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.
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.
“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
The USD/CHF is in the apex of a triangle that is close to a breakout. We channel in a very tight rage on the daily chart between the .8760-.8860 levels. Those are also the breakout points that traders will look for a break above/or below for direction.
Blake Morrow
Chief Currency Strategist, Wizetrade
The EUR/NZD stopped falling back in March and consolidated around the 61.8 Fib level. In recent weeks the EUR/NZD has been moving higher and is no approaching a recent breakdown point and down trend line. A breakout above 1.6300 would be a very bullish event for the pair.
Blake Morrow
Chief Currency Strategist, Wizetrade
Disclaimer: I have been long the pair for several weeks.
As you all know, for so many years the JPY has been highly regarded as a “carry trade” instrument. But post financial crisis, that trade did not make much sense anymore since the interest rate differetials were so much smaller that they were pre financial crisis. Now with many major central banks at or near ZIRP, even some of the “best carry traders” like the NZD/JPY carry a 3% interest. For an institution, that trade is probably not work the risk (volatility). However, that trade (carry) exists in most traders minds (for whatever reason). I had a special guest Mark Dow on my webinar a few weeks ago as we discussed why this is. And frankly, in his view, he has seen this example of this “Pavlov’s Dog” behavior in many trades years after they realistically have not existed. However, that should be a topic of another blog somewhere down the road.
Getting back on point, over recent years the USD/JPY and SPX have enjoyed a very “parallel” relationship. I have argued many times the last leg of this market rally in 2013 was a combined effort by the Federal Reserve AND the Bank of Japan when they indeed launched their massive QE efforts.
Present day, one of the reason why months ago I shorted the USD/JPY and went long JPY is there was a major divergence in the JPY and SPX. See article here in the FX Cafe.
Today, very similar setup. The SPX rallied back (retraced) about 80% of its sell off from 2 weeks ago. The USD/JPY? 50%. That “divergence” tells me that when the market would move down (like the SPX is today) the risk of a breakdown (larger) could be in store for the USD/JPY. So, it should be no mystery why the USD/JPY is testing 102.00 currently.
Frankly, if the USD/JPY breaks the 101.00 major support in the coming days, stock market bulls may want to get defensive.
Blake Morrow
Chief Currency Strategist, Wizetrade
Disclaimer: I have been long JPY against most majors for last several weeks and also short equities via ETF’s
This EDGE chart is simple. There is a massive breakout looming in the EUR/JPY. It’s a triangle in a bullish trend. Most would “think” it breaks higher, but the problem is that is should have broke higher weeks ago with equities surging higher. Below 140.00 and a breakdown could be severe. Above 142.50 and the uptrend continues.
Blake Morrow
Chief Currency Strategist, Wizetrade
After surging to the upper end of it’s daily/weekly channel and completing a 261% extension, the NZD/CAD is forming a bearish wedge on the daily and break of .9400 on a daily close could lead to a substantial sell off in the coming week(s).
Blake Morrow
Chief Currency Strategist, Wizetrade
GBP/USD double top, targeting just above 1.6700. Trend line on daily chart comes in just below at 1.6650 (by the time it gets there)
Blake Morrow
Chief Currency Strategist, Wizetrade
Disclaimer: I just shorted the pair earlier today with targets listed above
We should keep a close eye on the USD/CNH (candle chart) and the AUD/USD (bar chart) as the weaker Yuan (CNH) is a type of “stimulus” for the Chinese economy as the Chinese government adjusts the peg and makes way for a weaker Yuan assisting exports and domestic downside pressures. In other words, the Chines government may continue to weaken the Yuan instead of direct stimulus assisting the stabilization of the Australian dollar which relies on a stronger Chinese economy.
Blake Morrow
Chief Currency Strategist, Wizetrade
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