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The Aussie channels spirit of Easter

April 12, 2020

Last week: The central theme of Easter is Resurrection and the AUD$ certainly channelled this last week with trend line breakouts on the AUD/USD and AUD/JPY delivering close to 600 pips between them. These were the best of the few breakout trades available last week and the shortened trading week to come, with the holiday Monday, might offer another slow week for trend trading opportunities. The weaker US$ would have no doubt helped the Aussie but I suspect the early success Australia seems to be experiencing with managing Covid-19 might be helping to boost the local currency.

 

Technical Analysis: As noted over recent weeks, it is important to keep in mind that this analysis is Technical and chart-based but that any major Fundamental news items, as recently seen with Coronavirus, have the potential to quickly undermine identified chart patterns. This is why it is critical that traders appropriately manage their trade exposure and risk per trade during these volatile market conditions. Coronavirus remains the dominant market theme and this can be seen from CNBC’s Saturday’s front page:

 

 

 

Trend line breakouts and TC signals:  It was another fairly quiet week in the shortened Easter week but, surprise surprise, the Aussie gave one of the best and biggest trend line breakout trades!  Articles published during the week can be found here, here and here:

  • Gold: a TL b/o move for $45.
  • Oil: a TL b/o move for $2.50.
  • AUD/JPY: a TL b/o move for 270 pips.
  • EUD/USD: a TL b/o move for 70 pips.
  • AUD/USD: a TL b/o move for 300 pips:

 

AUD/USD 4hr: chart from weekend analysis with a channel b/o trade idea:

 

AUD/USD 4hr: breakout target of 61.8% fib was reached and more for 300 pips!

 

 

This Week: (click on images to enlarge):

 

    • DXY: US$ Index: The US$ index closed with bearish-coloured Indecision-style Inside weekly candle:

 

DXY weekly: 

 

    • New Member-Only pages: Please remember to check out these new member-only pages to help with trying to catch trend line breakout trades off lower time frame charts. These two pages are linked below:

 

      • Managing trend line breakout trades: through this link.
      • Trend line breakout trade samples: through this link

 

    • Gold: there is a potential Ascending Triangle pattern brewing on the 4hr chart of Gold worth up to $250.

 

    • AUD/USD: the recovery of the AUD/USD, off the recent Low of circa $0.55, has been quite an achievement. On looking at the monthly chart this weekend I am now wondering if there might be a bullish-reversal Descending Wedge brewing? Something to keep an eye on over the coming months:

 

AUD/USD monthly: watch for any developing Descending Wedge:

 

 

    • S&P500: Keep the bigger picture in perspective with this pullback:

S&P500 yearly: keep this latest move lower in perspective:

 

 

 

    • DJIA weekly: The DJIA closed with a large bullish weekly candle and remains above the 2009-2020 support trend line. The Index recently tested to down near the 50% Fibonacci of this swing High move BUT watch for any test of the 61.8% level. The second DJIA weekly chart shows this latest bullish pullback has reached up to just under the 50% fib but watch for any push up to the 61.8% fib as this would satisfy a Gap Fill as well:

 

DJIA weekly (condensed): 

 

DJIA weekly: 

 

 

    • NASDAQ composite: The NASDAQ Composite Index closed with a bullish weekly candle. Note that the 2009-2020 trend line is still intact and that price has only retreated to about the 38.2% of this swing High move. The second NASDAQ weekly chart shows this latest bullish pullback has reached up to just under the 50% fib but watch for any push up to the 61.8% fib:

 

NASDAQ weekly (condensed): 

 

NASDAQ weekly: 

 

 

    • DAX weekly: The DAX closed with a large bullish weekly candle. Note how price recently tested down below the 50% Fib of the 2009-2020 swing High move but has pulled back above the recently broken 11-year trend line. The second DAX weekly chart shows this latest bullish pullback has reached up to just under the 50% fib but watch for any push up to the 61.8% fib as this would satisfy a Gap Fill as well:

 

DAX weekly (condensed):

 

DAX weekly:

 

 

    • Russell-2000: The Russell-2000 is often viewed as the ‘Canary in the Coal Mine’ for US stocks. The Index is still trading below the longer-term 2009-2020 support trend line but printed a bullish candle last week. Price recently tested done below the 50% but watch for any push to the key 880 level, near the 61.8% fib, if any weakness resumes. The second RUT weekly chart shows this latest bullish pullback has reached up to just under the 38.2% fib but watch for any push up to the 61.8% fib as this would satisfy a Gap Fill as well:

 

RUT weekly (condensed):

 

RUT weekly:

 

    • Bonds / TLT: The Bond ETF, TLT, closed with a bearish-coloured Spinning Top weekly candle reflecting ongoing indecision. Note the pullback being suggested by the Elliott Wave indicator:

TLT weekly:

 

 

    • VIX: the Fear index closed with a small bearish weekly candle and note how price is now down near the 61.8% fib retracement of the recent swing High. Watch this 40 region for any new make or break:

 

VIX weekly: price has pulled back more than the Elliott Wave tool predicted!

 

 

Calendar:    Courtesy of Forex Factory:

 

 

Earnings: Courtesy of Earnings Whispers:

 

 

 

Market Analysis:

 

S&P500: SPX: The S&P500 closed with a bullish weekly candle, back above the recently broken 2009-2020 support trend line and just under 2,800 making this the horizontal S/R level to monitor for any new make or break.

Last week’s potential Bear Flag was undermined by the breakout move above 2,650 and the the target for this bullish move remains as 2,950 / 3,000; a significant whole-number region and near the 4hr and daily chart’s 61.8% Fibonacci retracement of this Covid-19 induced swing Low.

This 2,950 / 3,000 level, being the 61.8% Fibonacci retracement, will be in increasing focus should this pullback target be reached. The reason being is that price action followed a similar trajectory with the GFC pullback. Note, on the chart below, how price pulled back to test this 61.8% Fibonacci level after the initial GFC pullback before then moving lower:

 

S&P500 weekly & GFC: note the pullback to the 61.8% fib after the initial downtrend with the GFC:

 

For the chart below I have expanded this GFC price action and removed the weekly candles following the 61.8% fib test. The chart after this shows the current weekly chart with the wait for any potential test of the 61.8% Fibonacci. They look rather similar, don’t they!

 

S&P500 weekly & GFC: pullback to the 61.8%:

 

S&P500 weekly & Covid-19: watching for any pullback to the 61.8%, circa 2,950 / 3,000:

 

 

Will price action mirror that of the GFC? No one can know for sure but the reaction at the 2,950 / 3,000 level, should this be reached, will be critical to aid our understanding of what might be to follow.

As mentioned over recent weeks: I am still watching for any broader pullback to the 61.8% Fibonacci of the 2009-2020 swing High move and this level is down near 1,700 / 1,600. This is a region of some confluence as it is the previous upper level from the 2013 channel breakout. The 61.8% Fibonacci zone was also tested in the 1987 and GFC market pullbacks, as described in this post. For the moment though, the index has only pulled back to around 45% of this 2009-2020 swing High move so keep this move in perspective as technical theory would suggest the uptrend is intact until the 61.8% fib is broken!

Bullish targets: any bullish continuation move, above 2,800, would bring 2,950 / 3,000 into focus as this is near the 4hr chart’s 61.8% fib.

Bearish targets: any bearish retreat from 2,800 would bring the recent S/R level of 2,650 back into focus followed by the recent Low, near 2,200.

  • Watch 2,800 for any new make or break:

 

 

 

ASX-200: XJO: The ASX-200 closed with a bullish weekly candle after last weeks bullish-reversal Morning Star pattern. Recall that I have been warning for some time about the potential support from the weekly 61.8% fib, highlighted in articles here and here, and this continues to be the case.

Despite this bullish weekly candle, the 4hr and daily charts still show trend lines around recent price action that could be viewed in either of two ways:

  • Bullish: any breakout to the upside above 5,450 would support a V-shaped recovery and would endorse the bullish-reversal Inverse H&S pattern. This seems unlikely but that is what the chart would reflect.
  • Bearish: these channel trend lines are also shaping up in a potential Bear Flag so keep an open mind for any breakout: up or down! The Flag pole here is large and would predict the index falling to down near 2,000 so let’s hope this pattern fails! However, the impact from the economic fallout due to Covid-19 is still uncertain but could take an enormous toll if the situation continues out to the end of the year.

Bullish targets: Any bullish 4hr chart breakout, above 5,450, would bring the 4hr chart’s 61.8% fib level, near 6,125, into focus and this would satisfy a Gap Fill move as well.

Bearish targets: Any bearish 4hr chart Bear Flag style breakout would bring 5,000 and, then, whole-numbers down to the recent Low, near 4,400, into focus followed by 4,000 and, after that, the GFC Low near 3,120.

  • Watch 5,450 and the channel trend lines for any new breakout:

 

 

Gold: Gold closed with a rather large bullish weekly candle and just under the $1,700 level. This price action has set up a potential Ascending Triangle on the 4hr chart worth up to $250 so this $1,700 is certainly worth watching!

Weekly chart: As mentioned last week, the weekly chart has the look of a broad Inverse H&S pattern or some may see this as a broad Cupping style pattern. Both are rather similar though as they are bullish patterns and suggest follow-through to the order of magnitude of the depth of the Cup / height of Head. In this case, that move is of around $700 so it is a longer-term pattern worth monitoring. The upper breakout region for this pattern is $1,800 which is still a way off yet.

Bullish targets: any bullish 4hr triangle breakout would bring $1,800 S/R into focus and would support the Ascending Triangle breakout with a target move worth $250.

Bearish targets: any bearish triangle breakout would bring $1,650, $1,600 and, then, $1,550 into focus as the latter is near the 4hr chart’s 61.8% Fibonacci level.

  • Watch for any 4hr chart triangle breakout:

 

 

Oil: Oil closed with a bearish-coloured Inside weekly candle reflecting indecision. This is hardly surprising given the competing tensions of lower demand, due to Covid-19 putting pressure on price, versus OPEC production cut action that would help to boost price.

This uncertainty makes technical analysis a challenge, indeed last week’s Morning Star pattern was given short shrift, but I have drawn in revised 4hr and daily chart trend lines to help with identifying any new momentum breakout. The bullish target remains up near $41 / 41.50 as this is near the 4hr chart’s 61.8% fib and would satisfy a Gap Fill.

Bullish targets: any bullish 4hr triangle breakout would bring $30 S/R into focus followed by the $41 / $41.50 region as the latter represents a Gap Fill from a previous weekly close and is near the 61.8% fib of the recent swing Low move.

Bearish targets: any bearish 4hr triangle breakout would bring $20 back into focus.

  • Watch for any 4hr triangle breakout:

 

 

 

EUR/USD: The EUR/USD closed with a bullish-coloured Inside weekly candle still suggesting indecision.

Price action looks to have made a new 4hr chart triangle breakout so watch for any continuation here. Price is just under the 4hr chart’s 200 EMA so watch this for any new make or break.

Bullish targets: Any continued 4hr chart trend line breakout above the 4hr chart’s 200 EMA would bring 1.10 back into focus followed by whole numbers on the way up to 1.12 as this is near the 4hr chart’s 61.8% fib. After that, watch the 1.15 level, near the previous High.

Bearish targets: Any bearish retreat from the 4hr chart’s 200 EMA would bring the 20-yr TL followed by the recent Low, near 1.065, into focus.

  • Watch the 4hr chart’s 200 EMA and for any continued 4hr chart triangle breakout:

 

 

 

AUD/USD: The Aussie closed with a bullish, essentially Engulfing, weekly candle and has been in an uptrend now for the last three weeks.

Last week’s price action gave a bullish channel breakout trade worth up to 300 pips so watch for any continued momentum movement here. To this end there are revised trend lines to monitor for any new momentum breakout.

This recent recovery is quite an achievement and traders need to keep an open mind about potential further gains here. The longer-term monthly chart looks to be setting up in a bullish-reversal Descending Wedge and, with a target up near 0.90, this is a pattern worth monitoring over the coming months!

Bullish targets: Any bullish 4hr chart triangle breakout would bring 0.65 S/R back into focus and, after that, the recent High near 0.67 S/R.

Bearish targets: Any bearish 4hr chart triangle breakout would bring 0.62 S/R into focus followed by whole-numbers on the way down to 0.55 S/R.

  • Watch for any 4hr chart triangle breakout:

 

 

AUD/JPY:  The AUD/JPY closed with a bullish, essentially Engulfing, weekly candle following the risk-on shift also seen with stocks.

Last week’s 4hr chart triangle breakout remains in play and price action closed the week near the 61.8% fib of this move, just under 70 S/R, making this the level to watch for any new make or break.

Bullish targets: Any continued 4hr chart triangle breakout would bring 70 S/R into focus, as this would complete a Gap Fill, followed by whole-numbers up to 75 S/R.

Bearish targets: Any bearish retreat from the 61.8% fib would bring 65 S/R back into focus.

  • Watch for any continued 4hr chart triangle breakout:

 

 

NZD/USD: The Kiwi closed with a bullish, almost Engulfing, weekly candle and above 0.60 S/R.

Price action is trading within a revised 4hr chart triangle giving trend lines to monitor for any new breakout.

Bullish targets: Any bullish 4hr chart triangle breakout would bring 0.625 into focus followed by the previously broken 20-yr trend line and recent High, near 0.64 S/R.

Bearish targets: Any bearish triangle breakout would bring 0.57 S/R back into focus as this is near the 4hr chart’s 61.8% fib

  • Watch for any 4hr chart triangle breakout:

 

 

 

GBP/USD:  The GBP/USD closed with a bullish weekly candle and just below 1.25 S/R.

Price action continued to chop sideways last week in the range bound by 1.25 above and 1.22 below keeping this as the main region to watch for any new breakout.

Bullish targets: Any bullish 4hr chart channel breakout above 1.25 would bring whole-numbers on the way up to 1.32 into focus.

Bearish targets: Any bearish 4hr chart channel breakout below 1.22 would bring 1.20 S/R back into focus and, after that, the 2016 Low, near 1.145.

  • Watch for any 4hr chart channel breakout:

 

 

 

USD/JPY: The USD/JPY closed with a bullish-coloured Doji weekly candle reflecting indecision.

Price action pretty much just chopped sideways near 108.5 last week but there are revised 4hr chart trend lines to monitor as well.

Bullish targets: Any bullish 4hr triangle breakout would bring 109 and, then, whole-numbers on the way to 112 into focus.

Bearish targets: Any bearish triangle breakout would bring 108, 107 and, then, 105 S/R back into focus as the latter is near the 4hr chart’s 61.8% Fibonacci and the monthly 200 EMA.

  • Watch for any 4hr chart triangle breakout:

 

 

 

GBP/JPY:  The GBP/JPY closed with a small, bullish-coloured Spinning Top weekly candle suggesting continued indecision.

Price action chopped sideways again for much of the week in the range boarded by 135 above and 132.50 below keeping this as the main region to watch for any new breakout. There was a bullish breakout attempt last week but the 136 S/R level (see daily chart) seemed to put an end to that. Watch to see if the GBP/JPY has any more luck with this resistance level after the Easter week holiday completes.

Bullish targets: Any bullish 4hr chart channel breakout above 135 would bring whole-numbers on the way to 140 and 150 into focus.

Bearish targets: Any bearish 4hr chart channel breakout below 132.50 would bring 130 S/R back into focus and, after that, the key 125 level.

  • Watch for any 4hr chart 135 – 132.50 channel breakout: