The price action was comparatively moderate, stable and rather predictable in the financial markets last week. The technical outlook remained the same for the vast majority of financial instruments, confirming recent trends’ direction. Some of the assets added several adjustments to be implemented for the pivot levels calculation technique, however, all of them come in line with the general tendency and nothing crucial happened. US stock indices showed the best monthly performance in 30 years, as traditionally, January is not the best month for stock indices. Equities kept climbing at a moderate pace and with lower volatility. S&P 500 added another 1,73% to its value, NASDAQ raised by 1.24%, DJIA climbed 1.32%. In other regions, stock indices had a mixed performance with Japanese benchmark NIKKEI remaining flat as the weekly result, German DAX 30 sliding -0.90%, while French and British equities even accelerated the bull sentiment with CAC 40 surging by 1.90% and FTSE 100 soaring 3.10%.
The foreign exchange market had a mixed correlation to equities. The US Dollar Index kept sliding with a recovery at the end of the previous week, charting the weekly result of -0.21%. EUR/GBP cross rate bounced off the local bottom (+1.33%) as Euro and Pound traded in different directions against the greenback: EUR/USD +0.44%, GBP/USD -0.88%. Japanese Yen finished the trading week flat versus the US dollar, weakening versus commodity currencies which raised their value: AUD/USD +0.95%, NZD/USD +0.75%, USD/CAD -0.89%. One of the largest gainers among emerging market currencies was South African Rand, again. USD/ZAR lost 2.16% of its value, having charted an inverse correlation with US stock indices.
Commodities were also trading in accordance with the current trend. The price of gold appreciated 1.10%, testing important technical resistance. Silver followed with 0.87% gain. WTI Crude oil surged 3.40%, closing the trading week above $55 per barrel, which never happened since mid-November last year. Most of the charts suggest a continuation of those achievements and here is why.
The most popular currency pair remains in the same sideways range with a slightly bullish bias. The intraday 4-hours chart below shows an ascending widening formation with the dotted median as the magnetic attractive line for the price. EUR/USD finished the trading week exactly on that line and you can easily find lots of periods when prices were hovering around it since November 2018. The median line held prices in the beginning of the previous week, while another important indicator -- the simple moving average with the period of 89 -- worked as the support. The recent bullish run toward 1.1500 round-figure static horizontal resistance failed to have a meaningful continuation and the bears took the market back under control. Parabolic SAR jumped above the price signalling that the bullish momentum exhausted. However, RSI oscillator is still above the 50% level which leaves room for more Northwards action this week. The only thing to monitor before entering the market is the RSI’s behaviour when reaching the 50% mark. If the bullish bounce happened - it’s time to buy. The 89-bars simple moving average is also the support level to watch in the scope of potential long positions. So, buying EUR/USD on a re-test of 1.1406/1394 support range would be attractive for aggressive short-term traders. The conservative trading strategy does not recommend entering the market higher than the bottom support line of the range, which is placed around 1.1300/25.
THe cross-rate entered the sideways consolidation channel (yellow) which used to work in March - June 2018. The bullish recovery continued after the priced breached the Bollinger Bands’ middle line (modified period - 55 bars) on the intraday 4-hours chart. The BB upper and lower lines narrowed the range, signalling lower volatility in the recent price action, so we doubt that the range will be breached on either top or the bottom sides. Despite the lack of further bearish momentum after the failed test of 0.8800 resistance, EUR/GBP is still vulnerable to a bullish test of the resistance at 0.8830/50. That range would be attractive for fresh short positions using the swing trading technique. The current price is exactly in the middle of the yellow range, so entering the market here would be dangerous, as stop-loss orders have to be placed rather far from here. We’ll be looking for bullish whipsaws to short the pair on potential re-test of 0.8700 support as the BB middle line still points to the bear market in the medium-term perspective.
The Australian dollar has finally breached the resistance of 0.7200 after two failed attempts. Both unsuccessful tries were accompanied with decent pullbacks of 50 on average. AUD/USD also charted the nearest resistance range of 0.7271/93 on Thursday last week, which allowed us to adjust borders of the current ascending channel (green lines). We’ve also cloned the resistance trendline (blue dotted lines) and placed another channel in order to understand the market’s intentions on the upper side. As a result, we have a medium-term target for AUD/USD which is currently placed slightly above 0.7400. The green curve represents the 34-bars exponential moving average which used to work as the base of the latest bullish run started on January 29. Therefore, the best-case scenario suggests a bearish pullback to EMA34 (0.7212 currently) before the uptrend renewal. Oscillators will be reloaded completely, having the bullish potential to rise again both intraday and medium-term. We’ll monitor the static horizontal round-figure support line of 0.7200 to find attractive price levels and go long on the Aussie, targeting 0.7400. A profit of 200 pips is quite a large one for such a slow-moving currency pair as AUD/USD, so the buy-and-hold trading strategy is applicable for patient traders.
The Loonie accelerated its strength versus the greenback last week. Besides breaching crucial technical support of 1.3100, USD/CAD entered into a zone of deeper retracement than it was previously anticipated. The intraday 4-hours chart below shows the price breaching the Gann Fan’s 2/1 line and accelerating the downtrend after a short consolidation below it. Two lines represent strong support range at 1.3000/40, which is the last defensive line for the bulls. If bears managed to push USD/CAD below those levels, the recent uptrend will be completely over, and all gains will be eliminated with the technical outlook turning back to the negative territory. It’s a bit late to short USD/CAD from current levels, however, a decent pullback could be absent completely as the pair reloads oscillators by sideways consolidations but not bullish bounces. At the same time, going long on USD/CAD is too dangerous here as the fact of closing the trading week below 1.3100 support suggests that further selling pressure is more likely. Aggressive traders could place a risky sell-position by current market price on American trading session opening on Monday. But they have to be ready to add more volume in case of the price would bounce up to 1.3150. Reasonable stop-loss order has to be hidden above 1.3200 in that case. Anyway, that’s a short-term approach.