AUD/JPY may be signaling something for the S&P 500

31. March 2015 · Write a comment · Categories: Uncategorized · Tags: ,

The AUD/JPY has always been a great correlation for the US equity market. The very popular “Carry Trade” has always been a great way to see strong correlation between stocks and the Forex market. Typically, the carry trade is a popular trade (for individuals or institutions looking to capture the difference in yield) in a rising market, but when risk aversion picks up (unwillingness to own assets) the carry trade tends to unwind and they fall precipitously.

Some traders or economists would argue that with so many central banks yielding such low rates, the carry trade is not as popular anymore. However, I disagree. If we are in a world where everyone is seeking yield, no matter how small. I think there is a good amount of money hiding out in carry trades these days. A great example is the AUD/JPY where the RBA has rates at 2.25% and the BOJ who is at .10%.

The first chart I would like to look at is the AUD/JPY weekly chart, which as you can see below, is approaching some critical trend line support. Also, please note we have made a “lower high” in 2014 vs the high in 2013:

 

3-31-15AUDJPY

 

 

Next is the SPX (yellow line) and the AUD/JPY:

 

3-31-15AUDJPYSPX

 

If you notice back in 2012 the AUD/JPY rallied sharply, that was when PM Abe was elected and implemented his three arrow approach of fiscal stimulus to the economy, dubbed “Abenomics.” That created a divergence between the SPX and the AUD/JPY (Nikkei followed a lot closer to the AUD/JPY at that time).

If you closely at the AUD/JPY now, we are developing a bear flag formation, which has targets set (technical) much lower. The question that one who owns stocks at current levels will be “will the SPX follow the AUD/JPY if it falls?”

 

3-31-15AUDJPYSPX2

 

The last couple days the AUD/JPY has been pointed lower, even when the stock market rallied 1.5% yesterday. Tonight we have Chinese Manufacturing PMI’s which could affect the AUD/JPY in the very near term.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I do own JPY, and have been long JPY against many currencies for many weeks including the AUD/JPY

 

 

 

 

 

 

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EUR/NZD setting up and Inverted H&S pattern

30. March 2015 · Write a comment · Categories: EDGE Chart of the Day

The EUR/NZD downside stalled at a daily/weekly 127% extension near the 1.4350 level. This 4 hour chart shows a inverted Head and Shoulder’s “setup” in the event that the 1.4575 level is broken.

3-30-15EURNZD

 

Blake Morrow

Chief Currency Strategist, Wizetrade

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Gold sitting on critical support

19. March 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags:

Gold is sitting at critical support on the weekly chart. As you can see below, the 61.8% retracement of the 2008 lows to 2011 highs are being tested once again:

3-19-15GC

On the daily chart, you can see that gold has been well bid despite the recent bounce back in US Dollar overnight. However, if gold breaks above 1180 (or so) we may start to see traders looking at long gold trade from a favorable risk/reward point of view. And if the FED and ECB are correct, and the deflationary forces we are feeling are transitory, perhaps inflation will tick up in the coming months, and provide a tailwind for gold.

3-19-15Gc2

Personally, I don’t think this is the bottom in gold, but from a technical perspective I don’t think we can rule out a move back to 1250 or 1300.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

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Bullish Gartley Pattern in the EUR/GBP Weekly Chart

18. March 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags:

As we head into the election season in the UK, the GBP has felt some jitters in a lot of cross rates recently. However, one currency that is trading firmer than the GBP surprisingly is the EUR.

As you can see in the weekly chart below, we had overshot a 161% extension to just around .7000 pence, then have bounced. The daily chart (not shown) have taken out a downtrend line and the pair looks set to recover back towards .7500 or above.

3-18-15EURGBP

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer, I have been building a long EUR/GBP trade as noted here.

 

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Nikkei and JPY are not “Jiving”

12. March 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags: , ,

When the Nikkei hits highs, typiclly the JPY will hit lows. What you will notice below is the Nikkei futures (yellow line) is breaking out higher, but the 6J JPY futures (candlestick chart) is developing a double bottom. I suspect one is going to give was soon.

3-12-156JNKD

The Nikkei is pushing the 161%v extension, RSI on the daily chart is divergent. With currencies like the EUR/JPY are looking very bearish on the weekly charts, there is quite a battle going on at the moment.

3-12-15NKD

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I am long some JPY in hopes that the Nikkei turns from this key resistance.

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EUR/JPY Breaks 130.00, Weekly Bear Flag on Radar

10. March 2015 · Write a comment · Categories: EDGE Chart of the Day

The break below 130.00 opens up a move towards 120.00 in the coming weeks. With the EUR/USD under strong pressure and the USD/JPY rejecting key resistance overnight at 122.00, the EUR/JPY could be primed for a move lower in the coming weeks. If you don’t recall, the EUR/JPY was developing this bear flag a couple weeks back here.

3-10-15EURJPY

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I am currently short the EUR/JPY and will be looking to add to position while below 130.00

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EUR/USD at 161% Fib Extension of 2012-2014 Move

09. March 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags:

There is a strong case for a bounce higher from current levels, as the market seems pretty oversold. H/T Steve F on the Lunch Money webinar for bringing this chart to my attention.

Current price at 1.0849, a downtrend line comes into play on the daily chart near 1.1000 which could be a better place for a short.

3-9-15EURUSD

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I just established a long (counter trend) position myself today because of this chart and the overbought nature of the USD.

 

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Nikkei 225 Posts a False Breakout to the 161% Extension, Now Reversing!

06. March 2015 · Write a comment · Categories: EDGE Chart of the Day

The Nikkei has hit the 161% extension and may post (at the EOD and there is definitely some time left) a reversal candle with a long wick.

To me, that was a suckers rally this morning, and stopped out some shorts, got a lot of traders long on a breakout. Sunday night will be a very interesting open in Asian trade.

Here is the chart:

3-6-15NKD

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

 

 

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DAX is in an ascending wedge

03. March 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags:

The German stock market index (DAX) is in an ascending wedge. Typically, these are reversal patterns that end up reversing lower (descending wedges are bullish reversal patterns). Although I don’t trade the German DAX it is important to me as a currency trader so I know where to strategically trade.

A sustained break below 11,200 could target the 10,260 level which represents the 38% retracement of the move from October lows to last weeks highs.

3-3-15DAX2

Blake Morrow

Chief Currency Strategist, Wizetrade

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