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

By | May 8, 2019

Stocks and WTI are both down around 2% on negative risk sentiment, which will only increase as we approach Friday’s deadline for the US to begin imposing increased tariffs on China. I suspect there is more downside to come in both and prefer to trade from the short side. In the FX markets, today sees the RBNZ Meeting at which a cut is generally expected, which should weigh on the Kiwi, and probably the Aud$ as well. Elsewhere, trading the Jpy from the long side is favoured although the other FX pairs are choppy and directionless.

EurUsd:  Once again there is little change for the pair after another rangebound session that has ended Tuesday just under 1.1200. as we said before, 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 now seen at the session high, at 1.1216 and then again, nearby 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 remains intact 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 mildly prefer to look for levels to be long US$/ short Euro although on Wednesday we may see better levels than currently trade in order to do so. Neutral6

DXY:  (97.55) is virtually unchanged again on Wednesday, and the daily momentum indicators look indecisive, albeit they seem to be turning slightly negative, while the weeklies are 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 Wednesday  although I still prefer to buy dips in the dollar.

US$Jpy: headed steadily lower on Tuesday, to reach a low of 110.16 closing at 110.20 and looking very heavy heading into Wednesday. Below here would open the way to 110.00 (28 March low) and then to 109.70 (25 March low) and 109.55 (6 Feb low). Under here would allow for the 38.2% Fibo support of the flash crash low at 109.18 (38.2% of 104.01/112.40). On the topside, strong resistance will now be seen at the previous support at 110.60 100 DMA) and at 110.70 (100 WMA/ /61.8% of 109.75/112.40). Further, minor resistance would then 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 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 Wednesday.

AudUsd: The Aud rallied sharply to 0.7047 following yesterday’s RBA Meeting, since when it has drifted steadily back towards 0.7000. It has actually held up rather well so far given Tuesday’s selloff in stocks, coupled with and the risk-off mood currently going through markets ahead of Friday’s deadline in the US/China tariff war. In the absence of any local data today, it may end up hanging close to current levels although, should the RBNZ cut rates today, it may send the Aud$ lower in sympathy, and overall I still think the downside will be the one to watch. Technical resistance now lies at 0.7022 (200 HMA) ahead of yesterday’s high at 0.7047 and beyond there, at 0.7055 (38.2% of 7206/0.6965), 0.7070, 0.7100, and then 0.7112 (61.8%) and 0.7110 (100 DMA). On the downside, back below 0.7000, the near term support is seen at 0.6985 and then at 0.6965, 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 in anticipation of the inevitable rate cut.

NzdUsd: As with AudUsd, the Kiwi looks heavy and will have its own central bank decision to contend with today, when the RBNZ are expected to announce a rate cut. 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 (200 HMA), ahead of Friday’s high at 0.6653 and, further out, at the 0.6880/85 resistance which capped last week’s recovery.  In the medium, 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 although it has already strengthened somewhat so being cautious here and selling rallies in AudJpy, NzdJpy and EurJpy is favoured. Elsewhere things look choppy and  I prefer to remain focused on the US$ moves right now.

Gold: is a little higher right now, at 1283, but continues to respect 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 has been choppy, but is 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: lost almost 2% on Tuesday, as the Friday tariff deadline looms, and in the absence of any real progress in the negotiations the downside looks to be the weaker link.  The dailies are pointing lower and the weeklies are looking a little toppish so right now I prefer to be short, with a tight SL placed above 2940 (S+P) and 26450 (DJI). The opposite is true if we see a breakthrough between the US/China, in which case the S+P and Nasdaq will be in blue sky territory, closely followed by the DJI.

WTI: also fell almost 2% on Tuesday, as the trade tariffs loom and with the dailies pointing lower a return to 60.00 would not surprise. Having said that, the medium term charts are still suggesting conflicting messages (4hour- higher; dailies – lower), so 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!

———————————————————————————————————————

*Trade of the day: May 8, 2019; 9.00 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 @ 0.7045. SL @ 0.7080, TP @ 0.6960

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

Sell S+P @ 2900. SL @ 2945, TP @ 2825

Sell DJI @ 26250. SL @ 26500, TP @ 25750