The JPY looks set to turn higher as risk aversion builds

29. June 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags: , ,

The strong move lower in global equities over the last 24 hours is giving the JPY a boost. The 6J (JPY) looks set to rally as we may have put in a false breakdown below the 2007 low and may breach a down trend line that has been keeping the JPY pressured since mid 2014.

6-29-156J1

Also, you may have noticed the divergent RSI that looks like it may break higher as well.

6-29-156J

Due to the recent events in Greece, Puerto Rico and the sell off we had seen in Asian equities even after China cut rates over the weekend, the JPY may come back into demand as investors look for a safe haven currency. Since the JPY seems so oversold, the JPY may be in a perfect storm to stage a rally.

There are many currency crosses with JPY pairs that could be set to move too. The GBP/JPY, AUD/JPY, CAD/JPY and the NZD/JPY to name a few.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I am short the USD/JPY from last week, I am actively looking to sell other JPY cross pairs currently

S&P 500 is testing major resistance on the monthly charts

23. June 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags: ,

Another trader and talented technician, Nicolas Chéron tweeted a chart of the SPX earlier today, which prompted me to look at the major Fib extensions of the market. What you will notice is that we have extended to (within 4 points) of the highs (2007 pre financial crisis) to the lows (2009 post financial crisis). In addition to this move higher the last year, the Relative Strength Index (RSI) is also diverging lower, which suggests the last year move the strength of the move is somewhat waning. Also note, in Nicolas’s chart, he is using the MACD which is looking to roll over too. See below:

6-23-15SPX

I’d like to think the market is waiting for a positive outcome (can kicking exhibition) of the Greek crisis, which could take the market to new highs. With the 161% extension just above the highs by a few points, I wouldn’t be surprised with a small false breakout first, before some profit taking kicks in.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I have no position in the SPX and do not plan on it within the coming sessions.

Technically, the EUR Currency Looks Very Weak

21. June 2015 · Write a comment · Categories: Uncategorized · Tags: , , , ,

Many people believe that a Greek compromise between the EU and Greece is right around the corner, and it very well may be. Whether one is going to be finalized in the coming week or not, the EUR looks very vulnerable technically, and is probably going to be a good short regardless of the outcome.

If Greece eventually defaults and is shown the exit, or stays in the European Union with a parallel currency, or even stays in the EU with a new set of reforms and possible concessions, it really doesn’t matter. If you think about every one of those scenarios, the European Central Bank will probably have to stay defensive to promote price stability and confidence with ultra-low rates and extremely loose monetary policy for the foreseeable future. Ultimately, that will drive price action in the currency market and keep the EUR single currency pressured.

Below, we will take a longer term technical look at the EUR against most major currencies on the weekly charts:

6-21-15EURAUD

EUR/AUD – Although the pair has seen some recent upside the last few weeks, the pair is trending lower.

6-21-15EURCAD

EUR/CAD – The pair has been attempting to complete an inverted H&S pattern but has fallen short of the objective the last couple weeks. The downtrend line comes in near 1.4000 and is keeping a lid on price.

6-21-15EURCHF

EUR/CHF – This currency pair is one of the more vulnerable currencies in the near term, in my opinion. If Greece and the EU can’t put some sort of “deal” together, a Greek default could lead to a massive rush into Swiss Francs for safety. Despite the hefty negative interest charged on deposits with the Swiss National Bank, most institutions, risk managers, banks, etc. won’t care about that in the near term to ensure the safety of their deposits.

6-21-15EURGBP

EUR/GBP – With renewed beliefs that the BOE will be the central bank shortly after the FOMC to raise rates, the EUR/GBP looks as if we can push levels not seen since 2004 if the EUR continues to weaken.

6-21-15EURJPY

EUR/JPY – The last couple weeks the EUR/JPY has stalled at the Golden Fibonacci ratio (61.8%) and has failed to rally past it (140.75) on a sustained basis. The pair looks vulnerable to a correction now.

6-21-15EURNZD

EUR/NZD – The EUR/NZD sharp correction from 1.4000 has led a test of resistance at 1.6400 in just a couple of months! Mostly this was due to the RBNZ’s surprise rate cut. We can’t rule out further strength here and really is the one currency the EUR has had a lot of strength against recently. After a sharp rally like we have seen here, a likelihood of a correction is building.

6-21-15EURUSD

EUR/USD – The pair has been bouncing in recent weeks as the positioning of USD longs and EUR shorts have been at extremes in recent months. As Marc Chandler of BBH noted this week, the EUR long positions “was the largest accumulation in a year, which itself was the biggest since January 2011.” The EUR looks like we could reach as high as 1.1640 (2005 lows) before turning lower. The setup would be similar to that of the EUR/GBP (flag pattern) which is a continuation pattern of the recent predominant trend.

So, in other words, if a Greek/EU deal does materialize in the coming week(s) I will be looking for the EUR to turn lower after a knee-jerk initial move higher.

There has been speculation recently that if Greece is forced out of the European Union, that the EUR would ultimately rally, The thought process would be if you remove the weakest country (Greece) the Union itself would be stronger as a whole and the EUR would turn higher as a result. Although long time listeners of my daily webinars knew this was an idea I had also subscribed to years ago when the EZ periphery first showed signs of trouble, I still think the “unknown” or fear of the potential fallout or contagion to other Eurozone countries would keep the EUR downside pressure initially before that could take place. Investors loathe fear and the unknown, so I suspect the EUR would stay under pressure until the market was absolutely sure the potential for contagion was contained.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I do not have any exposure in the EUR. I will be looking to initiate EUR shorts in the coming sessions.

 

Guppy Touching Resistance from 2008 – GBP/JPY

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

The GBP/JPY (AKA the Guppy) probed previous weekly support dating back to March of 2008. But if you look a little closer, we are also probing the 161% Fibonacci extension from the 2009 highs to 2011 lows. See below:

6-15-15GBPJPY

If you look even CLOSER what you will notice is that we also just overshot (slightly) the 161% extension of the February highs to the April lows:

6-15-15GBPJPY1

The GBP/JPY is facing some very strong resistance and may be due to pullback from current levels.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I am establishing a short position at current levels today

Copper is Consolidating in Break Down Territory

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

A trader I follow, @faaaal , brought to my attention the pivotal level that Copper is at. I found the daily chart to be particularly interesting as we are consolidating below the daily triangle breakdown point. You can see the longer term here:

6-3-15HG

If you focus in a little closer, this is what you see:

6-3-15HG1

I don’t trade copper, but I do trade the AUD currency, which tends to be influenced by copper from time to time. Currently, I am long the AUD on a cross, so I will be watching copper very closely.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I have no position in copper and do not plan to in the coming days.

AUD/NZD Poised to Challenge Long Term Trend Line

02. June 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags: , ,

The AUD/NZD is poised to break higher. Not only is the downtrend line (about 1.0850) about to be challenged, but the pair has also developed a “bull flag” pattern and looks poised to move towards the 1.1450 level (also major retracement level) in the coming weeks. In addition, the recent pullback to 1.0575 was a shallow 38.2% Fibonacci retracement (not shown). Take a look at the chart below:

6-2-15AUDNZD

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I have been establishing a long AUD/NZD and will be adding to the position in the coming days.

 

Hang Seng Stock Market Poised to Pullback?

21. May 2015 · 1 comment · Categories: Uncategorized · Tags: , , , ,

In recent months all the rage has been talk about the Chinese stock market and how aggressively it has rallied, but probably more concerning on how many “retail trading accounts” have been opened. Which to me, is probably the scariest part of the analysis that you will see below.

When I say “scary” what I mean by that is when everyone (I mean everyone) is buying stocks, and especially people that typically don’t (and probably don’t even have the means to dabble in the markets) invest in the markets, it becomes very concerning. In today’s market I think the term “bubble” is grossly overused. But in terms of the Chinese stock markets, I think it may be appropriate. Here is Wikipedia’s definition of “Stock Market Bubble”

A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation.

Behavioral finance theory attributes stock market bubbles to cognitive biases that lead to groupthink and herd behavior. Bubbles occur not only in real-world markets, with their inherent uncertainty and noise, but also in highly predictable experimental markets.[1] In the laboratory, uncertainty is eliminated and calculating the expected returns should be a simple mathematical exercise, because participants are endowed with assets that are defined to have a finite lifespan and a known probability distribution of dividends. Other theoretical explanations of stock market bubbles have suggested that they are rational,[2] intrinsic,[3] and contagious.[4]

Emphasis on behavioral finance theory is mine.

Below, I take a look at the Shanghai Class A shares and I want to show you the weekly chart since 2007:

5-21-15Shang1

We have a cluster of Fibonacci (Golden, mind you…) levels with a 68.8% retracement from the 2007 highs to the 2008 lows. But also a 161.8% extension from the 2009 highs to the 2013 lows. That massive cluster comes in approximately at 4700.

Since many traders here stateside trade the Hang Seng, I started to wonder what those charts looked like. First, the monthly chart:

5-21-15HangSang1

You will notice that we had slightly over-shot the 78.6% retracement level as we exploded higher out of the wedge pattern last month. Here is the daily:

5-21-15HangSang2

After reports about the explosion of retail accounts opening in late March, the first couple weeks of trading in April caused price inefficiencies (aka gaps). As traders, most of us believe those “gaps” will eventually be filled as prices come back down. Also, you may notice that there is a head and shoulder’s technical formation with a neckline at about 27,000.

If you are long the Chinese stock market, or Chinese equities, I think you should pay close attention to what’s happening in Asia. We have rallied pretty sharply in recent months. And if you ask me, it seems like everyone is on the same side of the market. And when that happens, usually the opposite will occur.

overloaded bus

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I have no position in any Chinese markets or currencies.

USD/CAD False Breakdown at Range Lows Could Create a Short Squeeze

13. May 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags: ,

The USD/CAD reached range extension lows (and 38.2% Fibonacci support of June 2014 lows to March 2015 highs) and made a brief new lows before reversing after crude oil futures tumbled today following the inventories numbers. With the USD oversold on a 4 hour chart, the USD/CAD may be primed for a bounce back from current levels. Here is the chart:

5-13-15USDCAD

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I have held a long USD/CAD trade for the last 2 weeks

 

GBP/NZD Weekly Inverted H&S Pattern Points to Almost 3000 Pips Higher!

11. May 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags: , ,

If the long term (4+ year in development) Inverted Head and Shoulder Pattern plays out, the move could be nearly 3000 pips. This has been a highly anticipated move (by me and many others) for the last several months. We have attempted to break the neckline at 2.1050 a could times Today if finally happened. I suspect it is a combination of the UK election results and the Tory party claiming a majority in last week’s elections, and the fact that some local New Zealand banks are now seeing the possibility of rate cuts in the coming months. Also keep in mind, in 2014 the markets were pricing in over 2% of hikes, and the RBNZ only delivered 1% before stalling its rate hie cycle.

Here is the chart:

5-11-15GBPNZD1

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I have been long the GBP/NZD for the last 2 weeks and am adding to my long position currently

 

Traders expecting the USD/MXN to trade like the USD/CAD may be disappointed

30. April 2015 · Write a comment · Categories: EDGE Chart of the Day · Tags: , ,

Wen you take 2 North American currencies like the CAD and MXN, you can see the tight correlation. But what has happened in the USD/CAD is we have seen a strong depreciation of the pair as crude oil prices have rebounded. On the other hand, the USD/MXN has barely pulled back as the USD/CAD has corrected. Matter of fact, the USD/MXN is within striking distance of it’s multi-year highs.

Banxico meets today, and the market doesn’t expect much change from the CB. Last week, Governor Carstens said the central bank is weighing the weak economy’s need for low interest rates and to divert pressures if the Fed decides to hike rates. Those types of dovish comments could push the USD/MXN higher in the near term. Or, if the USD starts to bounce against other major currencies, that could be the catalyst to drive the USD/MXN back to the highs as well.

4-30-15MXNCAD

 

Blake Morrow

Chief Currency Strategist, Wizetrade

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