The tech-heavy index soared more than 4% this past week on the back of a strong demand from traders and investors using the buy-dips trading strategy. The daily chart setup below points to two strong buy-signals as both attempts to test the support curve of Ichimoku Baseline failed to break it through by daily close prices (see green arrows on the screenshot). As a result of the four-day rally, the benchmark rewrote the all-time high value this past week.
The technical sentiment points to a bullish continuation of the uptrend. The Ichimoku Cloud trend indicator increased the positive surplus of the leading span, while the nearest support level moved higher to 9206.2 points. The conversion line could limit possible bearish rebounds in the week ahead. Besides, Chaikin oscillator remains bullish as its value did not cross the accumulation-distribution line from above. If the positive surplus of the indicator will keep increasing, then the buying pressure will remain in play. Williams %R had a bearish bounce towards the oversold zone, but the indicator did not perform the breakout of the threshold during the previous retracement. That was another confirmation for the bounce-by-trend pattern, offering an attractive entry-level for fresh longs. Although the indicator is in the overbought territory, further bullish performance is expected.
The U.S. dollar index measuring the greenback’s strength versus the volume-weighted basket of six major currencies charted the largest weekly gain since August 2019, adding +1.37% to the highest daily close value since October 10 (98.70 points).
Such strong demand for the U.S. dollar was noticed across the board as all of the major currencies weakened simultaneously. The index finished the bearish retracement, which was limited by the yellow zone of the Double-Bolli formation (see the chart below). The higher low of the continuation pattern provided a strong buy-signal confirmed by consecutive breakouts of several technical resistance levels. First, DXY breached the upper line of the Bollinger Bands indicator with a period of 21 days and deviation 1. Second, the index performed a bullish breakout signal by closing two days above the upper curve, which could signal even higher rates in the near future.
The buy-and-hold trading strategy is still attractive, although the index is getting overbought on short-term timeframes. Those traders who missed the opportunity to long the index last Monday should consider opening longs on a potential short-term bearish bounce towards support range of 98.35/40, the November’s top. The medium-term target is placed at around 99.40, the highest value in 2019. However, the ascending green median line could act as a limit for consolidative price action, so taking profits at around 99.00/20 would not be a mistake.
The price of gold retraced from multi-year highs at $1585/93. The depth of the bearish rebound was limited by long-term support curve at $1547 though, so the bulls managed to lift the yellow metal towards a neutral value of $1570 per ounce last Friday. Although the bears had a powerful selling pressure this past week, it is hard to conclude that the long-term uptrend is over. What the technical analysis can suggest is that further consolidation is likely because the current technical sentiment is mixed.
Williams Alligator did not perform a bearish crossover. The price of gold closed the week below the upper line, and there was a daily close below the middle line, however, that does not change the overall bullish bias. The bears need to push the daily close price below the recent low of $1552.80 to complete the bearish reversal pattern. Otherwise, the bulls would regain the upside momentum as the Alligator is still in the eating mode. Next, the Relative Strength Index had a bearish bounce limited by the 50% threshold dividing bullish from bearish momentum. The upside risk persists until the support level is not breached. Finally, the MACD trend indicator is also mixed as its lines remained in the positive territory but the histogram dropped below zero, extending the negative surplus.
We’d consider a rangebound scenario as the most likely outcome for the upcoming week. Thus, both buying lows and selling highs might be lucrative, given the technical outlook and recent price action. The only requirement for such a trading strategy is to keep stop-loss and take-profits orders tight with short-term deals prevailed. Pivot points and possible reversal levels are 1536.11, 1547.67, 1581.80 and 1593.90.
WTI Crude: Bearish
The price of oil charted the lowest daily close level ($49.42) since January 2019 this past week, erasing all of the yearly gains. The total loss counting from the peak registered on January 8, 2020, reached almost 25% as WTI Crude is in freefall for a fifth straight week. The only daily candle in the green was Wednesday last week as the price action triggered postponed buy-orders below the psychological round-figure support at $50.00. The bullish retracement was limited and short-lived though, and the price of oil continued sliding, finishing the trading week at $50.40 per barrel.
The technical outlook underlines an extremely oversold condition as the price of WTI Crude was falling without any significant retracement recently. Commodity Channel index bounced off the bottom and even went out of the oversold zone, promising further recovery for the price of oil. Stochastic RSI performed the bullish crossover in the oversold zone and headed north despite the bearish action on Thursday and Friday. Therefore, fast and sensitive oscillators require fresh air to breathe, while the sellers need to regain momentum.
On the other hand, the Average Directional Index still points to a growing bearish momentum as its mainline is ascending well above the threshold. Although the negative surplus was narrowed, the selling pressure could be renewed as early as in the week ahead because the main driver is related to the fundamental environment. Such strong trends could ignore technicals for quite a while, and the upcoming week is going to be a tough fight between the bulls and bears for the crucial support level of $50.00 per barrel. If the bears won it, then traders would eye the bottom of the long-term descending formation at around $42 per barrel. Otherwise, a deep bullish retracement would take place with targets at $52.50 and $54.00 in extension.
The New Zealand dollar was among the worst performers versus the U.S. dollar this past week. The NZD/USD currency pair has lost 89 pips or -0.98% of the exchange rate, printing 8-weeks low at 0.64028. On top of that, the long-term technical sentiment turned bearish as the pair breached several support levels, completing the bearish reversal pattern on the daily timeframe (see the screenshot below).
The Ichimoku Cloud trend indicator performed a bearish crossover as the leading span switched the surplus to negative for the first time since November 2019. Conversion line went off the cloud, confirming the bearish reversal pattern of the resistance curve, while the Baseline is extremely close to the same achievement. What’s more, a technical rebound towards the former support now resistance trendline (dashed green) points to a continuation scenario with further losses in the week ahead. Awesome Oscillator extended the negative value, underlining the growing bearish momentum since the beginning of the current year. An important sign for the bears was that NZD/USD accelerated the decline last Friday, plunging by -0.88% in one single day after stronger-than-expected U.S. NFP report caused an additional demand for the greenback across the board.
As long as the bullish rebound already played out, it would be hard to expect another upside swing in the upcoming week. Given that, the most attractive trading strategy suggests a breakout approach with postponed sell-stop orders slightly below the round-figure psychological support level of 0.6400. Moreover, we would not be surprised to see a weekend gap through that support on Monday as New Zealand traders would try to absorb the fundamental events that happened on Friday during the North American trading session. The near-term target is horizontal static support at 0.6329 printed on November 8, 2019. The exchange rate seems to test that support sooner rather than later, and it would be reasonable to take profits there because a consolidation might be in place afterwards.