk-on’ alignment last week but there have not been any new 4hr chart TC signals with this bias just yet. Most of the major stock indices closed with small weekly candles and many FX pairs continue to hover near major S/R levels with all of them seeming to wait for one to lead the pack and make a breakout move. The NASDAQ is trying to carve out out a bullish monthly-chart triangle breakout to follow those printed on the S&P500 and DJIA which means the next two weeks could be rather interesting!

This week:

US$: The US$ closed lower for the week and broke below the 95.50 S/R threshold which is bringing the possibility of a test of the key 92.50 back into focus. A review of the FX Indices can be found through the following link.

Big levels: a number of instruments are trading near major and potential breakout levels and I noted as much in article last Thursday. Gold, Silver, Oil, the EUR/USD, AUD/USD, NZD/USD, the XJO and NASDAQ are just some that are pushing up at major resistance levels and looking to try for a bullish breakout. Conversely, the GBP/USD and USD/JPY are two FX pairs resting at significant support and looking to either bounce or fail at these key levels. It may take until August closes for all of these scenarios to play out though so some patience will be required here.

Gold: continues to struggle under a major 5-year bear trend line.

AUD/USD: also continues to struggle under a major 3 ½ -year bear trend line and formed a bearish-reversal candle at this resistance so a pullback may be in store.

GBP/USD: this pair closed the week with, essentially, a bullish Engulfing weekly candle above major 1.30 support. Either that or you could call it a Railway Track bullish reversal pattern, but it’s the same sentiment either way though. An in-depth analysis of the GBP/USD and GBP-cross pairs can be found through the following link.

NASDAQ: this index remains above the key 5,200 level and any new monthly close above this level would support a longer-term bullish breakout, following in the wake of those already seen on the S&P500 and DJIA.

Stocks and broader market sentiment:

Most of the major stock indices closed with either small bearish or indecision-style candles last week with the Russell 2000 being the only index to print a bullish coloured candle. The NASDAQ is still testing the air above 5,200 though and I’m keenly watching to see if it can hold above this resistance for August. However, a monthly close below 5,200, whilst not conclusively bearish, could support a bit of a pullback or even a deeper ‘Double Top’. Germany’s DAX index is looking to make a bullish breakout for August as well. I was asked to include this index in my analysis and a review of the DAX can be found through the following link.

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 continues to hold up from the Bull Flag and above the 2,135 breakout level but there still isn’t a huge amount of momentum just yet. Keep an eye out for any test of the 2,135 level in coming sessions.

S&P500 weekly: The index closed with a Doji indecision candle but continues to hold above the Bull Flag’s upper trend line.

S&P500 monthly: I’m still on the lookout for any completion of this bullish triangle breakout move to test 2,500:

S&P500 multi-year chart: I’m open to the idea of a multi-year rally but still think a test of the breakout region could evolve before hand and this would involve a painful test of the 1,600 region. Note how the previous sideways period from 1965-80 resulted in a test of the breakout region before bullish continuation. There has not been a test of the 1,600 breakout region on the S&P500 as yet:

Russell 2000 Index: this small caps index is considered a US market ‘bellwether’ and continues to hold above the Flag supporting a bullish breakout and last week’s candle was bullish.

XJO Aussie ASX-200: I’m watching this Bull Flag under the key 5,600 S/R level:

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

Oil: Oil continues holding above the 2009 low of $33.50 and printed a large bullish weekly candle. Watch now for any test of the $50 level as this is ‘neck line’ for my bullish-reversal Inverse H&S pattern.

Trading Calendar ‘High Impact’ data Items to watch out for:

Trading Calendar ‘Medium Impact’ data Items to watch out for:

FOREX:

EUR/USD: The E/U has a bullish week, breaking up and out from the 4hr chart’s triangle pattern and breaking back above the key 1.12 S/R level. However, whilst this move did not trigger any new TC LONG signal, this triangle breakout gave up to 130 pips.

The 1.12 level remains a key level to keep in focus as it is the monthly chart’s 61.8% fib of the 2000-2007 swing high move. The chart below shows how we are up to the 20^th monthly candle chopping around near this key 1.12 level.

The daily chart also shows that price has been consolidating in a range bound by the 1.15 and 1.045 levels for the last 18 months and this 1.15 level may come into greater focus next week.

The key levels to monitor on the EUR/USD remain as:

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.
1.22: near weekly 200 EMA, a previous monthly triangle trend line and it is 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, daily and now even the weekly Cloud which is a bullish shift. Price had previously broken out above the weekly Cloud, pulled back to test this support and has now printed two weekly candles above this support base. This is the first bullish hold above the weekly Cloud since May 2014.

The weekly candle closed as a bullish candle.

Traders need to watch how next Friday’s Yellen speech impacts the US$ and, thus, this pair. There is a lot of second-tier EUR data to impact this pair next week so keep an eye on these as well, especially Tuesday with a batch of European Manufacturing and Service PMI, Consumer Confidence and German GDP data.

I’m watching for any new TC signal on this pair and the 1.12 and 1.15 levels.

EUR/JPY: Price action pretty much just chopped sideways last week and continues to hold below the key 115 level. The 115 level is key as it is near the weekly chart’s 61.8% fib. The 4hr chart still shows a triangle with little momentum so watch for any trend line breakout that evolves with increasing momentum.

There had looked to be a new 4hr chart LONG signal trying to form last week but this did not evolve. This pair does look like it is consolidating before its next big move though and I am open minded about the direction this might take and will use the 115 S/R level as my guide. I would read any new move and hold back above this 115 level as bullish.

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

The weekly candle closed as a small bullish candle giving the weekly chart a bullish-reversal ‘Morning Star’ appearance albeit this pattern did not form at the extreme LOW.

I’m watching for any new TC signal on this pair, the 4hr chart’s triangle trend lines and the 115 level.

AUD/USD: The A/U continues to trade above an 8-month support trend line and it also held the week above the key 0.76 S/R level. This price action is forming up a triangle pattern with the upper trend line being the 3¹/₂-year bear trend line so it is not surprising that this level is offering some weighty resistance.

The AUD/USD has been making higher HIGHs and higher LOWs since June and has only recently slowed due to reaching the 3¹/₂-year bear trend line. Price action is consolidating in a broadening wedge pattern around this major trend line as August draws to a close. Given the longevity of this bear trend line the various 4hr, daily and even weekly gyrations around this region are, IMHO, rather insignificant. I believe it would take at least a monthly close above this multi-year trend line for any bullish breakout case to be made and so I am looking to see where the Aussie closes for August:

Any bullish breakout above 0.76 and the 3¹/₂year bear trend line for August will have me looking up towards the 0.95 cents level. This is near the 61.8% fib of the recent swing low move (see weekly chart) and also near the other major bear trend line, since 2011, for added confluence. The 0.80, 0.85 and 0.90 would be obvious draw-cards as well of course.
Any bearish respect of this 3¹/₂year trend line and reversal for August would have me looking for a test of the daily chart’s triangle trend line, which is near the key 0.74 level, followed by the 61.8% fib near 0.72 (see the MT4 daily chart below)

Price is now trading below the Cloud on the 4hr chart but above the daily and weekly Clouds.

The weekly candle closed as a bearish-reversal ‘Shooting Star’ candle at this major resistance though so I am keeping an open mind here.

I’m watching for any new TC signal on this pair, the triangle trend lines and the 0.76 level.

AUD/JPY: Price action chopped down and out from a recent 4hr chart triangle but this move did not trigger any new TC signal. I have been looking for a possible test of the major 75 level but, whilst price is chopping down towards this level, it hasn’t reached this support as yet.

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

The weekly candle closed as a bearish candle.

I’m watching for any new TC signal on this pair and the key 75 level.

Kiwi: NZD/USD: The NZD/USD chopped around under the key 0.73 level again last week and price action remains in a triangle on the 4hr chart. The monthly, weekly and daily charts still show a Bear Flag pattern brewing here though.

The 0.73 level is long-term S/R and a look at the monthly chart shows the multiple highlighted regions where price has reacted at this level over the years. This remains the level to watch for any make or break activity in coming sessions.

The NZD/USD is trading above the Cloud on the 4hr and daily charts and is holding above the weekly Cloud too.

The weekly candle closed as a bullish candle.

There is the NZD Trade Balance data on Wednesday as well as the US data to impact this pair.

I’m watching for any new TC signal on this pair, the 4hr chart’s trend lines and the 0.73 level.

The Yen: USD/JPY: The USD/JPY is certainly sitting on the fence with its weekly close right on top of the psychological 100 level. The 100 – 101.50 region remains as a key battle ground for this pair as it is near the weekly chart’s 50% Fibonacci retracement level and I’m still on the lookout for any hold above this to help shape up a potential weekly chart ‘Inverse H&S’ pattern.

The 4hr chart shows price action forming up under a descending bear trend line and this, with the recent low near 99, is giving us trend lines to watch for any momentum-based breakout. Note how the ADX and both DMIs on the 4hr chart are below the 20 level.

Price is trading below the Cloud on the 4hr & daily charts.

The weekly candle closed as a bearish candle.

There is a BoJ Gov Kuroda speech to possibly impact here on Monday as well as all of the USD-sensitive data.

I’m watching for any new TC signal on this pair, the 4hr chart’s triangle-style trend lines and the 100/101.50 region.

USD/CAD: The USD/CAD kept drifting lower last week as the strengthening Oil price boosted the CAD$ and as the US$ weakened. Price drifted down to the bottom trend line of the three month wedge pattern but promptly bounced back up off this support. I’m still watching these wedge trend lines and the 1.30 region for any make or break activity. I note that a 4hr chart 61.8% fib retracement would bring price back to near the key 1.30 level and, even if this pair is to remain bearish, a test of this 1.30 would not be out of order before any potential bearish follow-thorough.

Price is now trading below the Cloud on the 4hr and daily (just) charts.

The weekly candle closed as a bearish candle after last week’s bearish engulfing candle.

There isn’t much CAD data next week but USD data will impact this pair, especially Friday’s Jackson Hole event. USD/CAD traders also need to keep an eye on Oil though as any break above the key $50 level could help to support the CAD$ and keep pressure on the USD/CAD. Just FYI: I’m still stalking a bullish-reversal ‘Inverse H&S’ on Oil with the ‘neck-line’ at $50 and a target near $70.

I’m watching for any new TC signal, the wedge trend lines and 1.30 level.

Gold: Gold chopped sideways within a 4hr-chart triangle last week as it continues to consolidate under the major 5-year bear trend line.

The following levels above current price are key S/R regions to contend with:

The major 5-year bear trend line that is near the $1,380 level.
The bottom of the monthly Cloud that is also near the $1,380 level.
The whole-number $1,400 level.

Any bullish break and hold above these levels will have me looking for a test of the monthly chart’s 2011-2015 swing low 61.8% fib near $1,600.
Any failure to break up through this bear trend line will have me looking for a test back down at the $1,300 level.

Gold is trading below the Cloud on the 4hr chart but above the Cloud on the daily and weekly charts.

The weekly candle closed as a small bullish coloured ‘Spinning Top’ candle reflecting indecision.

I’m watching for any new TC signal here, the 4hr chart’s triangle trend lines, the $1,380 level and the 5-year bear trend line.

Silver: I have used my Profit Source charts to narrow down the nearest resistance level for Silver and this, to me, seems to be the $21.50 level rather than my previous $20.50 level.

Price action has been consolidating under this $21.50 level since breaking higher earlier this year. The 4hr chart shows a 7-week wedge pattern giving us trend lines to watch for any breakout; bullish or bearish. Any August close above the $21.50 level would be rather bullish but a failure could support a sustained pullback.

Silver is trading below the 4hr Cloud and in the top edge of the daily Cloud but it is the weekly Cloud that I believe traders should take note of. Price action is holding above the weekly Cloud for the first time in 5 years, since August 2011, and this is a bullish shift:The weekly candle closed as a bearish candle though.