I decided to hold off trading last night until the DXY broke out of the pennant formation, and as expected the USD strengthened across the board. EURUSD was the correct trade but unfortunately it came back to breakeven before moving lower. The GBPUSD has also broken down from a rising wedge structure at a double top zone, so we are expecting further downside leading into tonights US Non-Farm Payroll and unemployment data release.
GBPUSD Daily Charts
The lower end of the rising channel is providing a target for the short position.
GBPUSD 4 Hour Charts
Trade Setup: SELL market execution, current price 1.4098, stop loss 1.4171 and take profit 1.3974.
The USD Index is pushing higher, and based on yesterday analysis it should move into new highs creating a risk-off sentiment in the market. USD strength = RISK OFF. With that in mind, and based on how Crude Oil is positioned, it appears as though a rising wedge structure is ready to break to the downside which agrees with the USD strength theory.
On the oil front, OPEC met early hours this morning and agreed to gradually ease production cuts. The OPEC group opted to stick to the plan which was agreed in April, where 2.1 million barrels per day of supply would be brought back to the market between May-July. The increased supply, paired with the global economic recovery could provide some selling opportunity on crude oil, especially at these major resistance zones.
Crude Oil – Daily Charts
Crude Oil has hit another double top zone which could see some profit-taking. There is generally a reaction at major double tops or bottoms. Additionally, the rising channel or possible bear flag could still be in play.
Crude Oil – 4 Hour Charts
The shorter-term time frame is showing a rising wedge structure at the peak, which can indicate a reversal opportunity.
Trade Setup: SELL Market Execution, current price 67.89, stop loss 69.09 and take profit target 65.00 initially.
Stop loss: 120 pips
Take profit: 289 pips
Pricing is the same on Focus and Fusion markets for Crude Oil – MT4/MT5 codes USOUSD or XTIUSD
I have been waiting for the DXY to form a possible bottom on this current pullback and it appears to have complete. The DXY index has retraced to the 23% FIB level which is a crucial support zone. Furthermore, there has been a five-wave impulsive rally from support followed by an A-B-C pull back. Based on Elliott Wave theory there should now be a continuation higher meaning a decline in the EURUSD.
DXY Chart
EURUSD 1 Hour Chart
The EURUSD is very much the complete opposite of the DXY, there has been a five-wave decline followed by an a-b-c correction. Therefore, price action should decline if the DXY continues higher.
Trade Setup: SELL STOP, entry price 1.2210, stop loss 1.2280 and take profit target 1.2000.
We are looking to position long with a BUY STOP on the AUD leading into the RBA interest rate decision and statement in 45 mins.
Please check the fundamental update in telegram for more information.
The NZDCAD played out very well last week breaking out of a falling wedge structure that looks identical here to the AUDCAD. Therefore, we are looking to go long now anticipating a move higher.
AUDCAD 4 Hour Charts
RSI is showing a bullish divergence suggesting a reversal opportunity.
AUDCAD – 1 Hour Charts
Trade Setup: BUY STOP, entry price 0.9370, stop loss 0.9295 and take profit target 0.9550.
The USD index has finally broken out of the falling wedge structure and now appears to be bullish. We are looking to position on the AUDUSD ready for a continuation of a stronger USD.
DXY 4 Hour Charts
Anyone on Focus Markets can actually look to go long on the USD INDEX alone. Targets for the USD can be found at 91.06-91.60.
AUDUSD 4 Hour Charts
Based on Elliott wave principle, it appears as though the AUDUSD has been in a corrective structure since the peak at 0.8000 in late February, where it completed a long term 5 wave structure. The pair has been tricky the last two weeks as it has been trading sideways. However, based on the DXY breakout it now appears to be ready for a deeper correction.
AUDUSD 1 Hour Charts
Trade Setup: SELL Market execution, current price 0.7728, stop loss, 0.7798 and take profit target 0.7568.
The GBPUSD and CADJPY are holding on a key support zone, I am not looking to hold any drawdown with these positions so if they return to break even we may look to close down (I will keep you posted). Both of these trades are suggesting a risk-off sentiment in the market (USD and JPY strength). The EURAUD has grabbed my attention as the pair are lagging behind the EURNZD, they both follow each other very closely due to the AUD and NZD moving in a close relationship.
EURAUD V EURNZD 4 Hour Charts
The EURNZD (orange) dived lower yesterday based on the RBNZ interest rate statement. We can see the EURAUD holding its price at the top of the channel formation as the pair lags behind the EURNZD. We are now anticipating the EURAUD to head lower moving in line with the EURNZD.
EURAUD – 4 Hour Charts
There has been a rising wedge breakdown at the top of a channel suggesting a bearish reversal opportunity.
Trade Setup: SELL Market Execution, current price 1.5745, stop loss 1.585 and take profit targets 1.5610-1.5550.
The AUDNZD buy position closed out at breakeven last week. This week we have the RBNZ interest rate decision and policy statement. Previously economic data has improved in NZ and many analysts are forecasting a more positive tone from the central bank. With that in mind, we see the possibility of NZD strength coming into play over the coming days and as the AUDNZD failed to breakout to the upside, there is a possibility of a deeper correction on the cards.
AUDNZD – 4 Hour Charts
AUDNZD – 1 Hour Charts
Based on Elliott wave theory, a triangle formation labelled a-b-c-d-e, can ONLY occur in a wave 4 or a wave b. Therefore we see this triangle formation as a B wave, which is part of a correction. Our targets can be found at 1.0540 – 1.0430
Trade Setup: SELL Market Execution, current price 1.0770, stop loss 1.0840 and take profit 1.0540.
Very frustrating reversal across the markets overnight, we will look to revisit the USDCAD at a later stage. For the time being, we are taking a look at the NZDUSD as there are a number of bearish signals suggesting further downside.
DXY reversal overnight resulted in a risk-on sentiment with equities and cryptos recovering from the Wednesday night SELL off. This comes despite the President of the Dallas FED publicly calling for bond tapering. “Maybe taking the foot gently off the accelerator would be a wise thing to do here so that we can manage this transition more effectively”. “That’s why I have encouraged sooner rather than later we begin a discussion of these purchases.”. Pairing this with the FOMC minutes which suggested the FED is open to bond tapering, we see the possibility of a stronger USD over the coming weeks as a high possibility.
Goldman Sachs Bond Tapering Forecast
Goldman’s are forecasting the FED to begin bond tapering in early 2022 therefore markets will begin to price that in over the coming months.
NZDUSD – 4 Hour Charts
The 4-hour charts are showing a trend line breakdown followed by a retest of the structure. There is also a classic head and shoulders formation in play suggesting a continuation to the downside.
NZDUSD 1 Hour Charts
We just need to be aware of the lower pennant formation trend line which could provide some support.
Trade Setup: SELL Market Execution, current price 0.7188, stop loss 0.7258 and take profit 0.7050.
We are back in on the CADJPY as the set-up is still valid, the current price action looks like a corrective rally, overlapping in nature, meaning price action should continue to the downside.
Trade Setup: SELL Market Execution, current price 90.07, stop loss 90.77 and take profit 88.30.
Stop loss: 70 pips
Take profit: 177 pips
19th May 2021
Good morning team,
This morning we are taking a look at the CADJPY as the pair has broken down from a rising channel with a number of key technicals suggesting a bearish reversal opportunity.
CADJPY – Weekly Charts
There is a bearish divergence on the weekly charts which has provided great shorting opportunities previously. The market price is also at a major supply zone or resistance zone.
CADJPY Daily Charts
The recent move above the negative trend line resistance is possibly a fake breakout.
CADJPY 1 Hour Charts
There has now been a breakdown from the rising channel formation suggesting further downside awaits.
Trade Setup: SELL Market Execution, current price 90.20, stop loss 90.95 and take profit left open with our first target zone at 88.30.
Today the RBA confirmed they would leave interest rates on hold until at least 2024 despite signs of rising inflation across the economy.
The Minutes state that ”Australia’s central bank wants annual wage growth to more than double to its highest in over a decade to meet its inflation goals, a tough task that underlines how long rates could remain near zero,” Reuters noted. (RBA) Board believed wages would likely need to expand by “sustainably above 3%” to generate inflation. Wage growth is currently running at just 1.4%.
Whilst the Australian economy appears to be recovering from the Covid-19 pandemic, the RBA are showing no signs of monetary tightening just yet, and the rally on the AUDUSD could have been due to the USD weakening across the board.
The AUDUSD has set up a bearish technical structure that we are looking to trade.
AUDUSD – 4 Hour Charts
Trade Setup: SELL Market Execution, current price 0.7797, stop loss 0.7867 and take profit target 0.7640-0.7575.
