20 May: Trend table outlook for FX, Commodities, Indices

By | May 20, 2019

The US$ remains underpinned at the start of the week and this looks set to continue, particularly against Sterling and the Australian/NZ dollars. In the short term they are all now rather oversold, so we may see a corrective bounce in each but this is only likely to provide a better selling opportunities as lower levels look to lie ahead for all of them. I am leaving Sterling alone right now, until we see some clarity in the Brexit issues.

In the FX crosses, the theme is similar. All 3 of Gbp, Aud and Nzd look heavy in the medium/longer term but are currently oversold and we could see a near term bounce in AudJpy, NzdJpy and AudCad. At the same time, EurAud and EurGbp look a little overstretched on the topside in the short term charts and we could see a bit of a dip although the longer trend remains higher in both.

Elsewhere, the main move was in the metals, which look set to continue their downward path. Stocks and oil both seem choppy and rangebound right now and are possibly best left alone.

Note that the Aud$ has popped higher in early Monday trade following the surprise election result, pulling the Nzd$ along for the ride. The bigger picture remains unchanged and lower levels still lie ahead, I suspect.

EurUsd:  The Euro has once again traded heavily on Friday, ending the week at its lows, and with the short term momentum indicators look heavy we could be in for a run towards the 3 May low of 1.1135, which lies ahead of the 26 April low at 1.1110. Below 1.1100 would target 1.1060/65, where the base of the descending wedge should see decent bids. A downside break would then open the way to 1.1020 (minor) and to 1.1000. On the topside, the initial resistance will be seen at 1.1175/85 and again at 1.1200 ahead of 1.1125, 1.1240/45 and at the May 1/Monday spike high at 1.1265. Selling rallies remains favoured although another tight session would not surprise on Monday as there is little on the calendar to provide inspiration. I think we are in for a test of 1.1100 and possibly lower at some stage, albeit rather slowly.

DXY:  (98.00) was up by another 0.2% on Friday and may be building for further gains ahead although the weeklies are still in neutral so a nimble stance is required. Having seen a return to 98.00 the next target is now at 98.33, the trend high (April 26), while further gains would see a run towards 98.80, where the top of the rising wedge lies, and then towards 100.10 (76.4% of 103.82/88.25). On the downside support will now be seen at 97.75 (minor) and 97.50 ahead of the stronger level at 97.25/15, but below which there is not too much to hold it up until the 12 April low at 96.75 and then the 100 DMA/ rising trend support, seen at 96.67. A cautious stance is still required given the neutral look of the weekly charts, but the dailies look more constructive, so I prefer to trade from the long side and to selectively buy dips in the dollar.

US$Jpy: squeezed a bit higher on Friday in breaking above 110.00 and ending the week in a mildly positive mood at 110.05. Above Friday’s high of 110.19 could see a run towards 110.30 (Daily cloud base/38.2% of 112.40/109.00) and even to 110.70 (50% pivot of 112.40/109.00). Above here would allow for the 61.8% Fibo target at 111.10, which would also fill in the chart gap from 3 May, which I suspect me be a medium term target. On the downside, the dollar is currently above previous resistance, now support, at the 200 HMA/ (23.6% of 112.40/109.00) at 109.80. If this gives way, then we may expect a return to 109.50 and eventually back to the recent 109.00 low, below which would target 108.75 (50% pivot of 98.94/118.60) and 108.50 (31 Jan low) and 108.17 (50% of 104.01/112.40%). The dailies may be bottoming out to turn higher, so buying dips may be the plans but the pair will be headline driven, so a cautious stance is required as risk sentiment could change at any time.

AudUsd: The Aud finished the week on its knees, at 0.6865 and, depite the post-election bounce in early trade this morning, the medium term momentum indicators still looking negative, so the downside may be in for further tests in coming days. If so, once below 0.6865, there is very little support to be seen until 0.6827, the 17 January 2016 low. Under there would allow for a return to the flash-crash low at 0.6715 although that it still some way off although I think that is where we are heading. Note that there is some bullish divergence building in the short term momentum indicators so a bounce at some stage looks quite likely.  This may have already begun on Monday morning, and currently at 0.6900, further gains could see a squeeze towards last Thursday’s high 0.6930 ahead of the more distant 0.6945 (23.6% of 0.7205/0.6865), 0.6960 (minor) and 0.6995 (38.2% of 0.7205/0.6865). Overall, I think we are heading lower though and my longer term downside objective is 0.6650/0.6700 so, as before, I prefer to sell rallies in anticipation of the inevitable rate cut. In the short term there is now a 30 point downside chart gap that needs to be filled.

NzdUsd: The Kiwi remains heavy and closed the week sitting right on the long term rising trend support at 0.6515 – from March 2009 (Chart). This should be strong support at the start of the week, but a break of which would look at the 26 October 2018, spike low at 0.6465 and then at the early Oct ’18 low at 0.6424. On the topside, minor resistance levels will be seen at 0.6525, 0.6545, 0.6560, and 0.6580 and at 0.6600 although any rallies do seem to be a sell opportunity.

On the crosses, AudJpy still looks heavy in the medium term but may see a short term reprieve allowing a sell opportunity, while AudCad looks heavy on all fronts. The other cross worth watching still seems to be EurGbp, which has already moved higher but seems to have more left in it on the topside. I would be looking to buy dips here with a SL paced below the Daily cloud top, currently at 0.8655. Also, as we said previously, UsdCnh may be building a head of steam to test 7.000 at some stage, albeit that it is overbought in the near term. Dips may yet provide a decent buying opportunity.

 Gold: has fallen back to 1278 after having been capped by sellers at 1300 during the week, and the short term momentum indicators suggest that it will remain heavy, while the dailies have returned to neutral. On the downside, support below Friday’s low of 1275 would allow a return to 2 May low at 1265 and then towards the 200 DMA currently at 1253. On the topside, resistance will be seen at 1285 and again at 1295/1300. (1296:100 DMA). If we do get above 1300 at any stage, unlikely for now, a run towards 1310 (10 Apr high) and then to 1324 (25 March high) would then be the targets. Right now, with the daily momentum indicators in neutral, some choppy trade would not surprise, with the 100 DMA (1296) and 200 DMA (1253) providing the parameters for a $40-$50 range trade.

Silver: as with Gold, Silver headed lower on Friday, reaching 14.40 and closing below the Fibo support (76.4% of 13.88/16.20) seen at 14.44. As before, I prefer to remain short, and looking to sell into rallies with stops now placed above the descending trend support/resistance, currently at 14.65. Above here could see another squeeze higher, back towards 14.80/90, which would provide another sell opportunity, with a SL placed above 15.00/05 (50% pivot of 13.89/16.21). Above here, which seems unlikely for a while, could then see a run toward the 100 DMA at 15.32. On the downside, we may see some consolidation at current levels (76.4% of 13.89/16.21), ahead of 14.20 (minor) and 14.00 but with an eventual, long term target being at 13.85. As before, a good deal of caution is required but I prefer to remain short, as I think 14.00 – and lower – is eventually on the cards, in line with a stronger US$.

Stocks: had a late selloff and finished Friday down by around 0.5%. The price action remains very choppy and it is difficult to get set either way without being stopped out but overall I still prefer to look for levels to sell into, with a SL placed around 1% above entry levels.

WTI: remains choppy and ended the week back just below 63.00 after a relatively tight range on Friday of 62.68/63.79.  The dailies have now turned neutral, so a nimble stance is required and I am now neutral on the price. WTI is supported by political considerations (Iran/Saudi/US tensions), while ongoing trade tensions and increasing supply coming online, particularly from the US, suggests that the price still has downside potential. Support will arrive at 62.00 (minor) and at the 200 DMA @60.35 and again at 60.00, while sellers will be seen at 63.50/80, above which could see a return to 64.00/70. While I am neutral, I prefer to sell rallies at the top end of the range, but with a tight SL placed above 64.80. Stay nimble!


*Trade of the day: May 20, 2019; 5:59 AM(AET)                     

*This is a personal opinion only, based on the look of the table below, and carries no guarantee of success.

All trades are good till 5.00pm NY time. All “in the money trades” should have the SL raised to break-even, or managed manually. All “out of the money trades” should keep original SL in place.

Sell EurUsd @1.1185. SL @ 1.1205, TP @ 1.1085

Buy EurUsd @ 1.1110. SL @ 1.1075, TP @ 1.175

Sell AudUsd @ 0.6890. SL @ 0.6915, TP @ 0.6815

Sell NzdUsd @ 0.6545. SL @ 0.6585, TP @ 0.6465

Sell WTI @ 63.80. SL @ 64.80, TP @ 62.00

Sell DJI @ 26250. SL @ 26550, TP @ 25800