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Stocks Realizing What the Currency and Crude Markets Did Months Ago

By , Sr. Technical Strategist  and Joel Kruger, Technical Strategist
04 May 2012 21:46 GMT

PRICE TREND / RANGE TABLE

Stocks_Realizing_What_the_Currency_and_Crude_Markets_Did_Months_Ago_body_Picture_12.png, Stocks Realizing What the Currency and Crude Markets Did Months Ago

-PriceRank is the percentile rank of the last daily close compared most recent 60 and 20 daily closes (100=highest close and 0 = lowest close)

-Range is the difference in pips of highest high – lowest low over X days (60, 20) – for example, a range of 500 under the 20 days column means that the highest 20 day high – the lowest 20 day low = 500 pips

-Rank is the percentile rank of the range over X days (60, 20) – for example, a rank of 100 under the 20 day column means that the range over the last 20 days is the highest it has been in 20 days

-ATR% is the average range over the last 20 days expressed as a %. The rank indicates whether the average range is high or low relative to the last 20 days.

AUDUSD (on top) / S&P 500 (on bottom)

Weekly

Stocks_Realizing_What_the_Currency_and_Crude_Markets_Did_Months_Ago_body_inx.png, Stocks Realizing What the Currency and Crude Markets Did Months Ago

Prepared by Jamie Saettele, CMT

Jamie – This chart is updated from the 3/30 FX Technical Weekly. At the time, I wrote that “the AUDUSD turned lower in March while the S&P 500 traded to nearly 4 year highs. The striking divergence has preceded significant trend shifts in recent years.” The S&P hasn’t traded higher since and risk in general is beginning to accelerate lower. The popular US equity indices are lagging the selloff in risk but additional charts in this issue support a larger degree downturn. Focus early next week is on positioning with the downtrend in AUDUSD and NZDUSD at levels slightly above the market.

Crude Oil Futures (on top) / Copper (on bottom)

Weekly

Stocks_Realizing_What_the_Currency_and_Crude_Markets_Did_Months_Ago_body_CRUDECOPPER.png, Stocks Realizing What the Currency and Crude Markets Did Months Ago

Prepared by Jamie Saettele, CMT

Jamie - Long term topping patterns in crude and copper suggest that slowing economic growth and eventually economic contraction will likely dominate news headlines in the coming months. I hesitate to say weeks because copper is in the process of rolling over and the mainstream media tends to realize the situation when the market move in question is near its midpoint or end. Crude’s panic style drop may extend a bit lower to test lows from February and December at 9677 and 9424 prior to a bounce. The 52 week average reinforces the February low as support on the cash chart as well (below). Crude seems to be leading as copper is just now testing trendline resistsance. Early week resistance is 3.7550-3.7910 in copper and 99.75 in crude.

Crude Oil Cash Price

Weekly

Stocks_Realizing_What_the_Currency_and_Crude_Markets_Did_Months_Ago_body_crude.png, Stocks Realizing What the Currency and Crude Markets Did Months Ago

Prepared by Jamie Saettele, CMT

SPX 500 Daily

Daily

Stocks_Realizing_What_the_Currency_and_Crude_Markets_Did_Months_Ago_body_spx.png, Stocks Realizing What the Currency and Crude Markets Did Months Ago

Prepared by Jamie Saettele, CMT

Jamie – (all levels are cash levels) As mentioned, equities have finally turned down. Breaks of 1357.38 in the S&P and 12710.56 in the Dow would make lower lows after making lower highs (in the S&P…the Dow eked out a slight new high on 5/1). Focus would shift to 1337.35 and 12710.56 (60 day lows). Initial tests of 60 day lows often lead to a bounce. Until BOTH the S&P and Dow trade to their mentioned 60 day lows, the trend must be described as sideways. The NASDAQ gapped lower today in what may be a breakaway gap. Focus is on the March low at 2900.28, which if reached will probably produce a sharp ‘short covering’ rally. ALSO, a drop under 2900 could complete a corrective decline from the March high and produce one final high. This is well within the realm of possibilities and should not be dismissed.

Dow Daily

Daily

Stocks_Realizing_What_the_Currency_and_Crude_Markets_Did_Months_Ago_body_dow.png, Stocks Realizing What the Currency and Crude Markets Did Months Ago

Prepared by Jamie Saettele, CMT

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR)

Daily

Stocks_Realizing_What_the_Currency_and_Crude_Markets_Did_Months_Ago_body_usdollar.png, Stocks Realizing What the Currency and Crude Markets Did Months Ago

Prepared by Jamie Saettele, CMT

Jamie – The technical condition of the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) was deteriorating last week but the sharp reversal this week returns price to the middle of its range. One can’t ignore the 4 successive lows since August 2011. Much like the USDCAD (see below), last week’s decline was nearly completely retraced which raises the possibility of a false bearish break. False breaks are often good signals in the opposite direction. 9875-9905 is support.

JoelThe market remains locked in a multi-day consolidation and should continue to chop between the 9,600-10,100 area. Overall, we do retain a bullish outlook given the broader recovery structure out from a major base in 2011 and therefore recommend looking to buy on dips in favor of an eventual break above 10,100.

Euro / US Dollar

Daily

Stocks_Realizing_What_the_Currency_and_Crude_Markets_Did_Months_Ago_body_eurusd.png, Stocks Realizing What the Currency and Crude Markets Did Months Ago

Prepared by Jamie Saettele, CMT

Jamie – “I don’t want to suggest a direction when the market is drifting sideways but the inability of the EURUSD to break 13000 after 3 attempts in the last 2 months hints that the break will be higher.” The EURUSD is nearing the 4/18 low at 13057. That is a level to keep an eye on Sunday/Monday. Volatility remains extremely low, which isn’t conducive to a break but a 4th attempt on 13000 probably doesn’t hold and focus would shift to 12880 (January resistance).

JoelOverall, the market remains locked in a very tight directionless, choppy consolidation. Ultimately a break back above 1.3500 or below 1.3000 will be required for clearer directional bias. At this point, the market has stalled by some key resistance just ahead of 1.3300 to once again put the pressure on the downside towards the multi-day range lows down by 1.3000. Only back above 1.3500 would negate outlook.

British Pound / US Dollar

Weekly

Stocks_Realizing_What_the_Currency_and_Crude_Markets_Did_Months_Ago_body_gbpusd.png, Stocks Realizing What the Currency and Crude Markets Did Months Ago

Prepared by Jamie Saettele, CMT

JamieI touched on the similarities between 2011 and 2012 earlier this week, noting that “if the pattern breaks, then the GBPUSD would head higher towards the trendline that extends off of the 2009 and 2011 highs above 16500. Supports are 16150 and 16060/80.” The trend is up and dips should be bought. This is a good place to do just that as price is holding support from late April highs (16150-16170). Failure to hold 16150 would shift focus to 16080. The trendline that crosses off of the April 2011 and August 2011 highs is just above 16300 and interim resistance.

JoelAlthough the market had been very well bid in recent sessions, the rally looks like it might finally be closer to stalling out in favor of a bearish resumption. Look for a daily close back below 1.6150 to officially confirm, but aggressive traders may want to consider fading any strength beyond 1.6300 with daily studies starting to roll from overbought. Ultimately, only a daily close above 1.6400 would delay outlook.

Australian Dollar / US Dollar

Daily

Stocks_Realizing_What_the_Currency_and_Crude_Markets_Did_Months_Ago_body_audusd.png, Stocks Realizing What the Currency and Crude Markets Did Months Ago

Prepared by Jamie Saettele, CMT

Jamie The AUDUSD broke to its lowest level since January 9th, which was the day of the year to date low. Focus is on the 2012 low at 10145, late December low at 10045 and December low at 9861. The 100% retracement of the decline from 10856 reinforces the latter level at 9861 and intersects channel support in early June. I’m looking to short into 10210/40 early next week with a 10360 stop.

JoelOur bearish outlook in this market remains intact and we continue to project deeper setbacks over the coming days and weeks back below parity. A fresh lower top is now sought out by 1.0475 but only back above 1.0640 would ultimately delay and give reason for concern. From here, look for a break and weekly close back below 1.0225 to confirm bias and accelerate declines below parity.

US Dollar / Japanese Yen

Weekly Bars

Stocks_Realizing_What_the_Currency_and_Crude_Markets_Did_Months_Ago_body_usdjpy.png, Stocks Realizing What the Currency and Crude Markets Did Months Ago

Prepared by Jamie Saettele, CMT

Jamie“The USDJPY turned around just ahead of the much discussed 7950 (October 2011 intervention high / Fibonacci extension). This is the time (beginning of month) and level where one would expect an important pivot. The rally from 7963 extended into 5 waves which increases confidence in the bullish bias against 7963. Interim resistance is 8085.” Failure to hold 7963 encounters support at 7913/53 (61.8% retracement and October 2011 intervention high).

JoelThe latest pullback from the 2012, 84.20 highs is viewed as corrective and it looks as though the market could still see a bit more weakness before considering the possibility for the formation of a medium-term higher low. Overall, this is a market that has undergone a major structural shift in recent months and we now see the pair in the early stages of a longer-term up-trend. Ultimately, only a weekly close back under 78.00 would negate.

US Dollar / Canadian Dollar

Daily

Stocks_Realizing_What_the_Currency_and_Crude_Markets_Did_Months_Ago_body_usdcad.png, Stocks Realizing What the Currency and Crude Markets Did Months Ago

Prepared by Jamie Saettele, CMT

Jamie – “My best guess is that sideways trade in recent months composes a triangle. In this case, the triangle is bearish and a terminal thrust below 9841 would complete a bearish cycle.” Was the terminal thrust completed with a 1 week drop? Last week’s drop was nearly retraced (most of it today). Resistance is clustered at and just above the current level from the 4/23 high, and 13 and 52 week averages. If the drop under 9841 was a false break (story of my life the last few weeks) then don’t be a stubborn bear as false breaks are often good signals in the opposite direction. I’m short (from 9900) with a stop at 9985.

JoelOur constructive outlook remains intact despite the latest interday pullback with the market largely locked in a medium-term consolidation ahead of what we believe will be an eventual retest of the key October highs by 1.0660. Look for any declines to continue to be well supported on a weekly close basis above 0.9800, while a daily close back above 1.0050 will help to reaffirm.

--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com

To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele

To be added to Jamie’s e-mail distribution list, send an e-mail with subject line "Distribution List" to jsaettele@dailyfx.com

Jamie is the author of Sentiment in the Forex Market.

--- Written by Joel Kruger, Technical Strategist for DailyFX.com

To contact Joel e-mail jskruger@dailyfx.com. Follow him on Twitter @JoelKruger

To be added to Joel’s e-mail distribution list, send an e-mail with subject line "Distribution List" to jskruger@dailyfx.com

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04 May 2012 21:46 GMT