The GBP/AUD is attempting to break a out in a bull flag pattern, while in a weekly bull flag pattern. Here is the daily chart:

11-5-14GBPAUD

What you may notice, the bull flag is already in process on the longer time frames as well. The most recent highs of 1.8681 will offer the near term resistance, but if broken the 1.9184 (1.9211) level will be the major resistance for the weekly bull flag pattern as seen below:

11-5-14GBPAUD2

If the 1.9211 (38% weekly Fibonacci level) breaks it could open the door for a move toward 2.20 in 2015.

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I am not long the GBP/AUD but plan on establishing a long in the next 72 hours.

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Technically the USD looks very overbought. I know it. You know it. Hell, your grandmother probably knows it (by suggesting you buy it). But the question you have to ask yourself, “should you short it?”

Most traders are loured in by the tendencies of being the one guy or gal who “calls the top” or can yell from the rooftops “I nailed it!” I know this since I have been there, done that. I (like many others) have tried to fade the strong US equity markets one too many times in the last 5 years and have come up empty handed (or pocketed…however you want to look at it!).

The USD in this situation is no different, in my opinion. Technically, we are nudged up against a trend line that has confined us for the last 10 years! See weekly chart below:

9-17-14USD1

But before you short the USD, take into account a few things technically:

Daily chart we just broke out of a bull flag (continuation pattern and now target 86.00:

9-17-14DX2

And, if you take a “longer term look of the weekly chart, RSI wise, the RSI has seen more overbought conditions in the past:

9-17-14USD2

When you take a step back and ask “why” the USD is moving against some of the major currencies counter parts, the answer now is a little clearer than it was a couple months back. The single most powerful driver in the Forex markets are rates (and rate expectations). Today, the FOMC is talking about “normalizing” rates and ending many years of quantitative easing, where the ECB and BOJ are adding more liquidity to the markets. If you take a look at the BOE and what is happening in Scotland this week, the BOE may end up with an ultra loose monetary policy for quite some time as well if Scotland decides to go independent, which will only fuel more fire to the USD rally unfolding before your eyes. Bottom line, rate expectation for the US are moving up. In a ZIRP world, the other 3 central banks are…well….moving sideways at or below ZIRP.

Can you make money fading the USD’s strength? Yes you can, but be very careful, this move is strong may end up being more powerful than you can imagine. Keep your stops tight, manage your risk appropriately, so you can trade another day. If this trend really explodes to the upside, the last thing you will want is to be on the other side of the USD when (or if) it moves a quick 10 cents on the USD index.

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I am long the USD and have been long the USD against a basket of currencies for weeks.

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24. June 2014 · Write a comment · Categories: Uncategorized · Tags:

Here are some quick charts:

 

6-24-14EURJPY

 

EUR/JPY hugging (below) 200 day SMA and rejecting down trend line.

6-24-14AUDJPY

 

AUD/JPY failure at very important resistance

6-24-14GBPJPY

 

GBP/JPY lower high and rejection at key resistance.

6-24-14NZDJPY

 

NZD/JPY multiple rejections at same resistance levels.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I have started to get long JPY on some crosses

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10. June 2014 · 2 comments · Categories: Uncategorized · Tags: , ,

Well, it will be “High Noon” somewhere tomorrow, right?

The AUD/NZD is technically in breakout territory, but tomorrow is going to be a big day for the pair. Tomorrow afternoon we have the RBNZ rate decision, and a couple hours after we have the Australia employment numbers for May.

Keeping in mind, technically the pair is pointed to a move of 1.1300 (from the double bottom, retest of neckline) in the coming weeks, the combination of tomorrow’s news could set the pair off in that direction. (see chart below)

6-10-14AUDNZD

The RBNZ is expected to raise rates another .25% tomorrow 3.25%. This would be the 3rd hike in 3 meetings. The market has priced in a total of 8 hikes in the next 2 years to 4.5%. There is some skepticism that the market may have overpriced two more hikes in 2014. In the event the RBNZ leads the market to believe that they may not be as hawkish into year-end (especially with housing moderating recently) the NZD currency is at risk for a continued pullback.

Turning attention to the Australia jobs numbers a couple hours later, it must be noted that the last three employment numbers Australia has beat the expectations. I don’t see this time as any different as full time employment also seems to be swinging higher too. Labor force participation rate is ticking lower which may be a concern.

In the event that the RBNZ tones down future rate hike expectations and Australia comes in with a stronger employment picture, it could send the AUD/NZD higher and continue this massive short squeeze that had started earlier this year.

 

Blake Morrow

Chief Currency Strategist, Wizetrade

Disclaimer: I have been long the AUD/NZD since below 1.0900 and maintain my position.

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I am attempting to come to grips with my thoughts on the successes of Draghi.  And I think I am looking at him through the wrong set of eyeglasses.

Bernanke was measured by what he was able to accomplish for the American economy.  He kept deflation (mostly) in check, and kept the US stock market from collapsing, even though it took until March 2009 for the trading public to believe him and start buying stocks.

Should Draghi be measured differently?  It seems he is charged with keeping deflation in check also, but to keep the various European stock markets from falling in the future, he has promised to loosen the reins on credit.  Without implementing anything, he has successfully jawboned the market into believing his rhetoric (we will do whatever it takes, part II) and promised future programs, like targeted long term repo ops, but the only real thing the bank did was to change the interest rate structure to one of charging interest on the banks who hold reserve funds overnight with the ECB (what would happen if other banks like the US Fed or the BOJ did that???)

Yes, just like in America, stocks welcomed the move in Europe and the DAX nearly surpassed the 10,000 level for the first time in its history.  Is this what Draghi wanted?  A picture of a growing economy by viewing the strength of stocks?  If so, then he succeeded, and unlike Bernanke, he did not have to spend money to do it.  Bernanke had to implement QE 3 times and spend FED money, Draghi just had to hint at it.

So why in my mind do I measure the success of Draghi by looking at the exchange rate?  With the Euro strengthening on the move yesterday, I was thinking he failed.  With a strong Euro, it makes manufactured products to be exported less competitive.  But who does Europe export to?  They mostly trade amongst their own member nations.  So keeping European companies growing and their stocks strong may be Draghi’s objective.  Bernanke was not measured on the strength of the US dollar, so why should Draghi be similarly measured?  With their strong Euro, they certainly can buy more Chinese imported goods, which they seem to do a lot of, same as here in the US when our dollar experiences occasional bouts of strength.

So changing the filter on my glasses helped me see that Draghi is accomplishing what Europeans want him to do.  It is not necessarily a race to see which central bank can weaken their currency the most so that manufactured goods can be competitive on a world landscape, it is what path is taken to ensure that the stock market or markets governed by that central bank can keep growing.  In the case of Japan, those markets only grow by exports.  In Europe and the US, those markets grow by having access to nearly free credit.

Bottom line, Draghi does not care about the strength of the Euro, so why do we here in America care? Why were so many analysts here in America criticizing him for it?  I think I finally settled this in my mind. I thought I would share it all with you, too.

 

Steve Beilby

Wizetrade Analyst

 

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09. May 2014 · 1 comment · Categories: Uncategorized · Tags: , ,

One of the best technical indicators for me is when I am looking at a Japanese candlestick on a daily or weekly trend, and see a “long wick” as we near a close or an interval. The reason why this is so powerful is because that means that traders were caught  a little wrong footed early on, and may have got “caught on the wrong side” and are forced to trade the other direction to cover shorts or liquidate longs. Hence a reversal takes place.

In the case of the USD, the market has definitely been bearish. No signs of letting up…until yesterday’s ECB meeting. This meeting has changed the outlook near term of the EUR and the ECB future policy actions, hence the USD index (which is comprised of about 57% of the index) may be influenced as well. Some pundits will say “the ECB has yet to act” but the market seems to care less since it seems to be caught a little “wrong footed.”

Whether or not the USD can capitalize or not on this recent squeeze or not, will be dependent on central bank activity in the coming weeks. However, 2014 has been the year of the hibernating bull for the USD. Don’t look now, but I think the bull just growled at you!

USD Index Daily chart:

5-9-14DXYDaily

 

USD Index Weekly

5-9-14DXYWeek

 

DJ FXCM USD index Weekly (for a little more balanced USD view)

5-9-14USDWeek

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I started buying USD selectively against European currencies post ECB meeting yesterday

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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.

5-1-14ZB

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

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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.

4-30-14USDCHF

 

Blake Morrow

Chief Currency Strategist, Wizetrade

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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.

4-25-14SPXJPY

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.

4-25-14SPXJPY1

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

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The AUD/USD has been working an inverted H&S pattern and counter trend bull flag pattern to the 78.6% retracement just to over .9500.

Assuming the RBA minutes are fairly hawkish we should test those levels later tonight. On the other hand, this is one of the most discussed chart in the FX at this time, sometime traders tend to take profits ahead of the key levels since they know  many traders are looking at the same chart.

4-14-14AUDUSD

 

 

 

Blake Morrow

Chief Currency Strategist, Wizetrade

Disclaimer: I am short the AUD/USD near current levels since Friday and am looking to add at HIGHER levels.

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