[Please note that this is a temporary home for this blog. Previous entries found at fundtech707.ghost.io]
Introduction:
Given recent
developments in global currency markets, we shall focus solely on forex this
week. A number of major patterns have
recently completed, or are nearing completion.
With such confluences it is an opportune time to venture some medium to
long-term possibilities. We will look at
the majors, minors and selective EM currencies, with our starting point the US Dollar. DXY broke out of a 22-month rectangle with gusto, closing at
101.35 on the week. This confirms our bullish USD outlook with DXY’s first target at 108
and second target 120. We took a
number of trades last week, as per suggestions, and we will look at some further trade set-ups as proposed in
the last section.
Forex Majors:
The US Dollar’s
impressive run is reflected in all the majors.
USDJPY closed the week at 110.95 with 114 the next target. We prefer to get long on a pullback, given
the opportunity, with a retracement to 109-110 possible.
EURUSD continues its
slide with an impressive breakout of a 22-month rectangle pattern– technically, a
channel – closing the week at 105.90.
A run on parity seems a likely near term possibility, with the last
remaining resistance at 104.50. As we
have repeatedly highlighted in recent weeks, our medium to long term view sees EURUSD trading down to 0.82 our favourite possibility. Next month’s ECB meeting will be keenly
watched for indications of further extension to QE operations.
AUDUSD closed at
0.7335 and a pull back - close to re-testing the boundary line - early in the week afforded us a great entry opportunity
for shorting at 0.7550. Our initial
target of 0.7150 is quickly coming into view; 0.66 is our final target.
NZDUSD beautifully
completed 2 major patterns last week, taking us short at 0.7050. A 15-month rising wedge projects a target of
0.65 and a 5-month head & shoulders top gives us a 0.66 target.
The Canadian dollar
is the standout of the commodity currency complex, exhibiting some resilience
against the USD. That said, we remain
comfortably long of USDCAD at 1.3450, targeting 1.40.
The cable traded down some 250 pips on the week on Brexit concerns. However, our current view remains that the
cable has bottomed in the medium term, although cognizant of news flow having
the potential to whipsaw price action.
We continue to like a number of the Pound crosses, as discussed in the
next section.
Forex Minors:
We elected to buy
GBPAUD on a pullback – as opposed into strength – and were able to buy at 1.6507,
only 100 or so pips higher than the boundary line from of the breakout from a
7.5-month falling wedge. Our target
price from this major pattern breakout is 1.8534.
Already long of
GBPNZD at 1.74 an excellent pyramid opportunity is presenting itself as
highlighted in the 4-hour chart below.
Buying on the break of this small symmetrical triangle and through
resistance at 1.77 would be an excellent way of increasing leverage via
pyramiding or indeed provide a good entry to those currently flat however
wishing to get long of the pair.
We are long of
GBPJPY at 135, targeting 148.
EURJPY recently
broke out of a 5 month symmetrical triangle or coil and we look to get long
either on a pullback – e.g. to the 8 day exponential moving average – or via a
pyramid should the opportunity reveal itself.
As can be seen from
the weekly EURCAD chart below there was a good opportunity to short at 1.44,
whereupon the pair completed a 7.5-month channel and this further provided an
anticipatory entry for completion of a 17-month head & shoulders top pattern,
projecting a target of 1.32. We missed
this entry and so we potentially look to get short on a retest of 1.44. Alternatively, sell upon completion of the
major head and shoulders top around a level of 1.42.
EURCHF has completed
a 15-month head & shoulders top and we look to get short on a retest of the
neckline around 1.0750.
USDNOK is about to
complete a 15-month head & shoulders top failure. We look to get long on a break of the highest
point of the right shoulder around 8.6 with a target of 9.55.
USDDKK will soon
complete a 22-month rectangle at 7.06, targeting 7.64, initially.
Forex EM:
Not an emerging
market, per se, USDCNH continues to make new all time highs. Yuan weakness is a major story, exacerbated by
recent and on-going Yen weakness, which has implications for global systemic
stability. Expatriation of Chinese
assets on continued Yuan weakness shows up very clearly on Bitcoin charts. We are closely monitoring the crypto-currency
as we see a high possibility of a considerable price spike on a break of 2016’s
high at $775 (BTCUSD).
USDKRW is close to a
13-month head & shoulders failure completion, as can be seen on the weekly
chart below. We look to get long at 1200,
unless we get a retracement to 1160.
USDMYR closes in a
completion of a 14-month base with a break of 4.54. This chart targets 5.165.
The strong US Dollar
is negative for nearly all EM currencies, with the possible exception of the
Brazilian Real and Russian Ruble.
Current positions:
Long GBPNZD @
1.7342, SL b/e, TP 1.8650
Long GBPAUD @
1.6507, SL b/e, TP 1.8534
Short AUDUSD @
0.7550, SL b/e, TP1 0.7150, TP2 0.66
Short EURGBP @
0.8680, SL b/e, TP1 0.8450, TP2 0.76
Long USDCAD @
1.3449, SL 1.3299, TP 1.40
Long GBPJPY @ 134.96,
SL b/e TP 147.70
Short EURUSD @
1.0703, SL b/e, TP1 100.00, TP2 0.82
Short NZDUSD @
0.7041, SL 0.7151, TP 0.66
Trade set-ups, potentially
for execution:
Long USDJPY, limit order
@ 109.50, SL 108.50, TP1 114.00, TP2 119
Long EURJPY, limit
order @ 116.50, SL 115.60, TP 122
Short EURCAD, limit
order @ 1.44, SL 1.4260, TP 1.26
Short EURCAD, stop
order @ 1.4150, SL 1.4290, TP 1.26
Short EURCHF, limit
order @ 1.0740, SL 1.0810, TP 1.03
Long USDNOK, stop
order @ 8.6433, SL 8.5583, TP 9.5500
Long USDDKK, stop
order @ 7.0700, SL 7.0130, TP 7.6400
Long USDKRW, stop
order @ 1205, SL 1170, TP 1300
Long USDMYR, stop
order @ 4.5037, SL 4.4237, TP 5.1617
Long BTCUSD, stop
order @ 780, SL 765, TP1 1000, TP2 1300
