EUR/CAD – ‘Bear party’ ahead, could test 1.34

Daily chart

EURCAD D1 (02-13-2017 2320).png

Chart source: FXCM Marketscope

  • Bearish break from the inverted flag & pole (bearish continuation pattern) is pretty much a done deal.
  • That would open up downside towards 1.3550 (measured height target).
  • Take note of the bearish daily RSI and and bearish crossover on the DMI.
  • The bearish trend seems to be gathering pace… the ADX has bottomed out and is not sloping upwards.

Monthly chart

EURCAD M1 (02-13-2017 2325).png

Chart source: FXCM Marketscope

  • Falling tops formation on the monthly chart is another warning of an upcoming fall.
  • The rising trend line support is seen around 1.3630.

Conclusion

  • Shorts could be initiated at the current levels as the cross is seen falling to 1.3630-1.3550 and possibly to 1.35 (May 2015 low) over the next few weeks.
  • Stops could be placed as per individual risk appetite.
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AUD/JPY poised for a bullish breakout

Price action since mid-January

The cross has been restricted to a 200-pip range of 85.00-87.00. The 50-DMA has acted as a strong support since January 31. The recent high stands at 87.53 (Dec 15 high).

What is so bullish on the charts?

Daily chart

audjpy.jpg

Source: http://www.netdania.com

  • The repeated rebound from the 50-DMA plus a bullish RSI and the bullish DMI indicate a potential for a rally.
  • However, bulls need to wait for a break above the upper end of the Bollinger band. That would open doors for a rally to 88.62 (Mar 2012 high) levels and possibly to 90.00 levels (monthly 50-MA).

Weekly chart

audjpy monthly.jpg

Source: http://www.netdania.com

  • The weekly chart adds credence to the bullish arguments made above.
  • Take note of the rebound from 85.00 levels for five straight weeks.
  • Last three weekly candles had long tails… which suggests dip demand. The last week’s close was above strong resistance 86.70 (March 2016 high).
  • The upper end of the Bollinger band is seen at 88.33 levels.

Technicals perfectly aligned with Macro/Fundamentals

  • The risk assets are on the roll. Trump has promised a big announcement (tax cuts) over the next three weeks. Hence, any dip in the risk assets are likely to be short lived, which means less scope for sharp gains in the Japanese Yen.
  • Furthermore, geopolitical risk has dropped as well as Trump is now backing ‘One China’ policy! Strong China export and import numbers reported last week is another good news for the AUD and the risky assets.
  • To conclude the long story short, the cross looks set to test major resistance levels seen at 88.33 – 88.62-90.00 levels.

Bearish scenario – Two consecutive daily close below 85.00 levels would signal that the rally from the June 2016 low of 72.44 has topped out – Major Trend Reversal.

What’s next in GBP/USD?

The pair has dropped from the high of 1.2706 to 1.2550. BOE event didn’t offer anything that markets weren’t prepared for. The sell-off, in part, could be due to sell the fact trade.

Carney warned the rates could either way…there is nothing new in this either.

Bears must be salivating at the idea of Pound falling back to 1.21-1.20 levels. On the daily chart below, we can see a double top formation of sorts with the neckline support at 1.2412 levels.

However, the daily RSI is still above 50.00, furthermore, on the 4-hour chart we also see the rising trend line is intact.

4-hour chart

Untitled.png

Hence, the best level to initiate shorts is below the rising trend line support. On the other hand, I could easily see myself initiating fresh longs if the spot rebounds from the rising trend line and moves back above 1.2605 levels.