Long shadows and whipsaws on weekly candlesticks of major asset classes characterise the last trading week of June. The two-way price action was noticed for currencies, commodities and equities. However, the general trend did not change the direction as the technical sentiment remained the same, and it was more of a consolidation week rather than a reversal. For instance, the S&P 500 finished the trading week flat but recovered the mid-week loss of 1.35%. Tech-heavy NASDAQ had a similar price action but ended up with 0.27% loss, while Dow Jones Industrial Average slipped 0.47%. Japanese Nikkei 225 managed to print insignificant gains of 0.08%, German DAX 30 continued the bullish expansion (+0.48%), and French CAC 40 added 0.19% to its value. Such indecisive traders’ sentiment was spread to currency pairs as well. The U.S. dollar index measuring the greenback’s strength versus six major peers was trying to recover part of recent losses, but failed to hold gains and posted just a slight appreciation of 0.04% thanks to the weekend gap. Same Doji stars were seen on weekly charts of EUR/USD and USD/CHF. Japanese yen and British Pound were among losers, while commodity currencies including AUD, NZD and CAD gained strength. The price of gold reached the peak charted in May 2013 ($1439.14 per ounce), but slid back down on profit-taking flows, and finished the trading week at $1409.10, adding 0.75%. WTI Crude oil tested psychological resistance at $60.00 but reversed and dropped to $58.15, resulting in a moderate gain of 0.99% on a weekly basis.
The Australian dollar had not only bounced off the multi-month lows, but also managed to close the day at the highest level since May 6. The psychological round-figure resistance of 0.7000 did not hold the bulls from buying the Aussie last Friday. That’s why we are bullish on AUD/USD. However, buying the pair right at the market open on Monday would be dangerous and here is why. The rate failed to overcome the 89-days simple moving average (yellow curve, 0.70260 currently). Bollinger Bands %B indicator did not perform the bullish breakthrough, while the Commodity Channel Index went into the overbought territory. The most probable scenario, in this case, is to reload technical indicator, bounce back down, gather bullish momentum, and proceed the uptrend after that. When it comes to a possible depth of the retracement, we’d consider 21-days SMA (0.6947) and monitor the BB indicator at the middle line (50%). The buy-dips trading strategy looks attractive at this chart setup. Mid-term target is coming at the descending trendline (blue dotted) at around 0.7074/90, which would give a brilliant haul of 120-140 pips for the slow-moving currency pair in 4-5 trading days.
The Kiwi is back on track with the fast recovery of previous losses. NZD/USD printed the exchange rate never seen since April 18 during the impressive bullish rally of 150 pips last week. The pair also breached the 89-days simple moving average, which is a strong bullish signal to proceed with the recovery. MACD trend indicator confirms that suggestions as the histogram are extending the positive gains, both lines had crossed the zero level from below, while the positive surplus is growing. The only concern for the short-term perspective is the overbought condition of most of the oscillators. For instance, we’ve added a modified Stochastic RSI oscillator (21,21,3,3) to the daily chart, and what we see is that it’s nearing to extreme values, while the blue and red lines are about to cross each other. What that means is that a healthy technical retracement is required to go further north. We’d consider a bounce back to the breached resistance (now support) curve of 89 SMA at around 0.6682, which would be attractive to refresh long positions or add volume for those traders who still hold them. The nearest target is in the range of 0.6800/50, and it will depend on the bullish momentum.
GBP/NZD: Extremely Bearish.
GBP/NZD was the most lucrative cross-rate this past week as the pair dropped 2.28% (440 pips), charting the worst week since November 2018. What’s more, the rate broke through the long-term ascending support trendline, which used to limit the bearish action since January 2017. The 21-weeks RSI confirms strong bearish momentum with plenty of room to go south. If the situation developed in the same direction, and the British Pound was weakening together with the New Zealand dollar’s appreciation, we could see a sharp decline of the exchange rate for another 800 pips this summer. The nearest support is placed at 1.8132, the weekly low charted on December 10, 2018. We’d suggest shoring the pair aggressively in case of bullish bounces towards 1.9000.
Currency speculators took profits last Friday, charting a long downside shadow on the daily candlestick. That bounce represents strong support level at around 1.3050 as the bulls stepped in with heavy-volume long positions. The Gann Fan graphical analysis tool shows several price swings starting from the reversal point charted on October 1, 2018. First, there was a sharp spike towards multi-month high slightly below 1.3700 (almost 900 pips in three months!). Second, a quick retracement sent rates to the local bottom in early February this year. Third, the main Gann line acted as the median line, representing the slow-moving uptrend till the end of May this year. What we saw recently was another wave of correction, and the 3/1 line held it last week. Therefore, we expect USD/CAD to consolidate in the blue sector with a slightly bullish bias for at least two weeks from now. Conservative traders should consider shoring the pair at around 1.3240, while aggressive speculators might think of going long right on the market open on Monday with the same target to take profits and reverse.
WTI Crude Oil: Neutral.
The long-term technical outlook remains negative for the black gold price. Ichimoku Cloud trend indicator is bearish on the weekly timeframe (see the chart below), the current price entered into uncertain territory. The upper band of the span held prices from further appreciation this past week, and it pulled back as the result. However, the bulls managed to fix the cost of WTI Crude above the Ichimoku Conversion Line (blue), which is positive for a future fight with the bears. On the other side, the 13-weeks Relative Strength Index is still below the 50% level, pointing to weak bullish momentum. Therefore, we’d stay out of the market for a while, having a wait-and-see position. At the same time, we’d short WTI Crude on bullish spikes towards the upper range of the cloud ($60.00 approximately), and long it on bearish slides (more preferable scenario). The nearest support is edging higher (Ichimoku’s Base Line, brown curve), the current value is at $55.47 per barrel. However, such a depth looks unlikely so far, and we’d watch a daily chart to find more appropriate support levels to use the buy-dips trading strategy. Conservative traders should wait for a clear breakout signal as a consolidation inside the span is possible.