Monday, April 26, 2010

Sunday Analysis

An interesting week ahead!!  Will Magic risk-on Monday work again?
Its not a secret that I am longer term bullish the USD but looking at all the charts it is clear that we are looking at a risk-on rally as we start this week with breakouts in commodities and indices and possibilities in the yen crosses.  While many dollar crosses are held back by trendlines or in consolidating in pennants the Friday candles show  risk-on reversal potential breakouts.
After it's best run since December the dollar fell off sharply on Friday on the news of Greece asking for its IMF money.  This is the fifth Greece rally and now calling in the IMF is an excuse to rally (yes, I am a bit cynical).  The CoT shows the market was heavily short EURUSD last week so a squeeze is not unexpected and could bounce higher than anyone expects after the sharp move off 1.32.  So Greece is fixed and that leaves the most important news on the calendar for the dollar next week.  There is the FOMC which won't likely change the Fed Funds Rate but the market will be watching the discount rate and the language for hints on timing, but the biggest event risk for the dollar comes Friday with the Q1 GDP figure where a weak number could dampen the markets expectations for a rate hike.

Dollar Index (June): 
After five consecutive days of gains which put the dollar back in its ascending channel the dollar fell hard back to test the channel support.  We could be consolidating sideways and forming a large pennant, similar to the ones on the daily charts of AUDUSD and GBPUSD, so perhaps more choppy sideways movement before the news later in the week gives a firm direction but it is clear that after a strong rally the dollar is doing some back and fill correcting to start the week..  

S+P futures -
Weekly bullish engulfing, daily bullish long candle, the index has made new highs with no signs of reversal.  Buy on dips, targets 1216 and 1226.  Support at 1200 should give a long entry.

FTSE 100 futures -
Weekly bullish hammer like doji, daily bullish engulfing.  Price was in a descending channel / bull flag and broke out Friday.  A pull back to test the top of the channel or a break of Thursday's hammer candle are good long entries with a target of the old high at 5795 and then 5842.50 & 5905

Weekly bullish hammer, daily bullish continuation of Thursdays hammer, this chart says crude is on the way up again.  Price has closed on the 61.8fib retracement of the recent high-low and may pullback here to give a long entry.  I would watch for price action at 83 or 83.50 to buy with a target of  90.40.  I am however a bit cautious of this long, as we have bounced off the top of a wide trading range and if the dollar continues to rally it could put downward pressure on crude.  As most of the rally on Friday was triggered by relief over perhaps (another) solution for Greece it means crude is very sensitive to risk appetite.

Weekly bullish piercing line, daily massive bullish engulfing.  Gold really rallied hard on Friday as the dollar fell and broke its downtrending resistance line.  It has stalled at the 127fib extension and I am looking for a pullback here to 1150 or 1146 area to buy. We could test 1160 before gold pulls back and that could present a shorter term short opportunity.

SILVER. Similar to gold, Silver broke out from a wedge Friday and I would look for a pullback to 18.00 to buy with a target of 18.75 / 19.50 and if the dollar continues to rally I would pass on buying silver.

Currencies - Majors

Weekly bullish doji, daily bullish hammer, AUDUSD has formed a tight wedge on the daily charts and could break either way.  There is the potential for a double top here with the November 2009 high at 94.00.
This pair is very sensitive to risk appetite and it is hard to see a reversal without a correction in stocks so I would wait for a breakout of this wedge.

NZDUSD – Weekly bullish consolidation, daily long bullish marabuzo.  Despite the bullish rally on Friday  I am bearish and looking for signs of a reversal for this pair.  The gently rising pattern is bearish to me and this is at the top of a broad descending channel.  I still like short below 0.72 and a break of 0.7050 opens up a much bigger fall.  If the dollar continues to fall this could break out on the long side and I will sit this one out.

Weekly bearish reversal, daily bearish, USDCAD is in a bear flag pattern and looks set to break lower.  The 78.2fib from the 07 low to 09 high is support for now and just below it at 99 is the 88.6 fib from the 02 high to 07low.  Above these two major fib levels I am bullish and waiting for an opportunity to buy.  Below 99 and we have much farther to fall.  

Weekly bullish bit in a tight range, daily bullish piercing line.  Price is consolidating in a wedge or pennant and due for a breakout after last Mondays bullish hammer made a higher low (just).  A break of the wedge to the upside comes in at 1.5430 and I favour a break to the upside with a target of 1.5710 1.27fib extension but 1.5830 SR level and 61.8fib retracement are also possibilities.  I will be looking for price action to cut and short at these levels but until then I am bullish ... 

EURUSD – Bearish doji, daily long inside bar off 1.32 support suggests a tweezer bottom.  Price is still contained in a steep descending channel with resistance at 1.34 / 1.3540 and 1.36.  I am a seller of rallies and am looking to those levels to add shorts. 

USDJPY – Bullish breakout - weekly  bullish engulfing, daily long bullish doji.  The uptrend in USDJPY appears to have resumed and a break above 94.77 will confirm.  Buy on dips, I am looking to buy on a retest of 93.00 / 92.75 (if it gets there).  

USDCHF – Reverse of EURUSD. As long as the SnB keeps intervening to keep the CHF in line with the EUR then this pair trades in inversely to EURUSD.  I like this pair better short than I like EURUSD long but if Greece implodes again then so will this trade and I would rather buy dips.


Weekly bullish engulfing, daily bullish hammer, this chart is strongly bullish.  However, right above at 87.50 area is a strong resistance level / range high / and potential triple top.  A break and retest of this level gets me long but otherwise below that level I would prefer to wait for a pullback to buy at 85.60/86.00 to run at the resistance level with a profit cushion.  Particularly because above that level at 88.13, the March08 low could be significant resistance.

Weekly massive bullish engulfing, daily bullish marabuzo, this pair has broken out of a pennant formation and on its way to the top of the range highs at  68.65 / 69.75.  I am looking at 66.35 to buy but a break of the high would be a more conservative trade. 

CADJPY – Weekly bullish engulfing, daily bullish continuation following higher low.  This pair has important weekly resistance at 97 and just below that an unfilled gap resistance at 96.48 that has not been filled since October 08.  I am bullish, but cautious that a reversal may not be far off.

Weekly bullish piercing line, daily long bullish marabuzo on Greek/IMF news.  Price has stalled at fib cluster and 126.40 and this is a possible short opportunity. It would need to pull back to 125.20 or 124.50 to entice me long but I am not sure this is the best yen trade.

Weekly bullish engulfing, daily bullish, price has broken above the key 145 resistance level tonight but looks a bit precarious, there is no entry long at this level.  I am watching for a pullback to retest 1.45 and see if it holds which would be a buy if it does..  If it does not I am looking at 141.75-142.50 area for a long entry with a target of  150.70

Same as EURJPY, Weekly bullish piercing line, daily bullish engulfing, appears to be consolidating sideways below 88.00 and is off the top of a descending channel.  Price is making lower highs and lower lows, this is not a long for me until it breaks the daily trendline resistance I favour the short side or a pull back to buy.

AUDNZD – Weekly bearish, daily long bearish marabuzo, and I would sell a retest of 1.30 from the underside with initial target 1.27 then 1.24 - I like this one a lot, check the monthly chart.

AUDCAD – Sideways consolidation, weekly bearish outside bar, daily long legged bullish doji (pin bar).  This does appear to have broken support, which is what I have been waiting for but it is hard to sell into that daily candle.  I will wait for better price action to short. Pass for now, waiting to short.

GBPCHF – Weekly bullish engulfing daily bearish engulfing, price bounced off trendline resistance and 200DMA.  This is the inverse trade of EURGBP and I therefore expect this consolidation to eventually result in a break to the upside.
EURGBP - Weekly long bearish marabuzo hit double bottom, daily bullish engulfing off 0.86 level.  I am bearish this pair because it broke trendline support.  It has bounced off 0.86 potential double bottom  and back above the trendline support.  I am watching to see if it holds above and offers a short term bullish trade but I prefer to wait and sell rallies.  If it holds above the trendline support I am watching for price action at 0.8870-0.8915

EURAUD – Weekly Bearish engulfing, daily rallied Friday but price has been unable to close above 1.4420 resistance, despite some forays above. After 15 consecutive down months it is hard to imagine it falling further but of course it can.  I like this short here at 1.4420 and would sell any rallies off 1.4575 or 1.48 .

EURCHF – Weekly doji, daily sideways in congestion.  A countertrend long on Greek euphoria is tempting but not smart.  This looks all set to retest the lows.

GBPAUD - Weekly bullish spinning top, daily bearish hammer at the top of a range.  I like this short and the gently rising wedge on the weekly is bearish.  I am selling rallies and watching to see if this can get back up to 1.6985 and close the gap.

EURNZD - Another pair that keeps dropping.  Weekly bearish marabuzo, daily doji on Friday, the low looks like it is about to be taken out and I would sell rallies or a break of the low.  This is still a one way train next stop 1.8340

USDNOK – Weekly bearish shooting star, daily bearish engulfing confirms a weak week ahead for the USD and this pair looks set to test the range lows again at around 5.8.  I prefer to wait and buy there.

USDSGD - Monthly bearflag broke down, weekly is bearish continuation and daily is a bearish engulfing. I like this long above 1.36 but there is no price action yet to buy, so I will pass.



  1. Hi Nicola:

    Lodsa stuff here. All good.

    Yet what I like the best is the clarity of style. Down to earth, no nonsense.


  2. Thx Nic for doing the homework I didnt have the drive to do this weekend! This was my first stop on the blogosphere this morning...