29 July: Trend table outlook for FX, Commodities, Indices

By | July 29, 2019

Friday was mostly about the recently recurring theme of US$ strength and this set to continue over the next few days although some caution is warranted in view of the upcoming FOMC meeting at which a 50bp rate cut is still possible, albeit unlikely. On the crosses, EurChf looks interesting, while Sterling is back under downside pressure. Elsewhere, the S+P made a new all-time high close on Friday and looks bid although the index is approaching major trend resistance, while the metals and oil moved sideways.

EurUsd:  The Euro remained heavy into the end of the week, while at the same time holding on above 1.1100, and will now most likely chop around until the next directional move is provided by the Fed, on Wednesday. The short term momentum indicators look mildly supportive on Monday and may be turning a little higher although the dailies are building some downside momentum so I suspect that selling rallies is still going to be the play. The H/S formation remains intact, and as long as we don’t go back above 1.1200, the downside target is at around 1.1000, and if we do break below 1.1100 there is very little support to stop it getting there quite quickly although I don’t see it happening ahead of Wednesday. On the topside, the initial resistance will be at 1.1150 and 1.1170 (both minor) and 1.1186 (25 July high) above which further sellers 1.1200.  This level will be critical; If 1.1200 gets taken out again, the H/S formation will be invalid and could see an aggressive move higher and would open 1.1220 (38.2% of 1.1411/1.1101) and 1.1240 (100 DMA) and then 1.1255 (50%), and 1.1285/92where a minor triple top lies along with the 61.8% Fibo resistance, although that is becoming rather distant.  As before, I prefer to be short and to add to the position, with a SL placed tight above 1.1200.

DXY:  (97.80) The DXY reached a high of 98.09 on Friday, before closing the week at 97.90 but looks to me as though a sustained break of 98.00 may be imminent. That may not happen ahead of Wednesday but the momentum indicators remain positive and if/when 98.00/10 is taken out we could eventually head back towards the trend high at 98.37 (23 May). The reverse H/S neckline has been broken and the eventual measured target would be at around 99.25 – a long way off but worth watching.  On the downside, support lies 97.75/80 and at 97.60 (both minor) and then at the neckline – at 97.45. Back below the 100 DMA, at 97.18, would find bids at 97.00 and then at 96.80/73 (200 DMA/12 July low). As before, I prefer to be long Usd against the Euro, with a SL at the neckline 97.45 (1.1200).

US$Jpy:  was unphased by Friday’s US data and chopped around in a tight 30point range. The momentum indicators are now mixed, and further sideways action below 109.00 would seem most likely ahead of the Fed on Wednesday although before then the BOJ will be meeting. There is little expectation of any change in policy in Japan, but if the dollar can build some positive momentum, look for a squeeze towards the 10 July high of 108.99, beyond which would open the way towards 109.17 (61.8% of 110.67/106.77) and eventually to 109.74 (76.4%) and 109.92 (30 May high), ahead of 110.00. On the downside, minor support will be seen at Friday’s low of 108.55 ahead of 108.30/40 and 107.95/108.00 (200 HMA). Under here further would arrive at 107.60/65 and at 107.40/45 ahead of the 18 July low of 107.20. I am neutral on US$Jpy although I do have a mildly bullish dollar bias and suspect a slow move towards 109.00+ may be on the cards.

US$Chf:  closed the week on a firm note, at 0.9932 and may be about to turn interesting given that EurChf made a bullish outside-day reversal, hinting that we may be about to see Chf weakness ahead. If so, above the July high of 0.9951, the initial hurdle will arrive at 0.9980/90, where the 100 DMA/200 DMA are about to cross, above which could see another attempt to move back above parity. If successful, once above minor resistance at 1.0010, look for a quick run towards 1.0090/1.0100, 1.0120 and eventually to the 26 April high of 1.0236. If the dollar fails here, then we are likely to see return towards 0.9840/50 where the 200 WMA/100 WMA currently sit. Overall I like the dollar higher and would look to buy dips at around 0.9900, with a SL placed sub 0.9840.

AudUsd:  The Aud moved south again on Friday, reaching a low of 0.6902, ending the week with a dead-cat bounce, at 0.6910. The hourlies are currently attempting a recovery after becoming oversold, while the 4 hour charts are also at oversold extremes. However, with the 4hour/daily charts still both looking very heavy, further downside movement is very possible, with 0.6900/0.6890 likely to provide the initial support (0.6890=(76.4% of 0.6831/0.7081), below which would open the way for a return to the 18 June low of 0.6830 although that remains a long way off, but only minor support levels are seen at 0.6875 and 0.6850. On the topside, the initial resistance will now be seen at 0.6915 (daily cloud base), beyond which the Fibo levels of the move from 0.7081/0.6902 are seen at 0.6945 (23.6%), 0.6970 (38.2%) and 0.6990 (50%), albeit this is now rather distance. Right now I remain short although I have taken some back around current levels but will look to resell in the 0.6920/50 area should we see it. SL is now above 0.6970.

NzdUsd: The Kiwi has moved sharply lower after breaking below the neckline of the head shoulder top, currently at 0.6635, and appears to have a measured target of around 0.6590, with Fibo support also nearby, at 0.6602 (61.8% of 0.6487/0.6789). Below 0.6590 would then open up 0.6567 (10 July low) and 0.6557/0.6553 (76.4%/21 June low). On the topside, minor Fibo levels f the drop from 0.6489 lie at 0.6663, 0.6887 and at 0.6707.A break of the 0.6690 neckline would nullify the head shoulder formation and would then allow for a move back towards 0.6718/20 (200 DMA/Session high), above which the 200 HMA sits at 0.6732 and the 100 HMA is at 0.6742. Selling rallies with a SL above 0.6680 is now the plan.

Stocks: The S+P gained by 0.7% on Friday and the short term momentum indicators  seem to suggest that there may be further positive momentum ahead, although the charts for the DJI seem to be lagging a little, so a slightly more neutral stance maybe wise as we could easily just chop around ahead of Wednesday’s FOMC Meeting. The daily/weekly charts though are showing some bearish divergence, and the S+P is coming up against trend resistance as it approaches 3040. I suspect that we are unlikely to break through this level at the first attempt and it may be a sell level, with a SL placed above 3050, but looking for a bit of a correction to the downside, where 3000 would be the first target. Having said that, the momentum indicators retain an overall positive outlook and further blue sky levels through August/September may well be on the cards.



*Trade of the day: July 27, 2019; 7:55 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 @1.1160. SL @ 1.1215, TP @ 1.1080

Sell AudUsd @ 0.6945. SL @ 0.6975, TP @ 0.6870

Sell NzdUsd @ 0.6650. SL @ 0.6685, TP @ 0.6570

Sell S+P @ 3040. SL @ 0.3055, TP @ 0.3000