Trade Week Analysis for 04/03/13

Another choppy week.

Last week: It’s been more of the same for this whole last month: Cloud divergence, choppy markets, few TS signals on 4hr charts BUT some good 30 min chart trades during the US session.  There were only 4 TS signals this week: Kiwi =0, Cable= 0, Silver = 50 and Gold = 280. 

This week: There is still divergence across the Index Ichimoku Cloud charts so I will continue to be wary with trading TS signals off 4hr charts.The only chart not currently aligned for 'risk off' is the Euro index daily chart. Price is edging closer to the support of its Kumo, or 'Cloud'. Respect of this support may see the start of a new 'risk on' rally. Failure of this support would then tip all of the charts into 'risk off' alignment. I will be on the lookout for this and, if it evolves, then I'll be looking for TS signals that align with ‘risk off’:

Divergence is evident across the broader markets as well. Stocks have been trading 'risk on' and enjoying new highs but this has been alongside a rising USD! This same risk appetite has not been evident in Forex though:

Some key events to watch out for this week include:

• Tue 5th: AUD Interest rates.
• Thurs 7th: BoJ data
• Thurs 7th: ECB Press Conference
• Fri 8th: USD Non Farm Payroll

Pairs I’m leaving for the time being: I am leaving out the USD/SGD as there has been a lot of noted and documented anomalies with this pair. I’m also leaving the USD/CHF too whilst there is pegging of the CHF to the Euro. I’m leaving the Loonie out too. I’m realising it is better to watch fewer pairs, the ones that are delivering trends, and to watch them well.

E/U: Price has now broken down from trading within a symmetrical triangle on the monthly chart. The bull support trend line was broken earlier in the week. Price is trading below the Cloud on the daily Ichimoku chart and 4hr chart which is bearish. The weekly candle closed as a large bearish candle. The February monthly candle closed as a bearish engulfing candle. Price is currently trying to hold up above the psychological whole number support level of 1.30.

• I will look to SHORT the E/U on a new TS signal, a close& hold below the 1.30 and if ‘risk off’ returns.
• I will look to LONG the E/U on a new TS signal and if ‘risk on’ returns.

E/J: Price broke down early in the week from trading within a descending trend channel.  It found some support in the 120 whole number level. You could still be forgiven for thinking that the price action on the daily chart still appears a bit ‘bull flag’ like. Price is trading below the Cloud on the 4hr and is only just above the Cloud on the daily time frame which is divergent and suggesting further choppiness. The February candle closed as bearish and as an ‘inside’ candle. This was after four bullish months. The weekly candle closed as a large bearish candle.

• I will look to LONG the E/J on any new TS signal and if ‘risk on’ returns.
• I STILL WON’T SHORT the E/J this week given the ongoing stimulus.

A/U: Price has chopped around this week as it tried to hold above the 1.02 level. Price broke down through a major monthly support trend line during the week on the 4hr chart.  It is trading below the Cloud on the daily and on the 4hr chart which is bearish. The monthly candle for February closed as a bearish engulfing candle. The weekly candle closed as a large bearish candle. Price has managed to close the week though sitting on top of the 1.02 level. This level will be a ‘line in the sand’ for this pair next week.

• I MIGHT look to SHORT the A/U on any new TS signal and close & hold below the 1.02 level.
• I will look to LONG the A/U on any new TS signal and if ‘risk on’ returns and price holds above the 1.02 level.

A/J: Price had been chopping around between 97 and 95 for much of the previous week. The 95 support level was broken early last week and, then, 93 became the new bottom support with 95 being new upper resistance. Price on the daily chart also has a bit of a ‘bull flag’ appearance. Price is trading just above the Cloud on the daily but below the Cloud on the 4hr chart which is divergent so price may be even choppier. The monthly candle for February closed as small and bearish and as an indecision style ‘inside’ candle. The weekly candle closed as a large bearish candle. 

• I WON’T SHORT the A/J this week given BoJ stimulus.
• I will look to LONG the A/J on any new TS signal, if ‘risk on’ returns and if price closes & holds above the 95 level and monthly pivot.

G/U: Price traded in a narrow range for most of the week between the 1.520 and 1.505 levels all week. Price fell on Friday though to test the psychological whole number support level of 1.5. It is trading below the Cloud on the daily and on the 4hr chart so which is bearish. The February monthly candle closed as a large bearish candle. The weekly candle closed as a reversal style ‘inverted hammer’ candle though. Price finished the week just above the 1.5 support level. It will be interesting to see if this 1.5 level does form a ‘floor’ for the G/U before any potential reversal.

NB: Go Market charts have an error for my weekly 200 EMA with the G/U. I have advised them about this. Thanks again Viv for the alert here!

• I MIGHT look to the LONG G/U on any new TS signal.
• I MIGHT look to the SHORT the G/U on any new TS signal and close & hold below 1.5.

Kiwi: NZD/USD: I’ve adjusted the trend lines here to show most recent S/R levels. Price has chopped up then down all week. It is now trading just below the Cloud on the daily and 4hr chart which is bearish. The February monthly candle closed as a bearish engulfing candle The weekly candle closed as a large bearish candle. Price finished the week sitting just above the daily 200 EMA and weekly support trend line.

• I MIGHT look to LONG the Kiwi on any new TS signal and if ‘risk on’ returns.
• I MIGHT look to the SHORT the Kiwi on any new TS signal, if ‘risk off’ returns and if price closes and holds below the weekly support trend line.

EUR/AUD: Price has chopped downwards within a descending trading channel for the last 4 weeks. Price broke through and closed below the 1.28 support level. It is trading just above the Cloud on the daily chart but is below the Cloud on the 4hr chart which suggests further choppiness. The monthly candle for February closed as small and bearish and as an indecision style ‘inside’ candle. The weekly candle closed as a bearish candle.

• I will look to LONG the EUR/AUD on any new TS signal and if price breaks and holds out of the trading channel.
• I will look to SHORT the EUR/AUD on any new TS signal and a hold below the 1.28 level.

The Yen: U/J: Price fell heavily this week and through the daily support trend line. Price has been choppy as it trades under the key S/R and psychological level of 95. As with the E/J and A/J, the daily chart here still looks a bit ‘bull flag’ like. Price is still trading above the Cloud on the daily but is in the Cloud on the 4hr chart which is divergent so price might continue to be choppy. The monthly candle for February closed as bullish BUT, also, as a reversal style ‘shooting star’ candle. The weekly candle also closed as a reversal style candle with a fair bit of a ‘hanging man’ candle look to it.

• I MIGHT trade the USD/JPY LONG on any new TS signal and if the USDX keeps rallying.

EUR/GBP: I am back looking at this pair as it is trading at an interesting level. It is trading near the upper edge of a trading channel on the monthly chart that dates back to 2009. Price is currently trading within a smaller ascending channel pattern on the 4hr chart but, in doing so, is chopping around just under the monthly trend line. Price is trading above the Cloud on the daily but below the Cloud on the 4hr chart which is divergent so it might continue to be choppy. The monthly candle for February closed as bullish BUT, also, with a bit of a reversal style ‘shooting star’ candle look to it. The long upper and lower shadows suggest ‘indecision’ at a minimum here. The weekly candle closed as a large bearish candle.

• I MIGHT look to LONG the EUR/GBP on any new TS signal and hold above the bear trend line.
• I MIGHT look to SHORT the EUR/GBP on any new TS signal and a hold below the bull trend line.

Silver: Silver has broken below the long term monthly support trend line. Price is still trying to hold above the $28 level. The $26 level is the next major support level after $28.

Gold: Gold has also broken down through major monthly support that dates back to early 2008. This is a major break down for the metal. The next major support level seems to be at $1,525. Price looks like it might go on to test this lower support level.