Trend Line Analysis : 24/08/2015

Introduction to Trend Line Analysis
Welcome to our newest feature; Trend Line Analysis. Our professional market technician showcases intraday / swing trade setups on a broad spectrum of FX currency pairs. The most effective way to use the setup are:
▪ If indicated price zone holds; consider partial profit taking between 20-40 pips before aiming for the maximum listed target.
▪ If the price zone fails to hold; we likely to see price moving against us. Fail means; the candle closing higher or lower to indicated price zone.

The past week was all about RISK OFF on the USD; with US DOLLAR and the Stocks were sold out at will. SPX dropped almost 140 USD with the last 2 days of trading alone saw a 100 USD dip.

There are a number of factor that contributed towards the volatility but namely so; it all began with dovish FOMC and while markets were gearing up for a very likely September rate hike by the Fed’s; FOMC suggested it can be delayed out. This anticipation of rate hikes been going on for a while now; with original expectations were to see the hike done in June.

Nevertheless the markets are getting increasingly frustrated and we all saw the same scenario on the GBP; which has been played out since 2014. The GBPUSD hit almost 1,7100 handle and then with constant delayed on the rate hikes by the BOE saw it getting sold out to 1.45XX; before rebounding  back to 1.592X and currently holding mid 1.55XX.

IF FOMC fails to deliver on next statement; I’m afraid the run out with the US DOLLAR shouldn’t be any different than the GBP. US DOLLAR could get hit hard; for markets are now losing patience on empty promises and have made up their minds that either you deliver or be prepared.

Other factor that was the usual suspect here was the devalue of the Yuan and the sell off that started last month on the Chinese Stocks which was sorted out to some extend by the PBOC intervention; has another big dip of 6% loss on the 18th Aug, which finally spiral over the global stock markets. SPX / DJ and others finally caught up on the plunge.

The outlook for US DOLLAR is not entirely bearish; for if US data improves there still can be hikes seen but technically speaking we can sell out a bit more before perhaps finally finding a base and lifting off. Again technically speaking US DOLLAR has the potential to hit new yearly highs.

USDJPY

The JPY has been enjoying the Risk Off factor on the US Dollar and not only end up dropping under 123.70 important support but extended the decline under 123 handle printing 121.81 low.

We feel there is more to the downside technically speaking and as such we are looking for a retrace if coming to around 122.7X to enter shorts for a possible move down under to 121.75 support for a prime target of 120.5X. Alternatively this level looks good spot to see end of correction; hence to buy off it.

With JPY interest rates sitting at all time low; it has been easy to borrow at lower interest rates and invest in ever bullish stock markets. It has been a lucrative deal since with BOJ on QE along with lower interest rates; made sense to borrow at low interest rate and invest into stocks. The current meltdown on the stocks has forced the investor to pull out of stock markets and convert the USD to JPY to pay back the bank loans. This is the cyclic move behind the JPY appreciation directly link to the falling stock prices and as such enjoying the safe heaven status along with CHF.

We can attribute that if stock markets stabilizes we can see a pull back on the USDJPY; but keeping an eye on the technical; SPX likely to print 192X  or even prime 189X lows and as such there could be more sell off on the USDJPY making it down to our target of 120.5X.

Using a 4 hrs chart to demonstrate the breakout done to 122.7X and any retest back to it and a halt would encourage to enter shorts for a possible move down to 120.5X and alternatively this prime target comes in as a very good buy back point to take it back possibly to 126 or close to 128 handle.

The factor that Fed’s can eventually end up hiking rates can bring back the glory on the US DOLLAR bullishness back to the limelight.

There are few ways to consider trading this pair.

  1. If aggressive can look for 122.40 or close to see an impact and if price holds to it can consider going shorting for initial attempt back to 121.7X with break to open ways for intended target.
  2. Ideal would be to get a retrace to 122.7X and a halt to here; comes in as a better spot to enter shorts for a re break under 122.30 encouraging a pass back to the 121.7X; a further break and we could be on our way to 120.5X test.
  3. Ideal scenario and considering US Dollar wants to stage some better bounce; then wait a 122.7X halt and a drop under 122.30 to enter shorts with stops to above the highs posted. 121.7X breaks and can hold steadfast for a 120.5X target.
USDJPY 8 hr - 120.5X possibly marks end of the corrective drop & pullbacks expected to T1 ideally for starters
USDJPY 8 hr – 120.5X possibly marks end of the corrective drop & pullbacks expected to T1 ideally for starters
USDJPY 4 hr - 122.7X retrace & halt to consider going short
USDJPY 4 hr – 122.7X retrace & halt to consider going short
USDJPY 2 hr - If agressive can use 122.40 or around to consider shorts
USDJPY 2 hr – If agressive can use 122.40 or around to consider shorts
SPX - Weekly 192X followed by potential 189X prin to be seen
SPX – Weekly 192X followed by potential 189X prin to be seen

Quick View on Few Pairs – Showing important support / resistance & some possible playout

US DOLLAR

Trading under a breakout and more slide expected.

US DOLLAR 8 hrs - T2 breakout pointing to T5 slide
US DOLLAR 8 hrs – T2 breakout pointing to T5 slide

EURJPY

The pair is dependent on it’s respective mother pair as in EUR and JPY. Both were the clear winners on Friday with EUR leading ahead. However it seems; EUR may have exhausted the run up and possibly JPY can try to catch and leap ahead.

EURUSD has important resistance coming up roughly to 1.141X; above which it can possibly bull out once more with same ferocity it showed on Friday; however EURUSD can take a breather and a retrace and that just might prove enough for the EURJPY to retrace lower. 139.10-15 is main resistance zone; 139.5X extended and confirmation spot to consider that 139.10-15 break is genuine and we to challenge 140.6X. The bulls above to 140.6X would look for 145 which could imply EURUSD heads for 1.17XX handle.

EURJPY - Daily - Can attain a breakout or fall through -139.00-20 important from here onward
EURJPY – Daily – Can attain a breakout or fall through -139.00-20 important from here onward
EURJPY - 8 hr - 139.10-15 main resistance zone
EURJPY – 8 hr – 139.10-15 main resistance zone
EURJPY - 8 hr - 139.10-15 main resistance zone - Close up view
EURJPY – 8 hr – 139.10-15 main resistance zone – Close up view

EURUSD

EURUSD was a beast of a pair on Friday and it rallied against every currency playing havoc on EURCAD and EURAUD namely. JPY was the second best performer and while EURJPY stayed in a tight range having a tug of war going back and forth but by the ending round EUR came out winner with EURJPY closing at session highs only dipping meaningless 10-12 pips right around the close.

However; it barely tested the mian resistance which came stone throw distance and it will be interesting to see how Monday goes. Will the Asia sell off the stocks and will JPY will start benefiting right on the opening bells. Will the USDJPY only retrace to bare minimum 122.35-40 or will it be able to make way to 122.7X which we want it to. Will EURUSD break higher to 1.141X after brief pullbacks or will it attempt the level and fail.

Back to EURUSD and well if it can take out 1.141X clean has a potential run store to make it’s way to 1.17XX handle with 1.1570-80ish initial main target to the north side. To the lower side as in if it opts to retrace off 1.141X; a decent retrace should or could hit back 1.123X.

 

EURUSD - Daily - Approaching critical resistance @ 1.141X
EURUSD – Daily – Approaching critical resistance @ 1.141X
EURUSD - 8 hr - If 1.141X holds; ideal retrace should make it to 1.1220-30ish
EURUSD – 8 hr – If 1.141X holds; ideal retrace should make it to 1.1220-30ish

AUDUSD

The pair failed to make headwinds against the USD or other major currencies; but nevertheless has potential to make a run higher considering it holds higher to 0.7270.

 AUDUSD - 8 hr - Can stage a rally if can hold above 0.7270 important support now
AUDUSD – 8 hr – Can stage a rally if can hold above 0.7270 important support now

EURCAD

Like EURJPY; somewhat similar view; however this requires some fruitful work from CAD as well to flex muscle after been the weakest of the currencies on performance on Friday.

EURCAD - 8 hr - Can head anywhere but under 1.5050 it can go for some meaningful retrace
EURCAD – 8 hr – Can head anywhere but under 1.5050 it can go for some meaningful retrace
EURCAD - 4 hr - Only meaningful if can hold under 1.5050; then can see 1.483X possible playout
EURCAD – 4 hr – Only meaningful if can hold under 1.5050; then can see 1.483X possible playout

EURGBP

EURGBP - 4 hr - T3 under would expect the balance to shift between EUR and the GBP
EURGBP – 4 hr – T3 under would expect the balance to shift between EUR and the GBP

GBPCAD

This looks straight forward. The pair can hit new fresh high for the year and then a likely retrace of 150 odd pips. Then wait & see if can hit back higher or go for further drop lower.. The pair is genuinely bullish but can use a correction prior to next round of buying.

GBPCAD - 8 hr - 2.0777-8X likely to show halt and a drop
GBPCAD – 8 hr – 2.0777-8X likely to show halt and a drop

GBPJPY

GBPJPY - 4 hr - It can sell off to under 190 handle before possibly getting bid out
GBPJPY – 4 hr – It can sell off to under 190 handle before possibly getting bid out

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