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

By | May 23, 2019

After a rather steady session there is not an awful lot that is new to report. Oil had the biggest move of the day and the short term momentum indicators are pointing lower although the medium term range shows no real change. Elsewhere the commodities/stock markets both have a rather neutral look, with the exception of the ASX, which still looks underpinned in the medium term as traders prepare for a rate cut in June. Dips may well provide a buying opportunity.  For the same reason, the Aud$ looks very heavy, dragging the Kiwi with it, and selling rallies seems to be the plan.

Sterling looks weak for obvious reasons – Brexit – and this may be set to continue today, with a UK cabinet resignation already having taken place, and with more likely to follow – and also with the EU elections to take place on Thursday.

Keep an eye on UsdCnh. it is moving sideways after the recent strong run higher. The dailies are topping out for now, but the weeklies appear to be picking up steam and at some stage we may be in for a test of 7.00+. Much will depend on the outcome of the trade talks between the US and China. If they don’t go well, a break of 7.00 – which the PBOC appear currently keen to protect – would see the US$ head a fair bit higher on all fronts, particularly against the Aud$.

EurUsd:  The Euro had another uninspiring session, confined to a tight range of 1.1147/79. The momentum indicators are pretty much unchanged, and the initial resistance will once again be seen at 1.1180/85 and then at 1.1200, ahead of 1.1125, 1.1240/45 and the May 1/Monday spike high at 1.1265. On the downside, below 1.1140 would find bids at 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 is possible but I still think we are in for a test of 1.1100 and possibly lower at some stage, albeit rather slowly. Watch the PMIs today.

DXY:  (98.10) is grinding slowly higher each day, and 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 at the April 26 trend high, at 98.33, 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 is 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 in case safe-haven demand returns.

US$Jpy: has backed off the Tuesday high of 110.66 where it fell just short of the Fibo level at 110.70 (50% pivot of 112.40/109.00).  The daily momentum indicators look constructive though and above 110.70 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 may be a medium term target. On the downside, the dollar will now find bids nearby, at 110.20, ahead of 110.00 and 109.80 (200 HMA), which looks some way off. If/when this gives way though, 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%).  Although the dailies are turning higher and  buying dips may be the plan,  the pair will be headline driven with regard to the US/China trade talks, so a cautious stance is required as risk sentiment could change at any time.

AudUsd: The Aud$ had a sideways session and currently sits unchanged at 0.6880. There is no change in view, and with the medium/longer term momentum indicators still looking negative, the downside may be in for further tests in coming days, and if/when 0.6865 gives way 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 but I think that is where we are heading. On the other hand, the 4 hourly charts are somewhat positive and hinting at some bullish divergence, so  if we get back above 0.6900 we could see a further recovery towards 0.6930/35,  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). Selling rallies is preferred, and my longer term downside objective is 0.6650/0.6700 so, as before, I prefer to be short in anticipation of the inevitable rate cut.

NzdUsd: The Kiwi remains heavy and is still toying with the downside, sitting just below 0.6500 but possibly running out of downside momentum in the short term. 0.6500 may act as a magnate in the near term, but, a downside break would look at the 26 October 2018, spike low at 0.6465 and then at the early Oct ’18 low at 0.6424. On the topside, minor resistance levels will be seen at 0.6515/25, 0.6545, 0.6560, and 0.6580 and at 0.6600 although any rallies do seem to be a sell opportunity.

Gold: remains steady at 1274, and the momentum indicators suggest that it will remain rangebound for now, using 1270/80 as a range guide for today. On the downside, support below 1270 would allow a return to 2 May low at 1265 and then towards the 200 DMA currently at 1253. On the topside, resistance will be seen at 1285 and again at 1295/1300, (1296 =100 DMA). If we do get above 1300 at any stage, unlikely for now, a run towards 1310 (10 Apr high) and then to 1324 (25 March high) would then be the targets. Right now, with the daily momentum indicators in neutral, some choppy trade would not surprise, with the 100 DMA (1296) and 200 DMA (1253) providing the parameters for a wide, $40-$50 range trade. My own longer term view is that we are likely to see a sterner test of the rising trend support (chart) and that the downside will eventually come into play, so the preference is to be short.

Silver: as with Gold, Silver remains heavy, but sitting on the Fibo support (76.4% of 13.88/16.20) seen at 14.44. As before, I prefer to remain short, and looking to sell into rallies with stops now placed above the descending trend support/resistance, currently at 14.65. Above here could see another squeeze higher, back towards 14.80/90, which would provide another sell opportunity, with a SL placed above 15.00/05 (50% pivot of 13.89/16.21). Beyond there, which seems unlikely for a while, could then see a run toward the 100 DMA at 15.32. On the downside, we may see further consolidation at current levels (76.4% of 13.89/16.21), ahead of 14.20 (minor) and 14.00 but with an eventual, long term target being at 13.85. As before, a good deal of caution is required but I prefer to remain short, as I think 14.00 – and lower – is eventually on the cards, in line with a stronger US$.

WTI: WTI fell sharply, by 3% on Wednesday to currently sit at 61.30, with the “rounding top” that we mentioned yesterday coming good, to meet its downside target. With the short term momentum indicators still looking heavy, a test of the 200 DMA @60.25 would not surprise. A break of 60.00 would find strong support at 59.70 (100 WMA) but below this would lead to further losses, targeting 59.45 (50% pivot of 76.87/42.23) and even the 100 DMA at 58.00. Sellers will be seen at 62.00 and again at 62.75/90. Above here looks unlikely today, but if wrong, we could see a run back towards 63.50/80, above which could see a return to 64.00/70.

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*Trade of the day: May 22, 2019; 8:03 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.

With little movement on Wednesday, the trade ideas remain unchanged.

Sell EurUsd @1.1185. SL @ 1.1205, TP @ 1.1115

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

Sell AudUsd @ 0.6910. SL @ 0.6950, TP @ 0.6810

Sell NzdUsd @ 0.6530. SL @ 0.6565, TP @ 0.6465