NASDAQ 100: Bullish
One of the U.S. major stock indices delivered a perfect buy-signal this past week. The bearish retracement started on November 28 and accelerated on the first trading day of December. The depth of the rebound was reaching -3% on Tuesday as the bears dominated in the equities market. However, the bulls stepped-in with heavy-volume demand for stocks across the board as prices reached an attractive level to refresh longs or add volume to open positions.
Technically speaking, the correction was expected for quite a while as some of the indicators were extremely overbought and required a reload. Three perfect signals provided a perfect entry. First, the benchmark could not break through the exponential moving average applied to low rates with a period of 21 days (see the green arrow on the price chart below). Second, 14-days Relative Strength Index charted a perfect bounce-by-trend pattern and remained above the middle line, confirming the bullish sentiment. Third, the daily close rate did not cross the Ichimoku Base Line from above. As a result of the failed bearish retracement, the index rallied, adding +1.13% to the value and closing the week near all-time highs. The buy-and-hold trading strategy is still in play.
Although the U.S. dollar index rallied on Friday, recovering part of its mid-week losses, the general technical outlook is bearish. The daily chart below highlights the green descending channel of the downtrend, the index is in the middle of the range. The Williams Alligator is in the eating mode, all lines are placed in the correct order to continue with the downtrend. MACD trend indicator turned bearish four days ago ass the histogram dropped below zero, while both lines performed the bearish crossover. So everything points to a bearish continuation. However, there is concern.
The bears might face a problem as sensitive Stochastic oscillator’s lines crossed each other on the oversold territory. That might or might not lead to a short-term bullish swing as it’s too early to talk about a complete reversal. This bullish rebound should be used as an entry opportunity by those traders who missed the chance to short the greenback at the beginning of the past week. The nearest resistance to watch is coming at 97.85.
The most popular currency pair in the foreign exchange market has a mixed technical sentiment. On the one hand, Average Directional Index points to a bullish surplus, while Parabolic SAR dots are still below daily prices. On the other, ADX mainline shows a weak bearish momentum and Stochastic RSI performed the bearish crossover in the overbought zone. All that points to a further consolidation rather than break out in either side. The range would remain tight with resistance at 1.1120/60 and support at 1.0980/1000.
The intraday technical picture is more obvious. The four-hourly chart below points to a double support level, which has been tested this past Friday. There is a descending green dashed median line attracting average intraday prices since October 18, and the simple moving average with a period of 89 bars coming at 1.1051 currently. Both support levels weren’t breached by the close rate, so EUR/USD has a chance to bounce back up if the bulls would have momentum strong enough to recover from Friday’s loss. Otherwise, a breakout of the double support level might lead to a test of the bottom band of the range mentioned above. Awesome oscillator is lowering its positive histogram, indicating a potentially bearish scenario. Traders should also monitor the greenback’s performance across the board as European fundamentals do not have a sustainable impact so far.
Sterling traders ignored the U.S. NFP report, which was positive for the greenback. The British point was among major currencies that did not reflect the greenback’s rally on Friday and that confirmed the bullish sentiment of the majority of traders. GBP/USD breached an important psychological resistance this past week as the exchange rate finished the trading week above 1.3000 and even above 1.3100 for the first time since April. The previous consolidation range was breached on the upside, further appreciation is possible amid fundamental support from political factors and positive Brexit expectations.
The technical sentiment is bullish, while the pair has good chances to finish the year without losses, or even with gains. The thing is that the bulls eye a local top, which represents the highest daily close rate in 2019. The horizontal resistance and mid-term target come at 1.3342 with only 180 pips left to go there. Indicators are in favour of such a bullish scenario. Donchian channels spread the surplus, pointing to higher volatility, while the upper band shifted north, reflecting the weekly gain. True Strength Indicator was sliding south during the sideways consolidation but remained positive and performed the bullish crossover again. A bearish correction is possible, but it would be limited and short-term as the demand for Sterling is sustainable across the board, reflecting the rule ‘buy rumours sell facts’ regarding the upcoming elections in the UK. GBP/USD could have a bearish whipsaw towards 1.3100 in the scope of possible demand for the greenback at the beginning of the upcoming week. The buy-and-hold trading strategy applies.
The Japanese yen failed to reflect the equities’ rally on Friday. The main fundamental factor driving the decline of USD/JPY is a negative impact from the economic slowdown registered in Japan. The pair tested a local peak at 109.67 this past week, but failed to maintain the bullish sentiment and slid back to 108.50 support.
From a technical analysis point of view, USD/JPY is in a retracement phase of the mid-term uptrend started on August 26. The pair breached both Ichimoku support lines, which suggests a deeper rebound. The leading span remained bullish though, showing two possible support levels for the week ahead. If the exchange rate failed to come inside the cloud with the upper band at 108.24, then the bearish retracement would come to an end. However, if the nearest support was breached, the slide could be extended towards the bottom of the cloud coming at 107.60 yen per dollar. The fast Relative Strength Index (14 days) points to the second scenario as its value dropped below the 50% threshold. Short-term sell-positions are possible, while the long-term analysis suggests a bullish reversal and further buying pressure until the end of the year. Therefore, conservative traders might consider the wait-and-see position and fresh longs with appropriate signals from technical indicators.
The Kiwi was unstoppable this past week. NZD/USD reacted on hawkish RBNZ and accelerated the bullish recovery. On the daily chart, a huge ascending triangle triggered a breakout and the pair has good chances to test the 0.6600 handle as early as this week. There is also a long-term downtrend resistance trendline coming at around the same level, so the bulls might halt the rally on profit-taking flows and consolidation to regain the momentum. It’s recommended to close current longs at around that target, wait for a bounce-back down and go long again.