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

By | May 22, 2019

Aside from the early move in the Aud$, Tuesday was a relatively steady session, with stocks the main focus – ending a 0.5%/1% higher – and taking US$Jpy along with it. The Aud$ may see some early activity again on Wednesday with the release of the Construction Work Done and the WBC Consumer Confidence  Leading Economic Index although the calendar is once again rather empty until Mario Draghi speaks early in the European session, who may create some waves for the Euro. The main event of the session, the FOMC Minutes are likely to show that the Fed are happy to continue to sit on their hands, although they will probably pay due attention to the increased possibility of a bigger turndown on economic activity if the trade war escalates.

EurUsd: The Euro had a mostly uninspiring session, confined to a tight range albeit with a brief spike higher when headlines leaked out that UK PM, May was poised to offer MPs a vote on a second Brexit referendum. Various conditions attached to that quickly put Sterling and the Euro back where they had started, with little activity for the rest of the day and leaving the outlook unchanged. The momentum indicators are pretty much unchanged although the short term charts may be hinting at another mild topside squeeze. If so, the initial resistance will once again be seen at 1.1180/85 and again at 1.1200, ahead of 1.1125, 1.1240/45 and the May 1/Monday spike high at 1.1265. On the downside, below the Tuesday low of 1.1140 would find bids at 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. Selling rallies remains favoured although another tight session seem likely but in the longer term, I think we are in for a test of 1.1100 and possibly lower at some stage, albeit rather slowly. Keep an eye on Sterling, as a Brexit inspired selloff would inevitably drag the Euro lower.

US$Jpy: headed up to a high of 110.66 on Tuesday, underpinned by the firm stock markets, and so far falling just short of the Fibo level at  110.70 (50% pivot of 112.40/109.00).  The momentum indicators look constructive though and above 110.70 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 may be a medium term target. On the downside, the dollar will now find bids at 110.30 ahead of 110.00 and 109.80 (200 HMA), which looks some way off. If/when this gives way though, 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 dovish RBA yesterday sent the Aud$ back down, filling the chart gap from Monday, to reach 0.6865, which has so far held and seen a dead-cat bound to sit at 0.6880 With the medium/longer term momentum indicators still looking negative, the downside may be in for further tests in coming days and if/when 0.6865 gives way 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. On the other hand, the hourly charts are positive while the 4 hourlies are hinting at some bullish divergence, so  if we get back above 0.69000 we could see a further recovery towards 0.6930/35,  0.6945 (23.6% of 0.7205/0.6865), 0.6965/70 (minor) and 0.0.6995/70000.(6995 =(38.2% of 0.7205/0.6865). Selling rallies is preferred, and my longer term downside objective is 0.6650/0.6700 so, as before, I prefer to be short in anticipation of the inevitable rate cut.

NzdUsd: The Kiwi remains heavy and is toying with the downside, sitting just below on the long term rising trend support at 0.6515 – from March 2009. This may act as a magnate in the near term, but, a downside break 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. The Retail Sales are due shortly and we may get some directional movement once they are released. 

Gold: remains steady at 1275, and the momentum indicators suggest that it will remain rangebound for now, using 1270.80 as a guide for today. On the downside, support below 1270 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). My own view is that we are likely to see a sterner test of the rising trend support (chart) and that the downside will eventually come into play, so the preference is to be short. 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 remains heavy, but sitting on 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 further 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$.

WTI: remains choppy and continues to sit just below 63.00 after a relatively tight range on Friday of 62.75/63.76.  The dailies are neutral, so a nimble stance is required and I am currently square. WTI continues to be 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 @60.25 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 towards the top end of the range, but with a tight SL placed above 64.80. Stay nimble – but keep an eye on the 4 hour charts which seem to be building a rounding top formation.


*Trade of the day: May 22, 2019; 8:03 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 @ 1.1115

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

Sell AudUsd @ 0.6910. SL @ 0.6950, TP @ 0.6810

Sell NzdUsd @ 0.6530. SL @ 0.6565, TP @ 0.6465