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Long Term Trade Possiblities in USD and NZD Pairs; What about Gold?

Long Term Trade Possiblities in USD and NZD Pairs; What about Gold?

2013-12-20 21:19:00
Jamie Saettele, CMT, Sr. Technical Strategist
Share:
  • NZD following AUD?
  • USD attempting breakouts against multiple currencies
  • A long term look at gold

I spoke at length about many of the situations below in Friday’s DailyFX Plus webinar (video is titled JamieTrading12202013).

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.

This is the final FXTW of the year. Today’s publication will focus on longer term ideas (rather than just the week ahead). The DailyFX 2014 Trade Ideas will be out soon and some of the charts and commentary will appear in that publication.

EUR/NZD

Weekly

Long_Term_Trade_Possiblities_in_USD_and_NZD_Pairs_body_Picture_8.png, Long Term Trade Possiblities in USD and NZD Pairs; What about Gold?

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

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-Maybe EURNZD (NZD in general, see next chart) is a year behind EURAUD. A possible head and shoulders bottom has been forming since February 2012. This pattern is longer in duration than the EURAUD pattern that completed thisyear and therefore potentially more powerful. The pattern would ‘confirm’ above 1.7274. The measured objective would be 1.9583, which is also the 2011 high (1.9564).

-From an Elliott perspective, the decline from that 2011 high is an ending diagonal. Ending diagonals are characterized by 5 overlapping waves that typically form converging lines (hence ‘diagonal triangle’). The reversal from the diagonal was confirmed on the break of the 2-4 line in December 2012. The objective is the origin of the pattern…at 1.9564.

Trading Strategy: I am flat at the moment. The rate has been coiling since 11/28. I suspect that the break will be higher and would entertain longs above 1.6800. Possible support within the range is 1.6485.

USD/JPY

Weekly

Long_Term_Trade_Possiblities_in_USD_and_NZD_Pairs_body_Picture_7.png, Long Term Trade Possiblities in USD and NZD Pairs; What about Gold?

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Automate trades with Mirror Trader

-USDJPY has broken higher from a 6 month triangle. The triangle from the May top probably composes a 4th wave with the current rally composing a 5th wave (Elliott). The implications are that another correction/decline takes hold after wave 5 is complete.

-Based on common wave relationships, an objective for wave 5 is 61.8% of waves 1 through 3 at 111.19. This is near the August 2008 high of 110.65. A 100% extension of wave 4 yields 113.68. An extended wave 5 (blowoff) could see the 100% extension of waves 1 through 3 at 121.95 (not far from the 2007 high at 124.13). In other words, there is plenty of upside.

Trading Strategy: I am long with a 102.60 stop. A level that may induce a pullback (or failure) is the uncovered close from October 2008 at 105.30. Know that there are long term trendlines in play over the next few months as well.

USD/CAD

Monthly

Long_Term_Trade_Possiblities_in_USD_and_NZD_Pairs_body_Picture_6.png, Long Term Trade Possiblities in USD and NZD Pairs; What about Gold?

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Automate trades with Mirror Trader

-USDCAD has broken out from years of ‘coiled’ price action, specifically an inverse head and shoulders (left shoulder in April 2010). This is the second breakout attempt (first was in July).

-There is no chart resistance until the May 2010 high at 1.0853. An 11 year trendline is near that level. The objective of 1.1680 is in line with former inflection points.

Trading Strategy: I am long with a 1.0550 stop. Weakness below 1.0550 would suggest that the current breakout attempt has failed.

USD/NOK

Weekly

Long_Term_Trade_Possiblities_in_USD_and_NZD_Pairs_body_Picture_5.png, Long Term Trade Possiblities in USD and NZD Pairs; What about Gold?

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Automate trades with Mirror Trader

-USDNOK broke through the line that connects the 2010 and 2012 highs in June. That line was tested as support in September (on ‘no taper’).

-The drop from the July high to the September low was in 3 waves (corrective) and supports a larger bullish structure.

Trading Strategy: I am flat. A close above 6.2650 would suggest that the rate has broken higher. Targets are 6.8-6.9. Support within the range is 6.10-6.13.

USD/MXN

Weekly

Long_Term_Trade_Possiblities_in_USD_and_NZD_Pairs_body_Picture_4.png, Long Term Trade Possiblities in USD and NZD Pairs; What about Gold?

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Automate trades with Mirror Trader

-USDMXN has been tightening within a triangle since June. It’s possible that an even bigger triangle is forming from the 2008 high.

Trading Strategy: I am long with a 12.80 stop. Within the range, resistance is seen at 13.17 and 13.36/39. Exceeding 13.50 would shift focus to 14 (trendline) and 14.50 (measured move). Weakness below 12.80 would shift focus to support within the range at 12.70 or even 12.50.

EUR/USD

Monthly

Long_Term_Trade_Possiblities_in_USD_and_NZD_Pairs_body_Picture_3.png, Long Term Trade Possiblities in USD and NZD Pairs; What about Gold?

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Automate trades with Mirror Trader

The following is from late October but worth repeating:

-“October is no stranger to important EURUSD market turns. My colleague Kristian Kerr has discussed the importance of ‘anniversary dates’. The all-time EURUSD low occurred on 10/26/2000 and the high last month was on the 25th. Other important Octobers include the 1998 high (not yet physical), 2008 (the low was on the 28th) and 2011 (the high was on the 27th).

-Generally speaking, lower tops from the 2008 high and lows in the same area form a possible descending triangle (typically bearish).” The line that extends off of the 2008 and 2011 highs is near 1.3900.

Trading Strategy: Monitoring for resistance at 1.3755 (post FOMC hurly close) for a short against 1.3815 and target of 1.3420. This is a range trade idea and risk is defined. A break above the 2008-2011 trendline could prove hazardous to anyone caught short and we may entertain longs (preferably on a subsequent pullback to the top side of the line) if that happens.

AUD/NZD

Monthly

Long_Term_Trade_Possiblities_in_USD_and_NZD_Pairs_body_Picture_2.png, Long Term Trade Possiblities in USD and NZD Pairs; What about Gold?

Chart Prepared by Jamie Saettele, CMT

Automate trades with Mirror Trader

-AUDNZD is nearing the bottom of the range that has held since 1979. In general, 1.0500-1.0700 is the support zone. Interestingly, the measured objective from the latest range is 1.0736 (1.1197 – (1.1659 – 1.1197).

-Lows (monthly closes) have appeared roughly every 105 months, or 8.75 years. The January 1988 low is 105 months from April 1979. The cycle translated to the left in 1995 and 2002 although another low formed to the right of the cycle in 2005. For what it’s worth, the next cycle low date would be April 2014.

Gold

Monthly

Long_Term_Trade_Possiblities_in_USD_and_NZD_Pairs_body_Picture_1.png, Long Term Trade Possiblities in USD and NZD Pairs; What about Gold?

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Automate trades with Mirror Trader

-The WSJ (see front page) ‘closed the book on an historic rally’ in gold today. Interestingly, the market is nearing levels from which to attempt an advance. Keep the following levels in mind…

-1156 (July 2010 low), 1086 (50% retracement of the rally from the 1999 low), and 1033/44 (2008 high and 2010 low).

-The drop from the 2011 high can be counted in 5 waves with wave 5 in progress (Elliott). 61.8% of waves 1 through 3 yields 976 (it’s worth noting that on long term arithmetic charts, markets sometimes come up short of bearish targets but exceed bullish targets…think about the math). Watch the 1-3 line (line off of the September 2011 and June 2013 lows) for support as well.

--- 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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