The EUR/GBP is posting a big reversal pattern after spending a few months stalling near a major support (161% extension of 2012 lows to 2013 highs). I originally tweeted the chart yesterday, and (full disclosure) have been building a long position in the pair the last week.

One of my favorite reversal patterns are descending (and ascending!) wedges since the initial reversal (thrust) tends to give the quickest push. Take a look at the chart below:


Many traders attribute the EUR/USD rally to just USD weakness. I think it is a combination of both USD weakness and EUR strength on many crosses, like the EUR/GBP, EUR/AUD, EUR/CHF, etc. Keep in mind the EUR/GBP is one of the more liquid and highly traded pairs in the world of FX, which is just adding fuel to the EUR “squeeze” fire.


Blake Morrow

Chief Currency Strategist, Wizetrade


Disclaimer: I am long the EUR/GBP, and I am looking to stay long for the days to come.

As Zerohedge has pointed out the big move in the EUR/CNH is causing a bit of a squeeze in Euro pairs, I think we should take a good look at the daily chart:


In 2 days we have retraced about 61.8% retracement of the entire 2015 move. Also, from the highs in May 2014 we are near the 38.2% retracement.

The EUR may be close to being finished squeezing here against the CNH for now. Make sure you are careful with EUR/XXX trades from here, especially if you are trading them long.


Blake Morrow

Chief Currency Strategist, Wizetrade

At some point in your investing or trading career, you find out nothing is ever “too far-fetched” for the markets. I can’t tell you how many times I have heard (or said myself) that “there is no way (insert any asset class, stock or market instrument) will drop to those prices!” Or “no way it’s going that high!” The market proves to us time and time again that trends can last a lot longer than most think.

I believe it was best said by John Maynard Keynes, “The market can stay irrational longer than you can stay solvent.”

When I look at a chart of any market, I have to assume prices can go there. Also, I have to think what type of knock on effects it may have on other asset classes in the event it does. Asset classes, like crude oil, have strong correlations with currencies like the Canadian Dollar or the Norwegian Krone because of their heavy crude oil exports. If prices in crude move aggressively, some currencies may also stage an aggressive move as well.

Today Business Insider quoted Jeffery Gundlach in a presentation from December 2014 referencing if crude oil goes to $40 then “something is very wrong with the world, not just the economy.” Fast forward to August of 2015, and we are back near $42, a price that we had been at just a few months ago in March and January right after Mr. Gunlach made that statement. So, here we are again back near those levels. Is it possible we go lower from here? Technically, not only do I think it is possible, but I think the odds are increasing daily that we do visit levels below $40. Take a look at the monthly chart:


There are a lot of “days” left in the month of August, so the current monthly bar has time to change. You can see the very large red bar already developing. We are well-situated below the rising trend line of 15+ years. Also, you will notice the last several months we have had a very shallow bounce. Shallow bounces like this tell me there is not much interest to buy an asset class at these prices, even after a steep drop like we have seen in crude oil this last 12 months. In turn, this means that we may have further to drop.

Frankly, I can’t imagine crude oil drops much farther. It sounds irrational at this point. But when we were near $100 last year, it really was no surprise to me that we would come down eventually, as noted in this Yahoo Finance article back in August of 2014. I am unsure how long we will sustain these prices, but I have to ask myself as a currency trader, what am I to do in the event we do break $40 in crude oil and “what if” we sustain these lower levels? As irrational as it seems.

I turn your attention to the USD/CAD. I had been playing on the long side the USD/CAD for several weeks. I have been in and out, booking profits when I can and being very careful about being long as we are near these multi-year highs. With the BOC and the FOMC moving in opposite direction with monetary policies and the persistent weakness in crude oil prices (CAD and Crude are strongly correlated most of the time) this has been a fairly straight forward trade in recent months.

Let’s imagine that crude does break $40, and let’s also imagine that prices sustain these lower levels for the foreseeable future. The USD/CAD currency pair has a long term “cup and handle pattern” which has developed in recent months that point the pair over time towards the mid 1.5000’s exchange rate. Take a look below:


Here is a chart showing the strong correlation of the USD/CAD to crude prices longer term. USD/CAD is the blue line:


I know it sounds crazy, doesn’t it? It sounds almost “irrational.” C’mon, ANOTHER 2000+ pip move higher in the USD/CAD? Really? That’s just silly.


Blake Morrow

Chief Currency Strategist, Wizetrade


Disclaimer: I have both long and short CAD exposure currently.




Do you think these Canadian/US price differences come back again?

The AUD/USD has been in a relatively strong decline since mid 2013, and now we are approaching some critical “confluence” of major support. As you can see on this monthly chart, we are very close:


The lows in 2001 to the highs in 2011, we are at the 61.8% Fibonacci retracement near .7200. The lows post financial crisis in 2008 to the highs in 2011, we are near the 78.6% retracement near .7100. The 127% extension of the lows in 2010 to the highs in 2011 come in just below where we are currently at, near .7230. if you draw a trend line across all the lows that comes in near .7100. Normally, from a risk reward perspective, I would typically get long near here. The risk is manageable in relation to the upside reward for a bounce. However, I am hesitant. Here are some reasons why, compare the S&P to the AUD/USD:


If you add the SPX futures (yellow) to the chart, you will notice until 2013, the AUD/USD and SPX had a very tight correlation. One would argue that because of the slowdown in China and the divergent central bank policies of the RBA and FOMC the two had diverged. The SPX has benefited from continuous loose monetary policies of the FOMC and other central banks in recent years. As you know, this may be coming to an end here in the US. I also believe the SPX is attempting a rounded top formation due to a tighter monetary policy in the coming months. If I am correct, what will the AUD/USD do? With the potential of the FOMC raising rates this year, and at best, the RBA on hold, the AUD/USD may continue lower, especially if US equities head that direction too.

In addition, take a look at the AUD/USD vs. Copper (Copper is the candle chart, AUD/USD is yellow line). Copper looks as if it wants to test the 2.00 level.


This is a big week for the USD and for the AUD. Tonight we have retail sales and the RBA decision (RBA is expected to leave rates unchanged), Wednesday evening is the Australian jobs report. On Friday we are expecting our own employment report in the US, and most are expecting a steady showing of more than 200K jobs again. I suspect after this week we may have a better idea if this is the level we want to be long the AUD/USD, or perhaps we start a new leg lower?


Blake Morrow

Chief Currency Strategist, Wizetrade


Disclaimer: I have no position in the AUD/USD, but may towards the end of the week.

This is a classic descending wedge reversal signalling a short squeeze in the pair.

With the recent reversal in the USD/CAD from the key 1.3065 level resistance and the USD/CHF squeeze higher, the CAD/CHF looks like it will rally from current levels.

The .7566 (38.2%) or .7641 (50%) retracement levels look like reasonable targets.



Blake Morrow

Chief Currency Strategist, Wizetrade


Disclaimer: I am not long the CAD/CHF, but may get long in the coming day(s)

With (hopefully) the worst of Greece past us (for now) the desire to hold a currency that has a negative interest rate is a less appealing prospect for institutional traders. The safety of the Swiss currency may not be needed in the near term, and we may see investors move back out of the CHF that had been accumulated (just) in case things in Greece did not work out.

Also, worth mentioning is the strong correlation between CHF and Gold. With Gold breaking 1130 and falling to mulit-year lows, this may be another reason traders and investors may continue to shun the Swiss Franc.


A sustained break above 1.0525 would further support the bullish argument.


Blake Morrow

Chief Currency Strategist, Wizetrade


Disclaimer: I am starting a EUR/CHF long position today. I do currently hold CHF short trades on other crosses as well.

I would suspect this relationship would have been stronger if the Swiss/Gold referendum was passed back in November 2014 to bring up SNB reserves to 20%. Here is the chart:


Gold – Red Line


Blake Morrow

Chief Currency Strategist


Disclaimer: I am short CHF

If you recall my blog post from mid May, the GBP/NZD is now reaching for that 3000 pip gain! Many of us captured portions, if not the lion’s share of this rally. But at this point you have to ask how far will it go? Expectations of a rate hike from the BOE has pushed the GBP higher over the last few days, and next week the RBNZ meets and some expect that they could (once again) cut rates. However, if expectations of a BOE rate hike is premature, and the RBNZ holds rates at 3.25% next week, we could see the GBP/NZD stall, especially at such critical resistance. Take a look at the monthly chart:


On the monthly chart this pair is facing a major resistance trend line that spawns back from 2002. Also, you can see the previous support from December 2005 and February 2008 both come in just above 2.4100. Also, the RSI is extremely overbought as well.


On the daily chart we are closing in on channel resistance. Also, daily RSI is divergent as well.


One other clue I have is the NZD/USD, which is coming into a cluster of Fibonacci levels at the .6300-.6400 levels. These levels are from over 2 decades of price action.

Bottom line, the GBP/NZD may be a little tired here. I am not sure this will change the trend of the GBP/NZD, matter of fact, I suspect in the coming months the 2.4100-2.4200 level is broken, especially with the BOE follows the FOMC with higher rates into 2016. But, there may be a nice pullback/pause at current levels that I am willing to trade.


Blake Morrow

Chief Currency Strategist, Wizetrade


Disclaimer: I am looking to sell short the GBP/NZD above the 2.4000 level in the coming trading sessions

The AUD/NZD has been on a strong run for the last several months, but the last month the flag pattern started to break out. Today, we have hit a weekly downtrend line that may pose significant resistance:


If you look at the daily chart, the pair looks like we will post a “shooting star” reversal candle:


I am sure at some point the AUD/NZD will break higher as the New Zealand economy continues to weaken and the RBNZ cuts rates further. I suspect the Australian economy will start to stabilize following the weakness it has felt due to the slowdown in the Chinese economy and the pace of rate cuts by the RBA may start to slow, if not stop. However, the NZD looks fairly oversold against many currencies, so we may be due for a pullback before breaking the long term down trend.

Hat Tip to @A25Forex for bringing to my attention


Blake Morrow

Chief Currency Strategist, Wizetrade


Disclaimer: I did establish an AUD/NZD short position today near current levels, and I may add to it in the coming sessions.

Flag patterns are the most common continuation patterns, and tend to be good ones to follow to identify a strong directional trend. Today, the Canadian economy posted a weaker than expected GDP number, which may be the catalyst that drives this pair into a technical breakout today.

Here is the daily chart of the USD/CAD:


The weekly chart is telling us what the possible ramifications of a weekly breakout may be:


A move beyond a 1.4000 exchange rate could be possible into 2016 if crude oil continues to sustain very weak prices (which would continue to weigh on the Canadian economy) and the FOMC stubbornly maintains a hawkish bias towards a rate hike later this year.


Blake Morrow

Chief Currency Strategist, Wizetrade


Disclaimer: I did enter a long USD/CAD position (near current prices) today and am looking to continue to build a long position in the coming weeks