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USD Setups Heading into November- NZD, JPY Scalp Biases at Risk

USD Setups Heading into November- NZD, JPY Scalp Biases at Risk

Michael Boutros, Strategist

Talking Points

  • Key levels ahead of Major Event Risk this Week
  • NZDUSD Monthly opening range / USDJPY triangle breakout in focus
  • Dow Jones FXCM Dollar Index (USDOLLAR) rally in question

USDOLLAR Daily Chart

Forex_USD_Setups_Heading_into_November-_NZD_JPY_Scalp_Biases_at_Risk_body_USDOLLAR_DAILY.png, USD Setups Heading into November- NZD, JPY Scalp Biases at Risk

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • November opening range in Focus after hitting primary topside objectives
  • Key support still 10,365- 10,386 / channel support
  • Break below targets objectives at 10,323 ( June high) and Fibonacci support at 10,292
  • Key Resistance 10,581- 10,604 (channel resistance, 200DMA, Fibs)
  • Breach targets objectives at 10,649, 10,693 (July low) and 10,759
  • Note daily RSI Divergence in price action / 60 Rejection warrants caution
  • Key Events Ahead: RBA on Tuesday, US 3Q GDP, ECB & BoE on Thursday / NFPs & U of Michigan Confidence Survey on Friday

Notes: The USDOLLAR rally was well received last week with our highlighted setup breaching 10,455 to achieve all our near-term topside objectives before losing steam at the 50-day moving average (10,564). There have only been four other instances since 2009 when the index staged a 6-day consecutive rally, three of which saw minor one/two day corrections before proceeding on to fresh highs. That said, it’s important to note the significance of the event risk on tap as we head into central bank rate decisions from the RBA, ECB, & BoE (all component currencies) and US GDP & NFPs later in the week.

Although the 10,455 breach was further validated with the RSI trigger break above trendline resistance dating back to the July, the oscillator has now encountered resistance at the 60-threshold. This puts added emphasis on the days ahead- Not only will we be putting in the November opening range, but if momentum breaks down past the 40-thrshold, it would suggest that the broader decline off the July high is still in play. As such we will remain prudent as we open up the month with price action over the next few sessions likely to offer further conviction on a near-term directional bias. A break above the resistance region between 10,581- 10,604 warrants long exposure, with such a scenario eyeing topside objectives at 10,649, 10,693 and 10,759.

USDJPY Daily Chart

Forex_USD_Setups_Heading_into_November-_NZD_JPY_Scalp_Biases_at_Risk_body_USDJPY_DAILY.png, USD Setups Heading into November- NZD, JPY Scalp Biases at Risk

Technical Outlook

  • USDJPY continues to consolidate into the apex of a multi-month triangle pattern
  • Momentum trigger not validated in price action- 98.75/80 near-term resistance intact
  • Support 97.63, key support 96.55/83 (61.8% / 200DMA Confluence)- Bullish invalidation
  • Topside triangle breach targets initial objectives at 99.84/93, 100.58 & 101.60.
  • Support triangle break targets 95.43, 94.65 & 93.58/80
  • Key Events Ahead: BoJ Governor Kuroda speaks on Tuesday- Watch US Docket

Notes: The USDJPY is in a massive consolidation pattern dating back to April- Nothing else need be said. Any positions taken ahead of this breakout are to be treated as range trades until we complete the pattern. Daily RSI is unlikely to offer a concrete trigger here so we will eye the 40-60 range break for conviction. Our preferred directional break is to the topside, but we will respect a break below 96.55 as a means of invalidating our broader bullish outlook.

NZDUSD Daily Chart

Forex_USD_Setups_Heading_into_November-_NZD_JPY_Scalp_Biases_at_Risk_body_NZDUSD_DAily.png, USD Setups Heading into November- NZD, JPY Scalp Biases at Risk

Technical Outlook

  • Key support objective at 8180- 8214 holds- Resistance 8325/40 and 8409
  • Broader outlook remains bearish below 8465
  • Support break targets objectives at 8112 and 8010/15
  • Daily RSI holding just below 50- Support trigger break to offer conviction
  • Key Events Ahead: 3Q Unemployment, Watch US Docket

Notes: The kiwi setup featured on our October 24th report played out well into key support between 8180- 8214. This region continues to be of the utmost importance for the pair as it holds the 50% retracement of the 2013 range, the 38.2% retracement of the advance off the yearly low, and the 200 & 50-day moving averages. Also note that the current and previous month’s opening ranges also extends into this support region and we will continue to eye this key break for further conviction on short exposure. Topside advances are to be sold with only a breach above 8408 challenging our broader bearish outlook.

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---Written by Michael Boutros, Currency Strategist with DailyFX

For updates on these setups and more follow him on Twitter @MBForex

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