US$: strong but heading into a big week of data

Last week: I am away at the moment and trialing my algorithm off shorter time frame charts during the European and US sessions. The irony for me last week was that the best day for short-term FX trading was Monday which was a US public holiday and a day that I avoided.

I have completed week 2 of my 4-week trial and the results, to date, are as follows. I have noted 31 TC signals off my 30 minute charts:

22 delivered decent scalping profit of 20 pips or more.
6: chopped sideways.
3 reversed completely.

Thus, of 31 signals: 70% were profitable, 20% were flat and 10% were losses. The increased frequency of TC signals is most encouraging if nothing else! I am still trying to determine the best way to manage trades on this time frame with profit targets, stops etc.

This week:

US$: The US$ closed higher for the week but is heading into a week with lots of high-impact data. A review of the FX Indices can be found through the following link.

Data: two Central Banks report interest rate updates next week: the BoC on Wednesday and the ECB on Thursday. There is Employment data for the UK on Wednesday and Australia on Thursday. CPI data is released from NZD on Monday and from the UK and US on Tuesday. Chinese GDP & Industrial Production will be in focus on Wednesday.

Earnings Season: weaker than expected earnings from Alcoa set the tone for stocks at the start of last week and more big names report this week so keep an eye on how they unfold and how/if they impact market sentiment.

Presidential Debate: the final debate is on Wednesday.

AUD/USD: the Aussie dollar was the ‘quiet achiever’ last week as it managed to print a bullish weekly candle, albeit a small one, however this was in the face of a strong rally from the US$. It is back up nudging the major 3 ¹/₂ year bear trend line and this will be the level in focus next week.

Consolidation patterns: many trading instruments continue to trade within longer-term consolidation patterns such as triangles or wedge patterns. These include: the AUD/JPY, AUD/USD, EUR/JPY, EUR/NZD, NZD/USD, USD/CAD and Gold. The EUR/CAD and EUR/USD have broken down through recent triangle patterns however they remain within larger triangles. The EUR/AUD is currently attempting a breakdown through a monthly chart triangle but the monthly candle close needs to be seen to confirm any bearish breakout. This pair will be of key interest this week with lots of data to impact both the EUR and AUD currencies:

Stocks and broader market sentiment:

The S&P500, DJIA, NASDAQ, Russell 2000 and FTSE all printed bearish weekly candles but the DAX, however, printed a small bullish candle.The S&P500 closed below the key 2,135 level and the Russell 2000 below 1,220. However, the FTSE closed above 7,000, the NASDAQ held above 5,200 and the DJIA held above 18,000 making for a bit of a mixed bag.

The chart below shows the % of stocks above the 100 day MA and the value is back to near the mid-point of the 15-year range but with obvious scope for a move lower:

The chart showing % of stocks above the 50 day MA is more interesting though as it is nearing the bottom of its 15-year range so watch for any bounce if this keeps tracking lower:

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 has broken down from a recent triangle and closed below the 2,135 breakout level. Any close and hold below the recent low at the 38.2% fib will bring the 50% fib near 2,100 into focus:

S&P500 weekly: The index closed with a bearish coloured candle and just below the 2,135 S/R level.

S&P500 monthly: The current monthly candle is still bearish coloured but it is still worth noting that the bearish divergence has faded. I’m still open to a test of the 1,600 breakout region as per the multi-year chart though.

Russell 2000 Index: this small caps index is considered a US market ‘bellwether’ and continues to hold above the Flag supporting a bullish breakout. However, last week’s candle was a bearish candle and has closed back below the key 1,220 S/R level so keep an eye out for any pullback to test the monthly support trend line.

VIX Index: The ‘Fear’ index printed a bullish candle and is now back above the 14 threshold level.

Copper Weekly: this has printed a bearish candle but is holding above the ‘2’ handle for now as it continues to coil within a triangle. I’m on the lookout for any breakout.

Junk Bonds: still watching for any momentum-based triangle breakout here.

Oil: Oil continues holding above the 2009 low of $33.50 and printed a bullish weekly candle. We have now had the first weekly candle close above the $50 threshold in over a year; since July 2015. Watch for any continuation with the bullish-reversal Inverse H&S pattern as the target for this move is up near $70.

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

Mon 17^th: ECB Draghi speaks. AUD RBA Gov Lowe speaks. NZD CPI.
Tue 18^th: AUD Monetary Policy Minutes. GBP CPI. CAD Manufacturing Sales. USD CPI. NZD GDT Price Index.
Wed 19^th: CNY GDP & Industrial Production. GBP Employment data. USD Building Permits. CAD BoC Monetary Policy Report, Rate Statement & Press Conference. USD Crude Oil Inventories. Final Presidential debate.
Thurs 20^th: AUD Employment data. GBP Retail Sales. EUR ECB Rate Statement & Press Conference. USD Philly Fed Manufacturing Index & Weekly Unemployment Claims.
Fri 21^st: CAD CPI & Core Retail Sales.

FOREX:

EUR/USD: The E/U finally broke down from the daily chart’s triangle pattern and traded down near 1.10 support towards the end of the week. Friday’s upbeat US data was enough to tip the balance here though and the E/U closed the week below this 1.10 S/R level.

It is worth checking the daily chart at this point to inspect this triangle breakdown and to note the other, longer-term trading range. This chart shows that price has been consolidating in a horizontal range bound by the 1.15 and 1.045 levels for the last 20 months. Any hold below 1.10 will have me looking to the following lower levels as potential targets including the obvious whole-number levels:

The first target would be the 61.8% fib of this latest swing high move which is near the 1.095 region.
The second target would be the 78.6% fib of this move near 1.075.
The next target would be the 1.045 level which is the 2015 low.

Price is trading below the 4hr and daily Cloud.

The weekly candle closed as a large bearish candle.

Data: Traders need to be aware that the ECB President makes a speech on Monday. There is the ECB interest rate on Thursday to impact here as well as the batch of US data, most notably, US CPI. The daily chart shows price outside the Bollinger band and so some pause or pullback may evolve even if price action continues to be bearish. I would imagine there will be many orders to SHORT from any test of 1.10 but caution will be needed given Monday’s ECB Draghi speech!

I’m watching for any new TC signal on this pair and the 1.10 level BUT cautious until after Thursday’s ECB Rate decision.

EUR/JPY: This pair continues consolidating within a daily chart triangle and is becoming increasingly squeezed towards the apex here. The 15 min chart shows how price has essentially bounced between the 114 and 115 levels during recent sessions.

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

The weekly candle closed as a bearish candle.

There is the ECB interest rate update next week to impact here as well as the batch of US data, most notably, US CPI.

I’m watching for any new TC signal on this pair and the 114 and 115 levels.

AUD/USD: The Aussie chopped higher within the daily chart’s triangle and managed to print a small bullish candle in the face of a strong US$. A small bullish-reversal descending wedge became apparent within this triangle during the week but price action eventually made a bullish breakout from this wedge. The Aussie bounced up from the bottom triangle trend line & 0.75 support level and rallied to close the week above 0.76.

Price action is becoming increasingly squeezed towards the apex of the triangle though and up towards the major 3 ½ year bear trend line. The weekly chart still shows a potential bullish-reversal inverse H&S brewing as well and I’m wondering if this week’s batch of AUD and Chinese data might help define this pattern.

Price is trading in the Cloud on both the 4hr and daily charts.

The weekly candle closed as a bullish coloured Doji candle.

There is a speech from the new RBA Gov Lowe and the AUD Monetary Policy Minutes during Tuesday’s Asian session and Chinese GDP and Industrial Production data released during Wednesday’s Asian session and US CPI on Tuesday that will impact here.

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

AUD/JPY: This pair is trading within a weekly chart triangle but, for the last two weeks, it had been range-bound between the 78 and 79 levels. Price made a bullish break above 79 on Friday however and closed the week above this key S/R level. Any hold above 79 will bring the key 80 level back into focus; the monthly chart shows the importance of this 80 level.

Price is trading above the Cloud on the 4hr and daily charts.

The weekly candle closed as a bullish candle.

Data: There is a speech from the new RBA Gov Lowe and AUD Monetary Policy Minutes during Tuesday’s Asian session and this is followed by US CPI. Chinese GDP and Industrial Production data is released during Wednesday’s Asian session.

I’m watching for any new TC signal on this pair and the key 79 and 80 levels.

Kiwi: NZD/USD: The NZD/USD last week chopped down towards the weekly chart’s 14-month support trend line, which is also near the 0.70 S/R level. Price bounced up from this region later in the week and broke up through a two week bear trend line but there was never much momentum behind this bullish effort.

The Kiwi is looking rather heavy here and so any break and hold below this 14-month trend line will have me looking towards the following fib levels as potential bearish targets: the 50% fib near 0.685 and the 61.8% fib near 0.67.

Remember: The 0.73 and 0.74 levels are long-term S/R and a look at the monthly chart shows the multiple highlighted regions where price has reacted at this region over the years. These remain as the longer-term levels to watch for any make or break activity but it should be remembered that the monthly, weekly and daily charts still show a broader Bear Flag pattern brewing here.

The NZD/USD is trading below the Cloud on the 4hr and daily charts.

The weekly candle closed as a bearish candle.

I am open-minded about some divergence developing between the AUD$ and the NZD$ as per the AUD/NZD chart below. This pair is becoming squeezed towards the apex of a monthly chart triangle and so I’m watching for any breakout activity; up or down:

There is NZD CPI during Tuesday’s Asian session to impact here as well as Chinese GDP and Industrial Production data released during Wednesday’s Asian session. Tuesday’s US CPI and NZD GDT Price Index data should be monitored as well.

I’m watching for any new TC signal on this pair and the 0.70 level.

The Yen: USD/JPY: The USD/JPY has continued to hold up and out from the weekly chart’s descending trading channel. Price action has not really pulled back much since the bullish breakout and it spent most of last week chopping around the 104 level and this remains the level to watch in coming sessions.

Recall that the weekly chart’s descending channel breakout also supports my weekly chart ‘Inverse H&S’ pattern. I had been looking for a possible pullback to test this broken channel trend line and note that any 61.8% fib pullback, normal as part of a continuation move, would bring price back to near the key 101.50 region. Any bullish continuation above 104 though will have me looking for targets on the way up to the 61.8% fib of the weekly chart’s swing low which is near the congested 116 region (see daily chart).

Price is trading above the 4hr and daily Cloud.

The weekly candle closed as a bullish candle.

There is a bit of US data to impact here this week but the most important one will probably be Tuesday’s US CPI. Market sentiment might also be impacted by Wednesday’s Presidential Debate and continued US earning results.

I’m watching for any new TC signal on this pair and the 104 level.

USD/CAD: Once again, the USD/CAD has traded right up to the upper trend line of the longer-term wedge trend line and, once again, has bounced right back down. Sp. I keep watching these wedge trend lines and the 1.30 region for any eventual make or break activity.

Price is trading below the Cloud on the 4hr chart but above the Cloud on the daily chart.

The weekly candle closed as a bearish coloured ‘Inside’ candle.

There is CAD Manufacturing Sales data on Tuesday, the BoC rate decision on Wednesday and CPI and Retail Sales data on Friday capping a big week for CAD data. There is also US data to impact here this week with the most important ones probably being Tuesday’s US CPI and Wednesday’s Crude Oil Inventories. Market sentiment might also be impacted by Wednesday’s Presidential Debate and the continued US earnings season.

NB: USD/CAD traders need to keep an eye on Oil though as it has now broken the key $50 level and any hold above this level would help to support the CAD$ and keep pressure on the USD/CAD. Just FYI: I’m stalking a bullish-reversal ‘Inverse H&S on Oil with the ‘neck-line’ at $50 and the target at $70.

I’m watching for any new TC signal, the wedge trend lines and 1.30 level but cautious with the huge batch of CAD and USD data this week.

EUR/AUD: The EUR/AUD chopped lower last week and has made a significant weekly close below the monthly chart’s triangle pattern. A monthly candle close needs to be seen below this trend line to confirm the breakout but this is a significant bearish shift and supports the Elliott Wave’s bearish bias (monthly chart).

The daily chart shows that 1.44 has been recent support but price even closed the week below this key level. I note that the 50% fib of the last swing high move is down near 1.40 and so this will be in focus if price holds below 1.44; this is a 400 pip move and so well worth stalking!

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

The weekly candle closed as a bearish candle.

Watch out for impact from the ECB speeches and rate decision and data impacting the AUD.

I’m watching for any new TC signal here and the 1.44 level.

EUR/NZD: the EUR/NZD has been making higher Highs and higher Lows for the last six weeks but is currently edging back to the support trend line that is underpinning this upward move. Any break of this recent support trend line would bring the larger triangle support trend line into focus and, given this is 300 pips lower, it is well worth watching!

The EUR/NZD is trading below the Cloud on the 4hr chart but above the Cloud on the daily chart.

The weekly candle closed as a bearish-reversal ‘Shooting Star’ candle.

Watch for any impact from the ECB speeches and rate decision as well as from data impacting the NZD: there in NZD CPI during Tuesday’s Asian session to impact here as well as Chinese GDP and Industrial Production data released during Wednesday’s Asian session. Tuesday’s US CPI and NZD GDT Price Index data should be monitored as well.

I’m watching for any new TC signal on this pair and the daily chart’s triangle support trend line.

EUR/CAD: With the GBP pairs out of the picture for me for a while I have taken more interest in this pair. I had been stalking this last week for any decisive move away from the 1.461 level and this move came through on Friday.

The monthly chart shows a larger triangle in play here but the weekly chart shows a more recent support trend line that has now been broken. Price closed the week just above the 1.44 level and this support can be seen on the 4hr chart. I note that any 61.8% fib pullback of the daily chart’s swing high move would bring price down to the 1.42 region and this is also a recent S/R zone. This would offer a possible 200 pip move if it evolves so is also worth stalking.

The EUR/CAD is trading below the 4hr and daily Cloud.

The weekly candle was large bearish candle.

Traders need to watch out for the data impacting the EUR and CAD this week: most notably, the ECB and BoC rate decisions.

I’m watching for any new TC signal and the 1.44 and 1.42 levels.

Gold: Gold has essentially been chopping sideways in a range between $1,250 and $1,265 for the last seven sessions ( see the 60 min chart below) and so I’m waiting for any breakout from this region; either up or down. Price closed right on $1,250 at the end of last week.

Any bullish break above $1,265 will bring the $1,300 level back into focus as this is the 61.8% fib of the recent swing low move.
Any bearish break below$1,250 will bring the $1,175 region back into focus as this is the 61.8% fib of the last swing high move.

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

The weekly candle closed as a bearish ‘Spinning Top’ candle.