The past trading week was mixed for the majority of the financial markets worldwide. Main stock indices in the United States were soaring to the all-time highs with S&P500 and NASDAQ leading the gains, while European indices showed a comparatively weak performance. Most of the major currency pairs were trading in narrow ranges with the greenback’s demand reinforced in the second part of the week. Emerging markets currencies together with commodity currencies were under bearish pressure again. Precision metals failed to hold gains from the previous recovery ending the week with a slight decline. Crude oil WTI was climbing to $70 level but commodity bulls did not manage to break through this psychological level.
The U.S. dollar index: Neutral.
The index measuring the dollar versus a volume-weighted basket of six major currencies has found a local bottom this past week at 94.50 level approximately. Bullish divergence on slow MACD indicator was confirmed by RSI fast oscillator on Wednesday. This combination is traditionally a strong reversal signal which was not missed by greenback bulls as a brilliant opportunity to pair the mid-week losses. The MACD divergence is not played out yet with both lines did not cross the zero level yet and the histogram is in positive territory. RSI has crossed the 50% mark and turned bullish. There are chances for bulls to get as high as 95.49 level which used to be a horizontal resistance in July 2018. Although the index is still below the simple moving average with 89 period, further decline is possible. We would stay out of this asset until we get further clarification from technical indicators and more obvious signals. Sell-highs trading strategy could be considered by short-term traders in case if the index would become overbought.
The most popular currency pair on foreign exchange markets continued the recent bullish recovery on Monday and Tuesday last week with the highest gains noticed at 1.1733 level. But EUR/USD bullish momentum failed to get fresh power and the pair slid back below 1.1600 level. Three technical signals caused that reversal: bearish divergence on MACD indicator, extremely overbought levels of RSI fast oscillator and close price below the upper Bollinger Bands’ line on Tuesday (first blue arrow). Bearish pullback happened as the result which was extended after bulls failed to breakthrough the Bollinger Bands’ middle line (second blue arrow). Moreover, Bollinger Bands indicated further decline for EUR/USD as the latest candles closed below the lower line (bearish breakout). MACD lines are far away from each other and RSI is deep below the 50% level. All that confirmes the bearish outlook. We would recommend getting into the market on bullish spikes watching closely shorter timeframes like H1 for instance. A couple of moving averages and the same BB indicator (middle line as the most crucial one) might help intraday traders to identify the best entry points for new short positions.
AUD/USD: Extremely bearish.
One of the weakest currencies among the majors was Australian dollar this past week. Early gains seemed to be optimistic for AUD/USD bulls as the pair was holding above 0.7318 level which used to work as the support during the sideways range in June - July 2018. But Tuesday was a tough day for Aussie bulls: breakout of the support mentioned above together with several moving averages breached and the failed bullish retracement. All that led to bearish acceleration with the new local bottom (and 2018 year-low) was posted on Friday. All the technical indicators show bearish continuation as the most probable scenario for the upcoming week. The only problem is the RSI which is at extremely oversold levels, so the best trading strategy would be to wait for some kind of reloading of the oscillator. 50% level would be a huge gift for new short positions but even not so deep bounces should be considered to sell AUD/USD.
AUD/JPY: Extremely bearish.
Aussie weakness was not only versus the greenback but also versus Japanese Yen. The long-term weekly chart below illustrates an extremely bearish perspective for AUD/JPY. The first bearish signal came from bulls’ inability to get above Ichimoku Cloud baseline as the nearest resistance. That caused the slide of more than 170 pips on weekly basis. The span has enlarged the bearish range and all three lines are in the right order for bearish continuation. Moreover, two important technical events happened: the lowest weekly close price in 2018 breaking out the support at 80.666 and the lowest weekly close price since November 2016 (22 months!). There is no significant support level until 76.000 mark which was the lowest weekly close in six years. Sell highs would be the best option for intraday traders with Ichimoku baseline to watch as the resistance.
There is no need to put any technical indicator on the weekly USD/TRY chart below as the price action is historically unprecedented and all of the technical indicators will show extreme overbought levels. The only important fact for the technical analysis to be noticed is the weekly highest close price on record. Turkish Lira is in turbulence with new highs seen as the nearest future perspective. Targets to watch are the shadow’s extremes for recent three trading weeks: 6.8396 and 7.2069.
Crude Oil WTI: Bullish.
Bulls are back in control of the Crude oil WTI market. The 4-hours chart below shows an ascending symmetric triangle which is a bullish continuation graphical pattern. The nearest resistance is noted at 70.64 level where the triangle’s lines are crossed. Breaking through that resistance will open the door for bulls to test 2018 year highs at 74.75 level. One more important fact which happened last week was the highest price beating the recent local top on July 30. Higher highs and higher lows are the most important factors of an uptrend and this price action is not an exclusion. Bears do not have any power to cause a significant pullback which creates a bullish spring momentum for the breakout. A breakthrough trading strategy could be used here with postponed buy orders to be placed slightly above 70.41/64 range. Stop-loss orders should be hidden below 69.50 in case if the buy orders will be triggered. Additional long positions could be considered on intraday bearish pullbacks with accordingly suitable technical signals on the H1 timeframe.