This is my vacation post for other (non-equities) markets. For equities check my last post from earlier today. Normal service resumes next Monday 4th August.
Last time I was looking at EURUSD I said that I was expecting a test of rising wedge support in the 1.35 area. EURUSD made that and then slightly lower to test the 200 DMA, so the rising wedge is now broken. Unless we see a fairly fast recovery to new highs I’m now looking at targets for EURUSD in the mid-120s. I’ve been watching this setup for months in the expectation that there should be a strong USD rally at the end of QE3 so I’m expecting this to resolve down. EURUSD weekly chart:
Uncle Buck and his reserve status were leveraged to the hilt by “The Hero” and now his successor is trying to gently talk the Fed out of its policy stance over time. In other words, tightening is going to come one way or another and Janet Yellen is trying to go the orderly route. When this process becomes disorderly, the USD is likely to benefit from the liquidations elsewhere in the asset world.
Technically, USD is in a long basing pattern. There are those who think it is basing before a renewed decline, reading a Symmetrical Triangle (continuation) pattern into poor old Unc. I think the odds are it is bottoming over the post-2008 years when inflation – try as they might to have promoted it – simply has not taken root. Leaning bullish, watch support and resistance.
There was an interesting comment made to me yesterday that the shooting down of the Malaysian Airlines flight over Ukraine helped the bears considerably, and that’s true, up to a point. It is something I have noticed regularly before at big inflection points, and it’s obviously not the case that the patterns can somehow see into the future. I think there is a relationship there but logically it must be that if there is a strong bear setup like this, then the right news trigger will set the ball rolling with an apparent reaction to the news that is disproportionately larger than the reaction you might see to similar news at other times. We’ve all seen the markets shrug off bad news many times before, but when there are decent bear setups in play the market is showing a willingness to reverse that any bad news can then set strongly in motion.
Obviously the investigation into the extent that Moscow was responsible for this very avoidable tragedy is just getting started, and we may well see more geopolitical shockwaves from this in current days, though it’s important to keep this in proportion. No war is likely to start due to this tragedy, and it’s even possible that it may act as a catalyst to end the current Russian insurgency in Ukraine. (more…)
Bears put a strong day together yesterday and broke down below the 50 hour MA. Shortly before the low I tweeted a confluence of strong support levels in the 1957-60 range, and the low was at 1959.46. The key support level here is the SPX daily middle band at 1957, and only a closing break below that would open up lower targets at the daily lower band in the 1930 area and the 50 DMA at 1921. The last two significant lows were at 1945 and 1926 and both of those are potential H&S necklines of course. SPX daily chart: