Dow Jones Industrial Average: Bullish.
The Wall Street index measuring total cost of 30 blue-chip companies showed the strongest performance among major U.S. stock indices this past week. The Dow Jones Industrial Average added +1.17% to its value and closed the week above the psychological mark of 28000 points. Given the recent sustainable growth pace and the lack of volatile counter-trend action, the index should finish the current year with one of the most impressive results in a decade. Since the end of the past year, the benchmark soared more than 25%. Fibonacci Retracement levels point to a long-term target of 30871 points (161.8% Fibo), taking into account this year’s performance.
The daily chart below has a strong bullish sentiment from a technical analysis point of view. Although 14-days Relative Strength Index had entered into the overbought territory, it is still far from extreme levels. However, a healthy bearish retracement might be required to reload daily oscillators and re-gain the momentum for the bulls. A bounce-back towards 21-day exponential moving average might be attractive for conservative traders to add some volume for long positions. A similar scenario was noted at the end of October when the bearish retracement bottomed out above EMA21. So far, technicals do not show any sign of a bearish reversal, so the buy-and-hold strategy might be lucrative.
The U.S. dollar index failed to proceed with the bullish recovery and peaked at 98.50. The current rate is placed between 55-days simple moving average and 89-days exponential moving average. Both curves represent resistance and support levels, while a sideways consolidation between them is likely. The dashed blue line represents former support trendline of the uptrend in June-September this year, and it could act as a long-term magnetic line to attract average daily prices. Therefore, the bulls could take some profits when the index will be testing that line from below. On the other hand, the BullBear Trend indicator refused to develop the bullish sentiment and headed back to zero, which could trigger a sell-signal in the week ahead. The condition for the bears to continue the selling pressure on the greenback is to close at least one day below the threshold of 98.00 points. If that happened, the downside swing could be prolonged down to 97.00 and 96.50 in extension.
The British pound gained strength versus the U.S. dollar despite weak economic reports from the United Kingdom. Such an unexpected reaction might be related to investors’ optimistic expectations for upcoming elections and Brexit outcome. The technical sentiment is also in favour of the bulls. The general form of the daily chart below reminds a flag, which could point to a bullish continuation. However, the price range was limited by the Bollinger Band indicator with deviation 1 (yellow background), which suggest a weak momentum. Double-Bolli’s lines had narrowed the general surplus, reflecting lower volatility compared to previous periods. Therefore, the bulls should break through the resistance range of 1.2920/50 in order to proceed with the uptrend. Otherwise, the pattern would be crashed and a deeper bearish retracement towards support at 1.2740 could occur. The Breakthrough trading strategy might be attractive for the week ahead with postponed buy-limit orders above 1.2935 and if-done take-profit at 1.3084/3120.
Although the Swiss Franc followed the general trend and gained strength versus the U.S. dollar, USD/CHF charted a directionless trade recently. The daily chart below points to both lower-highs and higher-lows sequences, which underlines the overall uncertainty. There were several attempts to lift the rate towards the parity between the two currencies, however, every next attempt is lower than the previous, which confirms weak momentum. MACD trend indicator squeezed to zero, while the fast Relative Strength Index is hovering around the middle level. All that indicates a directionless trade in the week ahead, so we’d rather stay away of the pair.
Although the Australian dollar was sold off this past week, the mid-term technical analysis remained bullish. The price action at around the support level of 0.6770 confirms that suggestion as the buyers of the AUD/USD currency pair was extremely active on Thursday. What’s more, the pair managed to recover part of the mid-week losses on Friday when the exchange rate jumped to 0.6820, gaining more than 50 pips. The technical analysis points to a bounce-by-trend pattern, according to the daily chart setup below. Both Williams %R and Commodity Channel Index have sharp whipsaws to the oversold territory with a quick rebalance of the momentum. Such events happen when currency traders to not support the counter-trend action and buy the pair at attractive levels. As long as both oscillators have a long way to go before reaching the overbought zone, we suggest that the upcoming week will be profitable for AUD/USD buyers. The rate could soar to the previous peak of 0.6930 registered on November 1 and even breach it if the bulls had enough power to keep supporting the pair.
Unexpected support for the pair came from the Reserve Bank of New Zealand. The regulator was much more hawkish this past week, and Kiwi bulls did not hesitate to use the advantage of the fundamental boost. As a result, NZD/USD surged more than 1.2% on the single-day rally on Wednesday. Given the opposite performance of AUD/USD, the AUD/NZD cross-rate charted an impressive plunge of more than 140 pips that day, which was the largest one-day drop noted this year.
The technical sentiment is positive for NZD/USD, so the bulls have nothing to worry about. Three oscillators are bullish, pointing to further upside pressure. Awesome Oscillator was able to maintain the bullish bias and remained above zero with the green colour of the histogram, 14-days Relative Strength index is still above the middle threshold, Stochastic RSI is headed north with more room to go before the overbought level was reached. Thus, we suggest buying NZD/USD right on the market open on Monday. Those traders who took advantage of the past week’s positive surprise could consider holding long positions portfolio. Once the exchange rate was able to close a day above the recent peak of 0.6466, the market would eye 0.6600 as a medium-term target.
One of the most volatile currency pairs in the foreign exchange market -- USD/ZAR -- gave a lucrative opportunity to enter the market with fresh shorts this past week. As far as the general trend is headed south (see the daily chart below), and the greenback’s performance across the board was weak, it was not hard to assume a bearish bounce off the round-figure resistance of 15.000 rands per dollar. Postponed sell-stop orders were triggered on Wednesday, while the three-days bearish rally brought a crispy profit of more than 340 pips. The technical outlook points to a possible breakthrough of the horizontal support at 14.5500 approximately, although another bullish whipsaw is possible.