Trade Week Analysis for 05/08/13

Last week: There were some good 4hr TS signals last week, especially on the AUD cross pairs, but subsequent mixed NFP data, and a tumbling USD, then shattered some of the newer signals.

The Euro index daily chart shows how price has finally broken out of the trading channel. Let’s hope this signals an end to choppy markets the beginning of some decent trends!

Stocks and broader market sentiment:

I believe that Forex traders need to be aware of the sentiment with stocks and other trading instruments as the momentum there can often influence that with currencies. I am a trend follower and I'm waiting for the next momentum trend with stocks to emerge so that I can, hopefully, catch a slice of it. I would then look to see if the same trend develops in Forex. I do look for a confluence of technical signals that might point to any new market direction. Stocks have had a bit of a pullback but now look to be turning bullish again. The signals I'm watching out for include:

S&P500 daily chart: a break of the daily support trend line. The trend line was broken temporarily but price has now closed back above this support. A ‘Bull Flag’ evolved and now price seems to have broken and closed above the possible ‘double top’ area.

Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. There was a bearish Tenkan/Kijun cross recently but these crosses, positioned above the Cloud, are deemed ‘weak’ signals. There was not a lot of bearish follow through with this and price has now moved back above the Cloud after giving a bullish Tenkan/Kijun cross, albeit a ‘weak’ signal too. price is still holding above the Cloud:

EURX monthly chart: a break of the monthly support trend line (see monthly chart).

S&P500 monthly chart: a break of the monthly support trend line (see monthly chart below). A break of this support level would suggest to me of a more severe pull back or correction. The look of this ‘market top’ appears quite different to that of the previous two market tops from back in 2000 and 2007. Elliott wave suggest a big correction here though. This chart pattern had been setting up as an ascending triangle pattern for some time. These are often bullish continuation patterns and this just may be what continues to evolve here now too!

I am still thinking that the 1,600 level might be the new floor, or base, for this index. This level has already been tested once after a previous monthly candle close above the 1,600 barrier. As with any break of a key level though, this 1,600 level might be tested again:

This week: There was better than expected Chinese PMI data out on Saturday that may impact sentiment. Also, there is a lot of AUD data due for release this week and further Chinese data releases. These might have a lot of impact on the AUD so be careful trading any AUD pairs!

• Mon 5: AUD retail sales. GBP and USD PMI.
• Tue 6: AUD trade balance & Interest rates. USD trade balance. GBP manufact. data.
• Wed 7: NZD employment data. GBP BOE.
• Thurs 8: AUD employment. CNY trade balance. JPY monetary policy. USD employment claims.
• Fri 9: RBA policy statement. CNY CPI.

E/U: Price struggled again once it reached the weekly 200 EMA this week. A flag pattern formed up and NFP data helped price to breakout to the upside. This shattered the new TS signal that had formed up earlier during the Asian session. The weekly bull trend line is still supporting price. Price is trading above the Cloud on the daily and on the 4 hr Ichimoku charts which is bullish. The weekly candle closed as an indecision style Doji or 'spinning top' though. 

• I’m watching for a new TS signal and the weekly 200 EMA.

E/J: Price chopped sideways to start the week but then rallied on Thursday. This seemed to be on the back of some Yen weakness brought about by the rise with the U/J. It is still forming up into a symmetrical triangle on the daily chart as the bottom trend line has been relaxed a bit. Price is trading above the Cloud on the daily and just above on the 4 hr Ichimoku Cloud which is bullish. The weekly candle closed as a bullish candle.

• I’m watching the triangle trend lines and for any new TS signal.

A/U: RBA announcements drove the Aussie lower this week and price broke through the key support of 0.90. The daily chart ‘bear flag pattern I had noted last week seems to have evolved now given that price has broken the 0.90 level. Price didn't even recover that much when the USD dropped on NFP Friday.

Now that the 0.90 level has failed: I don’t see much support until down at the 0.83 level! The 0.83 is the monthly 200 EMA. After that there is the 80 level that is near the 61.8% fib retrace from the last swing low to high level so this isn’t too ridiculous a notion! Any continued pause or pull back with the stock market might see price visit these low levels.

Ichimoku: Price is trading below the Cloud on the daily and on the 4hr chart which is bearish.

• I’m watching the 0.90 level. Price may test the 0.90 again after the weekly close below this key level. There is a lot of AUD data out this week so be careful with all AUD pairs.

A/J: Price broke down early in the week from trading within a symmetrical triangle pattern.  Price then fell through the key S/R level of 0.89. The 0.89 area is the 61.8% fib level from the recent swing high to the last swing low, a previous triangle breakout zone and a major S/R level for the A/J. Price rallied on the 4hr chart to test the 0.89 level following this breakdown. This level might be tested again on the weekly chart though after the weekly candle closed below the 0.89. Price is still trading below the Cloud on the daily and on the 4hr time frame which is bearish. The weekly candle closed as a large bearish candle.

• I’m just watching the 0.89 level at the moment. There is a lot of AUD data out this week so be careful with all AUD pairs.

G/U: Price broke down from an ascending trading channel forming and also gave a new TS signal to short that yielded up to 200 pips. NFP on Friday helped to lift this pair though causing the TS signal to close. Price is now trading below the Cloud on the daily but in the Cloud on the 4hr time frame which suggests choppiness. The weekly candle closed as a bearish coloured candle with a bit of a bearish ‘hanging man’ look to it.

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

• I’m just watching this pair at the moment.

Kiwi: NZD/USD: Price has traded all week in a descending trading channel that looks like the ‘handle’ of a possible ‘Cup and Handle’ pattern. The weekly candle closed as an almost bearish engulfing candle though. As with the A/U, any recovery with risk sentiment might help to boost the Kiwi but a fall in stocks would most likely see the Kiwi fall heavily. The monthly 200 EMA, at around 0.68, would seem to be the next level of support if this pair returns to being bearish.

• I’m watching the trading channel trend lines.

EUR/AUD: Price broke up and out of a ‘Flag’ pattern this week and gave a new TS signal that has yielded 500 pips!. It is still trading above the Cloud on the daily and on the 4hr time frame which is bullish. The weekly candle closed as a large bullish candle.

• There is an open TS signal on the E/A. There is a lot of AUD data out this week so be careful with all AUD pairs.

The Yen: U/J: There was a TS long signal here that gave 100 pips before NFP turned price action downwards. Price is still forming up into a triangle pattern on the daily chart though so trend line breaks here might be helpful. Price is now trading in the Cloud on the daily and 4hr time frame which suggests choppiness. The weekly candle closed as a bullish candle.

• I’m watching the triangle trend lines.

GBP/AUD: Price broke out of a symmetrical triangle pattern this week and also gave a new TS signal that has given up to 300 pips! It is trading above the Cloud on the daily and on the 4hr chart which is bullish. The weekly candle closed as a large bullish candle.

• There is an open TS signal on this pair. There is a lot of AUD data out this week so be careful with all AUD pairs.

Silver: Silver gave a triangle break and TS SHORT signal early on Friday but the subsequent NFP, and a weakening USD, caused this signal to close off. It is still trading in a triangle pattern on the daily chart even with the spikes on the 4hr chart. Price closed the week below the key $20 level again though. The weekly candle closed as an indecision style ‘spinning top’ candle. Trend line breaks on the daily chart might help to determine the next move here. The next major support after $20 seems to be down at $15, near the monthly 200 EMA.

Gold: Gold also gave a triangle break and TS SHORT signal early on Friday but the subsequent NFP and weakening USD caused this signal to close off too. Gold is still trading in a triangle pattern on the daily chart even allowing for the spikes on the 4hr chart. Price closed the week again just above the key $1,300 level. The $1,300 level is the 50% fib pullback from the last swing low to swing high. The next major support after $1,300 seems to be down at the whole number, $1,000 level and, after that, at $850 in the monthly 200 EMA. The weekly candle closed as a bullish candle. Trend line breaks on the daily chart might help to determine the next move here.