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Currency Trade Ideas in a Manic US Stock Market Environment

Currency Trade Ideas in a Manic US Stock Market Environment

Jamie Saettele, CMT, Sr. Technical Strategist
  • Long term stock market channels and US Treasury Bond pattern
  • New Zealand Dollar crosses may reverse
  • USDMXN responds to support

Subscribe to Jamie Saettele's distribution list in order to receive FX trading strategy delivered to your inbox.

Jamie is the author of Sentiment in the Forex Market.

30 Yr. US Treasury Bond Future Continuous Contract (Dec)

Daily

Currency_Trade_Ideas_in_a_Manic_US_Stock_Market_Environment_body_usbond.png, Currency Trade Ideas in a Manic US Stock Market Environment

Chart Prepared by Jamie Saettele, CMT

Automate trades with Mirror Trader

-The 30 Yr. US Treasury Bond future traded above the 7/22 high today and into the day of the July high.

-Price is at resistance but so is the specter of a head and shoulders bottom. Friday’s weak US session urges caution but 131 20/32 (Wednesday low) is the pivot. A push through 135 14/32 would open up a run towards measured levels of 139 14/32 and 140 20/32. These levels coincide with important highs in June.

-Bigger picture, price has responded to the October low and the mentioned measured levels are in line with major support/resistance levels (see below chart).

30 Yr. US Treasury Bond Future Continuous Contract (Dec)

Weekly

Currency_Trade_Ideas_in_a_Manic_US_Stock_Market_Environment_body_usbond_1.png, Currency Trade Ideas in a Manic US Stock Market Environment

Chart Prepared by Jamie Saettele, CMT

Automate trades with Mirror Trader

Nasdaq Composite and S&P 500 Index

Weekly

Currency_Trade_Ideas_in_a_Manic_US_Stock_Market_Environment_body_stockmarket.png, Currency Trade Ideas in a Manic US Stock Market Environment

Chart Prepared by Jamie Saettele, CMT

Automate trades with Mirror Trader

-The Nasdaq and S&P 500 are pushing into channel resistance that originates at the 2009 lows.

-The dashed lines are trendlines that connect the origin of a move and first meaningful reaction (defined as more than 6 months of weakness) within that move. The lines identified the final highs in 2007 although the S&P 500 did ‘ride’ the line higher for some time. The steep slopes of the current lines denote a manic market environment. A final ‘blowoff’ into these lines is possible.

-The Nasdaq composite would consist of 2 equal legs from the 2009 low at 3921. The S&P 500 would consist of 2 equal legs at 1179 (the first legs end at the May 2011 highs).

Trading Strategy: A possible outcome from a bond market breakout (not yet confirmed) and US equity indices at major resistance is a reversal from capital appreciation to capital preservation. In other words, ‘carry’ gets destroyed. Risk levels are outlined in appropriate crosses. I covered this scenario closely in Friday’s DailyFXPLUS video.

EUR/NZD

Daily

Currency_Trade_Ideas_in_a_Manic_US_Stock_Market_Environment_body_eurnzd.png, Currency Trade Ideas in a Manic US Stock Market Environment

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Automate trades with Mirror Trader

-EURNZD decline from the March 2011 high is an ending diagonal. Reversals from these patterns often return to the pattern’s origin (1.9564).

-Price has returned to the 200 day average. Highs from October 2012 and February 2013 are support here as well.

-Divergence with NZDJPY supports a turn at the current juncture. This fractal may help us navigate market swings moving forward as well.

Trading Strategy: I am long now with a stop at 1.6000. Catching a turn often requires several attempts and if this market heads lower then watch for support at the 5/29 low of 1.5873. As always, I’ll track developments in real time through Twitter @ JamieSaettele.

NZD/JPY

Daily

Currency_Trade_Ideas_in_a_Manic_US_Stock_Market_Environment_body_nzdjpy.png, Currency Trade Ideas in a Manic US Stock Market Environment

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Automate trades with Mirror Trader

-NZDJPY has responded to the line that extends off of the April and September highs. A key reversal formed on Thursday and an inside day on Friday.

-Gaps can only occur in the FX market over the weekend. When gaps occur, pay attention. The close before the gap serves as a reference point. That level is possible resistance when approached from below and possible support when approached from above. Look to April for an example. The 4/12 gap served as resistance for weeks. The 9/20 close is serving as resistance right now.

Trading Strategy: Flat at the moment…will visit this early next week.

USD/MXN

Daily

Currency_Trade_Ideas_in_a_Manic_US_Stock_Market_Environment_body_usdmxn.png, Currency Trade Ideas in a Manic US Stock Market Environment

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Automate trades with Mirror Trader

-USDMXN has been trading in a broad range since the June high. The pattern may take the form of a 3 point ascending triangle. Such patterns have the ability to produce intense bullish market moves.

-Dashed trendlines are drawn off of the closes. Solid lines are drawn off of the high/low. USDMXN has rebounded from the trendline that extends off of the closes.

Trading Strategy: Near term resistance extends to about 12.93. A push through on an impulsive rally would suggest that a low is in place. Until then, keep 12.70 in mind as possible support for a turn.

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

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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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