USD/NOK and Crude divergence

12. January 2016 · Write a comment · Categories: EDGE Chart of the Day · Tags: ,

Everyone is talking, blogging and tweeting about crude oil today and I figured I should throw my 2 cents in as well.

Crude oil may have found some near term support today. I am on the fence whether or not we can create a sustainable low here since the price action has been so bearish today (and recently).

What has caught my eye in the last couple sessions is the recent divergence between crude and the USD/NOK. Typically, this correlation has been very strong (crude down, USD/NOK up etc.) but the last couple sessions we have seen a strong divergence.

1-12-16USDNOKCrude1

Crude is the line chart, the USD/NOK is the candlestick chart. You notice the USD/NOK has stalled the last week as crude continues lower.

What this means to me is if crude does at least “bounce” here or near here, the probabilities of a pullback in the USD/NOK are high. As you can see below, we have also rejected a 161% extension of the last major pullback from September high to the lows in October.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I am establishing NOK longs for the next few days.

EUR/GBP snaps multi-year trend line

08. January 2016 · Write a comment · Categories: EDGE Chart of the Day · Tags: ,

The EUR/GBP has been in a steep downtrend for the last couple years since 2013, and yesterday we took notice. This week we not only snapped that downtrend, but we also are breaking out from key resistance above the .7500 pence level:

1-8-16EURGBP2

Although it is still early in the day and we could close back above the .7500 level, what you will notice is that longer term we held a minor Fibonacci level, and also made higher lows:

1-8-16EURGBP2

A natural target for the reversal pattern is a potential “double bottom” on the daily chart, which suggests we could rally as far as .8000 in the coming months ahead:

1-8-16EURGBP3

Although I think a “Brexit” is highly unlikely this year, the risks and uncertainty surrounding the U.K. early this year may be enough to fuel a move higher in the EUR/GBP like this. If anything, a move like this in the EUR/GBP, with as much liquidity that trades through this pair daily, should keep you defensive while attempting to play the GBP on the long side (even on crosses).

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I am not in a EUR/GBP long (yet) but will be buying on dips in the coming days.

Nikkei testing major support

06. January 2016 · Write a comment · Categories: EDGE Chart of the Day · Tags: , ,

We have been watching the Nikkei closely, as it is approaching a long term uptrend line dating back from 2012:

1-6-16Nikkei

As many of you know, the JPY has been extremely strong all week. Many traders (such as myself) have been waiting for a pullback to get long some JPY (i.e. short EUR/JPY, AUD/JPY etc.):

1-6-166J

If you take a look closer to the Nikkei, and compare to the 6J (JPY contract) you can see the very strong correlation:

1-6-166JNKD

If the Nikkei sustains a break down, the JPY may not pullback any time in the near future.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

Metals are approaching serious support levels

18. November 2015 · Write a comment · Categories: Uncategorized · Tags: , , ,

I personally don’t trade precious metals like gold or silver, or industrial metals like copper. As a currency trader I watch them very carefully since currencies like the AUD, NZD, NOK and CAD tend to be very sensitive to them.

As you know, gold, silver and copper have been under tremendous pressure as of late. The Strong USD as of late has been an added thorn to their side as well in the last year. Frankly, I am not too sure how much lower they can go, or when they will bottom. But the charts you see here, could argue we are at levels that may provoke a bounce.

Take a look:

11-18-15bloggold

As you can see with gold, we are trading very close to a 50% retracement near the 1070 level. We have probing above and below this level the last couple weeks.

11-18-15blogsilver

Silver shows we are sitting on a multiyear trend line, which suggests that the $14 level is a very big support.

11-18-15blogcopper

Copper is also trading at a multiyear trend line. However, one could argue that we connect the tip of the candle back in 2008 and you could take support closer to 1.95 which is also the 78% retracement. Take a quick look at the MONTHLY RSI oversold conditions!

Regardless of how you feel about the commodity markets and precious metals in particular, one could argue that they are getting close to a bounce. It may not be the ultimate low, but I think value players will be looking soon at these commodities.

The next question is how the AUD, NZD, NOK and CAD react to some of these commodities if they do bounce soon. I suspect they could also see a bounce higher as well. If you take a look at the AUD below (which has a strong correlation to copper and gold) has not been following the metals market lower the last couple months. We could be setting the stage for a bounce here too.

11-18-15blogAUD

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I have been long the AUD/USD for the last 2 days, and I am looking to add to current exposure.

USD/SEK Showing Relative USD Strength

15. October 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags: ,

For a USD pair, the USD/SEK is showing some relative strength compared to other USD pairs this week. It’s worth noting as it has been a leading indicator for the DXY from time to time over the years.

10-15-15USDSEK

Here is the USD/SEK weekly chart. Notice how the weekly candle is attempting to create a “Hammer” formation at the range lows.

10-15-15DXYUSDSEK

Here is the USD/SEK (candle) and DXY (blue line) weekly charts. Notice how the USD/SEK surged many weeks ahead of the DXY in early 2014

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

GBP/AUD cracking some key support

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

Since the GBP/AUD tagged major resistance back at the end of August (read this post) the pair looks as if it cracking some major support on the daily chart. Take a look below:

10-6-15GBPAUD

With other GBP commodity pairs like the GBP/CAD and GBP/NZD falling, it looks like this may be a group effort.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

CHF currency on the verge of collapsing?

25. September 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags: ,

Most of this summer I have been playing the CHF to the short side as the SNB has made it very unattractive for institutions and banks to hold long CHF for any extended period of time. Even in the face of risk aversion, which hit the market in August, has had very limited impact on the CHF for any extended period of time.

Technically, the CHF looks like it is on the verge of making a large down move. Take a look at the near term daily charts of the USD/CHF:

9-25-15USDCHF

You will notice that we are within 50 pips of challenging a downtrend line since January. And as most traders know, January was when the SNB removed the floor in the EUR/CHF pair which shocked the market (understatement). What is more interesting is if you look at the weekly charts:

9-25-15USDCHF2

On the weekly charts, that is the same trend line since 2001! If you look at the CHF futures contract, you will also notice we are not far from breaking lower as well.

9-25-156S

On the USD/CHF, the downtrend line comes in at .9850 or so, but a clean break above 1.000 (parity) may suggest a much larger move lower in the CHF is about to occur.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I am long USD/CHF, and I am looking to add to this position if the USD/CHF rallies beyond parity.

AUD/USD clears 14 year trend line and major Fibonacci “clusters”

04. September 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags: ,

The AUD/USD will close firmly below the 14 year uptrend line. What’s worse for the AUD currency, we have cleared a major grouping (or cluster) of major Fibonacci levels from the .7100-.7200 level. In my opinion, any rally towards the .7100 level will find a very strong wall of sellers.

There is not much longer term support until the .6200 level, which represents a very strong support level following the financial crisis of 2008.

9-4-15AUDUSD

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

 

US Dollar Entering a Long Term Buy Zone

25. August 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags: ,

The US Dollar (DXY) has been under significant pressure the last week, and we may have just tested a critical support for long term traders who are looking for longs.

Before we take a look at the chart, let’s talk about the reasons (the market believes) the DXY has pulled back:

 

  • Recent market turmoil has traders and investors thinking the Fed won’t raise rates in September, and some don’t think rates will go up until next year. Barclays just revised its outlook from September till 2016 due to volatility in the market. Although I think the market is having a mini tantrum (think taper tantrum in May 2013 when the Fed announced it would taper asset purchases and the markets fell) but I am not sure it is a done deal that the Fed will cater to the needs of the market at this time. Keep in mind this is the Yellen Fed, not the Bernanke Fed. I believe the Bernanke Fed was a little more sensitive to market forces. The Jury is still out with Janet Yellen at the helm.
  • Traders and Investors note that the “carry trade” unwind in the EUR denominated trades are being unwound as stocks and commodities fall. Correct me if I am wrong, China’s rates are just over 4%, Australia at 2%, New Zealand at 3% and Mexico at 3%. Tukey is at 7.5% which could make sense for a “carry” trade. In a world where most central banks are near ZIRP, I can’t see this being a huge catalyst and not very attractive to hold carry trades with such small rate differentials and accounting the volatility associated with holding a trade. Especially with some of the said currencies under performance in recent years. I think the next reason could be the bigger catalyst.
  • The market has been aggressively long the USD this last year. But as Forex Live reported last week, EUR shorts continued to trim positions (previous to the recent EUR surge). Is there still lopsided positioning long the US Dollar at this point? Perhaps, but I would assume after the move in the EUR/USD this last week or so, it is more “neutralized” as US Dollar longs got liquidated.Since the DXY is weighted 56.7% EUR, this may be a key point.

 

How much more US Dollar weakness will there be?

Based on this long term chart of the DXY, I think we are closing in on some serious support.

8-25-15DXYblog

DXY is testing the breakout points from 2004-5, and also still is in a bull flag formation. We just tested this week the 38.2% Fibonacci retracement level near 92.50.

Personally, I am now on the lookout for US Dollar longs.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

GBP/AUD tested major resistance today

24. August 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags:

Amid all the chaos in today’s equity markets, we have also seen some intense volatility in the Forex market in recent trading sessions. Some traders cite the relentless march of the EUR/USD higher was the big news in the currency market. However I think even the more interesting news is that some of the commodity crosses touched, broke, tested some major levels on the crosses. For example, the GBP/NZD finally tested (and held) a massive downtrend line and inverted H&S target today. Read this post from May of this year.

Another pair that I find extremely interesting is the GBP/AUD. What you will notice is that we have tested (and held) a major Fibonacci resistance level today on a weekly basis.This pair has been a fun long trade in recent months but may struggle with some resistance as seen below:

8-24-15GBPAUD

I believe three things currently that could weigh on this pair. 1) The GBP currency has been drug (tooth and nail) higher with the EUR’s rise against commodity and emerging market currencies. 2) I believe the EUR/USD is due to correct from its recent rise which may lead to a correction in the GBP. 3) I think stocks have the ability to bounce in the coming days, which tends to lend support to commodity currencies like the AUD, which may also lend to a correction of the GBP/AUD.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

 

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