Global stock indices climb
The trading sentiment was risk-on this past week in the financial markets. Several positive headlines from U.S.-China trade talks, accommodative monetary policy by the Federal Reserve and robust macroeconomic reports drove U.S. equities higher after they had rewritten all-time highs in the past week. So the S&P 500 benchmark continued climbing to 3090.9 points, adding +0.69% to the value. Tech-heavy NASDAQ 100 gained +1.26% to 8247.6 points, while the Dow Jones Industrial Average increased the value of 30 blue-chip companies by +1.08% to 27663.5 points. It feels like U.S. equities are headed to print one of the best years in a decade in 2019 if things continued in the same way.
Other regions had followed the global leader even with a faster pace of growth. For example, Japan’s Nikkei 225 benchmark gapped through the weekend and gained +2.37% on a weekly basis. German and French stock indices were strong on the back of a possible car-maker deal with the United States, adding +2.09% and +2.22%, respectively. British FTSE 100 also climbed north by moderate +0.97%. The global fundamental and technical environment was in favour of stocks this past week.
DXY recover previous losses
U.S. 10-year Treasury yields were growing on the back of attractiveness of the world’s leading economic compared to other regions. Thus, interest rates differentials and macroeconomic space drove the demand for the greenback across the board. As a result of one-way trading action, the U.S. dollar index surged +1.32% versus the volume-weighted basket of six major currencies this past week. DXY had recovered all of the previous losses seen in the past three weeks. Technically, that might mean an end of possible bearish retracement and renewal of the greenback’s long-term uptrend.
Dollar’s power was smooth among its major peers. All G10 currencies weakened on the back of strong demand for the leading world’s currency. EUR/USD closed the trading week at 4-weeks low at 1.1019, erasing all of the previous bullish rebound. The British Pound failed to recover to 1.3000 handles, falling more than 150 pips (four-digit quotes) to 1.2776. However, given the fundamental influence, GBP/USD can still return to growth in the week ahead.
The Japanese yen charted the weakest week since the beginning of October as USD/JPY finally breached strong technical resistance at 109.00 yen per dollar. The pair finished the trading session at 109.24, which suggests further uptrend ahead. The Swiss Franc was weak as well. USD/CHF is stubbornly testing the parity between currencies for the fifth time this Autumn, which could lead to a breakout and acceleration of the uptrend if happened.
All three commodity currencies were simultaneously weak versus the greenback. So, Australian, New Zealand and Canadian dollar had lost the ground after trying to reverse the long-term slide. AUD/USD -0.79% to 0.6859; NZD/USD -1.55% to 0.6329; USD/CAD +0.65% to 1.3227. Emerging markets currencies were hit by the greenback’s demand but not the risk appetite, so the pace of decline was slower and in some cases, even counter-trend action was noticed. For example, USD/MXN finished the trading week flat, while USD/ZAR even dropped -1.14%.
Commodities were mixed this past week. As a safe-haven asset, gold has lost ground on the back of the risk-on trading sentiment. So the price of gold dropped -3.65% to $1458.80 per ounce after charting three weeks of gains. If things continued, the yellow metal would be under a threat to reverse this year’s uptrend. The price of Silver also dropped but with a much faster pace of -7.33% to $16.75 per barrel. In contrast, the price of WTI Crude and Brent Oil rose this past week. The black gold was trading at $57.32 per barrel (+2.28%) in New York and $62.64 (+1.61%) in London.
EUR/USD weekly technical forecast: Bearish
The single European currency was declining versus the U.S. dollar for five days in a row this past week. As a result, previous achievements above the 1.1150 thresholds were erased and EUR/USD closed the week at 1.1019. The pair had also breached all three short-term exponential moving averages (21-, 34- and 55-days) on the daily chart below. The fact that the bulls were trying to reverse the slide on Wednesday and Thursday, but failed to lift the rate back above EMAs, suggests further downside action in the near term.
The technical sentiment turned bearish again. MACD trend indicator delivered a strong sell-signal on Wednesday when lines crossed each other and headed south, while the histogram turned negative. MACD lines are still above zero with a more room to go before the crossover happens. Therefore, the bears have all cards on hands to proceed with the selling pressure. Fast 13-days Relative Strength Index confirmed the previous signal as the value dropped below the 50% line, underlining the change in the momentum. The oscillator closed the week at 40.2, having a lot more room to go south before reaching the oversold level.
When it comes to trading strategies, the best approach is sell-highs. The mid-term momentum changed for the third time this Autumn, and traders got nothing but to follow the price action. Intraday signals like whipsaws and by-the-trend bounces should act as a confirmative sign to pull the trigger and open fresh short positions. However, traders should not count on too large price swings as the volatility remains comparatively low. So it’s worth keeping stop-loss and take-profit orders tight. Nearest technical supports are at 1.1000, 1.0979 and 1.0896 in extension.
USD/JPY weekly technical forecast: Bullish
The U.S. dollar accelerated the uptrend versus the Japanese yen after USD/JPY breached a significant psychological round-figure mark of 109.00 yen per dollar. From a technical point of view, previous action matters as USD/JPY bounced down, tested Ichimoku’s Base Line support curve and failed to breach it on November 1. Such an inability of bears to proceed with the downside retracement means that the bearish momentum is exhausted. There was another confirmation this past week when the pair crossed Ichimoku Conversion line from below, and turned back to it, but remained above. This is nothing but a strong buy-signal according to the daily Ichimoku Cloud chart setup.
Following the mid-term technical analysis, we’d suggest that USD/JPY has the only obstacle on the way north. The dashed blue median line had already acted as a resistance trendline in June - July this year. Now, the pair reached it again with a much higher chance to break it through. The resistance comes in the range of 109.60/75 for the week ahead. If the bulls closed a single day above it, then the road to the next target of 110.49 will be open. There is just a free space between those two levels, so we think that the bulls would not hesitate to use this chance and lift the pair to long-term average level at around 112.50. Long positions are preferred also because of the leading span, which is widening its positive spread and lifts possible support to 108.50.