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FX Technical Weekly: Don't Get Caught Fading the Next EUR/USD Move

FX Technical Weekly: Don't Get Caught Fading the Next EUR/USD Move

2016-09-30 21:57:00
Jamie Saettele, CMT, Sr. Technical Strategist
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EUR/USD

Quarterly

FX Technical Weekly: Don't Get Caught Fading the Next EUR/USD Move

Chart Prepared by Jamie Saettele, CMT

See REAL TIME trader positioning

High Frequency Trading Tools

-All is calm but that’s about to change. Markets oscillate between periods of range contraction (range) and range expansion (trend) at varying degrees of intensity (volatility). A range tends to develop once expansion has reached extreme intensity (March 2015) and a trend takes hold following the historically quiet conditions at present. That’s not hyperbole. The 3rd quarter EUR/USD range (3.53%) was the 4th smallest ever (synthetic rate pre-euro). The only smaller quarterly ranges were Q1 1976 (2.76%), Q2 1977 (2.39%), and Q2 2007 (3.31%). Strong directional moves developed in each instance. The Q1 and Q2 2014 ranges (highlighted) were slightly larger. Both were 3.65% and EUR/USD more or less crashed thereafter. A 3+ decade trendline is under price and EUR/USD has been unable to go lower despite negative rates, Brexit, banking issues, etc. So, maybe it’s not a bear. Irrespective of direction, get ready for a move.

As always, define your risk points (read more about traits of successful traders here).

-For forecasts and 2016 opportunities, check out the DailyFX Trading Guides.

GBP/USD

Monthly

FX Technical Weekly: Don't Get Caught Fading the Next EUR/USD Move

Chart Prepared by Jamie Saettele, CMT

See REAL TIME trader positioning

-Cable remains pinned to a long term slope confluence and there is nothing new to add to weekly comments at this time. “I’m showing the monthly chart in order to display the long term trendline (1993-2001 line) and parallel that remain supportive of price. The importance of the current juncture cannot be overstated. If the July low gives, then there may be no support until early 2017 based on the 96 month (8 year) cycle low count.”

AUD/USD

Quarterly

FX Technical Weekly: Don't Get Caught Fading the Next EUR/USD Move

Chart Prepared by Jamie Saettele, CMT

See REAL TIME trader positioning

-AUD/USD remains capped by major slope resistance (see here) after finding low earlier in the year at ‘macro’ slope support. The combination of a Q1 outside reversal and sideways trade in Q2 and Q3 lends a positive vibe for Q4. Does this mean that AUD/USD is about to scream higher…not necessarily. Simply, these are bullish observations based on a long term chart; nothing more, nothing less. As noted previously with respect to the weekly slope resistance, “a breakout would shift focus to the next parallel in the mid-.80s.”

NZD/USD

Monthly

FX Technical Weekly: Don't Get Caught Fading the Next EUR/USD Move

Chart Prepared by Jamie Saettele, CMT

See REAL TIME trader positioning

-Kiwi ends the 3rd quarter at the 1985-1993 line, which has proved an important pivot throughout the decades. Remember, September’s rally was capped by the 2005 high and 2012 low at .7460. While not a monthly key reversal, the September candle sports a long upper wick indicating a good deal of overhead. Near term, .7200 is seen as the pivot.

USD/JPY

Quarterly

FX Technical Weekly: Don't Get Caught Fading the Next EUR/USD Move

Chart Prepared by Jamie Saettele, CMT

See REAL TIME trader positioning

-“If the rally from 2011 is from a ‘macro’ double bottom then a turn higher here isn’t inconceivable.” USD/JPY made an inside quarter and is trading on a long term trendline confluence. The flatter of the 2 lines is the internal trendline that is parallel to the 1990-1998 line, which helped identify the 2015 high at a time when it made zero sense to be a bear. That line has crossed through important pivots since the early 1990s. The area around 100 is clearly important too (see lows in 1999, 2000, 2005, 2014, and the 2009 high). In summary, the current level is massive support so don’t be shocked if USD/JPY surprises higher in Q4.

USD/CAD

Quarterly

FX Technical Weekly: Don't Get Caught Fading the Next EUR/USD Move

Chart Prepared by Jamie Saettele, CMT

See REAL TIME trader positioning

-There is nothing to add to the USD/CAD comments although I’d like to remind that the extreme trend into Q1 and subsequent reversal warns that action may be subdued for a while, at least from a longer term trend perspective. “The dynamic with the 55 week average in USD/CAD is interesting. This average was resistance in May and July (hit it again this week). The average was support for the last 3 years so the fact that the average has been acting as resistance warns that a bearish cycle is underway. The target on a break under the May low would be the May 2015 low at 1.1919. Meanwhile, strength through 1.3300 could carry to 1.38 (not my ‘preferred’ view). I’m ‘double-minded’ when it comes to CAD at the moment-a sentiment that is shared regarding crude oil too (see here).”

USD/CHF

Quarterly

FX Technical Weekly: Don't Get Caught Fading the Next EUR/USD Move

Chart Prepared by Jamie Saettele, CMT

See REAL TIME trader positioning

-USD/CHF continues to trade on a parallel to the 1985-2001 trendline. The parallel has been resistance since October 2006 on each advance so a break higher would be a game changer and target the trendline near 1.1500. Swissie has also reached an important pivot in time. Q3 is 63 quarters from the 2000 high. The 2000 high is 63 quarters from the 1985 high. The way I see it, the symmetry warns of a shift in conditions; from range to a MOVE. The 2011-2014 trendline remains the trigger for a downside break. The monthly RSI break hints that the break in price will be lower and momentum often breaks before price. The trade-off is that such breaks are prone to failure. Given the long term symmetry, caution is urged as per SNB history.

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