Today's Recap

Euro resistance at 1.2660/70 held. Loonie support at 1.0200/13 held. Ozzie failed 2nd time to get above 1.00 (200MA also was at this level) while Cable was the weakest not even managing to get back to 1.5600.

Yesterday I wrote that Ozzie will find it hard to get above 1.00 while I expected Loonie to fall to 1.0150 with 1.0215 being my first profit target. End result, pips earned are half as what they should have been but still not a bad result for being away from markets today.

I think equities are trying to put a bottom (top in USD) but it appears we are due for a downswing within this bottoming process after an impressive rally (at least in American equities). In one week S&P500 went from 1263 to 1349, a gain of 6.8%. Based on netdania charts (http://www.dailyfx.com/charts/forexpowerchart/) S&P, Dow30 and Nasdaq 100 futures hit their declining 50MA and previous swing lows as well this morning. 4h charts show that those three closed below their previous swing lows although S&P and Dow30 are still above their declining trendlines. Therefore, focusing on the short side tomorrow looks reasonable. S&P short around 1301 to target 1290. European indices to trade are FTSE100 and DAX30 - the weaklings. FTSE100 sell stop at 5380 with initial target at 5345. Dax is a sell at 6051. Initial target is 6000.

FX levels to watch are
USDJPY sell stop at 79.09. First target 78.75
EURUSD sell stop at 1.2430 targeting 1.2350 and below
As per previous post, long USDCAD at 1.0356 and short AUDUSD at 0.9817

Trades I am in/watching next week

USDJPY
This time I will limit myself to USDJPY only since JPY crosses do whatever this pair does. But when I execute trades, I will most be focusing on AUDJPY and GBPJPY.
Daily chart with a weekly inset.

4 hourly chart

USDCAD

Suggestion was to long this pair at 1.0218 to target 1.0360 (the broken multi-day uptrendline). Price reversed 6 pips short of target and now I am short.

AUDUSD

Be definition, I am long biased in this pair

The interesting thing is that Dow30, S&P500, Nasdaq100 and FTSE100 are all in similar if not the same situation which implies correlations are running high among major assets. High correlations mean markets in stress. However, in current conditions it is better to get similar signals across as many securities as possible rather singular signals here and there. Currently, all those signals are confirming each other. Equities and FX may turn south next week (high probability with Greek election mid June) against all my bullish expectations but it does not matter at all. When facts change we change our mind too. Therefore, watch for plan Bs as indicated on charts should markets turn sour.

Good luck next week.

Quick update and recap

Initial targets set in AUDJPY and GBPJPY have been achieved but JPY and its crosses went south since then. USDJPY fell back to its channel. Unless it gets back above, we are looking for a deeper retest (double bottom or higher low). GBPJPY also fell back below its downtrend line and only EURJPY and AUDJPY are holding above. Levels to watch for a long are when EUR and AUD crosses re-test their respective broken downtrendlines.

Yesterday I mentioned long loonie on my twitter account ( @abror_aa ). That worked as well. It is just about to test the broken multi-day uptrendline. No need to wait for the pair to hit the uptrendline and better cash half of profits already. Rest realise on a touch (approx 1.0360) and reverse (sell short) with a stop at 1.0378/80 area.

I will post some more charts and trade ideas tonite.
 

JPY and JPY crosses

Below are 4 hourly charts of USDJPY and its AUD, EUR and GBP crosses.
Moving averages: 21 (pink), 50 (blue) and 200 (green). Keep in mind 200MA in 4H chart approximates 50MA on a daily chart.

My interpretation of USDJPY is that it has bottomed. It successfully retested its previous daily swing high at 78.00 falling through downtrend channel in the process (fake-out) only to reverse back above it. This fake out is a strong bullish signal in itself. Obvious target is 80.50. In terms of pips, it is best to play crosses and keep an eye on 80.5 level is USDJPY for partial profit taking.
The main question now is whether it will continue up or will it retest? Generally, I would expect a retest of previous lows (double bottom or higher low) but in this fake-out case, I am leaning to NO re-test but if I am wrong and JPY does a retest, then we get a chance to load up at lower levels.

AUDJPY appears the strongest compared to GBP and EUR crosses as it has retraced the most versus Fib levels but there is a daily downtrendline (green) coming up at 80+/- level. This is where the risk of at least one day sell off lies. Obvious buy point is 78.37 and further below on a re-test of a broken downtrendline/swing low/moving average in the region of 76.80/77.15

EURJPY is coming against Fib level/swing high resistance and this pair may struggle to advance  initially but in the end it should overcome preferrably with a long bullish candle. Fallback to 98.30/50 is a buy. Initial target is 102.00

And finally GBPJPY - my personal favourite in terms of pips. It is volatile and requires a larger margin of error (stops) but this pair delivers well. First minor downtrendline is broken and initial target is 124.30/50. This is a Fib/Swing low/area with a downtrendlinejust above. So, I would not expect to breach through this level in one attempt. While a second target is 126.15/35. A dip to 122.30/10 area should be watched for a buy.

Good luck.

The Week Ahead

EURUSD

Minimum monthly target is 1.2977 while Jan 15 low at 1.2625 is my actual target. While this is the 2^nd weekly close below 1.31 – far more important than a daily read - daily close below 1.3028 should confirm weekly candles. I do not know if it is likely this Monday or Tuesday, but a bounce to 1.31 (+/- 5 pips) should be shorted. Expect momentum to slow down in 1.3049/23 area (Fib & swing low resistance)

GBPUSD

Clearly less weak than the Euro but it is very close to testing its intermediate uptrendline (now at 1.5825) as seen on the chart. The first test unsuccessful will take place on Monday, i think. Unsuccessful  because there are also Fib50% (1.5831) retracment & 50MA (1.5825). These three factors set the stage for a possible bounce in this pair. Bounce most likely to be muted and top at 1.5884. Thereafter I expect the trendline to be broken with downside looming large. Intraday, even after the break of the uptrendline, price may stall at 1.5805 area and bounce back to the uptrendline which, should it happen, will create a perfect sell the pullback opportunity. 

 

AUDUSD

Retest of the uptrendline was successfully rejected but the pair is now testing the bounds of the broken downtrend channel. I am neutral on Ozzie but because I am short biased in Euro and Cable, I think downside will prevail and an obvious short is 1.0288 level with 1.0250 and 1.0196 as the next targets. But a break of 1.0451(esp a daily close at or above) means 1.0540 is the next target.

USDCAD
Pretty obvious to me and therefore everyone else: it is building a base and a break from it will be full of steam. Look for a break of 1.0050 level. Watch 1H and 4H charts to enter either prior to 1.0050 or keep a standing buy order at 1.0060 if you do not have time to watch.

Good Luck

Riding it down

To quote it from the "A-Team" movie, I like it when the plan comes together. It is great to be bearish at the right time. All the signs of weakness in FX and equity markets were there. We took our cue from it and are benefitting immensely. Shorts are still on.

GBPUSD: 4h H&S width is approximately 175 pip. From 1.58, minimum target is 1.5625. Short intraday bounce to 1.5734. Initial profit target is 1.5655/62 area. This swing low presents a strong support.

EURUSD: uptrendline is broken. Short any bounce to 1.3157 and 1.3167 in particular. The most obvious initial target is 1.3023/30

USDCAD: may fall to 0.9995 to test the broken downtrendline where longs can be established

AUDUSD: this gal is real weak. China signalling low growth (7.5%, low that is) means Ozzie and commodities will have a hard time. The pair is below the bull flag and the uptrendline. Short any bounce to 1.0595. Next target is 1.0450

Monday update

The EURUSD trade i suggested worked well but short from 1.3230 stalled at 1.32. If this pair breaks out of 1.3240, then possible reversal area is 1.3275/90. Keep in mind that we may be looking at a possible "three day method" candlestick formation or my 2 in 1 candlestick formation because Friday was a long down day and today is a small bodied up day. Who knows, tomorrow may be another small up day? If that is the case, then expect a downmove to 1.32 and an upmove to 1.3240 or above. Altrenatively, 1.3225 holds and the Euro sells off tomorrow. Ultimately, EURUSD is a short candidate for me and I will play for the break of the uptrendline I mentioned in my yesterday's blog post.

GBPUSD: for now 1.58 held and this pair looks to be forming mini H&S in my 4h charts. There is an uptrendline at 1.5763 moving 3 pips up a day. I do not expect it to hold. 1.5886/1.59 is a great range to put out the shorts qith stops at 1.5910/15. Additional shorts can be put at 1.5833.

AUDUSD. Break out of the bullish flag was a fake and the pair is now back inside. I think we are looking at a possible pattern failure and I enjoy trading them as the move to the opposite direction is fast and furious. There is a strong support at 1.0650 and an uptrendline comes at 1.0625 (currently). Short levels are 1.07 and 1.0725. Sell the bounces is the policy here.

USDCAD: in my previous posts I mentioned the 0.9906 and 1.0055 range in this pair. It is back in the range with a vengeance....the sort of re-break one would like to see following a headfake. 4h close above 0.9970 is a harbinger of more upside to come including the break of the downtrendline based on Jan 12 and Feb 26 swing highs. currently at 1.0011 and is moving down 8 pips a day.

Major equity indices are testing their uptrendlines. FTSE100 and DAX30 daily futures charts downtrendlines are actually broken. I am watching to short DAX on a daily close below 6800. There appears a symmetrical triangle with an ascending tendency on 4h chart. I would have called it a bullish pennant (must be no more than 3 weeks) but I think it has now or just about to extend past 3 weeks. Same triangle in FTSE100. Triangle bottom breaks at 5860 and a daily close below 5850 will add fire to the oil.

Good luck

Week of March 5: EURUSD

EURUSD

You must have heard of the "Falling Three Method" candlestick formation. See also Bulkowski's page. Now, think of the 2 candles within one long candle. It is exactly the same as above, but two candles only. Since I could not find "Falling Two Method" anywhere, I guess I can claim to be the first one to bring this formation to trading public's attention :) I simply call it 2 in 1 candlestick formation.

Thus, December was a long red (down) candle followed by 2 (Jan & Feb) small bodied candles within Dec candle. Probable month end targets are a) 1.30, b) 1.29 and possibly c) 1.2623 (Jan low). This trade idea will be invalidated if monthly candles close above Dec open.

The trading plan:  marginal lower low, bounce and then renewed selling pressure

Last Fib support of 61.8% comes in at 1.3169 and 200MA (not shown) on this 4h chart comes in right below 1.3169 as well. This is also the area of 19 Feb gap which will finally be closed. Just below at 1.3140 & moving 3 pips a day is the uptrendline connecting Jan/Feb 16 swing lows. I expect 1.3169 level to hold for a bounce to 1.3225/40 area where Fib 50% and a daily resistance reside. I do not expect the pair to go higher than 1.3260. Finally, the pair should then breach the Fib 61.8% and the uptrendline.

To summarise, with EURUSD reversing at Fib50% resistance, it very much appears that the top with a big V (see the chart) is in place. All we need is a break of the trendline to confirm it. On fundamental side, the ECB is doing all it can to debase the Euro, a clear invitation to sell.

Good luck

P.S. Cycle watchers and a couple of newsletters I am subscribed to are calling for a top in March. A couple bloggers say the top was on Feb 28 but it appears it may stretch into mid March, important Bradley turn date. Uptrendlines on major indices are nearby and a break of them will give us the "short" signal. Note that Russell2000 (considered to be a leading indicator) is lagging already, not a good sign.