Technical outlook did not face any significant changes in most of the financial instruments compared to the previous week. Volatility and number of whipsaws lowered, while major trends remained in play. So, US major stock indices kept rising, as it was widely anticipated. S&P 500 added 3.40% as the weekly result, NASDAQ grew for 2.91%, while Dow Jones Industrial Average surged for 3.46%. This past week charted fourth positive candlestick in a row, confirming our previous suggestions that the local bottom has been found by the markets. Global equities were also rising on strong bullish demand with Japanese Nikkei 225 index adding 1.98% to its value, German DAX 30 accelerating for 3.56% growth and British FTSE 100 gaining modestly by 0.52% with relatively long downside whipsaw on weekly candlestick though.
The leading role of the US assets was also noticed in the foreign exchange market as the US dollar index soared 0.74% versus the volume-weighted basket of six major currencies, charting a bullish engulfing candlestick pattern on the weekly timeframe. In contrast, EUR/USD failed to keep the recent bullish momentum and reversed the trend, sliding four days in a row this past week with a total decline of -0.89%. The only indecisive currency was the British Pound as GBP/USD changed the price action several times. However, the general direction was on the upside, despite a sharp decline on Friday. GBP/USD added 0.25% as the weekly gain, forcing dramatic technical performance on EUR/GBP cross-rate, which is quite unusual for the slow-moving pair. Japanese Yen came back to the weakness phase with USD/JPY surging 1.12% and charting a U-turn reversal bullish pattern. Commodity currencies were also weakening at a different pace though.
S&P 500: Bullish.
One of the key equities benchmarks confirmed a strong bullish momentum recently, which gives us a couple of conclusions to make about a potential continuation of the uptrend. First, the descending median line, which used to work as the support in December 2018, has been clearly breached by the price. Two curves -- 55-days simple (green) and 21-days exponential moving averages (blue) -- are about to cross each other. The last time such a rare event happened was during the market crash on October 10. If that happened, the long-term technical outlook would turn back to the uptrend. Given the speed with which S&P 500 recovered lots of losses recently, we’d suggest that both MA’s would cross each other very shortly. The only problem for further growth, from the technical point of view, is that all of the oscillators are extremely overbought on the daily timeframe. Therefore, a pullback down or consolidation is needed to reload oscillators and gain more strength for equities bulls. EMA21 worked perfectly, showing the depth of retracements during the market turmoil, so it might support the uptrend as well. Such a deep retracement to the range of 2575.0/2600.0 would give traders a perfect opportunity to add volume (for those who still hold positions) or refresh long positions (for those who already took profits). On the upside, the level of 2700.0/15.5 represents the technical resistance, being a middle horizontal line which used to divide prices during consolidation wide range in the last two months of 2018. If breached, more strength might be on the cards.
The most popular currency pair had lost its bullish momentum, erasing all of the gains from the previous week. Three main technical indicators point to a bearish sentiment: the price is well below 89-days simple moving average, MACD histogram turned negative and its lines crossed each other, RSI oscillator fell below 50% level. Moreover, the latest breach of the ascending channel looks like a fake one, as EUR/USD failed to hold gains above the upper line. However, the price is approaching to the bottom of that channel and next couple of days should indicate whether the market is intended to push EUR/USD lower, renewing the downtrend in the medium-term perspective, or will the recent consolidation range be able to hold. The range of 1.1309/35 (for daily close prices, excluding whipsaws) is crucial to determine the next direction. If breached, further weakness would be seen. Otherwise, the pair should come back towards 1.1450 (SMA89 and the middle of the range) or even to 1.1500 in extension. We would recommend staying out of the market so far in order to assess the market intentions on the approach to the support level mentioned above. Some small-volume longs are possible around 1.1300 with tight stop-loss orders though.
Japanese yen showed another week of weakness with USD/JPY charting a reversal candlestick pattern on the weekly timeframe. The daily chart has a couple of bullish achievements as well. USD/JPY tested 110.00 psychological round-figure resistance, which never happened since January 1. Ichimoku Cloud’s resistance line, both conversion and base, were clearly breached. Taking into the count the depth of the latest decline, it’s rather far to go before the next resistance, however, further bullish perspective is possible. All we need to see before completing the reversal pattern is the cross of both lines mentioned above and the cross of the Ichimoku cloud itself which has already narrowed its range, signalling more strength on the cards. The buy-dips trading strategy is preferable with a range of 109.10/108.80 to monitor in the scope of potentially attractive long positions, targeting an upcoming test of 110.50/111.00 static resistances. Stop-loss orders should be hidden beyond 108.00 level, which is a comparatively deep and risky approach. Nevertheless, we doubt that the market would be so kind as to give us a better chance to join the recovery party of USD/JPY, especially in the light of stock indices surging rapidly.
The Sterling loves fake breakouts, and this past week was another confirmation of that rule. GBP/USD fell sharply last Tuesday, testing Ichimoku’s baseline support and leaving just a long tail on the daily candlestick. Usually, that means the market players made the last try to kick retail traders out of the market before going far North. We’ve been monitoring the latest developments very closely and some of the conclusions are rather positive for the British pound. First, GBP/USD jumped out of the Ichimoku span in a sustainable manner. Second, the price came back to the upper range of the cloud, which used to work as strong technical support. Third, the span itself performed the bullish cross pattern. Fourth, both Ichimoku lines had entered into the cloud, confirming the bullish momentum. The ascending trendline, which used to hold prices from further gains during the bullish retracement since December 13, is not clearly breached yet, as the trading week ended below that line. However, GBP/USD tested 1.3000 round-figure resistance level, and traders just took profits before the weekend due to the unknown impact from the fundamental side of things. We would recommend watching the pair on a pullback down to 1.2800/35 and going long from there in case if intraday signals would show a favourable environment such as long shadows, whipsaws and bounces on oscillators. Upside risks still persist, and we would not be surprised to see GBP/USD testing 1.3175 high noticed on November 7.