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.

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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

 

 

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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:

8-3-15AUDUSD

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:

8-3-15AUDUSDSPX

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.

8-3-15CopperAUD

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.

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The AUD/USD has a head and shoulders set up with the neckline at .9320. Right shoulder resistance is at .9440’s. With the event risk this week (CPI tonight and China HBSC PMI tomorrow) there is a good chance we either break the neckline, or stage a bullish breakout in a strong multi year downtrend (red trend line near .9500). Either way, the AUD/USD is set up to make a move in the coming week(s).

7-22-14AUDUSD

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I am short the AUD/USD for the last week near current levels.

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I know it has been a week or two since and EDGE chart, and I apologize. However, this very low volatility environment is making it difficult to produce any “good chart” as the market just grinds back and fourth.

The AUD/USD has challenged resistance at .9410 and its previous broken trend line and tested the under belly of it today at the same level. This “confluence” may provide a reversal signal intraday.

6-11-14AUDUSD

 

Blake Morrow

Chief Currency Strategist, Wizetrade

 

Disclaimer: I have a short position from yesterday near the .9365 level. I will not carry the trade through Australia employment this evening.

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