One of last week’s EDGE Chart was the USD/CHF, which now that it is breaking higher is posting a move above the downtrend line and out of the descending wedge. This formation is bullish by design, and also has a RSI that is breaking a down trend line.
Also notice the 38% retracement on the weekly chart which we currently trade back above at the .8660 level.
Blake Morrow
Chief Currency Strategist, Wizetrade
Disclaimer, I have been long the USD/CHF since last Thusday
One of the best technical indicators for me is when I am looking at a Japanese candlestick on a daily or weekly trend, and see a “long wick” as we near a close or an interval. The reason why this is so powerful is because that means that traders were caught a little wrong footed early on, and may have got “caught on the wrong side” and are forced to trade the other direction to cover shorts or liquidate longs. Hence a reversal takes place.
In the case of the USD, the market has definitely been bearish. No signs of letting up…until yesterday’s ECB meeting. This meeting has changed the outlook near term of the EUR and the ECB future policy actions, hence the USD index (which is comprised of about 57% of the index) may be influenced as well. Some pundits will say “the ECB has yet to act” but the market seems to care less since it seems to be caught a little “wrong footed.”
Whether or not the USD can capitalize or not on this recent squeeze or not, will be dependent on central bank activity in the coming weeks. However, 2014 has been the year of the hibernating bull for the USD. Don’t look now, but I think the bull just growled at you!
USD Index Daily chart:
USD Index Weekly
DJ FXCM USD index Weekly (for a little more balanced USD view)
Blake Morrow
Chief Currency Strategist, Wizetrade
Disclaimer: I started buying USD selectively against European currencies post ECB meeting yesterday
Ascending wedge – some call it a “rising wedge” but it is a reversal pattern ONCE the lower trend line is broken. Considering we are near the “apex” of this wedge, a downside breakout % is higher in the near term.
Blake Morrow
Chief Currency Strategist, Wizetrade
Disclaimer: I did short the pair today off the “upper trend line” and do plan on staying short for the coming days – weeks.
“don’t forget about me!” and the trend line(s) we approach. For those of you keen on correlations, you know how a rally in the JPY could affect the SPX and/or the bond market (bonds may have been leading since late last week).
Blake Morrow
Chief Currency Strategist, Wizetrade
Disclaimer, I started nibbling at some JPY today and may add over the next 1-2 days if a breakout occurs.
The 30 year bond has an inverted H&S or a bullish wedge, however you want to look at it. We are closing in on a breakout point, and regular listeners of the Morning EDGE webinar know we have been closely monitoring this chart. For FX traders, this move higher in bonds could push the USD/JPY (yield sensitive currencies) lower through critical support at 101.50.
Blake Morrow
Chief Currency Strategist, Wizetrade
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