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

By | May 27, 2019

Friday saw a continuation of the US$ weakness against most of the other majors, and at the start of the week this looks set to continue although, today being a US/UK holiday, it may be a rather quiet session. US Stocks are choppy but do look increasingly heavy in the longer term charts, while the ASX looks bid in the longer term as traders prepare for a rate cut, or three!

EurUsd:  The Euro ended the week back above 1.1200 and while the medium term indicators remain neutral, the short term charts do look mildly constructive. The initial resistance will be seen at 1.1210, ahead of 1.1125, 1.1240/45 (38.2% of 1.1449/1.1106/descending trend resistance) and the May 1/Monday spike high at 1.1265. Beyond here would allow for further gains towards 1.1275 (50% pivot of 1.1449/1.1106) and then to the larger descending trend resistance seen at 1.1305.  On the downside, bids will arrive at 1.1180 (200 HMA) and minor levels seen at 1.1145/50, at 1.1125/35 ahead of the 24 May low at 1.1106. 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 for a medium term move lower although another tight session is possible today. I still think we are in for a test of 1.1100 and possibly lower at some stage, but is does look right now as is we see a another look at 1.1265/1.1300. If so I remain a seller at those levels. Short term traders may prefer to buy dips today.

DXY:  (97.60) The DXY, after having made a new 2 year high last Thursday (98.39), has since reversed rather sharply to currently sit at 97.60, and the bearish key day reversal seen on 24 May does suggest that the index could face further downside pressure. If so, nearby support is seen at 97.50 ahead of the stronger level at 97.25/15, where the base of the rising wedge should see decent buyers. Below this, there is not too much to hold it up until the 12 April low/100 DMA at 96.75/80. A break of 96.80 would allow for an acceleration towards 98.40, where the 200 DMA should provide decent support although I don’t expect to see that for a while. On the topside, the initial, minor resistance will be seen at 96.75 ahead of 98.00.  Back above 98.00, further gains would allow for a run back to 98.39 and then 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 still required given the neutral look of the weekly charts, but with the dailies looking mildly heavy now, I prefer to wait and see. In the longer term though, I still like to trade from the long side and to selectively buy dips in the dollar. I suspect that the Euro is going to have issues, while a No-deal Brexit, increasingly possible now, would take Sterling sharply lower.

US$Jpy: finished the week looking heavy but does currently remain above the 13 May trend low, at 109.00. If the dollar selloff continues into the new week, which the charts suggest is possible, a break of 109.00 would target 108.75 (50% pivot of 98.94/118.60) and 108.50 (31 Jan low) and 108.17 (50% of 104.01/112.40%).  On the topside, resistance will be seen at minor levels at 109.50 and at 109.75, ahead of 109.90/110.00 (100 HMA/200 HMA). This seems unlikely to be seen today, but if wrong, look for a run towards 110.30/35. US$Jpy is very headline driven so I prefer to leave it alone but right now the charts do seem to be aligning for a test of 109.00 and lower.

US$Chf:  traded lower on Friday, ending the week back below the 100 DMA (1.0025) and looking heavy at the start of the week. Further downside momentum would find some decent bids nearby, with the initial Fibo level seen at 0.9988 (23.6% of 0.9186/1.0236) being the first target. Under here finds the 200 DMA at 0.9955 and the 15 month rising trend support at 0.9935. The topside currently looks capped at 1.0050, ahead of further minor resistance levels at 1.0075 and at 1.0100. A break of this would allow for a run towards 1.0120 and then 1.0150 although that seems some way off at present

 AudUsd: Despite Westpac’s call for 3 RBA rates cuts this year, the Aud$ ended the week at its highs and looks likely to build on the gains in the coming sessions. If so, the short term momentum indicators suggest that the resistance seen right here at 0.6930/35 will be overcome for a test of, 0.6945 (23.6% of 0.7205/0.6865). Beyond there would allow for a run towards 0.6965/70 (minor) and then to 0.6995/7000 (6995 = (38.2% of 0.7205/0.6865). Back above 0.7000 would track towards 0.7020 and then to 0.7035 (50% of 0.7205/0.6865) although I think this is unlikely. The downside will find bids at 0.6900, 0.8660 and at the trend low of 0.6965, which will be strong, if/when seen. Below 0.6865, there is very little support to be seen until 0.6827, the 17 January 2016 low, and under here 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 eventually heading. Selling rallies is still preferred, and my longer term downside objective is 0.6650/0.6700 so, as before, I prefer to look for levels to be short in anticipation of the inevitable rate cut, but we may see better levels to do so, nearer 0.7000. Note that on Friday the Australian 10Y bond rate fell to 1.53%, in line with the current cash rate, which is not supportive of a stronger Aud$ in the medium/longer term

NzdUsd: The Kiwi made a bullish key day reversal last Thursday, after making a new trend low of 0.6481, and this played out into the weekend with the Kiwi squeezing higher still and closing at levels last seen on 16 May. With the 4 hour and daily charts turning a little higher further gains do look possible and a run back to 0.6580/90 (0.6588 = 23.6% of 0.6938/0.6481) and at 0.6600 would not surprise. On the downside, support will be seen at 0.6525, 0.6500 and again at 0.6480. A downside break of there, unlikely for a while now, I think, would look at the 26 October 2018, spike low at 0.6465 and then at the early Oct ’18 low at 0.6424.  While the upside currently looks the most likely direction, for the longer term play, I still prefer to look for levels to sell into.

On the crosses, the main interest lies in EurGbp although I prefer to stand well back from that. The charts suggest selling near-term rallies but it is all too Brexit driven, and given the shambles in UK politics it is best to give it a miss, I feel. Elsewhere it all looks rather choppy although the Aud$ does seem to be in the early process of squeezing higher against the Cad and the Euro.

 Gold: remained steady at 1284 on Friday as it retests the head/shoulder neckline, and the momentum indicators suggest that it will remain rangebound for now, using 1275/90 as a range guide for today. On the downside, bids look strong at 1275/80 although a break of 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 1288 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-$50 range trade. My own longer term view is that we are likely to see a sterner test of the rising trend support (chart) and that the downside will eventually come into play, so the preference is to be short. If we do see a sizeable sell off in the US$, then we are likely to see a sterner test of 1300, although with a US holiday ahead a tight range looks more likely.

Silver: as with Gold, Silver remains heavy, but did see a mild recovery towards the end of the week to sit up against support-turned-resistance at 14.55, after having been previously underpinned by the Fibo support (76.4% of 13.88/16.20) seen at 14.44. As before, I prefer to look for levels to be short, and to sell into rallies with stops now placed at around 14.70/75, above the descending trend support/resistance. Above here could see another squeeze higher, back towards 14.85/90 (200 DMA), 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 15.30. On the downside, bids will be strong at 14.40/45 (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$ although that looks likely to be delayed.

 Stocks: I remain neutral on US stock indices in the short term although the longer term charts do look heavy. The price action remains very choppy but overall I still prefer to look for levels to sell into, with a SL placed around 2875 (S+P) and 25950 (DJI). Note that there is also plenty of support on the downside for stocks, with both the 100 DMA and the 200 DMA lying under current levels in each of the S+P and DJI, so further choppy trade could be the eventual outcome

WTI: WTI recovered from last week’s sharp selloff low at 57.31 to finish the week at 59.00. The short term momentum indicators hint at a further recovery towards 59.50 (23.6% of 66.57/57.31), beyond which 60.20 (200 DMA) and 60.85 (38.2% of 66.57/57.31) would see sellers.  On the downside, support will be seen at 58.05 (100 DMA) and at 57.30. A break of this would open 55.50, albeit still a long way off.

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*Trade of the day: May 25, 2019; 9:54 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.

I will be travelling this week so there will be no further update until I return – next Wednesday.

Sell EurUsd @1.1260. SL @ 1.1290, TP @ 1.1185

Buy EurUsd @ 1.1170. SL @ 1.1135, TP @ 1.1220

Sell AudUsd @ 0.6965. SL @ 0.7005, TP @ 0.6875

Buy AudUsd @ 0.6885. SL @ 0.6845, TP @ 0.6950

Sell US$Jpy @109.70. SL @ 110.10, TP @ 108.70

Sell NzdUsd @ 0.6580. SL @ 0.6605, TP @ 0.6485

Buy WTI @ 58.00. SL @ 57.00, TP @ 60.00