7 May: Trend table outlook for FX, Commodities, Indices

By | May 7, 2019

Following the early session gapping seen in the markets  –  care of the POTUS Twitter Account – the big moves on Monday were later seen in stocks and oil, which both largely recovered their early losses and with direction now largely dependent on progress, or otherwise, to be seen in the US/China negotiations ahead of the Friday deadline by the US administration to impose further tariffs. In the meantime, today’s main event will be the RBA Meeting, at which it will be a 50/50 bet as to whether they decide to cut, or not. I doubt they will cut ahead of the election, in which case we may see a spike higher, but would I suspect only serve to provide a better level to sell into. Later on, the calendar is thin and it will be all eyes on the US/China negotiations.

EurUsd: after having dipped to a session low of 1.1134 following last Friday’s jobs data, the Euro has since recovered to chop around in a tight range near 1.1200, and with the momentum indicators stuck in neutral, further choppy consolidation looks likely in the days ahead although I still prefer the downside. Minor resistance is seen at Monday’s high, at 1.1210, and then at 1.1220/30 ahead of last Thursday’s high of 1.1265, beyond which would then target 1.1300 and 1.1318/25(61.8% of 1.1447/1.1110/17 April high). Near term support sits at 1.1150/60 and then again at Friday’s low of 1.1135, which lies ahead of the 26 April low at 1.1110. Below 1.1100 would target 1.1060/65, where the base of the descending wedge should see decent bids. A downside break would then open the way to 1.1020 (minor) and to 1.1000. I still prefer to look for levels to be long US$/ short Euro although on Monday we may see better levels than currently trade in order to do so. Neutral.

DXY:  (97.50) is unchanged again today, and the daily momentum indicators look indecisive, albeit possibly slightly negative while the weeklies are also in neutral, so a nimble stance is required. On the downside support will again arrive at 97.25/15, but below which there is not too much to hold it up until the 12 April low at 96.75 and then the 100 DMA/ rising trend support, seen at 96.67. On the other hand, a topside squeeze could see a return to 97.80 and possibly to 98.00, ahead of a return to the 98.33 trend high. I don’t think we see too much volatility today in the absence of any economic news, but further gains would see a run towards 98.80, where the top of the rising wedge lies, and then towards 100.10 (76.4% of 103.82/88.25).A cautious stance is required on Tuesday although I still prefer to buy dips in the dollar.

US$Jpy: saw a gap lower on Monday, reaching down to 110.27, although it has since recovered to currently sit at  110.70 where the 100 DMA/100 WMA/rising trend support/61.8% of 109.75/112.40 are combining to act as a magnate. The medium term momentum indicators don’t look all that healthy, and back below 110.50 (minor) would then allow for a run to 110.35 (76.4%) and to the 110.27 low, where the daily cloud base also lies. Below here would open the way to 110.00 (28 March low) and then to 109.70 (25 March low). On the topside, minor resistance will now be seen at 111.05, which would fill the chart gap, ahead of 111.40 and then at 111.70, 111.80/85 and at 112.00 (200 WMA) and then, possibly, 112.40, albeit it that this is a long way off now. The momentum indicators look a little heavy so trading from the short side seems to be the initial plan and selling rallies towards 111.00 seems to be the plan for Monday.

AudUsd: The Aud has had a choppy session following the Monday gap lower, confined to a 0.6975/0.7000 range ahead of today’s RBA Meeting at which the market is divided 50/50 as to whether there will be a rate cut, or not. Technical resistance now lies at 0.7000 ahead of Friday’s close at 0.7020, which currently looks some way off but if there is not cut, we could easily see a spike beyond there, targeting  0.7055 (38.2% of 7206/0.6965), 0.7070, 0.7100, and then 0.7112 (61,8%) and 0.7120 (100 DMA). On the downside, 0.6965 now provides the near term support, below which would open the way for a run towards 0.6950 and eventually to 0.6900 and lower. My longer term objective is 0.6650/0.6700. As before, I prefer to sell rallies as we close the chart gap, in anticipation of the inevitable rate cut, which may/may-not come this month, but will eventually be a formality, after the election. Even if the RBA don’t cut in May, providing a probable spike higher, the RBA are only kicking the can down the road, so look for levels to sell into.

NzdUsd: As with AudUsd, the Kiwi looks heavy and will have its own central bank decision to contend with tomorrow, when the RBNZ are expected to announce a rate cut of their own, further dampening the outlook. If so, on the downside, support is currently holding at 0.6600 although a break would then open the way to and 0.6580 (25 April low), below which would target 0.6560 (January flash crash low), and eventually to the long term rising trend support at 0.6500 – from March 2009. On the topside, resistance will be seen at 0.6625/35 ahead of Friday’s high at 0.6653 and further out, at the 0.6680/85 resistance which capped last week’s recovery.  Above 0.6685 would open the way to 0.6700, 0.6715 (38.2%) and the 200 DMA at 0.6728, although not for a while I suspect. With the RBNZ Meeting in mind and a 25bp cut, to 1.5%, widely anticipated, trading from the short side is preferred.

On the crosses, the Jpy looks increasingly firm on all fronts while the Aud and the Kiwi both look heavy.

Also worth noting; USDCNH broke back above the 100 DMA (6.7540) for the first time since the 27th December, to reach the 200DMA (6.8215), which is currently capping further gains. The daily  indicators are beginning to point higher though, so a collapse in the trade talks would see the CNH weaken further and would have added implications, especially for the Aud$, putting it under increased pressure. Keep an eye out for a sustained break of 6.8200/83.00.

Gold: is flat right now, at 1281, but it is still respecting the neckline of the SHS formation at 1285, and, as before, while it does so I still prefer the downside as I suspect the US$ strength will eventually return to place downside pressure on commodities. Tight stops on short positions should be in place above the 100 DMA, at 1292; preferably above 1300. Should the SHS formation work as planned, the downside target is seen at 1218 but that is a long way off right now. Ahead of that, the immediate downside target is at 1267/70, ahead of 1253 (200 DMA). Some caution is required as there could easily be some safe haven demand in the event that  the US/China trade talks break down completely, potentially sending Gold higher, so keep stops in place.

Silver: as with Gold, Silver is choppy, but steady, at 14.90. I prefer to remain short for now, but stops should be placed tight above 15.00/05 (50% pivot of 13.89/16.21), above which could then see a run toward the 100 DMA at 15.32. On the downside, support will be seen at 14.80 (minor) and again at last Friday’s low at 14.60. Further downside support would be seen at 14.45 (76.4% of 13.89/16.21), 14.20 (minor) and at 14.00 but with an eventual, long term target being at 13.85. While a good deal of caution is require here if short, I prefer to trade this way, as I think 14.00 – and lower – is eventually on the cards, in line with a stronger US$.

Stocks:, Having gapped 2% lower at the Monday Globes, Asian open, the US indices then staged a strong recovery to largely fill the gap, and the outlook now looks choppy, with direction largely to be decided by political headlines and POTUS Tweets although as Friday looms, and in the absence of any real progress in the negotiations, the upside looks rather limited. The opposite is true if we see a breakthrough, in which case the S+P and Nasdaq will be in blue sky territory, closely followed by the DJI. Right now I prefer to be short, with a tight SL placed above last week’s trend/all-time highs, albeit that it looks like being a volatile ride.

WTI: gapped lower, to reach 60.00 on Monday, followed by a strong recovery to 62.90, and then dipped at the end of the session to currently sit at 62.10. With the medium term charts showing conflicting messages (4hour- higher; dailies – lower) I would stand aside and possibly look for a wide range trade. Support will arrive at the 200 DMA @60.75 and again at 60.00, while sellers will be seen at 62.90/63.00, above which could see a return to 64.00/70. Overall I prefer to sell rallies but stay nimble!

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*Trade of the day: May 7, 2019; 8:49 AM(AET)                       

*This is a personal opinion only, based on the look of the table below, and carries no guarantee of success.

All trades are good till 5.00pm NY time. All “in the money trades” should have the SL raised to break-even, or managed manually. All “out of the money trades” should keep original SL in place.

Sell EurUsd @1.1245. SL @ 1.1270, TP @ 1.1145

Buy EurUsd @ 1.1145. SL @ 1.1105, TP @ 1.1235

Sell AudUsd @ 0.7055. SL @ 0.7110, TP @ 0.6960

Sell WTI @ 63.50. SL @ 64.80, TP @ 63.00

Sell Silver @ 15.00. SL @ 15.15, TP @ 14.25

Sell Gold @ 1290. SL @ 1305, TP @ 1265