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Technical Weekly: Dollar Does Damage

Technical Weekly: Dollar Does Damage

2016-11-18 21:49:00
Jamie Saettele, CMT, Sr. Technical Strategist
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--Quarterly charts and comments

EUR/USD

Weekly

Technical Weekly: Dollar Does Damage

Chart Prepared by Jamie Saettele, CMT

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High Frequency Trading Tools

-FXTW expressed a bearish opinion last week and noted that “maybe this is capitulation on my part and not wanting to miss the next move but it’s difficult not to be bearish after a market wipes out a large swath of price action and closes on the lows.” The 3+ decades trendline has been decisively broken, which portends lower prices. Also, the gap lower on 11/14 is interpreted as a breakaway gap at this juncture. The target from the breakaway gap, when measured from the post-U.S. election high, is 1.0370. Bigger picture, the lower parallel from the bearish channel is in the low .90s. Strength above 1.0852 (the gap) is needed in order to alter the situation.

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

Weekly

Technical Weekly: Dollar Does Damage

Chart Prepared by Jamie Saettele, CMT

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-Cable is still above its October crash low but the top 2 weeks ago was at the underside of former channel support, which is bearish behavior. Also, there may be no real support until early 2017 based on the 96 month (8 year) cycle low count. A price level of interest is where the decline from the 2014 high (1.7191) would be equal to the 2007-2009 decline in percentage terms (36% declines). The math produces 1.0970.

AUD/USD

Weekly

Technical Weekly: Dollar Does Damage

Chart Prepared by Jamie Saettele, CMT

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-There is no change to last week’s comments as AUD/USD has followed through on the bearish outside week. “AUD/USD traded to its highest since the week of the April high and closed at its lowest week since mid-October. The bearish outside week is…bearish, until further notice. As noted a number of times in recent weeks, a weekly close above .7719 is needed in order to signal a major upside breakout. The action suggests that Aussie is headed lower again.”

NZD/USD

Weekly

Technical Weekly: Dollar Does Damage

Chart Prepared by Jamie Saettele, CMT

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-After reversing from the ‘magnetic’ 1985-1993 trendline, Kiwi carved a bearish outside week which suggested that the interpretation of price action since July as a top, rather than consolidation, would win out. The break under trendline support this week reinforces the idea that NZD/USD is headed lower. In fact, the entire rally from August 2015 may be just a re-test of the long term bear move that began with the double top confirmation in early 2015.

USD/JPY

Weekly

Technical Weekly: Dollar Does Damage

Chart Prepared by Jamie Saettele, CMT

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-I wrote last week that “the close above 105.50 is an important change in behavior and shifts focus to the line off of the December and January highs just above 108.00 and then the 55 week average (not shown) just above 110.” USD/JPY had no problem with either level. The May high looms at 111.44. That price may need to get taken out before any consolidation/pullback can take place.

USD/CAD

Weekly

Technical Weekly: Dollar Does Damage

Chart Prepared by Jamie Saettele, CMT

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-USD/CAD remains constructive and the next spot on the chart is 1.3800. The long term parallel, which crosses the low in October 2015, and the highs in May and July of this year, gave way to a break higher last week and was support this week. The stage is therefore set for upside acceleration.

USD/CHF

Weekly

Technical Weekly: Dollar Does Damage

Chart Prepared by Jamie Saettele, CMT

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-Last week’s comments were that “trade since April is a rectangle and a close above .9944 would signal a breakout. Don’t forget about the long term time symmetry described here.” The rectangle breakout materialized this week. Given probes of a VERY long term parallel beginning in November 2015, this rectangle could end up launching a major behavior change and rally to 1.15 or so (trendline from 1985). Below .9874 (gap) would negate.

Bonus Chart

Milk/Crude and NZDCAD

Weekly

Technical Weekly: Dollar Does Damage

Chart Prepared by Jamie Saettele, CMT

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-NZD/CAD recently completed a 32 month head and shoulders continuation pattern. One week after the breakout, the cross reversed sharply and follow through on the downside this week suggests that the pattern has failed. A failed pattern serves as a signal in its own right (in the other direction). What’s more, the milk/crude ratio (major exports for the respective countries) has been trending lower since the start of 2016. At times, this ratio has led important turns in the currency cross. The implication is bearish NZD/CAD.

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