Last week: The FX indices slipped back into alignment during last week and this triggered a flurry of new 4hr-chart based TC signals. Gold has been a star performer, yet again, with another TC signal following on from one in the previous week. This signal is still open and has contributed a whopping 500 pips (or $50) towards the combined TC signal pip haul of 1,160 pips.
The maximum pip tally for each trend move was as follows: Gold = 500 pips or $50 (open), AUD/USD = 90 (closed), USD/CAD = 230 (closed), NZD/USD 160 (closed), GBP/USD = 140 (closed) and EUR/GBP = 40 (open). Added to this, the EUR/USD eventually broke out from the daily triangle I had been stalking and this move gave 270 pips and the EUR/AUD broke out from a 4 hr chart triangle for over 200 pips as well. Thus, it was a great week for TC and technical trading!
Friday’s market action was interesting to say the least. Stocks traded lower due to negative sentiment from the fewer jobs added component of NFP but the US$ traded higher on positive sentiment from the improved wages and Unemployment rate component of NFP! This ongoing battle between Bulls and Bears is keeping a number of instruments in range-bound activity, albeit on different time frames: the USDX & EURX in weekly Flags, Silver & Gold in weekly wedge patterns, the latter having just broken out though, the EUR/USD in a weekly Flag of sorts, Oil in a daily triangle, the S&P500 in a weekly Flag and the USD/JPY has chopped along in a sort of H&S fashion above 117 for the last 12 months!
History reveals that decent trends often evolve from sideways and range-bound markets and, the longer the chop, then the better the eventual trend. One has to suspect then that we could be in for a decent ride when these markets do eventually breakout, whether it be a bullish or bearish, so it might be a good idea to strap on your seat belt!
This week:
- Oil: continues consolidating in choppy trade around the Feb ’09 GFC low of $33.55.
- Gold: has made a bullish descending wedge breakout. Watch for any pullback to test the broken trend line before possible continuation.
- Data: China markets are closed for the week with Lunar New Year celebrations but it is a fairly light week otherwise for data anyway. US data will be closely watched though to see how it impacts the US$ and items appear on Wednesday with a Fed Chair Yellen speech & Crude Inventories, Thursday with another Fed Chair Yellen speech and weekly Unemployment Claims and Friday with US Retail Sales and Prelim UoM Consumer Sentiment.
- The FX indices are aligned for LONG EUR$ and SHORT US$. A review of the FX indices can be found through this link.
- Monthly chart S/R levels: a number of instruments are trading near long term S/R levels derived from their monthly charts. These levels need to be monitored for any possible ‘launch’ potential: Gold, Oil, Silver, EUR/USD, EUR/AUD, EUR/GBP, GBP/JPY, USD/JPY and USD/CAD.
- NB: I am busy next w/e and updates may not be posted until the following Monday.
Stocks and broader market sentiment:
Stocks had a bearish week with continued concern about volatility with the price of Oil and lack of global growth. As mentioned above, US stocks sold off on Friday with negative sentiment coming from the weaker than expected jobs added component of NFP. However, the US$ traded higher with positive sentiment coming from the better than expected wages and Unemployment rate component of NFP. Go figure! There is this ongoing tug’o’war between stock market Bears and Bulls that is contributing to choppy stock market action.
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 below the psychological 1,900 level and I’m watching for any move down to test the monthly support trend line.
S&P500 weekly: this still has a bit of a Bull Flag appearance and traders need to keep note of both the 2,135 level and monthly support trend line for any breakout or respect. The weekly candle closed as a bearish, almost ‘engulfing’ candle but it still looks to be consolidating within the Flag for the time being.
S&P500 monthly chart: a break of the monthly support trend line. The monthly trend line remains intact for now but a break of this support level would suggest to me of a more severe pull back. Bearish divergence on the monthly chart had warned of recent weakness and I, like the Elliott Wave indicator, have been looking for a test of the 1,600 region. Any break and hold below the monthly support trend line would suggest a move to this next support level.
Russell 2000 Index: this small caps index is considered a US market ‘bellwether’ and does have a bit of a potential bearish H&S brewing. The weekly candle closed as a bearish coloured, almost ‘engulfing’ candle.
VIX Index: The ‘Fear’ index has printed a bullish weekly candle but is still below the 30 threshold for now.
Copper: closed with a bullish coloured weekly Spinning Top candle and still above the key 2.0 level.
Oil: Continues chopping around, within a daily chart triangle, near the 2009 low of $33.50.
Trading Calendar Items to watch out for:
- Mon 8th: NZD & CNY Bank Holiday.
- Tue 9th: CNY Bank Holiday.
- Wed 19th: CNY Bank Holiday. GBP Manufacturing Production. USD Fed Chair Yellen testifies & Crude Oil Inventories.
- Thurs 11th: CNY & JPY Bank Holiday. EUR Eurogroup meetings. USD Fed Chair Yellen testifies & weekly Unemployment Claims.
- Fri 12th: CNY Bank Holiday. AUD RBA Gov Stevens speaks. EUR German Prelim GDP. USD Retail Sales & Prelim UoM Consumer Sentiment.
Forex:
Gold: Gold has closed the week just above $1,172 and with a bullish breakout from a weekly chart bullish-reversal descending wedge pattern. This moved triggered a new TC signal during the week that has yielded up to 500 pips ($50). You can’t say I didn’t warn you all. I noted last week how Gold had closed the month with a bullish-reversal ‘Morning Star’ pattern and wrote a few other articles that can be found thorough the links here and here.
This was the 4hr chart that I posted on Tuesday noting this new TC LONG signal:
Note how the 4hr chart appears today:
This is a significant weekly close given the metal has also closed above the long term S/R levels of $1,145 and $1,150 and the monthly chart’s 61.8% fib from the 2007-2011 swing high move. Note how price tested this $1,145 level though during Friday’s trade.
However, traders need to be aware that technical breakouts often result in price action pulling back to test the breakout level before continuation. Thus, be on the lookout for any pull back to test the broken, three year+ trend line before any possible continuation with this Gold move and this trend line, if it is to be tested, is just below the key $1,145 level. I do note, though, that despite the big move during last week that the weekly Gold candle is still within the Bollinger band, albeit near the upper band, and so there is still room to move here.
I’ve received a bit of criticism about the placing of my weekly chart bear wedge trend line with others suggesting a more valid level would be as shown, highlighted in pink, below:
This, of course, is a valid trend line too and I note how it intersects with the key $1,200 level. Note, also, how this $1,200 level also ties in with top of the weekly Cloud so this will be a key level to watch in coming sessions and any break and hold above this threshold may enable new LONG entry. However, I still see my longer time-frame trend line as a demarcation of polarity and I stand by it. Whether it marks a bullish descending wedge breakout remains to be seen though 
Bullish targets above current price for any continuation move include:
- $1,200 S/R level (in fact, all whole number levels). The $1,200 level ties in with the top of the weekly Cloud.
- The weekly chart’s swing low 50% fib near 1,425. This is also near the monthly chart’s bear trend line.
- The weekly chart’s swing low 61.8% fib near 1,500.
Gold is trading above the Cloud on the 4hr and daily chart, in the middle of the Cloud on the weekly chart but below the monthly Cloud. Note that the top of the weekly Cloud ties in with the $1,200 S/R level so any bullish breakout above that region could see price action accelerate higher.
The weekly candle closed as a large bullish candle following on from the monthly close last week that signalled a bullish reversal ‘Morning Star’ pattern.
- There is an open TC LONG signal on Gold BUT I’m looking for any pullback to test either the $1,145 level or broken wedge trend line.
EUR/USD: The E/U broke up and out of a daily chart triangle pattern last week but this move was choppy and did not trigger a clean TC LONG signal. Price rallied up to the key 1.12 level before Friday’s NFP where it stalled whilst it waited for this news item. The 1.12 is a major level as it is the 61.8% fib of the 2000-2007 swing high move, best seen on the monthly chart:
The key levels to keep monitoring here 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 (see on monthly chart). It also happens to be the 61.8% fib of the recent daily chart-based swing low move (see on daily chart).
- 1.18: this is major long term S/R level (seen on the monthly chart)
- 1.045 /1.040: the recent & longer term support levels.
Price is trading above the Cloud on the 4hr and daily charts, in the bottom edge of the Cloud on the weekly chart but below the Cloud on the monthly chart.
The weekly candle closed as a large bullish candle.
The only EUR data for the week is German Prelim GDP on Friday but watch for impact from all of the USD data as well.
- I’m watching for any new TC signal on this pair and the 1.12 level.
EUR/JPY: The E/J chopped lower last week after bouncing down from the weekly chart’s bear triangle trend line and 132 resistance zone. Note the wedge that has formed up on the 4hr chart now though as this will give us trend lines to montior.
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! However, this recent cross has not been accompanied by any ADX move above 20 just yet and so there seems to be a point of difference with this particular cross:
Price is trading in the Cloud on the 4hr chart, below the Cloud on the daily & weekly charts but above the Cloud on the monthly chart.
The weekly candle closed as a bearish coloured, almost ‘inside’, candle.
- I’m watching for any new TC signal on this pair, the 4hr chart’s wedge trend lines and the 132 level.
AUD/USD: The A/U chopped higher to start last week following the rate hold from the RBA and some decent AUD Building Approval data. The weaker US$ and move higher with Gold helped to add support here despite the background knowledge of an easing bias from the RBA. This move higher also triggered a new TC signal that delivered up to 90 pips before closing off after Friday’s reversal following NFP.
Price is trading in the top edge of the 4hr Cloud but below the Cloud on the daily, weekly and monthly charts.
The weekly candle closed as a bearish coloured ‘Spinning Top’ candle suggesting some indecision.
Traders need to keep an eye on how USD data unfolds here during the week as well as the Friday speech from the RBA Gov Stevens. Any bullish continuation with Gold and US$ weakness will help to support this pair.
- I’m watching for any new TC signal on this pair.
AUD/JPY: The A/J mover lower, inspired by Yen buying with ‘flight to safety’ activity, but only after hitting up against the recent swing low’s 61.8% fib and monthly 200 EMA resistance.
Price continues within triangles on the weekly and monthly charts.
Price is trading below the Cloud on the 4hr, daily, weekly and monthly charts which is a bearish shift.
The weekly candle closed as a large bearish ‘engulfing’ candle.
The monthly chart shows the 80 level as major S/R and near a triangle trend line. This will be level to watch in coming sessions if bearish momentum continues.
- I’m watching for any new TC signal on this pair and the 80 level.
GBP/USD: The Cable broke up and out of a 4hr wedge pattern and this move also triggered a new TC LONG signal that gave 140 pips before closing off.
The weekly chart’s 1,600 pip triangle only delivered 850 pips to date but that has been a decent move anyway.
Price is trading above the Cloud on the 4hr chart but below the Cloud on the daily, weekly and monthly charts.
The weekly candle closed as a bullish, almost ‘Engulfing’, candle though.
The monthly charts shows the 1.40 as major S/R and will be the level to keep in focus here.
Data to impact here this week includes all of the US data as well as Wednesday’s GBP Manufacturing Production.
- I’m watching for any new TC signal on this pair and the 1.40 level
GBP/JPY: The GBP/JPY chopped lower last week with more ‘flight to safety’-inspired JPY strength. I’d previously mentioned price might test the 167 level and this move may be developing making 167 the level to watch in coming sessions.
Price is trading in the bottom edge of the Cloud on the 4hr chart, below the Cloud on the daily and weekly charts but above the Cloud on the monthly chart.
The weekly candle closed as a bearish candle.
- I’m watching for any new TC signal on this pair and the 167 level.
Kiwi: NZD/USD: The NZD/USD broke up and out of wedge pattern and triggered a new TC signal last week that gave up to 160 pips before closing off. Price stalled at the daily chart’s 19 month bear trend line and near the 0.67 S/R ahead of Friday’s NFP but bounced back down from there with NFP-inspired US$ strength.
I note that any bullish breakout above this bear trend line might target the 50% of the 2014-2015 swing low move as this is also near a strong level of previous S/R at 0.75 (see daily chart).
Price is trading above the Cloud on the 4hr chart but below the Cloud on the daily, weekly and monthly charts.
The weekly candle closed as a bullish candle.
- I’m watching for any new TC signal on this pair, the 0.67 level and the daily/monthly/weekly chart’s bear trend line.
The Yen: USD/JPY: The continued volatility with Oil price and concern about global growth has sustained ‘flight to safety’ Yen buying which has kept pressure on the U/J.
Price tested key 117 support in the lead up to Friday’s NFP, with the daily chart looking like one very large bearish developing H&S pattern over the last 12 months, and the U/J ended up closing the week below this key S/R level. Any hold below 117 would be bearish and would have me looking all the way down to other major S/R at 101.50:
Monthly Chart Bullish Cup’ n’ Handle pattern: There still looks to be a longer-term 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 101.50 level on the other monthly MT4 chart though. Any pullback down to this level, apart from helping to form up the 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 and daily chart, in the Cloud on the weekly chart but above the Cloud on the monthly chart.
The weekly candle closed as a bearish ‘engulfing’, candle.
- I’m watching for any new TC signal on this pair and the 117 level.
USD/CAD: The USD/CAD moved back below the 1.40 S/R level with the weaker US$ and small recovery efforts with Oil pricing and this move triggered a new TC signal that delivered 230 pips before closing off on Friday. Price action recovered a bit on Friday with NFP-inspired US$ strength but the USD/CAD still closed the week below the 1.40 level.
The 1.40-1.30 channel remains a congested S/R zone on the monthly chart time frame and so any hold below 1.40 might see this choppy action continue.
Monthly Chart Cup ‘n’ Handles? The monthly chart shows a developing bullish Cup ‘n’ Handle pattern with a neck line at 1.30. This is worth keeping an eye on as the pattern would be worth up to 3,500 pips 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. A completion of this pattern may set up for a second, larger Cup ‘n’ handle though too! See the Profit Source monthly chart below.
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 ‘Spinning Top’ candle reflecting indecision.
- I’m watching for any new TC signal on this pair and the 1.40 level.
GBP/AUD: Price action continues within a descending channel on the daily chart set within a larger Cup ‘n’ Handle pattern on the monthly chart.
Price is trading above the Cloud on the 4hr, weekly and monthly charts but below the Cloud on the daily chart
The weekly candle closed as a bullish engulfing candle BUT still below the key 2.07 level.
- There is a new TC LONG signal trying to form on this pair.
EUR/AUD: Price action consolidated within a 4hr chart triangle around the key 1.55 last week ahead of NFP but broke up and out on Friday to give 200 pips.
This was the 4hr chart before Friday’s NFP session:
The 4hr chart after Friday’s session showing the 200 pip breakout move:
The 30 min chart shows how this trade would have been an easy one to track during Friday’s late European and US sessions:
Price is trading above the Cloud on the 4hr, daily, weekly and monthly charts.
The weekly candle closed as a bullish engulfing candle.
- I’m watching for any new TC signal on this pair and the 1.55 level.
EUR/GBP: I’m still stalking a bullish ‘inverse H&S’ pattern here with a target of 0.80. I described this potential trade back in January and the post of that aarticle can be found through this link.
The EUR/GBP is trading above the 4hr, daily and weekly Clouds but below the monthly Cloud.
The weekly candle closed as a bullish candle.
- There is an open TC LONG signal here but the 0.77 S/R level is proving to be some resistance..
Silver: Silver remains below the $15 S/R level but still within a potential bullish-reversal descending wedge and any continued US$ weakness could help to develop this bullish wedge pattern as per the one on Gold.
Any sustained hold below $15 would be bearish though and would bring the $11 and $9 levels back into focus. $11 is previous S/R and the $9 area is the 100% fib level.
Silver is trading above the Cloud on the 4hr chart, near the top edge of the Cloud on the daily chart but below the Cloud on the weekly and monthly charts. I note that the top of the daily Cloud is near the key $15 level so any break and hold above this level might see Silver accelerate higher.
The weekly candle closed as a bullish candle.
- I’m watching for any new TC signal, the wedge trend lines and the $15 level.
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