Major financial instruments rebounded this past week, changing the technical sentiment intraday and deepening the negative outlook in some cases. Several currency pairs, stock indices and commodities reached the bottom of the local channels, testing support levels. The upcoming trading week is set to show whether the recent decline was just a retracement needed for trends to continue or was that a complete reversal of the price action in the medium-term perspective.
The US dollar rallied across the board and the dollar index measuring the basket of six major currencies picked up the bullish momentum, testing highest levels in six weeks. Moreover, DXY charted the largest weekly gain since August 2017, adding 1.07% to its value and closing the trading week at 96.64. The most popular currency pair with the largest trading volume among majors struggled the largest weekly decline since September last year, losing 1.19% and approaching to the bottom of the recent range slightly above 1.1300 round figure. The British Pound dropped another 1% versus the US dollar, as GBP/USD charted the second straight weekly slide after testing local top in January this year. All commodity currencies crashed on the back of the dollar's strength and risk aversion. AUD/USD fell by 2.24%, closing the trading week below 0.7100 support. NZD/USD lost 2.19% of its value, while USD/CAD gained 1.35%. The only currency which did not face the greenback's challenge was the Japanese yen, which managed to recover half of the losses. USD/JPY tested 110.63 resistance this week and slid lower, finishing the trading week with a +0.29% result. Emerging markets currencies were hit the hardest. South African Rand was leading the losses with USD/ZAR strengthening by 2.12%.
Despite the softness of global equities, US stock indices added modest gains, charting some kind of doji-star weekly candle with long shadow on the upside and small body: S&P 500 +0.11%, NASDAQ +0.72%, DJIA +0.17%. Things were much worse for Asian stocks, the Japanese Nikkei benchmark lost 2.19% of its value, and European equities: German DAX 30 dropped 2.45%, French CAC 40 -1.15%. However, British FTSE 100 was even appreciating last week, growing by 0.73% with a similar long upper tail on the weekly candle as US indices.
In commodities markets, a multi-directional action was noticed. Precious metals pulled back from the previous week's highs: Gold - 0.23% to $1313.97, Silver -0.32% to $15.808. But industrial metals were bid with copper leading the gains (+1.58%). WTI Crude oil dropped 4.79% in New York, while Brent Crude oil slid only 1.24% in London, finishing the trading week at $52.68 and $62.06, respectively.
Most of the timeframes are negative for EUR/USD from the technical point of view. The pair stays well offered below the 89-days simple moving average, the daily RSI oscillator is well below the 50% level, suggesting further bearish momentum to continue the selling pressure. We decided to show the same H4 chart as last week just to indicate the recent price action in a more detailed view. EUR/USD was moving in one way last week, breaching several support levels. The most important one was placed around 1.1400 round-figure static horizontal line. SMA89 curve was also coming there. Nevertheless, the bears cracked the support and EUR/USD continued sliding toward the next defensive barrier which seems to be much stronger, so we suppose that next week's action would not be so easy for the euro bears and here is why. The weekly close failed to break the recent sequence of higher lows. As a result, the price stayed in the green ascending channel. Intraday RSI oscillator is extremely oversold with small preliminary bullish divergences, pointing to a possible reversal of the price. Despite the crossover of two curves, EMA34 and SMA89, which is a bearish signal, the MACD indicator does not confirm the bearish continuation. The issue is that the MACD histogram is indicating the bear momentum exhausted and its lines are very close to crossover, pointing to reversal. We suggest EUR/USD should come back at least to the EMA34 curve, which is currently coming around 1.1378 and SMA89 is also slightly below 1.1400, so that level should be the main battlefield this week. If bulls were able to crack that barrier, then bears would retreat and EUR/USD will open the road to 1.1550 resistance again. Otherwise, we would see a medium-term consolidation if not a bear market with the bottom around 1.1200. The yellow range on the chart below represents strong demand for EUR/USD in postponed buy-orders.
The British pound has found a local bottom against the Japanese yen. At least a temporary one. Although most of the timeframes show the strength of bearish momentum, GBP/JPY charted a couple of attractive technical signs pointing to a possible near-term consolidation or even bullish reversal. On one side, the weekly Ichimoku Cloud trend indicator is totally bearish as the span turned negative with quite widespread. On the other hand, the weekly close price remains above the conversion line, which is rather a controversial sign showing the lack of further bearish momentum to push the pair lower. In contrast, the daily timeframe is positive for Sterling as Ichimoku Cloud performed the bullish cross, all three lines are in the correct order to proceed the upside action, and the current price even managed to appear above the span, even with a sideways action. The only problem of the daily chart is that GBP/JPY is still below the Ichimoku conversion line (142.68 currently), which holds bulls from further achievements. This pattern traditionally suggests a sideways consolidation range with the bottom band around 140.66 (Ichimoku's top of the span). That level has to be considered for strategic long positions in case if bears will get there next week. It's rather doubtful because the Ichimoku baseline curve is growing currently, representing strong support around 141.10/40. Last week's low is also placed there (141.12) and that's not an accident. Therefore, we would not be surprised to see GBP/JPY charting another U-turn this week and testing 144.00 resistance.
WTI Crude Oil: Neutral.
Another chart without significant changes compared to previous forecasts posted earlier is the daily chart of WTI Crude Oil. We’ve shown the local resistance several times, expressing the doubt that oil price would easily crack it. Slight corrections were made this past week and we added two curves to the chart - 89-days exponential moving average (blue) and 34-days simple moving average. Both curves will determine the upcoming trading week in the light of possible direction in the medium-term. Coming back to the importance of the recent top, it's so strong because of Fibonacci Retracement level of 61.8% (from the downtrend since October last year) is placed at $55.34 per barrel. And there is still no daily close price above it which is definitely a bearish sign. EMA89 is slightly above that level, limiting intraday spikes of the price. On the other side of the coin, support levels come at $50.86 (SMA34) and $49.67 (Fibo 78.6%) with a rather high probability of WTI Crude to test them this week. If those barriers were able to hold prices from further slide though, then we could see the uptrend to renew its momentum in the medium-term perspective. Otherwise, the bears would take the market under control again, and WTI Crude would be vulnerable to slide toward the local bottom at $42.45 per barrel.