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

By | May 21, 2019

Monday was quiet, and with little on the calendar on Tuesday coupled with little directional bias in the trend table, a similar session looks likely today. The main interest appears to lie in the Aud$, where we can expect some RBA inspired volatility, although the charts still suggest a sell on rally scenario. Otherwise the FX markets are choppy and seemingly going nowhere fast, while the more interesting outlook may be in the stocks, where the longer term charts may be pointing to some downside action, probably driven by increasing US/China trade tensions – we shall see.

EurUsd:  The Euro had an uninspiring session confined to a tight range, with more of the same looking possibly on Tuesday.  The momentum indicators are pretty much unchanged although the short term charts may be hinting at a mild topside squeeze. If so, the initial resistance will be seen at 1.1175/85 and again at 1.1200, ahead of 1.1125, 1.1240/45 and the May 1/Monday spike high at 1.1265. On the downside, below 1.1150 would then allow for a run towards the 3 May 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. Selling rallies remains favoured although another tight session seem likely but in the longer term, I think we are in for a test of 1.1100 and possibly lower at some stage, albeit rather slowly.

DXY:  (97.95) was unchanged on Monday, but may be building for further gains, judging by the daily charts, although the weeklies are still in neutral so a nimble stance is required. Having seen a return to 98.00 the next target is now at 98.33, the trend high (April 26), while 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). On the downside support will now be seen at 97.75 (minor) and 97.50 ahead of the stronger level 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. A cautious stance is still required given the neutral look of the weekly charts, but the dailies look more constructive, so I prefer to trade from the long side and to selectively buy dips in the dollar – i.e. probably leave the Jpy, Chf alone incase safe haven demand returns.

US$Jpy: remains close to 110.00 on Tuesday although the charts do look slightly positive. If so, above Friday’s high of 110.19 could see a run towards 110.30 (Daily cloud base/38.2% of 112.40/109.00) and even to 110.70 (50% pivot of 112.40/109.00). Above here would allow for the 61.8% Fibo target at 111.10, which would also fill in the chart gap from 3 May, which I suspect me be a medium term target. On the downside, the dollar is currently above previous resistance, now support, at the 200 HMA/ (23.6% of 112.40/109.00) at 109.75/80. If this gives way, then we may expect a return to 109.50 and eventually back to the recent 109.00 low, below which would target 108.75 (50% pivot of 98.94/118.60) and 108.50 (31 Jan low) and 108.17 (50% of 104.01/112.40%). The dailies may be bottoming out to turn higher, so buying dips may be the plans but the pair will be headline driven, so a cautious stance is required as risk sentiment could change at any time.

US$Chf:  traded lower on Monday and looks heavy on Tuesday although it is finding some support here at 1.0080. A break would allow for a decline towards 1.0045/50 ahead of 1.0025 (100 DMA/61.8% of 0.9894/1.0236), 1.0000 and possibly to 0.9975 (76.4% of 0.9894/1.0236). The topside currently looks capped at 1.0120, although a break would then allow for 1.0150 and maybe to 1.0200 although that seems some way off at present

AudUsd: The Aud gapped high following the election result although it has been unable to maintain its session highs of 0.6933 and is currently back at 0.6910. A nimble stance is now required ahead of the RBA Minutes and the Governor, Lowe’s lunchtime speech, and the charts are giving mixed signals. A dovish RBA today could easily see the Aud$ back at  0.6865, and with the medium/longer term momentum indicators still looking negative, the downside may be in for further tests in coming days. If so, once below 0.6865, there is very little support to be seen until 0.6827, the 17 January 2016 low. Under there would allow for a return to the flash-crash low at 0.6715 although that it still some way off although I think that is where we are heading. On the other hand, the 4 hour charts are positive, so above 0.6930/35 could see a further recovery towards 0.6945 (23.6% of 0.7205/0.6865), 0.6965/70 (minor) and 0.0.6995/70000.(6995 =(38.2% of 0.7205/0.6865). Anything above 0.6900 looks unlikely in the near term and overall, I think we are heading lower , so selling rallies is preferred, and my longer term downside objective is 0.6650/0.6700 so, as before, I prefer to sell rallies in anticipation of the inevitable rate cut.

Stocks: are lower again at the end of Tuesday trade with the DJI, S+P down by around 0.5%. The price action remains very choppy and it is difficult to get set either way without being stopped out, but overall I still prefer to look for levels to sell into, with a SL placed around 1% above entry levels. Right now, the  SL in the S+P seems to be above 2875, or preferably above 2890, and in the DJI at above the Monday high of 25898.

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*Trade of the day: May 21, 2019; 8:01 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 @1.1200. SL @ 1.1250, TP @ 1.1100

Buy EurUsd @ 1.1110. SL @ 1.1075, TP @ 1.175

Sell AudUsd @ 0.6980. SL @ 0.7015, TP @ 0.6880